SOC 10-Q Quarterly Report Sept. 30, 2021 | Alphaminr
ALPHAMINR

SOC 10-Q Quarter ended Sept. 30, 2021

Balance Sheet
Cash Flow
Income Statement
10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
    
    
to
    
    
    
    
Commission File
No. 001-40111
 
 
Flame Acquisition Corp.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
  
85-3514078
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
700 Milam Street Suite 3300 Houston, TX 77002
(Address of Principal Executive Offices, Zip Code)
(713)
 
579-6106
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading
Symbol(s)
  
Name of each exchange
on which registered
Units, each consisting of one share of Class A common stock and
one-half
of one warrant
  
FLME.U
  
The New York Stock Exchange
Class A common stock, par value $0.0001 per share
  
FLME
  
The New York Stock Exchange
Warrants, each whole warrant exercisable for one share of Class
        
A common stock at an exercise price of $11.50 per share
  
FLME.WS
  
The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐    No  ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T(§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2of
the Exchange Act.
 
Large accelerated filer   ☐    Accelerated filer   ☐
       
Non-accelerated
filer		   ☒    Smaller reporting company   ☒
       
         Emerging growth company   ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act):
    Yes  
☒    
No  ☐
As of November 22, 2021 there were 
28,750,000 shares of Class A common stock, $0.0001 par value, and 7,187,500 shares of Class B common stock, $0.0001 par value, issued and
outstanding.
 
 
 
 
 
 
  
Page
 
  
      
     
Item 1.
 
  
 
1
 
     
 
 
  
 
1
 
     
 
 
  
 
2
 
     
 
 
  
 
3
 
     
 
 
  
 
4
 
     
 
 
  
 
5
 
     
Item 2.
 
  
 
18
 
     
Item 3.
 
  
 
21
 
     
Item 4.
 
  
 
21
 
   
  
 
22
 
     
Item 1.
 
  
 
22
 
     
Item 1A.
 
  
 
22
 
     
Item 2.
 
  
 
23
 
     
Item 3.
 
  
 
23
 
     
Item 4.
 
  
 
23
 
     
Item 5.
 
  
 
23
 
     
Item 6.
 
  
 
24
 
   
  
 
25
 
PART I. FINANCIAL INFORMATION
FLAME ACQUISITION CORP.
CONDENSED BALANCE SHEETS
 
    
September 30,
2021
(Unaudited)
    
December 31,
2020
  
Assets
                 
Current assets:
                 
Cash
    $ 295,159     $ 9,014  
Prepaid expenses
      522,352       —    
Deferred offering costs associated with IPO
      —         295,209  
    
 
 
    
 
 
  
Total current assets
   
 
 817,511    
 
 304,223  
Prepaid expenses
–Non-Current
      207,808      
—  
  
Investment
held
in Trust account
      287,510,052       —    
    
 
 
    
 
 
  
Total assets
   
$
 288,535,371    
$
 304,223  
    
 
 
    
 
 
  
Liabilities and Stockholders’ (Deficit)
 Equity
                 
Current liabilities:
                 
Accounts payable and accrued expenses
    $ 331,188     $ 237,254  
Sponsor loans
      365,000       43,626  
    
 
 
    
 
 
  
Total current liabilities
      696,188       280,880  
Warrant Liabilities
      12,751,875       —    
    
 
 
    
 
 
  
Total liabilities
      13,448,063       280,880  
    
 
 
    
 
 
  
Commitments
            
Class A
Common stock subject to possible redemption, 28,750,000 shares at redemption value
      287,500,000       —    
Stockholders’ (deficit)
 equity
:
                 
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
      —         —  
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; no shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
      —         —    
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 7,187,500 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
      719       719  
Additional
paid-in
capital
      —         24,281  
Accumulated deficit
      (12,413,411 )     (1,657 ) 
    
 
 
    
 
 
  
Total stockholders’ (deficit)
 equity
      (12,412,692 )
 
     23,343  
    
 
 
    
 
 
  
Total liabilities and stockholders’ (deficit)
 equity
    $ 288,535,371     $ 304,223  
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
1
FLAME ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
    
For the
three months
ended
September 30,
2021
    
For the
nine months
ended
September 30,
2021
  
Formation and operating costs
    $ 306,668     $ 836,461  
    
 
 
    
 
 
  
Loss from operations
      (306,668 )      (836,461 ) 
 
 
 
 
 
 
 
 
 
Other income (expense):
                 
Interest income
 from Trust Account
      4,342       10,052  
Change in fair value of warrant
liabilities
      10,433,625       6,050,500  
Offering costs allocated to warrants
      —         (280,829 ) 
    
 
 
    
 
 
  
Total other income, net
      10,437,967       5,779,723  
    
 
 
    
 
 
  
Net Income
    $ 10,131,299     $ 4,943,262  
    
 
 
    
 
 
  
Weighted average shares outstanding, redeemable Class A common stock
      28,750,000       22,536,630  
    
 
 
    
 
 
  
Basic and diluted net income per share, redeemable Class A common stock
    $ 0.28     $ 0.17  
    
 
 
    
 
 
  
Weighted average shares outstanding,
non-redeemable
common stock
      7,187,500       6,984,890  
    
 
 
    
 
 
  
Basic and diluted net income per share,
non-redeemable
common stock
    $ 0.28     $ 0.17  
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
2
FLAME ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
 
 
  
Common Stock
 
  
Additional
Paid-In

Capital
 
 
Accumulated
Deficit
 
 
Total
Stockholders’
Equity
(
Deficit
)
 
 
  
Class A
 
 
Class B
 
  
 
 
 
 
 
 
 
 
 
  
Shares
 
 
Amount
 
 
Shares
 
  
Amount
 
  
 
 
 
 
 
 
 
 
Balance as of December 31,
2020
   
 
—  
 
  
$
—  
 
  
 
7,187,500
 
   
$
719
 
   
$
24,281
 
  
$
(1,657
) 
  
$
23,343
 
Sale of Units in Initial Public Offering
      28,750,000       2,875       —          —          287,497,125       —         287,500,000  
Underwriter discount
      —         —         —          —          (5,750,000 )    
—
 
 
      (5,750,000 )
Sale of Private Placement
Warrants
      —         —         —          —          7,750,000               7,750,000  
Initial value of warrant
liabilities
      —         —         —          —          (18,802,375 )      —         (18,802,375 ) 
Other offering costs charged to Stockholders’ equity (deficit)
      —         —         —          —          (857,751 )      —         (857,751 ) 
Offering costs allocated to warrants
      —         —         —          —          280,829       —         280,829  
Initial value before remeasurement to redemption value (1)

      (28,750,000 )      (2,875 )      —          —          (268,951,453 )      —       (268,954,328 ) 
Remeasurement to redemption value (1)
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
(1,190,656
)
 
 
(17,355,016
)
 
 
(18,545,672
)
Net income
      —         —         —          —          —         92,735       92,735  
    
 
 
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance as of March 31,
2021
(1)
   
 
—  
 
  
$
—  
 
  
 
7,187,500
 
   
$
719
 
   
$
—  
 
  
$
(17,263,938
) 
  
$
(17,263,219
) 
Net loss
      —         —         —          —          —         (5,280,772 )      (5,280,772 ) 
    
 
 
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance as of June 30,
2021
(1)
      —       $ —      
 
7,187,500
 
   
$
719
 
   
$
 
 
  
$
(22,544,710
) 
  
$
(22,543,991
) 
Net income
      —         —         —          —          —         10,131,299       10,131,299  
    
 
 
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance as of September 30, 2021
      —       $ —      
 
7,187,500
 
   
$
719
 
   
$
 
 
  
$
(12,413,411
) 
  
$
(12,412,692
 )
    
 
 
    
 
 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
 
(1)
As restated for Class A shares subject to redemption (see Note 2).
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
3
FLAME ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
 
    
For the Nine
Months Ended
September 30, 2021
  
Cash Flows from Operating Activities:
         
Net Income
    $ 4,943,262  
Adjustments to reconcile net income to net cash used in operating activities:
         
Interest earned on
Trust Account
      (10,052 ) 
Change in fair value of warrant liabilities
      (6,050,500 ) 
Offering costs allocated to warrants
      280,829  
Changes in current assets and current liabilities:
         
Prepaid
expenses
      (730,160 ) 
Accounts payable
 and accrued expenses
      331,187  
    
 
 
  
Net cash used in operating activities
      (1,235,434 ) 
    
 
 
  
Cash Flows from Investing Activities:
         
Investment of cash into
 
Trust Account
      (287,500,000 ) 
    
 
 
  
Net cash used in investing activities
      (287,500,000 ) 
    
 
 
  
Cash Flows from Financing Activities:
         
Proceeds from Initial Public Offering, net of underwriters’ discount
      281,750,000  
Proceeds from issuance of Private Placement Warrants
      7,750,000  
Proceeds from promissory note - related party
      396,548  
Repayment of promissory note - related party
      (75,174 ) 
Payments of offering costs
      (799,795 ) 
    
 
 
  
Net cash provided by financing activities
      289,021,579  
 
 
 
 
 
Net Change in Cash
      286,145  
Cash—Beginning
 of period
      9,014  
    
 
 
  
Cash—
End of period
    $ 295,159  
    
 
 
  
Supplemental Disclosure of
Non-cash
Financing Activities:
         
Initial value of Class A common stock subject to possible
redemption
(1)
    $ 268,954,328  
Remeasurement to Initial Redemption Value
(1)
 
$
18,545,672
 
Initial value of warrant liabilities
 
 
$
 
 
18,802,375
 
 
(1)
As restated for Class A shares subject to redemption (see Note 2).
The accompanying notes are an integral part
of
these unaudited condensed financial statements.
 
4
FLAME ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Organization, and Business Operations
Organization and General
Flame Acquisition Corp. (the “Company”) was incorporated in Delaware on October 16, 2020. The
 
Company was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies. The Company has selected December 31 as its fiscal year end.
As of September 30, 2021, the Company had not yet commenced any operations. All activity through September 30, 2021, relates to the Company’s formation and the Initial Public Offering (“IPO”) described below. The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest. The Company will generate
non-operating
income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO
 and non-operating income or expense from changes in the fair value of warrant liabilities.
Financing
The registration statement for the Company’s IPO was declared effective on
 
February 24, 2021 (the “Effective Date”). On March 1, 2021, the Company consummated the IPO of 28,750,000
units (the “Units” and, with respect to the common stock included in the Units being offered, the “Public Shares”), at
 $10.00 per Unit, generating gross proceeds of $287,500,000, which is discussed in Note
4
.
Simultaneously with the closing o
f
 the IPO, the Company consummated the sale of 7,750,000 warrants (the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant, which is discussed in Note 
5
.
Transaction costs amounted to $6,607,751 consisting of $5,750,000 of underwriting fees and $857,751 of other offering costs. Of the total transaction costs, $280,829
was
allocated
to expense as non-operating expense in the statement
s
of operations with the rest of the offering cost charged to stockholders’ deficit. The transaction costs were allocated based on the
with and without method
, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A common stock. 
Trust Account
Following the closing of the IPO on March 1, 2021, an amount of $287,500,000 from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”) which is invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185
days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule2a-7 of the Investment Company Act, as determined by the Company. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations, the proceeds from the IPO and the sale of the Private Placement Warrants will not be released from the Trust Account until the earliest of (a) the completion of the Company’s initial business combination, (b) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation, and (c) the redemption of the Company’s Public Shares if the Company is unable to complete the initial business combination within 24 months from the closing of the IPO, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds are intended to be generally applied toward consummating a business combination.
The Company’s business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (as defined below) (net of taxes payable) at the time of the signing an agreement to enter into a business combination. However, the Company will only complete a business combination if the post-business combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a business
combination.
 
5
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially
$10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The shares of common stock subject to redemption
are
recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a business combination if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon consummation of a business combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the business combination.
The Company will have 24 months from the closing of the IPO (with the ability to extend with stockholder approval) to consummate a business combination (the “Combination Period”). However, if the Company is unable to complete a business combination within the Combination Period, the Company will redeem 100%
of the outstanding Public Shares for a pro rata portion of the funds held in the Trust Account, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to the Company for the payment of taxes, divided by the number of then outstanding Public Shares, subject to applicable law and as further described in the registration statement, and then seek to dissolve and liquidate.
The Company’s sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their Founder Shares, Private Placement Warrants and Public Shares in connection with the completion of the initial business combination, (ii) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares and Private Placement Warrants if the Company fails to complete the initial business combination within the Combination Period.
The Company’s sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of
(i) $10.00
per Public Share and (ii) the actual amount per Public Share held in the trust account as of the date of the liquidation of the Trust Account, if less than
$10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked its sponsor to reserve for such indemnification obligations. The Company has not independently verified whether its sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Company’s sponsor’s only assets are securities of the Company. Therefore, the Company cannot be certain that its sponsor would be able to satisfy those obligations.
Liquidity
As of September 30, 2021, the Company had cash outside the Trust Account of $295,159 available for working capital needs. All remaining cash held in the Trust Account is generally unavailable for the Company’s use, prior to an initial business combination, and is restricted for use either in a Business Combination, to redeem common stock or to use for payment of taxes. As of September 30, 2021, none of the amount in the Trust Account was available to be withdrawn as described above.
Through September 30, 2021, the Company’s liquidity needs were satisfied through receipt of $25,000
from the sale of the Founder Shares and the remaining net proceeds from the IPO and the sale of Private Placement Warrants, as well as
$300,000 that was available under the Promissory Note and $365,000 that is available under the Updated Promissory Note (see Note 6). As of September 30, 2021, the $365,000 available under the Updated Promissory Note was fully drawn down.
Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loans (as defined in Note 6) from the initial stockholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 6), for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination. 
 
6
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating a business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the business combination. Moreover, the Company will need to raise additional capital through loans from its Sponsor, officers, directors, or third parties. Except as contemplated by the terms of the Promissory Note and Updated Promissory Note (see Note 6), the Company’s Sponsor, officers or directors are not under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. 
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health
 
emergency because of a new strain of coronavirus (the
“COVID-19 outbreak”).
In March 2020, the WHO classified
the COVID-19 outbreak
a pandemic, based on the rapid increase in exposure globally. The full impact of
the COVID-19 outbreak
continues to evolve. The impact of
the COVID-19 outbreak
on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of
the COVID-19 outbreak
on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial business combination may be materially adversely affected due to significant governmental measures being implemented to contain
the COVID-19 outbreak
or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial business combination in a timely manner. The Company’s ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by
the COVID-19 outbreak
and the resulting market downturn
.
Note 2 — R
estatement
of Previously Issued Financial Statements
In the Company’s previously issued financial statements, a portion of the Public Shares were classified as permanent equity to maintain net tangible assets greater than
 
$5,000,000 on the basis that the Company will consummate its initial business combination only if the Company has net tangible assets of at least $5,000,001.
Thus, the Company can only complete a merger and continue to exist as a public company if there are sufficient Public Shares that do not redeem at the merger and so the Company believed it was appropriate to classify the portion of its Public Shares required to keep its stockholders’ equity above the
 $5,000,000 threshold as “shares not subject to redemption.”
However, in light of recent comment letters issued by the Securities & Exchange Commission (“SEC”) to several special purpose acquisition companies, management re-evaluated the Company’s application of ASC 480-10-99 to its accounting classification of Public Shares. Upon re-evaluation, management determined that the Public Shares include certain provisions that require classification of all Public Shares as temporary equity regardless of the minimum net tangible assets required by the Company to complete its initial business combination. 
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the changes and has determined that the related impacts were material to the previously presented financial statements. Therefore, the Company, in consultation with its Audit Committee, concluded that its previously issued financial statements impacted should be restated to report all Public Shares as temporary equity. As such the Company is restating those periods in this Quarterly Report.
 
7
Impact of the Restatement
The impact of the restatement on the Company’s previously issued financial statements is reflected in the following tables:
 
 
  
As Reported
 
  
Adjustment
 
  
As Restated
 
Financial Statement as of March 1, 2021 (as presented in the Notes to Condensed Financial Statements in Form
10-Q
filed on May 28, 2021)
  
  
  
Balance Sheet
  
  
  
Class A common stock, subject to possible redemption ($)
 
$
 264,855,761
 
 
$
 22,644,239
 
 
$
 287,500,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A common stock—$0.0001 par value
 
$
 226
 
 
$
 (226
)
 
 
$
 —  
 
Class B common stock—$0.0001 par value
 
 
 719
 
 
 
 —  
 
 
 
 719
 
Additional
paid-in
capital
 
 
 5,288,997
 
 
 
 (5,288,997
)
 
 
 —  
 
Accumulated deficit
 
 
 (289,941
)
 
 
 (17,355,016
)
 
 
 (17,644,957
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total stockholders’ equity (deficit)
 
$
 5,000,001
 
 
$
 (22,644,239
)
 
$
 (17,644,238
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares subject to redemption
 
 
 26,485,576
 
 
 
 2,264,424
 
 
 
 28,750,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares not subject to redemptio
n
 
 
9,451,924 
 
 
 
(2,264,424
)
 
 
 
7,187,500
 
Financial Statements as of March 31, 2021 (per form
10-Q
filed on May 28, 2021)
 
 
  
 
 
 
  
 
 
 
  
 
Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
Class A common stock, subject to possible redemption ($)
 
$
 265,236,780
 
 
$
 22,263,220
 
 
$
 287,500,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A common stock—$0.0001 par value
 
$
 223
 
 
$
 (223
)
 
$
 —  
 
Class B common stock—$0.0001 par value
 
 
 719
 
 
 
 —  
 
 
 
 719
 
Additional
paid-in
capital
 
 
 4,907,981
 
 
 
 (4,907,981
)
 
 
 —  
 
Retained earnings (accumulated deficit)
 
 
 91,078
 
 
 
 (17,355,016
)
 
 
 (17,263,938
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total stockholders’ equity (deficit)
 
$
 5,000,000
 
 
$
 (22,263,220
)
 
$
 (17,263,220
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares subject to redemption
 
 
 26,523,678
 
 
 
 2,226,322
 
 
 
 28,750,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares not subject to redemptio
n
 
 
9,413,822
 
 
 
(2,226,322
)
 
 
 
7,187,500
 
Statement of Operations for the three months ended March 31, 2021
 
 
  
 
 
 
  
 
 
 
  
 
Weighted average redeemable Class A common stock outstanding
(1)
 
 
7,317,308
 
 
 
2,373,703
 
 
 
9,691,011
 
Basic and diluted net income per Class A common share
(1)
 
$
0.01
 
 
$
0.00
 
 
$
0.01
 
Weighted average non-redeemable Class B common stock
outstanding
 
 
—  
 
 
 
6,566,011
 
 
 
6,566,011
 
Basic and diluted net income per Class B common share
 
$
—  
 
 
$
0.01
 
 
$
0.01
 
Statement of Changes in Stockholders’ Equity (Deficit) for the three months ended March 31, 2021
(1)
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock, Class A—Share
s
 
 
2,226,322
 
 
 
(2,226,322
)
 
 
 
—
 
Statement of Cash Flows
 
for
 
the
 
three
 
months
 
ended
 
March 31,
 
2021
 
 
 
 
 
 
 
 
 
 
 
 
Initial value of common stock subject to possible redemptio
n
 
$
264,855,760
 
 
$
(264,855,760
)
 
$
—
 
Change in value of common stock subject to possible redemption
 
$
381,020
 
 
$
(381,020
)
 
$
—
 
Financial Statements as of June 30, 2021 (per form
10-Q
filed on August 16, 2021)
 
 
 
 
 
 
 
 
 
 
 
 
Balance Shee
t
 
 
 
 
 
 
 
 
 
 
 
 
Class A common stock, subject to possible redemption ($
)
 
$
 259,956,005
 
 
$
 27,549,705
 
 
$
 287,500,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class A common stock—$0.0001 par value
 
$
 276
 
 
 
 (276
)
 
 
 —  
 
Class B common stock—$0.0001 par value
 
 
 719
 
 
 
 —  
 
 
 
 719
 
Additional
paid-in
 
capital
 
 
 10,188,704
 
 
 
 (10,188,704
)
 
 
 —  
 
Accumulated deficit
 
 
 (5,189,694
)
 
 
 (17,355,016
)
 
 
 (22,544,710
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total stockholders’ equity (deficit)
 
$
 5,000,004
 
 
$
 (27,543,995
)
 
$
 (22,543,991
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares subject to redemption
 
 
 25,995,601
 
 
 
 2,754,399
 
 
 
 28,750,000
 
 
Number of shares not subject to redemptio
n
 
 
9,941,899
 
 
 
(2,754,399
)
 
 
7,187,500
 
Statement of Operations for the three months ended June 30, 2021
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average redeemable Class A common stock outstanding
(1)
 
 
9,413,822
 
 
 
19,336,178
 
 
 
28,750,000
 
Basic and diluted net loss per Class A common share
(1)
 
$
(0.56
)
 
$
0.41
 
 
$
(0.15
)
Weighted average non-redeemable Class B common stock
outstanding
 
 
—  
 
 
 
7,187,500
 
 
 
7,187,500
 
Basic and diluted net loss per Class B common share
 
$
—  
 
 
$
(0.15
 ) 
 
$
(0.15
)
 
8
 
  
As Reported
 
  
Adjustment
 
  
As
 
Restated
 
Statement of Operations for the six months ended June 30, 2021
  
      
  
      
  
      
Weighted average shares outstanding, Class A common stock subject to possible redemption
  
 
8,371,356
 
  
 
10,955,033
 
  
 
19,326,389
 
Basic and diluted net loss per share
  
$
(0.62
) 
  
$
0.42
 
  
$
(0.20
) 
Weighted average shares outstanding,
non-redeemable
common stock
  
 
—  
 
  
 
6,880,208
 
  
 
6,880,208
 
Basic and diluted net loss per share
  
$
—  
 
  
$
(0.20
) 
  
$
(0.20
) 
Statement of Changes in Stockholders’ Equity (Deficit) for the
three months ended June 30, 2021(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock, Class A—Shares
 
 
2,754,399
 
 
 
(2,754,399
)
 
 
—  
 
Change in Class A common stock subject to possible
redemption
 
 
5,280,776
 
 
 
(5,280,776
)
 
 
—  
Statement of Changes in Stockholders’ Equity (Deficit) for the 
six months ended June 30, 2021
(2)
  
      
  
      
  
      
Common Stock, Class A—Shares
  
 
2,754,399
 
  
 
(2,754,399
) 
  
 
—  
 
Statement of Cash Flows for the six months ended June 30,
2021
  
      
  
      
  
      
Initial value of common stock subject to possible redemption
  
$
264,855,760
 
  
$
(264,855,760
) 
  
$
—  
 
Change in value of common stock subject to possible
redemption
  
$
(4,899,756
) 
  
$
4,899,756
 
  
$
—  
 
 
 
(1)
The previously issued financial statements did not distinguish between redeemable and
non-redeemable
shares in the EPS calculation
(2)
The changes to the Common stock, Additional
Paid-in
Capital, Accumulated Deficit and Total Stockholders’ Equity (Deficit) line items shown in the Balance Sheet are also included in the restatement to the Statement of Changes in Stockholders’ Equity (Deficit)
9
Note 3— Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to
Form10-Q
and Article 8 of Regulation
S-X
of the U.S. Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and
 
cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on March 1, 2021, as well as th
e
 Company’s Current Reports on Form
8-K.
The accompanying condensed balance sheet as of December 31, 2020 has been derived from our audited financial statements included in that prospectus. The interim results for the three months and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,” as
 
defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2021 or December 31, 2020.
Marketable Securities Held in Trust Account
At September 30, 2021, the Trust Account had $287,510,052 held in marketable securities. During the period three months and nine months ended September 30, 2021, the Company did not withdraw any interest income from the Trust Account to pay its tax obligations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At September 30, 2021, the Company has not experienced losses on this
account.
 
10
Common Stock Subject to Possible Redemption
The Company accounts for
its
Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock are classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021, 28,750,000
shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’
equity (
deficit
)
section of the Company’s balance sheet. 
Net Income Per Share of Common Stock
The Company applies the two-class method in calculating earnings per share. The
 
contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net income per share of common stock is computed by dividing the pro rata net income between the shares of Class A common stock and the shares of Class B common stock by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted income per share does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable for 
22,125,000 shares of Class A common stock in the aggregate.
 
    
For the
Three Months
ended
September 30,
2021
     
For the
Nine Months
ended
September 30,
2021
  
Common stock subject to possible redemption
                  
Numerator:
                  
Net income allocable to Class A common stock subject to possible redemption
    $ 8,105,039      $ 3,773,670  
Denominator:
                  
Weighted Average Redeemable Class A common stock, Basic and Diluted
      28,750,000        22,536,630  
    
 
 
     
 
 
  
Basic and Diluted net income per share, Redeemable Class A common stock
    $ 0.28      $ 0.17  
    
 
 
     
 
 
  
Non-Redeemable
Ordinary shares
                  
Numerator:
                  
Net income allocable to Class B common stock not subject to redemption
    $ 2,026,260      $ 1,169,592  
Denominator:
                  
Weighted Average
Non-Redeemable
common stock, Basic and Diluted
      7,187,500        6,984,890  
    
 
 
     
 
 
  
Basic and diluted net income per share
    $ 0.28      $ 0.17  
    
 
 
     
 
 
  
Offering Costs
The Company complies with the requirements of the
ASC 340
-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A—“Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and that were charged to stockholders’ deficit upon the completion of the IPO. Accordingly, on September 30, 2021, offering costs totaling
$6,607,751
have been charged to stockholders’ deficit (consisting of
 $5,750,000 of underwriting fee and $857,751
of other offering costs). Of the total transaction cost,
$280,829
was
allocated
to
warrants
as a non-operating expense in the
condensed 
statement
s
of operations with the rest of the offering cost charged to stockholders’ deficit. The transaction costs were allocated based on the
with and without method
, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A common stock.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and
ASC
 
815-15.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period.
The Company accounts for its 22,125,000 common stock warrants issued in connection with its Initial Public Offering (14,375,000) and Private Placement (7,750,000)
as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed statements of operations. The fair value of warrants issued by the Company in connection with the Initial Public Offering and Private Placement had been estimated using Monte-Carlo simulations at the initial measurement date. However, for each subsequent measurement, beginning on April 19, 2021, the public warrants were measured at the Observable Quoted Price in Active Markets and the private warrants were measured using the Modified Black-Scholes Option Pricing Model.
 
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1
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
The difference between the effective rate of 0% and the statutory rate of 21% is attributable to the fact that the Company incurs a net loss before income tax.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not
to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company was incorporated in the state of Delaware and as such is subject to payment of franchise taxes there. As of September 30, 2021, $150,000 is accrued for this purpose in “Accounts payable and accrued expenses”
on the condensed balance sheet. 
The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Standards
In August 2020, the FASB issued ASU
2020-06,
Debt-Debt with Conversion and Other Options (Subtopic
470-20)
and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company is currently reviewing what impact, if any, adoption will have on the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
Note 4 — Initial Public Offering
Pursuant to the Initial Public Offering, the Company sold 28,750,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A Common Stock, par value $0.0001 per share, and
one-half
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A Common Stock at a price of $11.50 per share.
Note 5 — Private Placement Warrants
Simultaneously with the closing of the IPO, Flame Acquisition Sponsor, LLC a Delaware company (the “Sponsor”), Intrepid Financial Partners, LLC (an affiliate of one of the Company’s underwriters) (“Intrepid”) and FL
Co-Investment,
LLC (an affiliate of one
of the Company’s underwriters) (“FL Co-Investment”) collectively the (“Initial Stockholders”), purchased an aggregate of
7,750,000 Private Placement Warrants at a price of $1.00 per warrant ($7,750,000 in the aggregate),
and 
each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants was added to the proceeds from this offering to be held in the Trust Account.
Note 6 — Related Party Transactions
Founder Shares
In November 2020, our founders acquired 7,187,500 founder shares (the “Founder Shares”) for an aggregate purchase price of $25,000 (the “Class B common stock”), or approximately $0.0035 per share. The Sponsor purchased 4,671,875 Founder Shares, FL
Co-Investment
purchased 1,257,813 Founder Shares and Intrepid Financial Partners purchased 1,257,812 Founder Shares. Also in November 2020, the Sponsor transferred 434,375 Founder Shares to the independent director nominees and certain individuals, including Gregory D. Patrinely, the Company’s Chief Financial Officer and Secretary, at their original purchase price. Simultaneously with such transfer, each of FL
Co-Investment
and Intrepid Financial Partners transferred 13,125 Founder Shares to our sponsor, respectively, at their original purchase price.
The Initial Stockholders have agreed that, subject to certain limited exceptions, the Founder Shares will not be transferred, assigned, sold or released from escrow until the earlier of (A) one year after the completion of a Business Combination or (B)
 subsequent to a Business Combination. Notwithstanding the foregoing, if (x) the last reported sale price of the shares of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after a Business Combination, or (y) the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property, the converted Class A common stock will be released from the
lock-up
.
 
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2
Promissory Note — Related Party
On November 25, 2020, the Company issued an unsecured promissory note to the Initial Stockholders (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of
$300,000. The Promissory Note is
non-interest
bearing and payable on the earlier of (i) May 25, 2021 or (i) the consummation of the IPO. As of September 30, 2021, the Company had repaid the Promissory Note in full and no
 
additional
borrowings under such note are available.
On March 1, 2021, the Company issued an unsecured promissory note to the Sponsor (the “Updated Promissory Note”), pursuant to
 
which the Company may borrow up to an aggregate principal amount of $365,000. The Updated Promissory Note is
non-interest
bearing and payable on the consummation of the Company’s Business Combination. As of September 30, 2021, the Updated Promissory Note in the amount of $365,000 was fully drawn.
Working Capital Loans
In order to finance transaction costs in connection with a Business
 
Combination, the initial stockholders or an affiliate of the initial stockholders or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Comp
a
ny would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company, or convert them to warrants as described below. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In th
e
 event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30,2021, there were no borrowings under Working Capital Loans other than the $365,000 outstanding under the Updated Promissory Note as described above.
Note 7 — Commitments & Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Business Combination Marketing Agreement
The Company has engaged underwriters as advisors in connection with its business combination to assist it in holding meetings with the Company’s stockholders to discuss the potential business combination and the target business’s attributes, introduce it to potential investors that are interested in purchasing its securities in connection with the potential business combination, assist it in obtaining stockholder approval for the business combination and assist the Company with its press releases and public filings in connection with the business combination. The Company will pay the Marketing Fee (as defined in the Company’s registration statement on
Form S-1,
as amended, that was filed with the SEC on February 5, 2021) for such services upon the consummation of its initial business combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of the IPO, including the proceeds from the exercise of the over-allotment option.
Underwriters Agreement
On March 1, 2021, the Company paid a fixed underwriting discount of $0.20 per Unit, or $5,750,000 in the aggregate.
Note 8 — Stockholders’ Deficit
Preferred Stock
— The Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. At September 30, 2021, there were no shares of preferred stock issued or outstanding.
Class
 A Common Stock
— The Company is authorized to issue a total of 200,000,000 shares of Class A common stock at par value of $0.0001 each. At September 30, 2021, there were no shares issued and outstanding (excluding 28,750,000 shares subject to possible redemption)
Class
 B Common Stock
— The Company is authorized to issue a total of 20,000,000 shares of Class B common stock at par value of $0.0001 each. At September 30, 2021, there were 7,187,500
 
shares of Class B common stock issued or
outstanding.
 
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3
Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required by law.
The Class B common stock are identical to the shares of Class A common stock included in the units being sold in the IPO, and holders of Class B common stock have the same stockholder rights as public stockholders, except that (i) the Class B common stock are subject to certain transfer restrictions, as described in more detail below, (ii) our founders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (A) to waive their redemption rights with respect to any Class B common stock and any Public Shares held by them in connection with the completion of our Business Combination and (B) to waive their rights to liquidating distributions from the Trust Account with respect to any Class B common stock held by them if the Company fails to complete our Business Combination within the prescribed time period, although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if the Company fails to complete our Business Combination within such time period, (iii) the Class B common stock are shares of our Class B common stock that will automatically convert into shares of our Class A common stock at the time of our initial Business Combination, on a
one-for-one
basis, subject to adjustment pursuant to certain anti-dilution rights and (iv) are subject to registration rights. If the Company submits our Business Combination to our public stockholders for a vote, our Initial stockholders have agreed to vote any Class B common stock and any Public Shares purchased during or after the IPO in favor of our initial Business Combination.
With certain limited exceptions, the Class B common stock are not transferable, assignable or salable (except to our officers and directors and other persons or entities affiliated with our Sponsor, each of whom will be subject to the same transfer restrictions) until the earlier of (A) one year after the completion of our initial Business Combination or (B) subsequent to our initial Business Combination, (x) if the last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after our initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Note 9 — Warrants
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the IPO. The Public Warrants will expire five years from the completion of a Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable, and the Company will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. In addition, if the shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of the Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects to do so, the Company will not be required to file or maintain in effect a registration statement, but it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied the excess of the “fair market value” less the exercise price of the warrants by (y) the fair market value and (B) 0.361. The “fair market value” shall mean the volume weighted average price of the shares of Class A common stock for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received by the
warrant agent.
 
1
4
Redemption of Warrants For Cash
—Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants for cash:
 
  •  
in whole and not in part;
 
  •  
at a price of $0.01 per Public Warrant;
 
  •  
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
 
  •  
if, and only if, the last sale price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
If and when the warrants become redeemable by the Company, the Company may exercise its
 
redemption
 
right
 
even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. However, the Company will not redeem the warrants unless an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the
30-day
redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act.
Redemption of Warrants For Shares of Class
 A Common Stock
—commencing 90 days after the warrants become exercisable, the Company may redeem the outstanding warrants for shares of Class A common stock:
 
  •  
in whole and not in part;
 
  •  
at a price equal to a number of shares of Class A common stock to be determined by reference to the agreed table set forth in the warrant agreement based on the redemption date and the “fair market value” of the Class A common stock;
 
  •  
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
 
  •  
if, and only if, the last sale price of our Class A common stock equals or exceeds $10.00 per share (as adjusted per share splits, share dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
The exercise price and numbe
r
 of shares of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of shares of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s shares of Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company completes a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the Public Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices described above adjacent to “Redemption of Warrants For Cash” and “Redemption of Warrants For Shares of Class A Common Stock” will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the IPO, except that (x) the Private Placement Warrants and the shares of Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (y) the Private Placement Warrants will be exercisable on a cashless basis and be
non-redeemable
so long as they are held by the initial purchasers or their permitted transferees and (z) the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will be entitled to registration rights. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the
Public Warrants.
 
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5
Note 10 — Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
 
  •  
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
 
  •  
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
 
  •  
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
 
    
September 30,
2021
     
Quoted
Prices In
Active
Markets
(Level 1)
     
Significant
Other
Observable
Inputs
(Level 2)
     
Significant
Other
Unobservable
Inputs
(Level 3)
  
Assets:
                                    
Investment held in Trust Account
    $ 287,510,052      $ 287,510,052      $ —        $ —    
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ 287,510,052      $ 287,510,052      $ —        $ —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Liabilities:
                                    
Private Placement Warrants
   
$
 4,126,875     
$
 —          —        $ 4,126,875  
Public Warrants
      8,625,000        8,625,000        —          —    
    
 
 
     
 
 
     
 
 
     
 
 
  
Total Warrant Liability
    $ 12,751,875      $ 8,625,000      $ —        $ 4,126,875  
    
 
 
     
 
 
     
 
 
     
 
 
  
Public Warrants were transferred from Level 3 to Level 1 during the quarter ended June 30, 2021 at a value of $
15,381,250.
The fair value of warrants issued by the Company in connection with the Public Offering and Private Placement had been estimated using Monte-Carlo simulations at the initial measurement date. However, for each subsequent measurement, the public warrants were measured at the Observable Quoted Price in Active Markets and the private warrants were measured using the Modified Black-Scholes Optional Pricing Model. The estimated fair value of the private warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury
zero-coupon
yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The aforementioned warrant liabilities are not subject to qualified hedge accounting.
The following table provides quantitative information regarding Level 3 fair value measurements used to determine the fair value of the Private Placement Warrants and the Public Warrants as of Initial Measurement (March 5, 2021), and the fair value of the Private Placement Warrants as of September 30, 2021.
 
 
  
March 5,
2021
(Initial
Measurement)
 
 
September 30,
2021
 
Stock price
    $ 9.62     $ 9.72  
Strike price
    $ 11.50     $ 11.50  
Term (in years)
      5.50       5.42  
Volatility
      15.0 %      11.3 % 
Risk-free rate
      0.81 %      1.05 % 
Dividend yield
      0.00 %      0.00 % 
 
1
6
The following table presents the changes in the fair value of warrant liabilities:
 
    
Public
     
Private
Placement
     
Warrant
Liabilities
  
Fair value as of December 31, 2020
    $ —        $ —        $ —    
Initial measurement on March 1, 2021
      12,218,750        6,583,625        18,802,375  
Change in valuation inputs or other assumptions
      (287,500 )       (189,875 )       (477,375 ) 
    
 
 
     
 
 
     
 
 
  
Fair value as of March 31, 2021
    $ 11,931,250      $ 6,393,750      $ 18,325,000  
Change in valuation inputs or other assumptions
      3,450,000        1,410,500        4,860,500  
    
 
 
     
 
 
     
 
 
  
Fair value as of June 30, 2021
    $ 15,381,250      $ 7,804,250      $ 23,185,500  
Change in valuation inputs or other assumptions
      (6,756,250 )       (3,677,375 )       (10,433,625 ) 
    
 
 
     
 
 
     
 
 
  
Fair value as of September 30, 2021
    $ 8,625,000      $
4,126,875
      $ 12,751,875  
Note 11 — Subsequent Events
The Company evaluated subsequent events and transactions that
 
occurred
 
after the
 
balance sheet date through the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events, that would have required adjustment or disclosure in the condensed financial statements.
 
1
7
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Flame Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to Flame Acquisition Sponsor LLC, and references to our “founders” refer collectively to the Sponsor, FL
Co-Investment
LLC (“FLC”) and Intrepid Financial Partners, L.L.C. (“IFP”). The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report on
Form 10-Q
including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Delaware corporation on October 16, 2020 and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (the “Business Combination”). We intend to effectuate our initial Business Combination using cash from the proceeds of the initial public offering (the “Initial Public Offering”), the sale of the Private Placement Warrants (as defined below), our capital stock, debt or a combination of cash, stock and debt.
Results of Operations
We have neither engaged in any operations (other than searching for a Business Combination after our Initial Public Offering) nor generated any revenues to date. Our only activities from October 16, 2020 (inception) through September 30, 2021 were organizational activities and those necessary to prepare for the Initial Public Offering, as well as expenses related to searching for a target for a Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We expect to generate
non-operating
income in the form of interest income on the proceeds derived from the Initial Public Offering and placed in our Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the nine months ended September 30, 2021, we had a net income of $4,943,262. We incurred $836,461 of formation and operating costs consisting mostly of general and administrative expenses as well as offering costs allocated to warrants of $280,829. We had interest income of $10,052 on our amounts held in the Trust Account for the nine months ended September 30, 2021.
For the three months ended September 30, 2021, we had a net income of $10,131,299. We incurred $306,668 of formation and operating costs consisting mostly of general and administrative expenses. We had interest income of $4,342 on our amounts held in the Trust Account for the three months ended September 30, 2021.
 
18
Liquidity and Capital Resources
As of September 30, 2021, we had cash of $295,159. Until the consummation of the Initial Public Offering, our only sources of liquidity were an initial purchase of common stock by our founders and a loan from our Sponsor, FLC and IFP.
On March 1, 2021, we consummated the Initial Public Offering of 28,750,000 Units at a price of $10.00 per Unit, including 3,875,000 Units sold pursuant to the full exercise of the underwriters’ option to purchase additional Units to cover over-allotments, generating gross proceeds of $287,500,000. Simultaneously with the closing of the Initial Public Offering, we completed the private sale of an aggregate of 7,750,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant to the Sponsor, FLC, IFP and certain individuals (together, the “Initial Investors”), generating gross proceeds of $7,750,000.
Following the Initial Public Offering and the sale of the Private Placement Warrants, a total of $287,500,000 was placed in a trust account (the “Trust Account”) and we had $776,893 of cash held outside of the Trust Account, after payment of accrued costs related to the Initial Public Offering, available for working capital purposes. We paid a total of $5,750,000 in underwriting discounts and commissions and $857,751 for other offering costs related to the Initial Public Offering. In addition, the underwriters could receive up to $10,062,500 under a Business Combination Marketing Agreement upon the consummation of a Business Combination.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account to complete our Business Combination. We may withdraw interest to pay franchise and income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account after any redemptions will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts, or convert them to warrants as discussed below. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period.
On March 1, 2021, the Company issued an unsecured promissory note to the Sponsor (the “Updated Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $365,000. The Updated Promissory Note is
non-interest
bearing and payable on the consummation of the Company’s Business Combination. As of September 30, 2021, the Updated Promissory Note was fully drawn down. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-Balance
Sheet Arrangements
We did not have any
off-balance
sheet arrangements as of September 30, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters could receive up to $0.35 per Unit, or $10,062,500 in the aggregate, pursuant to the Business Combination Marketing Agreement. The deferred fee will be waived by the underwriters in the event that the Company does not complete a Business Combination, subject to the terms of the underwriting agreement.
 
19
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. We have identified the following critical accounting policies effecting our financial statements:
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The investments held in the Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income from investments held in the Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification Topic 480, “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable shares of Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. Our shares of Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, as of September 30, 2021, 28,750,000 shares of Class A common stock subject to possible redemption were presented as temporary equity, outside of the stockholders’ deficit section of our unaudited condensed balance sheet.
Net Income per Share of Common Stock
The Company applies the
two-class
method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend of the purposes of the numerator in the earnings per share calculation. Net income per share of common stock is computed by dividing the pro rata net loss between the shares of Class A common stock and the shares of Class B common stock by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted income per share does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
Offering Costs
Offering costs consist of legal, accounting, underwriting and other costs incurred through the condensed balance sheet date that are directly related to the Initial Public Offering. Upon the completion of the Initial Public Offering in March 2021, the offering costs are allocated between stockholders’ deficit and other expenses based on the fair value of warrant liabilities relative to the Initial Public Offering proceeds recognized in stockholders’ deficit.
Warrant Liability
The Company accounts for the warrants in accordance with the guidance contained in ASC
815-40-15-7
D and 7 F under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to
re-measurement
at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed statements of operations. The fair value of warrants issued by the Company in connection with the Initial Public Offering and Private Placement had been estimated using Monte-Carlo simulations at the initial measurement date. However, for each subsequent measurement, the Public Warrants were measured at the Observable Quoted Price in Active Markets and the Private Warrants were measured using the Modified Black-Scholes Option Pricing Model.
 
20
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company is currently reviewing what impact, if any, adoption will have on the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2021, we were not subject to any market or interest rate risk. The net proceeds from our Initial Public Offering held in the Trust Account have been invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7
under the Investment Company Act that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
 
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2021, as such term is defined in
Rules13a-15(e)
and
15d-15(e)
under the Exchange Act. Based on this evaluation, our management, including our principal executive officer and principal financial and accounting officer, concluded that, due to the previous material weakness in our internal control over financial reporting described in our Quarterly Report on Form 10-Q under Item 4 (Controls and Procedures) as filed with the SEC on May 28, 2021, and due to the restatements of our March 1, 2021, March 31, 2021, and June 30, 2021 financial statements (the “restatements”) regarding the classification of redeemable Class A Shares, as described below, we continue to have a material weakness in our internal control over financial reporting of complex financial instruments. As a result of this material weakness in our internal control over financial reporting, we believe that our disclosure controls were not effective as of September 30, 2021. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Regarding the restatements to the March 31, 2021, and June 30, 2021 quarterly financial statements included in the Company’s Form 10-Qs, as well as the Company’s balance sheet included on the Company’s Form 8-K, these were necessitated by the fact that the Company’s shares are complex equity instruments with certain redemption provisions not solely within the control of the Company that require all common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of the Class A common stock in permanent equity. The Company revised its financial statements to classify all Class A common stock as temporary equity and any related impact, as the threshold in its charter would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent equity.
It is noted that the non-cash adjustments to the financial statement do not impact the amounts previously reported for our cash and cash equivalents or total assets. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than the circumstances that led to the reclassification of redeemable Class A Shares, as described in Note 2 — Restatement of Previously Issued Financial Statements. In light of the restatements, we continue to enhance our processes and procedures to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans for enhancement include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
 
21
PART II—OTHER INFORMATION
 
Item 1.
Legal Proceedings.
None.
 
Item 1A.
Risk Factors.
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our final prospectus filed with the SEC on February 26, 2021 and our Quarterly Report on
Form 10-Q
filed with the SEC on August 16, 2021 (the “Q2 10-Q”). As of the date of this Report, there have been no material changes to the risk factors disclosed in our final prospectus or Q2 10-Q filed with the SEC.
 
22
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
None.
 
Item 3.
Defaults Upon Senior Securities.
None.
 
Item 4.
Mine Safety Disclosures.
Not Applicable.
 
Item 5.
Other Information.
None.
 
23
Item 6.
Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on
Form10-Q.
 
No.
   
Description of Exhibit
31.1*    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*    Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*    XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.CAL*    Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH*    Inline XBRL Taxonomy Extension Schema Document
101.DEF*    Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*    Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*    Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
*
Filed herewith.
**
Furnished.
 
24
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   
FLAME ACQUISITION CORP.
Date: November 22, 2021     By:  
/s/ James C. Flores
    Name:   James C. Flores
    Title:  
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 22, 2021     By:  
/s/ Gregory D. Patrinely
    Name:   Gregory D. Patrinely
    Title:  
Chief Financial Officer and Secretary
(Principal Accounting Officer and Principal Financial Officer)
 
 
25
TABLE OF CONTENTS
Part I. Financial InformationNote 1 Organization, and Business OperationsNote 2 Restatement Of Previously Issued Financial StatementsNote 2 RestatementNote 2 RNote 3 Significant Accounting PoliciesNote 4 Initial Public OfferingNote 5 Private Placement WarrantsNote 6 Related Party TransactionsNote 7 Commitments & ContingenciesNote 8 Stockholders DeficitNote 9 WarrantsNote 10 Fair Value MeasurementsNote 11 Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits

Exhibits

31.1* Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules13a-14(a)and15(d)-14(a),as adopted Pursuant to Section302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules13a-14(a)and15(d)-14(a),as adopted Pursuant to Section302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section1350, as adopted Pursuant to Section906 of the Sarbanes-Oxley Act of 2002 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section1350, as adopted Pursuant to Section906 of the Sarbanes-Oxley Act of 2002