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Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☒ No
☐
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-2 of the Exchange Act.
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
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
As of March 31, 2021 (the last business
day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the common stock held by non-affiliates
of the registrant was approximately $122,698,349 (based on the closing sales price of the Class A common stock on March 31, 2021 of $9.7581,
as reported on the Nasdaq Capital Market).
As of November 29, 2021, the day prior
to effecting the Codere Business Combination (as defined below), there were 12,870,000
shares of Class A common stock, par value $0.0001 per share, and 3,125,000
shares of Class B common stock, par value $0.0001 per share, issued and outstanding. As of February 16, 2022, there were 100
shares of common stock, par value $0.01 per share, issued and outstanding.
References throughout this Annual Report
on Form 10-K to “we,” “us,” “our,” “the company” or “our company” are
to Codere Online U.S. Corp. (f/k/a DD3 Acquisition Corp. II), unless the context otherwise requires.
Subsequent to the period covered by this
report, on November 30, 2021, the merger of our company and Codere Online U.S. Corp., a Delaware corporation (“Merger Sub”),
was completed pursuant to the terms of the Business Combination Agreement, dated June 21, 2021 (the “Business Combination Agreement”),
by and among our company, Codere Newco, S.A.U., a corporation (sociedad anónima unipersonal) registered and incorporated
under the laws of Spain (“Codere Newco”), Servicios de Juego Online S.A.U., a corporation (sociedad anónima unipersonal)
registered and incorporated under the laws of Spain (“SEJO”), Codere Online Luxembourg, S.A., a limited liability company
(société anonyme) governed by the laws of the Grand Duchy of Luxembourg (“Holdco”), and Merger Sub, which
among other things provided for the merger of Merger Sub with and into our company, with our company surviving such merger. In connection
with the consummation of the business combination contemplated by the Business Combination Agreement (the “Codere Business Combination”),
our company was renamed “Codere Online U.S. Corp.” and became a direct, wholly-owned subsidiary of Holdco.
Unless otherwise stated in
this Annual Report on Form 10-K (this “report”) or the context otherwise requires:
Certain statements in this
report may constitute “forward-looking statements” for purposes of the federal securities laws, including, without limitation,
statements under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our
forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs,
intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations
of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,”
“should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words
does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements
about:
The forward-looking statements
contained in this report are based on our expectations and beliefs as of the date of this report concerning future developments and their
potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may
cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These
risks and uncertainties include, but are not limited to, those factors described under “Item 1A. Risk Factors” and elsewhere
in this report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual
results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under
applicable securities laws.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities.
Market Information
As of September 30, 2021,
our units, Class A common stock and warrants traded on the Nasdaq Capital Market under the symbols “DDMXU,” “DDMX”
and “DDMXW,” respectively. Each unit consisted of one share of Class A common stock and one-half of one warrant. Our units
commenced public trading on December 8, 2020, and our Class A common stock and warrants commenced separate public trading on January 27,
2021. On November 30, 2021, the Nasdaq Stock Market LLC filed a Form 25 (Notification of Removal from Listing) with the SEC relating to
the delisting of our units, Class A common stock and warrants. As a result, our units, Class A common stock and warrants are no longer
listed on the Nasdaq.
Holders of Record
On September 30, 2021, there
were approximately six holders of record of our units, one holder of record of our Class A common stock, one holder of record of our Class
B common stock and one holder of record of our warrants. Such numbers do not include beneficial owners holding our securities through
nominee names. As of February 16, 2022, Holdco was the sole holder of record of our common stock.
Dividends
The Company has never declared or paid cash dividends
on its common stock and does not anticipate paying cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
On October 13, 2020, we issued
2,875,000 founder shares to our sponsor for an aggregate purchase price of $25,000, or approximately $0.009 per share, in connection with
our organization. On December 7, 2020, we effected a stock dividend of 287,500 shares with respect to our Class B common stock, resulting
in there being an aggregate of 3,162,500 founder shares outstanding. On December 10, 2020, in connection with the underwriters’
partial exercise of their over-allotment option and waiver of the remaining portion of such option, simultaneously with the consummation
of our initial public offering, our sponsor forfeited an aggregate of 37,500 founder shares to us at no cost, and 3,125,000 founder shares
remain outstanding at September 30, 2021, representing an adjusted purchase price of approximately $0.008 per share.
Simultaneously with the consummation
of our initial public offering, including the partial exercise of the over-allotment option, we consummated the private placement of an
aggregate of 370,000 private units to our sponsor and the forward purchase investors at a price of $10.00 per private unit, generating
total proceeds of $3,700,000. Among the private units, our sponsor purchased an aggregate of 296,000 private units and the forward purchase
investors purchased an aggregate of 74,000 private units. The private units were identical to the units sold in our initial public offering,
except that if held by the initial purchasers or their permitted transferees, the underlying private warrants (i) may have been exercised
on a cashless basis and (ii) were not subject to redemption. If the private units were held by holders other than the initial purchasers
or their permitted transferees, then the private warrants would have been redeemable by us and exercisable by the holders on the same
basis as the warrants included in the units sold in our initial public offering. In addition, the private units (and the securities underlying
the private units) were not transferable, assignable or salable until after the completion of our initial business combination, subject
to certain limited exceptions.
In connection with the Codere
Business Combination, (i) Baron elected to purchase an aggregate of 2,500,000 shares of the Company’s Class A common stock for an
aggregate purchase price of $25,000,000, at a price of $10.00 per each share of the Company’s Class A common stock, pursuant to
the terms of the Forward Purchase Agreement, dated as of November 17, 2020, by and between the Company and Baron, as amended on June 21,
2021 (the “Baron Forward Purchase Agreement”), and (ii) MG elected to purchase an aggregate of 2,500,000 shares of the Company’s
Class A common stock for an aggregate purchase price of $25,000,000, at a price of $10.00 per each share of the Company’s Class
A common stock, pursuant to the terms of the Forward Purchase Agreement, dated as of November 19, 2020, by and between DD3 and MG, as
amended on June 21, 2021 (the “MG Forward Purchase Agreement”), in each case in a private placement that occurred immediately
prior to the Merger.
Contemporaneously with the
execution and delivery of the Business Combination Agreement, the Company entered into two separate Subscription Agreements with DD3 Capital
Partners S.A. de C.V. (“DD3 Capital”) and Larrain Investment Inc. (“Larrain”) (the “Subscription Agreements”),
in each case to which Holdco is also a party, pursuant to which the Company issued and sold, in a private placement that closed immediately
prior to the Merger, (i) an aggregate of 500,000 shares of the Company’s Class A common stock, for an aggregate purchase price of
$5,000,000, at a price of $10.00 per each share of the Company’s Class A common stock, to DD3 Capital and its permitted transferees,
and (ii) an aggregate of 1,224,000 shares of the Company’s Class A common stock, for an aggregate purchase price of $12,240,000,
at a price of $10.00 per each share of the Company’s Class A common stock, to Larrain and its permitted transferees.
The foregoing issuances were
made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. No underwriting discounts or commissions
were paid with respect to such issuances.
In connection with the Merger,
all shares of the Company’s Class A common stock issued and outstanding immediately prior to the Merger Effective Time, but after
the Class B Conversion, were contributed to Holdco in exchange for the Merger Consideration in the form of one Holdco Ordinary Share for
each share of the Company’s Class A common stock pursuant to the Holdco Capital Increase, as set forth in the Business Combination
Agreement. As of the Merger Effective Time, each warrant of the Company that was outstanding immediately prior to the Merger Effective
Time no longer represented a right to acquire one share of the Company’s DD3 Class A common stock and instead represented the right
to acquire one Holdco Ordinary Share on substantially the same terms.
Use of Proceeds
On December 10, 2020, we
consummated our initial public offering of 12,500,000 units, inclusive of 1,500,000 units sold to the underwriters upon the underwriters’
election to partially exercise their over-allotment option, at a price of $10.00 per unit, generating total gross proceeds of $125,000,000.
Each unit consists of one share of Class A common stock and one-half of one redeemable warrant, each whole warrant entitling the holder
thereof to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment. The warrants will
become exercisable 30 days after the consummation of our initial business combination and will expire five years after the consummation
of our initial business combination, or earlier upon redemption or liquidation.
EarlyBirdCapital acted as
sole book-running manager of our initial public offering. The securities in the offering were registered under the Securities Act on registration
statements on Form S-1 (File Nos. 333-250212 and 333-251190). The registration statements became effective on December 7, 2020.
We paid a total of $2,500,000
in underwriting discounts and commissions and $466,508 for other costs and expenses related to our initial public offering. Concurrent
with the closing of our initial public offering, we repaid our sponsor $105,747 in satisfaction of an outstanding loan.
After deducting the underwriting
discounts and commissions and the offering expenses, the total net proceeds from our initial public offering, including the partial exercise
of the over-allotment option, and the private placement of private units was $125,733,492, of which $125,000,000 was placed in the trust
account.
For a description of the
use of the proceeds generated in our initial public offering, see “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of this report. There has been no material change in the planned use of proceeds from our initial
public offering as described in our final prospectus filed with the SEC on December 10, 2020.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements
and the notes related thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking
Statements,” “Item 1A. Risk Factors” and elsewhere in this report.
Overview
As of September 30, 2021,
we were a blank check company formed under the laws of the State of Delaware on September 30, 2020. We were incorporated for the purpose
of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar
business combination with one or more businesses or entities. On June 21, 2021, we entered into the Business Combination Agreement and
on November 30, 2021 the Codere Business Combination was consummated.
Recent Developments
Codere Business Combination
On June 21, 2021, we entered
into the Business Combination Agreement with Codere Newco, SEJO, Holdco and Merger Sub, which provided for the Codere Business Combination
that resulted, among other things, in the Company and SEJO becoming wholly-owned subsidiaries of Holdco. In connection with the Codere
Business Combination, Holdco filed the Form F-4 with the SEC that includes a proxy statement with respect to our special meeting of stockholders
which was held on November 18, 2021 to approve the Business Combination Agreement, among other matters, as well as a prospectus of Holdco
with respect to the issuance of Holdco securities in the Codere Business Combination.
On November 30, 2021, the
Nasdaq Stock Market LLC filed a Form 25 (Notification of Removal from Listing) with the SEC relating to the delisting of our units, warrants
and Class A common stock. As a result, our units, warrants and Class A common stock were delisted on the Nasdaq. On December 14, 2021,
we filed a Form 15 certifying the deregistration of our units, warrants and Class A common stock under Section 12(g) of the Exchange Act
and suspension of our duty to file reports under Sections 13 and 15(d) of the Exchange Act. The Company’s reporting obligations
under Section 15(d) of the Exchange Act have been suspended.
Business Combination Agreement
Pursuant to the Business Combination Agreement,
following the effectiveness of the transactions contemplated by the Exchange at the Exchange Effective Time and the Merger on the Merger
Effective Time, the parties consummated the Codere Business Combination and SEJO and the Company became direct wholly-owned subsidiaries
of Holdco. Pursuant to the Business Combination Agreement, each of the following transactions occurred in the following order:
| |
● |
pursuant to the Contribution and Exchange Agreement, Codere Newco, effective on the Exchange Effective Time, contributed its SEJO Ordinary Shares constituting all the issued and outstanding share capital of SEJO to Holdco in exchange for additional Holdco Ordinary Shares, which were subscribed for by Codere Newco. As a result of the Exchange, SEJO became a wholly-owned subsidiary of Holdco and Holdco continued to be a wholly-owned subsidiary of Codere Newco at the Exchange Effective Time; |
| |
● |
after the Exchange and immediately prior to the Merger Effective Time, each share of the Company’s Class B common stock automatically converted into and exchanged for one share of the Company’s Class A common stock pursuant to the Class B Conversion; |
| |
● |
on the Closing Date, pursuant to the Merger, Merger Sub merged with and into the Company, with the Company surviving such merger and becoming a direct wholly-owned subsidiary of Holdco and, in connection therewith, the Company’s corporate name changed to “Codere Online U.S. Corp.”; |
| |
● |
in connection with the Merger, all shares of the Company’s Class A common stock issued and outstanding immediately prior to the Merger Effective Time, but after the Class B Conversion, were contributed to Holdco in exchange for the Merger Consideration (as defined in the Business Combination Agreement) in the form of one Holdco Ordinary Share for each share of the Company’s Class A common stock pursuant to the Holdco Capital Increase, as set forth in the Business Combination Agreement; and |
| |
● |
as of the Merger Effective Time, each warrant of the Company that was outstanding immediately prior to the Merger Effective Time no longer represented a right to acquire one share of the Company’s DD3 Class A common stock and instead represented the right to acquire one Holdco Ordinary Share on substantially the same terms. |
Codere Newco held 30,000,000 Holdco Ordinary Shares
upon consummation of the Exchange.
At the Merger Effective Time,
each share of the Company’s Class A common stock issued and outstanding immediately prior to the Merger Effective Time was exchanged
for one validly issued and fully paid Holdco Ordinary Share.
The terms of the Business
Combination Agreement and other related ancillary agreements entered into in connection with the closing of the Codere Business Combination
(the “Closing”) are summarized in more detail in our Current Report on Form 8-K filed with the SEC on June 22, 2021 and in
the Form F-4.
Warrant Amendment Agreement
In connection with the Closing
of the Codere Business Combination, the Company, Holdco and Continental Stock Transfer & Trust Company, as warrant agent, entered
into an agreement at Closing (the “Warrant Amendment Agreement”) to amend the warrant agreement, dated as of December 7, 2020,
by and between the Company and Continental, as warrant agent, governing the Company’s warrants entered into by the Company, Holdco
and Continental, as warrant agent (the “Original Warrant Agreement”), pursuant to which, among others, as of the Merger Effective
Time, (i) each of the issued Company’s warrants that was outstanding immediately prior to the Merger Effective Time ceased to represent
a right to acquire one share of the Company’s Class A common stock and instead represented the right to acquire one Holdco Ordinary
Share on substantially the same terms as set forth in the Original Warrant Agreement and (ii) the Company assigned to Holdco all of the
Company’s right, title and interest in and to the Original Warrant Agreement and Holdco assumed, and agreed to pay, perform, satisfy
and discharge in full, all of the Company’s liabilities and obligations under the Original Warrant Agreement arising from and after
the Merger Effective Time.
Subscription Agreements
Contemporaneously with the
execution and delivery of the Business Combination Agreement, the Company entered into two separate Subscription Agreements with DD3 Capital
and Larrain, in each case to which Holdco is also a party, pursuant to which the Company issued and sold, in a private placement that
closed immediately prior to the Merger, (i) an aggregate of 500,000 shares of the Company’s Class A common stock, for an aggregate
purchase price of $5,000,000, at a price of $10.00 per each share of the Company’s Class A common stock, to DD3 Capital and its
permitted transferees, and (ii) an aggregate of 1,224,000 shares of the Company’s Class A common stock, for an aggregate purchase
price of $12,240,000, at a price of $10.00 per each share of the Company’s Class A common stock, to Larrain and its permitted transferees
(collectively, the “PIPE” and the shares of the Company’s Class A common stock issued in connection with the PIPE, the
“PIPE Shares”).
Forward Purchase Agreements
In connection with the Codere
Business Combination, (i) Baron elected to purchase an aggregate of 2,500,000 shares of the Company’s Class A common stock for an
aggregate purchase price of $25,000,000, at a price of $10.00 per each share of the Company’s Class A common stock, pursuant to
the terms of the Baron Forward Purchase Agreement, and (ii) MG elected to purchase an aggregate of 2,500,000 shares of the Company’s
Class A common stock for an aggregate purchase price of $25,000,000, at a price of $10.00 per each share of the Company’s Class
A common stock, pursuant to the terms of the MG Forward Purchase Agreement, in each case in a private placement that occurred immediately
prior to the Merger. Among other terms, (i) we agreed not to enter into any agreement with any other investor or prospective investor
on terms that are more favorable to such other investor or prospective investor than the terms provided to Baron or MG, as applicable,
and (ii) certain closing conditions were amended in part to align with the closing conditions in the Business Combination Agreement, including
that the terms of the Business Combination Agreement (as the same existed on the date of the amendments to the forward purchase agreements)
shall not have been amended or modified in a manner, and no waiver thereunder shall have occurred, that would reasonably be expected to
be materially adverse to the economic benefits that Baron or MG would reasonably expect to receive under their respective forward purchase
agreement, without Baron’s or MG’s written consent, as applicable.
Baron Support Agreement
Contemporaneously with the
execution and delivery of the Business Combination Agreement, we entered into the Investor Support Agreement with Baron (the “Baron
Support Agreement”), pursuant to which Baron irrevocably waived its redemption rights with respect to 996,069 public shares acquired
by Baron in our initial public offering (the “Baron IPO Shares”) and agreed not to (a) redeem, or exercise any of its redemption
rights with respect to, any Baron IPO Shares in connection with our special meeting of stockholders to approve the Business Combination
Agreement and the Codere Business Combination and (b) to certain transfer restrictions with respect to the Baron IPO Shares. The Baron
Support Agreement and the obligations of Baron under the Baron Support Agreement automatically terminated upon the Closing of the Codere
Business Combination. The Baron Support Agreement was subject to customary conditions, covenants, representations and warranties.
Pursuant to the Business
Combination Agreement, we undertook not to amend, modify, waive or otherwise change any of the Baron Support Agreement, Forward Purchase
Agreements and Subscription Agreements without the prior written consent of SEJO, such consent not to be unreasonably withheld, delayed
or conditioned.
Results of Operations
We have neither engaged in
any operations nor generated any revenues as of the end of the period covered by this report. Our only activities through September 30,
2021 were organizational activities, those necessary to prepare for our initial public offering, described below, and, after our initial
public offering, identifying a target company for our initial business combination. We do not expect to generate any operating revenues.
At September 30, 2021, we generate non-operating income in the form of interest income on marketable securities held in the trust account,
and 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 in connection with searching for, and completing, our initial business combination, including the Codere
Business Combination.
For the period from September
30, 2020 (inception) through September 30, 2021, we had a net loss of $1,580,128, which consisted of operating costs of $1,521,995, a change
in fair value of warrant liability of $114,700 offset by interest earned on marketable securities held in the trust account of $50,181
and an unrealized gain on marketable securities held in the trust account of $6,386.
Liquidity and Management’s Plan
Until the consummation of
our initial public offering, our only source of liquidity was an initial purchase of founder shares by our sponsor and loans from our
sponsor.
On December 10, 2020, we
consummated our initial public offering of 12,500,000 units, at $10.00 per unit, which included the partial exercise by the underwriters
of their over-allotment option in the amount of 1,500,000 units, generating gross proceeds of $125,000,000. Simultaneously with the closing
of our initial public offering, we consummated the private placement of an aggregate of 370,000 private units to our sponsor and the forward
purchase investors at a price of $10.00 per private unit, generating gross proceeds of $3,700,000.
Following our initial public
offering, including the partial exercise of the over-allotment option, and the private placement, a total of $125,000,000 was placed in
the trust account. We incurred $2,966,508 in transaction costs, including $2,500,000 of underwriting fees and $466,508 of other offering
costs.
For the period from September
30, 2020 (inception) through September 30, 2021, net cash used in operating activities was $530,132. Net loss of $1,580,128 was affected
by interest earned on marketable securities held in the trust account of $50,181 and an unrealized gain on marketable securities held
in the trust account of $6,386, offset by a change in fair value of warrant liability of $114,700 and offering costs allocable to warrant
liability of $396. Changes in operating assets and liabilities used $991,467 of cash for the period.
As of September 30, 2021,
we had marketable securities held in the trust account of $125,056,567 (including approximately $50,181 of interest income, net of unrealized
gain) consisting of securities held in a money market fund that invests in U.S. Treasury securities with a maturity of 185 days or less.
Interest income on the balance in the trust account may be used by us to pay taxes. Through September 30, 2021, we did not withdraw any
interest earned on the trust account to pay our taxes. We used substantially all of the funds held in the trust account, including any
amounts representing interest earned on the trust account (less income taxes payable), to complete our initial business combination and
to pay our expenses relating thereto, including a fee payable to EarlyBirdCapital upon consummation of our initial business combination
for assisting us in connection with our initial business combination, as described below.
As of September 30, 2021,
we had cash of $268,360 held outside the trust account. We used 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 our initial business combination.
Management believed that the
funds which the Company had available at September 30, 2021 were insufficient to sustain operations for a period of at least one (1) year
from the issuance date of this financial statement. Accordingly, substantial doubt about the Company’s ability to continue as a
going concern existed.
On June 21, 2021, the Company
entered into the Business Combination Agreement and subsequently on November 30, 2021, the Codere Business Combination closed, which
provided the Company access to additional capital that is sufficient to sustain operations and meet obligations as they become due within
one year. As such, substantial doubt has been alleviated.
Off-Balance Sheet Arrangements
We did not have any off-balance
sheet arrangements as of September 30, 2021.
Contractual Obligations
As of September 30, 2021,
we did not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other
long-term liabilities, other than an agreement to pay our sponsor a monthly fee of $10,000 for office space, utilities and administrative
support. We began incurring these fees on December 7, 2020 and continued to incur these fees monthly until the Closing.
We engaged EarlyBirdCapital
as an advisor in connection with our initial business combination to assist us in holding meetings with our stockholders to discuss the
potential business combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing
our securities in connection with our initial business combination, assist us in obtaining stockholder approval for our initial business
combination and assist us with our press releases and public filings in connection with our initial business combination. We paid EarlyBirdCapital
a cash fee for such services upon the consummation of our initial business combination in an amount of 3.5% of the gross proceeds of our
initial public offering, or $4,375,000.
We are also party to the
forward purchase agreements and have entered into the Business Combination Agreement, the Subscription Agreements and the Baron Support
Agreement in connection with the Codere Business Combination, among other agreements in connection with the Codere Business Combination,
as described above.
Critical Accounting Policies
The preparation of condensed financial statements
and related disclosures in conformity with United States generally accepted accounting principles (“GAAP”) 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from
those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the private
warrants in accordance with the guidance contained in Accounting Standards Codification (“ASC”) 815 under which the private
warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Under ASC 815-40, the private warrants are
not indexed to our common stock in the manner contemplated by ASC 815-40 because the holder of the instrument is not an input into the
pricing of a fixed-for-fixed option on equity shares. Accordingly, we classify the private warrants as liabilities at their fair value
and adjust the private warrants to fair value at each reporting period. These liabilities are subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in our statement of operations. The private warrants are valued
using a modified Black Scholes model.
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 ASC Topic 480 “Distinguishing Liabilities from
Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured
at fair value. Conditionally redeemable common stock (including common stock that features 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) is classified as
temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly,
at September 30, 2021, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside
of the stockholders’ equity section of our condensed balance sheet.
Net Loss Per Common Share
Net loss per share is computed
by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Shares of common stock subject
to possible redemption at September 30, 2021, which are not currently redeemable and are not redeemable at fair value, have been excluded
from the calculation of basic net loss per common share since such shares, if redeemed, only participate in their pro rata share of the
trust account earnings. We have not considered the effect of the public warrants or the private warrants in the calculation of diluted
loss per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants
would be anti-dilutive. As a result, diluted net loss per common share is the same as basic net loss per common share for the periods
presented.
Recent Accounting Standards
In August 2020, the Financial
Accounting Standards Board issued ASU No. 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. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early
adoption permitted. We are currently assessing the impact, if any, that ASU 2020-06 would have on our financial position, results of operations
or cash flows.
Management does not believe
that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.
We are a smaller reporting
company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 8. Financial Statements and Supplementary
Data.
Our financial statements
and notes thereto begin on page F-1 of this report and are incorporated herein by reference.
Item 9. Changes and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
Item 9A. 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 and accounting 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 defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act) as of September 30, 2021. Based on this evaluation, our principal executive officer and principal financial and accounting
officer has concluded that, as of September 30, 2021, our disclosure controls and procedures were not effective, due solely to the material
weaknesses in our internal control over financial reporting described below.
Our internal control over
financial reporting did not result in the proper accounting classification and valuation of complex financial instruments, including warrants
and shares subject to possible redemption, as described in Note 2 of the notes to the financial statements included elsewhere in this
report, which due to the impact on our financial statements we determined to be material weaknesses. Additionally, we have identified an accrual that was not initially recorded in the current financial statements for
the period from September 30, 2020 (inception) through September 30, 2021. The accrual is recorded in the current financial statements
and is appropriately reflected. Due to the impact on our financial statements, we determined the adjustment is indicative of a material
weakness.
Subsequent to the Closing
of the Codere Business Combination on November 30, 2021, the internal control structure of the Company ceased to be in operation and instead,
the relevant internal control structure after Closing of the Codere Business Combination is that of Holdco.
Changes in Internal Control over Financial
Reporting
Except as set forth below,
there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) that occurred during the fourth quarter of the fiscal year covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
On January 27, 2022, the
Company filed amended 10-Q/A Quarterly Reports for the periods ending December 31, 2020, March 31, 2021 and June 30, 2021 to restate the
financial statements to correct accounting errors related to the classification Private Placement Warrants and shares subject to possible
redemption. Due solely to the events that led to the restatements of our previously issued financial statements, our management identified
material weaknesses in our internal control over financial reporting related to the accounting for complex financial instruments, as described
above.
Additionally, in connection with
the preparation of our financial statements for the period from September 30, 2020 (inception) through September 30, 2021, we have identified
an accrual that was not initially recorded in the current financial statements for such period. The accrual is recorded in the current
financial statements and appropriately reflected. As part of such processes, we identified a material weakness in our internal control
over financial reporting related to the process of recording accounts payable and accrued expenses.
In light of these material weaknesses,
we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly,
our management believes that the financial statements included in this report present fairly in all material respects our financial position,
results of operations and cash flows for the period presented.
Subsequent to the Closing
of the Codere Business Combination on November 30, 2021, the internal control structure of the Company ceased to be in operation and instead,
the relevant internal control structure after Closing of the Codere Business Combination is that of Holdco.
Management’s Report on Internal Control
Over Financial Reporting
This report does not include
a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent
registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and
Corporate Governance.
As of September 30, 2021
and until the Merger Effective Time, our directors and executive officers were as follows:
| Name |
|
Age |
|
Position |
| Dr. Martin M. Werner |
|
58 |
|
Chairman and Chief Executive Officer |
| Jorge Combe |
|
43 |
|
Chief Operating Officer and Director |
| Daniel Salim |
|
29 |
|
Chief Financial Officer |
| Dr. Guillermo Ortiz |
|
73 |
|
Director |
| Daniel Valdez |
|
39 |
|
Director |
| Pedro Solís Cámara |
|
61 |
|
Director |
| Luis Campos |
|
68 |
|
Director |
Dr. Martin M. Werner was
our Chief Executive Officer and Chairman of the Board since our inception in September 2020 until the Merger Effective Time. Since
January 2021, Dr. Werner has also served as the Chief Executive Officer and Chairman of the Board of DD3 Acquisition Corp. III
(“DD3 Acquisition III”). Dr. Werner served as the Chief Executive Officer and Chairman of DD3 Acquisition Corp. (“DD3
Acquisition I”) from July 2018 until the consummation of its business combination with Betterware de México, S.A.B de
C.V. (NASDAQ: BWMX) (“Betterware”) in March 2020, and continues to serve as a member of Betterware’s board of directors.
He is a co-founding partner of DD3 Capital, a private investment and financial services firm headquartered in Mexico City that provides
a wide range of financial services to clients including, among others, merger and acquisitions advisory, equity and debt capital raising
advisory and advisory in highly structured debt financing and financial restructurings. Prior to founding DD3 Capital in 2016, Dr. Werner
worked at Goldman Sachs for 16 years (2000 – 2016) becoming a Managing Director in 2000 and a Partner in 2006. He was
co-head of the Investment Banking Division for Latin America and the country head of the Mexico office. From 2011 to December 2019,
Dr. Werner served as the Chairman of the board of directors of Red de Carreteras de Occidente, one of Mexico’s largest private
concessionaires operating more than 760 kilometers of toll roads, which was previously owned by Goldman Sachs Infrastructure Partners
I, L.P., from 2007 until its sale to Abertis Infraestructuras, S.A. and GIC Special Investments Pte Ltd. Prior to his time with Goldman
Sachs, Dr. Werner served in the Mexican Treasury Department as the General Director of Public Credit from 1995 to 1997, and as Deputy
Finance Minister from 1997 to 1999. Among his numerous activities, he was in charge of restructuring Mexico’s public debt during
the financial crisis of 1994 and 1995. Dr. Werner is the second largest investor of Banca Mifel, a leading mid-market Mexican
bank with $3.3 billion in assets and a credit portfolio of $2.0 billion. He was previously a member of the Board of Directors
of Grupo Comercial Chedraui, a leading supermarket chain in Mexico and the United States, and is currently a member of the Board
of Directors of Empresas ICA, a leading infrastructure construction company in Mexico, and of Grupo Aeroportuario del Centro Norte, one
of Mexico’s largest airport operators. He is a member of Yale University’s School of Management Advisory Board. Dr. Werner
holds a bachelor’s degree in economics from Instituto Tecnológico Autónomo de Mexico (“ITAM”) and a Ph.D.
in economics from Yale University.
Jorge Combe was our
Chief Operating Officer and one of our directors since our inception in September 2020 until the Merger Effective Time. Since January 2021,
Mr. Combe has also served as the Chief Operating Officer and as a director of DD3 Acquisition III. Mr. Combe served as the Chief
Operating Officer from July 2018, and also as a director from October 2018, of DD3 Acquisition I until the consummation of its
business combination with Betterware in March 2020. He co-founded DD3 Capital together with Dr. Werner in 2016 and is a
managing partner. Prior to co-founding DD3 Capital, he was a Managing Director in the Investment Banking Division of Goldman Sachs
in Mexico City from 2010 to 2017. While at Goldman Sachs, Mr. Combe covered companies across the Latin American region and led several
initial equity offerings, mergers and acquisitions, structured financing notes and debt offerings transactions in the Mexican and Latin
American markets. Prior to joining Goldman Sachs, Mr. Combe was a vice president in the investment banking division in Merrill Lynch
from 2009 to 2010. From 2008 to 2009, he worked at GP Investimentos, one of the leading Brazilian private equity firms, where Mr. Combe
was part of the founding investment team, analyzing multiple investment opportunities as well as supervising the portfolio company, Fogo
de Chao. Prior to joining GP Investimentos, Mr. Combe worked for Credit Suisse as an associate in the equity capital markets group
where he was involved in over 20 equity offerings for Latin American companies. Mr. Combe began his career at Banco Banorte as floor
equity trader, where he held various positions in Mexico and New York. Mr. Combe is a member of the Board of Directors of Quiero
Casa, a leading real estate residential developer in Mexico. He earned an MBA from the Wharton Business School at the University of Pennsylvania
and a Bachelor of Science in economics from ITAM.
Daniel Salim was
our Chief Financial Officer since our inception in September 2020 until the Merger Effective Time. Since January 2021, Mr. Salim
has also served as the Chief Financial Officer of DD3 Acquisition III. Mr. Salim served as the Chief Financial Officer of DD3 Acquisition
I from July 2018 until the consummation of its business combination with Betterware in March 2020. Since 2017, Mr. Salim
has also been a member of the DD3 Capital team analyzing the deal flow and execution of mergers and acquisitions, equity raising, advisory
and debt raising. From 2015 to 2017, Mr. Salim worked for Bank of Tokyo-Mitsubishi in its Latin America Corporate &
Investment Banking Group, where he evaluated project finance and acquisition opportunities involving Mexican blue-chip and state-owned companies,
across Latin America, in the renewable energy, petrochemicals and oil and gas sectors. From 2013 to 2015, he served as an analyst at HR
Ratings, a local rating agency covering medium and large companies in the retail, real estate, consumer, manufacturing and entertainment
industries. Mr. Salim received a Bachelor in Finance and Accounting from Universidad Anahuac Norte and is currently a chartered financial
analyst candidate.
Dr. Guillermo Ortiz,
who served as one of our independent directors since December 2020 until the Merger Effective Time, also served as an independent
director of DD3 Acquisition I from October 2018 until the consummation of its business combination with Betterware in March 2020,
and continues to serve as a member of Betterware’s board of directors. Dr. Ortiz is currently a member of the Board of BTG
Pactual Mexico and has also served as Chairman of BTG Pactual Latin America ex-Brazil, a leading Brazilian financial services company
with operations throughout Latin America, the U.S. and Europe, since 2015. Prior to joining BTG, from 2010 to 2015, he was Chairman of
the Board of Grupo Financiero Banorte-Ixe, the largest independent Mexican financial institution. In 2009, Dr. Ortiz served as chairman
of the Bank of International Settlements based in Basile, Switzerland. Dr. Ortiz served two consecutive six-year terms as Governor
of Mexico’s Central Bank from 1998 to 2009. From 1994 to 1997, Dr. Ortiz served as Secretary of Finance and Public Credit in
the Mexican Federal Government where he guided Mexico through the “Tequila” crisis and contributed to the stabilization of
the Mexican economy, helping return the nation to growth in 1996. He previously served on the Board of Directors of the International
Monetary Fund, the World Bank, the Interamerican Development Bank and Wetherford International, a leading company in the oil and equipment
industry. Dr. Ortiz is Chairman of the Board of each of the Pe Jacobsson Foundation, a member of Group of Thirty, the Center for
Financial Stability, the Globalization and Monetary Policy Institute, the Federal Reserve Bank of Dallas and China’s International
Finance Forum. He is also a member of the Board of Directors of a number of Mexican companies, including Grupo Aeroportuario del Sureste,
one of Mexico’s largest airport operators, and Vitro, a leading glass manufacturing company in Mexico. Dr. Ortiz is also a
member of the Quality of Life Advisory Board of the Government of Mexico City. Dr. Ortiz holds a bachelor’s degree in economics
from Universidad Nacional Autónoma de México (UNAM), a master’s degree and a Ph.D. in economics from Stanford University.
Daniel Valdez, who
served as one of our independent directors since December 2020 until the Merger Effective Time, has also served as a director (alternate)
for Betterware since December 2018, when his co-led special purpose vehicle, Promotora Forteza, S.A. de C.V., acquired a minority
stake in the business. He is a Managing Partner of Alternative Investments and Portfolio Manager (Public Equities) for Morales y Guerra
Capital Asesores S.A. de C.V. (“MG Capital”). Mr. Valdez has also served as an independent member of investment committees
for several public and private investment trusts, including Altum Capital. Prior to joining MG Capital, he held Senior Analyst positions
at prominent hedge funds: Sigma Capital Management from 2012 to 2014; Eton Park Capital Management from 2011 to 2012; and Surveyor Capital
(Citadel) from 2010 to 2011. Prior to joining Surveyor Capital, Mr. Valdez worked as an Investment Banking Associate for Morgan Stanley
in New York from 2008 to 2010. While at Morgan Stanley, he joined the Technology, Media & Telecom group executing several
initial equity offerings, mergers and acquisitions, and debt offerings transactions. Mr. Valdez earned an MBA from the Harvard Business
School and a Bachelor of Science from Stanford University.
Pedro Solís Cámara
who served as one of our independent directors since December 2020 until the Merger Effective Time, is a founding partner and director
of Solís Cámara y Cia, S.C. and Solís Cámara, López Guerrero, S.C., which are tax advisory firms headquartered
in Mexico City and formed in 1991. Prior to founding Solís Cámara y Cia, S.C. and Solís Cámara, López
Guerrero, S.C., Mr. Solís Cámara worked at Galaz, Carstens, Chavero y Yamazaki (currently Deloitte) from 1981 to 1986,
where he was the head of Grupo SARE’s tax department. From 1986 to 1991, he worked as an independent tax advisor at Solís
Cámara, Escobar y Compañia, S.C. Mr. Solís Cámara has also worked in the academic field as a part-time professor
at ITAM from 1985 to 2015 and has participated as a speaker and panel member at numerous conferences on tax issues. From 1995 and 1996,
he served as a member of the Fiscal Advisory Council on property tax of the Treasury of Distrito Federal, and from 2013 to 2014, he was
part of the training group of the Tax Administration System (SAT). Mr. Solís Cámara served as a director of DD3 Acquisition
I from October 2018 until the consummation of its business combination with Betterware in March 2020. Mr. Solís
Cámara is an active partner and member of the Fiscal Commission of Colegio de Contadores Públicos de México, A.C.
Additionally, he is a member of Instituto Mexicano de Contadores Públicos, A.C., of the IFA Grupo Mexico and of the International
Fiscal Association. Currently, Mr. Solís Cámara is an investor and advisor to several companies, including Bardahl
de Mexico S.A. de C.V., Grupo Ambrosia, La Era Natural, Don Apoyo, S.A.P.I. de C.V., Grupo Dinero Práctico, Grupo Gicsa S.A.B.
de C.V., Day Asesores, Fibra Plus and Latam Hotel Corporation LTD. Mr. Solís Cámara earned his bachelor’s degree
in accounting from ITAM in 1983 and his degree in tax law from ITAM in 1985.
Luis Campos, who served
as one of our independent directors since December 2020 until the Merger Effective Time, has been in the direct to consumer business
for almost 25 years. He has been Chairman of Betterware since 2001. Prior to Betterware, Mr. Campos served as Chairman of Tupperware
Americas from 1994 to 1999, Chairman of Sara Lee – House of Fuller Mexico from 1991 to 1993, and Chairman of Hasbro Mexico
from 1984 to 1990. Mr. Campos is an active member of the “Consejo Consultivo” of Banamex and he was an active member
of the Direct Selling Association, The Latin America Regional Managers’ Club and The Conference Board, and a board member of the
Economic Development Commission of Mid Florida, Casa Alianza-Covenant House, The Metro Orlando International Affairs Commission,
SunTrust Bank and Casa de Mexico de la Florida Central, Inc. Mr. Campos earned a bachelor’s degree in public accounting from
the National Polytechnic Institute of Mexico in 1974.
On November 30, 2021, effective
as of the Merger Effective Time, the foregoing directors and executive officers resigned as directors and officers, as applicable of the
Company. Following the Merger Effective Time, our directors and executive officers are as follows:
| Name |
|
Age |
|
Position |
| Gonzalo de Osma Bucero |
|
49 |
|
President, Treasurer and Director |
| Moshe Edree |
|
55 |
|
Director |
| Oscar Iglesias |
|
47 |
|
Director |
| Arie Rubinstein |
|
53 |
|
Vice President and Secretary |
Gonzalo de Osma.
Mr. de Osma has been our President and Treasurer and has served as a member of the Company’s board since the Merger Effective
Time. Mr. de Osma also currently serves as the Chief Accounting Officer of Holdco. Mr. de Osma has been Codere Group’s Digital Division
Chief Financial Officer and member of its Board of Directors since September 2018. Mr. De Osma had various roles in his more than 14-year
career at Codere Group and, prior to joining the Digital Division, he was Chief Financial Officer and member of the Board of Directors
and Steering Committee of the Codere Group’s Mexican Business unit where it supervised a diversified portfolio, including gaming
halls, racetrack, an exhibition center and an amusement park. At that moment, Mr. De Osma lead negotiations on the first international
bank loan granted to a Mexican gaming company. In 2017, Mr. De Osma actively participated in the valuation, negotiation and final purchase
of a minority stake in the main Mexican Subsidiary of the Codere Group. Previously, he was responsible for the successful merger integration
of the joint business under which the Codere Group operated in Mexico. Additionally, he has led several M&A projects, productivity
initiatives and implemented cost reductions. Mr. De Osma earned a Bachelor in Business Administration by the University of Wales.
Moshe Edree.
Mr. Edree has served as a member of the Company’s board since the Merger Effective Time. Mr. Edree currently serves as the Managing
Director of Holdco and as a member of the Holdco Board. Mr. Edree has served as SEJO’s Chief Executive Officer since January 1,
2022. He has also served as Chief Operating Officer and Director in one of the subsidiaries of the Codere Group since 2018, for which
he planned and executed a reorganization process and took on responsibility for developing Codere Online. Mr. Edree had various roles
in his around two decades of experience in management and directorship in the online gaming world. Between 2012 and 2016, Mr. Edree held
an ownership interest as a shareholder of the company that provided services to Ladbrokes to set up its online division. He took a leading
role in establishing Ladbroke’s online division and optimizing its digital processes. Between 2010 and 2014, Mr. Edree served as
non-executive director of NetPlay TV PLC. Between 2009 and 2012, he also served as Chief Operating Officer of Playtech Turnkey Solution,
where he also provided strategic guidance on planning, business and market development for Playtech B2C Partnership. Previously, he was
a shareholder and held the office of CEO at IMIntermedia Ltd. Mr. Edree was also a shareholder and partner of Europartners and, since
2012, has served as chairman of Amandi Energy, Ghana. Mr. Edree is founder, owner and holds the office of Chief Executive Officer at Media
Serve Ltd. He also serves as director in the board of directors of Top Archive Ltd and Twin City Ltd and provides services to Marketplay
Ltd as an advisor to its board of directors on marketing and strategy. In addition, since 2010, Mr. Edree has been a shareholder of Luckyfishgames.com,
where he oversaw the creation of this platform focusing on soft casino games tailored to social networks. Mr. Edree earned a Bachelor
of Science from the Tel Aviv University and the Holon Institute of Technology in Israel, as well as a Bachelor of Arts from the Pratt
University in New York, and a Master of Science in Project Management from the University of Bridgeport (Connecticut).
Oscar Iglesias. Mr.
Iglesias has served as a member of the Company’s board since the Merger Effective Time. Mr. Iglesias currently serves as the Chief
Financial Officer of Holdco and as a member of the Holdco Board. Mr. Iglesias has served since 2015 as Deputy CFO of Codere Group and,
since 2017, as Director of Corporate Development. Mr. Iglesias has served as officer and as a member of the board of directors of multiple
subsidiaries of the Codere Group and continues to serve as a member of the board of directors of CCJV S.A.P.I. de C.V. and HR Mexico City
Project Co. S.A.P.I. de C.V., two subsidiaries of the Codere Group. His previous experience includes CFO and Head of Corporate Development
for Franklyn Hotels & Resorts (Barcelona), principal with the private equity group WL Ross & Co. LLC (New York), and roles within
the investment banking and equity research departments of Bear, Stearns & Co. Inc. (New York). Mr. Iglesias graduated from the McIntire
School of Commerce at the University of Virginia and has an MBA from Columbia Business School. Oscar is a citizen of both the United States
and Spain.
Arie
Rubinstein. Mr. Rubinstein has been our Vice President and Secretary since the Merger Effective Time. Mr. Rubinstein joined Codere Group’s legal department for the
Online division in September 2020 and currently serves as Deputy General Counsel of Codere Online. Mr. Rubinstein is a senior legal counsel
with more than 20 years of experience providing in-house legal counseling in corporate, commercial and secretarial matters mainly for
global Israeli private and public companies traded at NASDAQ, NYSE and TASE with operations worldwide. Prior to Codere, Mr. Rubinstein
served as Chief Legal Officer of the biotech dental industry company Alpha Bio Tec. Ltd., a subsidiary of Danaher Corp. traded at Nasdaq.
Prior to Alpha Bio Tec., Mr. Rubinstein served as Senior Corporate and Commercial Legal Counsel at the headquarters of Israel Chemicals
Ltd. (ICL), an Israeli based public company in the chemicals industry, traded at NYSE and TASE, providing in-house legal counseling on
corporate, secretarial, commercial and M&A matters. Prior to ICL, Mr. Rubinstein served as General Counsel and Company Secretary of
On Track Innovations Ltd. (OTIV), an Israeli based hi-tech fin-tech company traded at Nasdaq, where he provided in-house legal counseling
on corporate, commercial and all other legal matters in respect to the company and its subsidiaries operations worldwide, as well as serving
as the company’s secretary, director in the subsidiaries companies, and compliance officer. Prior to his in-house counseling work,
Mr. Rubinstein worked many years as senior associate in leading law firms in Israel, among them, Avi Neeman & Co. law firm, G. Horowitz
& Co. law firm and others. Mr. Rubinstein although was born and raised partly in Mexico, has been residing for many years in Israel
where he started his legal profession. Mr. Rubinstein holds a Bachelor of Laws (LLB) degree from the College of Management Academic (COMA)
Law School of Tel-Aviv, Israel, is licensed as public notary by the Israeli Ministry of Justice, a certificated mediator and member of
the Israeli Bar Association.
Number and Terms of Office of Officers and Directors
As of September 30, 2021
and until the Merger Effective Time, we had six directors. Our board of directors was divided into three classes with only one class of
directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders)
serving a three-year term. The term of office of the first class of directors, consisting of Messrs. Valdez and Campos, would expire
at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Dr. Ortiz and Mr. Solís
Cámara, would expire at our second annual meeting of stockholders. The term of office of the third class of directors, consisting
of Dr. Werner and Mr. Combe, would expire at our third annual meeting of stockholders. We may not have hold an annual meeting
of stockholders until after the consummation of our initial business combination.
Prior to the completion of
our initial business combination, any vacancy on our board of directors may have been filled by a nominee chosen by holders of a majority
of our founder shares.
Our officers were appointed
by our board of directors and served at the discretion of our board of directors, rather than for specific terms of office. Our board
of directors was authorized to appoint persons to the offices set forth in our bylaws in effect prior to the Merger Effective Time as
it deemed appropriate. Our bylaws provided that our officers may consist of a Chairman of the Board, Chief Executive Officer, President,
Chief Financial Officer, Treasurer, Secretary and such other officers (including without limitation, Vice Presidents and Assistant Secretaries)
as may be determined by our board of directors.
Following the Merger Effective
Time, we have three (3) directors. Our directors are elected at the annual meeting of the stockholders. Each director so elected shall
hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or
removal.
Any vacancy on our board of directors may be filled
by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
Our officers are appointed by our board of directors
and serve until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. Our board of
directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that the
principal officers of the Company shall be a President, one or more Vice Presidents, a Treasurer and a Secretary who shall have the duty,
among other things, to record the proceedings of the meetings of stockholders and directors in a book kept for that purpose and such other
officers as may be determined by our board of directors.
Committees of the Board of Directors
As of September 30, 2021 and until the Merger
Effective Time, our board of directors had three standing committees: an audit committee, a nominating committee, and a compensation committee,
each of which was composed solely of independent directors. Each committee operated under a charter that was approved by our board of
directors and had the composition and responsibilities described below. Upon the Closing of the Codere Business Combination, the audit
committee, the nominating committee, and the compensation committee were disbanded, at which point the Company’s board of directors
assumed the duties of such committees.
Audit Committee
As of September 30, 2021 and
until the Merger Effective Time, the audit committee of our board of directors consisted of Mr. Solís Cámara (chairman),
Dr. Ortiz and Mr. Valdez, each of whom was an independent director under Nasdaq’s listing standards. Each member of the
audit committee was financially literate, and our board of directors had determined that Mr. Solís Cámara qualified
as an “audit committee financial expert” as defined in applicable SEC rules because he met the requirement for past employment
experience in finance or accounting, requisite professional certification in accounting or comparable experience. The audit committee’s
duties, which were specified in our audit committee charter, included, but were not limited to:
| ● | reviewing
and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether
the audited financial statements should be included in our annual reports; |
| ● | discussing
with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation
of our financial statements; |
| ● | discussing
with management major risk assessment and risk management policies; |
| ● | monitoring
the independence of the independent auditor; |
| ● | verifying
the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law; |
| ● | reviewing
and approving all related party transactions; |
| ● | inquiring
and discussing with management our compliance with applicable laws and regulations; |
| ● | pre-approving all
audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the
services to be performed; |
| ● | appointing
or replacing the independent auditor; |
| ● | determining
the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
| ● | establishing
procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or
reports which raise material issues regarding our financial statements or accounting policies; and |
| ● | approving
reimbursement of expenses incurred by our management team in identifying potential target businesses. |
Upon the Closing of the Codere
Business Combination, the audit committee was disbanded, at which point the Company’s board of directors assumed the duties of such
committee.
Nominating Committee
As of September 30, 2021
and until the Merger Effective Time, the nominating committee of our board of directors consisted of Dr. Ortiz (chairman), Mr. Valdez
and Mr. Campos, each of whom was an independent director under Nasdaq’s listing standards. The nominating committee was responsible
for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating committee considered persons
identified by its members, management, stockholders, investment bankers and others. Upon the Closing of the Codere Business Combination,
the nominating committee was disbanded, at which point the Company’s board of directors assumed the duties of such committee.
Guidelines for Selecting Director Nominees
The guidelines for selecting
nominees, which were specified in our nominating committee charter, generally provided that persons to be nominated:
| ● | should
have demonstrated notable or significant achievements in business, education or public service; |
| ● | should
possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a
range of skills, diverse perspectives and backgrounds to its deliberations; and |
| ● | should
have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders. |
The nominating committee
considered a number of qualifications relating to management and leadership experience, background and integrity and professionalism in
evaluating a person’s candidacy for membership on our board of directors. The nominating committee may have required certain skills
or attributes, such as financial or accounting experience, to meet specific board needs that aroused from time to time and also considered
the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee did not
distinguish among nominees recommended by stockholders and other persons.
Compensation Committee
As of September 30, 2021
and until the Merger Effective Time, the compensation committee of our board of directors consisted of Dr. Ortiz (chairman), Mr. Valdez
and Mr. Solís Cámara, each of whom was an independent director under Nasdaq’s listing standards. The compensation
committee’s duties, which were specified in our compensation committee charter, included, but are not limited to:
| ● | reviewing
and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating
our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration
(if any) of our Chief Executive Officer based on such evaluation; |
| ● | reviewing
and approving the compensation of all of our other executive officers; |
| ● | reviewing
our executive compensation policies and plans; |
| ● | implementing
and administering our incentive compensation equity-based remuneration plans; |
| ● | assisting
management in complying with our proxy statement and annual report disclosure requirements; |
| ● | approving
all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and
employees (if any); |
| ● | if
required, producing a report on executive compensation to be included in our annual proxy statement; and |
| ● | reviewing,
evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Upon the Closing of the Codere
Business Combination, the audit committee was disbanded, at which point the Company’s board of directors assumed the duties of such
committee.
Code of Ethics
Prior to Closing of the Codere
Business Combination, we adopted a code of ethics applicable to all of our executive officers, directors and employees (if any). The code
of ethics codified the business and ethical principles that govern all aspects of our business prior to Closing. We filed a copy of our
code of ethics, audit committee charter, nominating committee charter and compensation committee charter as exhibits to our registration
statements on Form S-1 (File Nos. 333-250212 and 333-251190) for our initial public offering, which exhibits are incorporated
by reference as exhibits to this report. You may review these documents by accessing our public filings at the SEC’s website at www.sec.gov.
Subsequent to the Closing
of the Codere Business Combination on November 30, 2021, the relevant code of ethics applicable to our directors and senior management
is that of Holdco, which is included as an exhibit to this report.
Item 11. Executive Compensation.
No director or executive
officer has received any cash compensation for services rendered to us. Commencing on December 7, 2020 through Closing, we were obligated
to pay our sponsor $10,000 per month for providing us with general and administrative services, including office space, utilities and
administrative support. However, this arrangement was solely for our benefit and is not intended to provide our officers or directors
compensation in lieu of a salary.
Other than the $10,000 per
month administrative fee and the repayment of loans from our sponsor, no compensation or fees of any kind, including finder’s, consulting
fees and other similar fees, have been or will be paid to our sponsor, members of our board of directors or management team prior to Closing
of the Codere Business Combination, members of our current board of directors or management team, or their respective affiliates, for
services rendered prior to or in connection with the consummation of our initial business combination, including the Codere Business Combination
(regardless of the type of transaction that it is).
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
The following table sets
forth information regarding the beneficial ownership of our common stock as of September 30, 2021, by:
| ● | each
person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; |
| ● | each
of our executive officers and directors; and |
| ● | all
our executive officers and directors as a group. |
Unless otherwise indicated,
we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially
owned by them. The following table does not reflect record or beneficial ownership of our warrants. The calculation of the percentage
of beneficial ownership is based on 15,995,000 shares of common stock outstanding on September 30, 2021, consisting of 12,870,000 shares
of Class A common stock and 3,125,000 shares of Class B common stock.
| | |
Class A Common Stock | | |
Class B Common Stock(2) | | |
Approximate | |
| Name and Address of Beneficial Owner(1) | |
Number of
Shares
Beneficially
Owned | | |
Approximate
Percentage
of Class | | |
Number of
Shares
Beneficially
Owned | | |
Approximate
Percentage
of Class | | |
Percentage of
Outstanding
Shares of Common Stock | |
| DD3 Sponsor Group, LLC(3) | |
| 296,000 | | |
| 2.3 | % | |
| 3,125,000 | | |
| 100.0 | % | |
| 21.4 | % |
| Dr. Martin M. Werner(4) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Jorge Combe(3) | |
| 296,000 | | |
| 2.3 | % | |
| 3,125,000 | | |
| 100.0 | % | |
| 21.4 | % |
| Daniel Salim(4) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Dr. Guillermo Ortiz(4) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Daniel Valdez(4) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Pedro Solís Cámara(4) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| Luis Campos(4) | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| All directors and executive officers as a group (7 individuals) | |
| 296,000 | | |
| 2.3 | % | |
| 3,125,000 | | |
| 100.0 | % | |
| 21.4 | % |
| Hartree Partners, LP(5) | |
| 1,500,000 | | |
| 11.7 | % | |
| — | | |
| — | | |
| 9.4 | % |
| Baron Global Advantage Fund(6) | |
| 1,037,000 | | |
| 8.1 | % | |
| — | | |
| — | | |
| 6.5 | % |
| Castle Creek Arbitrage, LLC(7) | |
| 753,898 | | |
| 5.9 | % | |
| — | | |
| — | | |
| 4.7 | % |
| BlueCrest Capital Management Limited(8) | |
| 663,546 | | |
| 5.2 | % | |
| — | | |
| — | | |
| 4.1 | % |
| (1) | Unless
otherwise noted, the business address of each of the following entities or individuals is Pedregal 24, 3rd Floor, Interior 300, Colonia
Molino del Rey, Del. Miguel Hidalgo, 11040 Mexico City, Mexico. |
| (2) | Shares
of our Class B common stock automatically converted into shares of our Class A common stock upon Closing of the Codere Business Combination. |
| (3) | Represents
securities held directly by our sponsor and indirectly by Jorge Combe as sole manager of our sponsor. Mr. Combe disclaims beneficial
ownership of such securities except to the extent of his pecuniary interest therein. |
| (4) | Such
individual does not beneficially own any of shares of our common stock. However, such individual has a pecuniary interest in shares of
our common stock through an ownership interest in our sponsor. |
| (5) | According
to a Schedule 13G/A filed with the SEC on September 27, 2021 on behalf of Hartree Partners, LP. The business address for this stockholder
is 1185 Avenue of the Americas, New York, NY 10036. |
| (6) | Represents
securities held (i) directly by Baron and an affiliated fund and (ii) with respect to securities held directly by Baron Global Advantage
Fund (“BGA”), indirectly by Mr. Ronald Baron, the Chief Executive Officer of BGA. Baron also has an economic interest in
our sponsor and therefore in certain of the founder shares held by our sponsor. Each of Baron, such affiliated fund and Mr. Baron disclaims
beneficial ownership of all such securities except to the extent of their pecuniary interest therein. The business address for this stockholder
is 767 Fifth Avenue, 48th Floor, New York, NY 10153. |
| (7) | According
to a Schedule 13G filed with the SEC on February 16, 2021 on behalf of Castle Creek Arbitrage, LLC (“Castle Creek”), Mr.
Allan Weine, CC ARB West, LLC and CC Arbitrage, Ltd. Castle Creek serves as a registered investment adviser whose clients are CC Arb
West, LLC and CC Arbitrage, Ltd. Mr. Weine is the managing member of Castle Creek. By virtue of these relationships, each of Castle Creek
and Mr. Weine may be deemed to beneficially own the 634,782 and 119,116 shares directly owned by CC ARB West, LLC and CC Arbitrage, Ltd.,
respectively. The business address of each of the reporting persons is 190 South LaSalle Street, Suite 3050, Chicago, Illinois 60603. |
| (8) | According
to a Schedule 13G filed with the SEC on February 5, 2021 on behalf of BlueCrest Capital Management Limited (the “Investment Manager”)
and Michael Platt. The Investment Manager serves as investment manager to Millais Limited (the “Fund”), and Mr. Platt serves
as principal, director, and control person of the Investment Manager. Millais USA LLC acts as sub-investment manager of the Fund and
reports to the Investment Manager. Each of the Investment Manager and Mr. Platt may be deemed the beneficial owner of the 663,546 shares
held for the account of the Fund. The business address of each of the reporting persons is Ground Floor, Harbour Reach, La Rue de Carteret,
St Helier, Jersey, Channel Islands JE2 4HR. |
As of February 16, 2022, the
Company was a wholly-owned subsidiary of Holdco. As of February 16, 2022, none of our directors or executive officers beneficially owned
any equity securities of the Company.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
On October 13, 2020, we issued
2,875,000 founder shares to our sponsor for an aggregate purchase price of $25,000, or approximately $0.009 per share, in connection with
our organization. On December 7, 2020, we effected a stock dividend of 287,500 shares with respect to our Class B common stock, resulting
in there being an aggregate of 3,162,500 founder shares outstanding. On December 10, 2020, in connection with the underwriters’
partial exercise of their over-allotment option and waiver of the remaining portion of such option, simultaneously with the consummation
of our initial public offering, our sponsor forfeited an aggregate of 37,500 founder shares to us at no cost, and 3,125,000 founder shares
remain outstanding at September 30, 2021, representing an adjusted purchase price of approximately $0.008 per share.
On December 10, 2020, the
founder shares were placed into an escrow account maintained by Continental Stock Transfer & Trust Company, acting as escrow agent.
Subject to certain limited exceptions, these shares will not be transferred, assigned, sold or released from escrow until the earlier
of one year after the date of the consummation of our initial business combination and the date on which the closing price of our Class
A common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing 150 days after the consummation of our initial business combination,
or earlier if, subsequent to our initial business combination, we consummate a liquidation, merger, stock exchange or other similar transaction
which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Simultaneously with the consummation
of our initial public offering, including the partial exercise of the over-allotment option, we consummated the private placement of an
aggregate of 370,000 private units to our sponsor and the forward purchase investors at a price of $10.00 per private unit, generating
total proceeds of $3,700,000. Among the private units, our sponsor purchased an aggregate of 296,000 private units and the forward purchase
investors purchased an aggregate of 74,000 private units. Immediately following the closing of our initial public offering, a total of
$125,000,000 of the net proceeds from our initial public offering and the private placement was placed in the trust account, with Continental
Stock Transfer & Trust Company acting as trustee. The private units are identical to the units sold in our initial public offering,
except that if held by the initial purchasers or their permitted transferees, the underlying private warrants (i) may be exercised on
a cashless basis and (ii) are not subject to redemption. If the private units are held by holders other than the initial purchasers or
their permitted transferees, then the private warrants will be redeemable by us and exercisable by the holders on the same basis as the
warrants included in the units sold in our initial public offering. In addition, the private units (and the securities underlying the
private units) are not transferable, assignable or salable until after the completion of our initial business combination, subject to
certain limited exceptions.
Our sponsor loaned us an
aggregate of $105,747 in connection with the expenses of our initial public offering, pursuant to the terms of a promissory note. We fully
repaid the loans from our sponsor at the closing of our initial public offering on December 10, 2020.
Pursuant to an agreement
with our sponsor, we pay our sponsor a monthly fee of $10,000 for certain general and administrative services, including office space,
utilities and administrative support. We began incurring these fees on December 7, 2020 and will continue to incur these fees monthly
until the earlier of the completion of our initial business combination and our liquidation. We believe, based on rents and fees for similar
services, that the administrative fee is at least as favorable as we could have obtained from an unaffiliated person.
In connection with our initial
public offering, we entered into agreements with our officers and directors to provide contractual indemnification in addition to the
indemnification provided for in the Amended and Restated Certificate of Incorporation.
Other than the $10,000 per
month administrative fee and the repayment of loans from our sponsor, no compensation or fees of any kind, including finder’s, consulting
fees and other similar fees, have been or will be paid to our sponsor, members of our management team or their respective affiliates,
for services rendered prior to or in connection with the consummation of our initial business combination (regardless of the type of transaction
that it is).
In connection with the Codere
Business Combination, (i) Baron elected to purchase an aggregate of 2,500,000 shares of the Company’s Class A common stock for an
aggregate purchase price of $25,000,000, at a price of $10.00 per each share of the Company’s Class A common stock, pursuant to
the terms of the Baron Forward Purchase Agreement, and (ii) MG elected to purchase an aggregate of 2,500,000 shares of the Company’s
Class A common stock for an aggregate purchase price of $25,000,000, at a price of $10.00 per each share of the Company’s Class
A common stock, pursuant to the terms of the MG Forward Purchase Agreement, in each case in a private placement that occurred immediately
prior to the Merger.
Additionally, Baron had an
economic interest in the sponsor and therefore in certain of the founder shares held by our sponsor, and MG had the right to acquire,
at the original purchase price, certain of the founder shares held by our sponsor immediately prior to the closing of our initial business
combination.
Baron also agreed not to
have the Baron IPO Shares redeemed and to certain transfer restrictions with respect to such shares pursuant to the Baron Support Agreement.
Contemporaneously with the
execution and delivery of the Business Combination Agreement, the Company entered into two separate Subscription Agreements with DD3 Capital
and Larrain, in each case to which Holdco is also a party, pursuant to which the Company issued and sold, in a private placement that
closed immediately prior to the Merger, (i) an aggregate of 500,000 shares of the Company’s Class A common stock, for an aggregate
purchase price of $5,000,000, at a price of $10.00 per each share of the Company’s Class A common stock, to DD3 Capital and its
permitted transferees, and (ii) an aggregate of 1,224,000 shares of the Company’s Class A common stock, for an aggregate purchase
price of $12,240,000, at a price of $10.00 per each share of the Company’s Class A common stock, to Larrain and its permitted transferees.
The holders of founder shares,
as well as certain holders of the private units (and all underlying securities), were entitled to certain registration rights pursuant
to a registration rights agreement, dated as of December 7, 2020, among the Company and such holders. Such agreement was terminated and
superseded by the Registration Rights and Lock-Up Agreement which the Company, Codere Newco, Holdco, the Sponsor, the forward purchase
investors and the other parties thereto entered into at Closing (the “Registration Rights and Lock-Up Agreement”), which provides
customary demand and piggyback registration rights. Pursuant to the Registration Rights and Lock-Up Agreement, Holdco agreed that, within
30 calendar days after the Closing date, it will file with the SEC a registration statement to permit the public resale of certain Holdco
Ordinary Shares and Holdco warrants (including underlying securities) held by the Holders (as defined in the Registration Rights and Lock-Up
Agreement), and that it will use its reasonable best efforts to have the registration statement declared effective as soon as practicable
after the filing thereof, but no later than 60 calendar days following the filing deadline, provided that the effectiveness deadline will
be extended to 90 calendar days after the filing deadline if the registration statement is reviewed by, and receives comments from, the
SEC.
Holdco also granted certain
registration rights to DD3 Capital, Larrain and their permitted transferees under the Subscription Agreements.
Related Party Policy
As of September 30, 2021
and until the Merger Effective Time, our code of ethics required us to avoid, wherever possible, all related party transactions that could
result in actual or potential conflicts of interests, except under guidelines approved by the board of directors (or the audit committee).
Related-party transactions are defined as transactions in which (1) the aggregate amount involved will or may be expected to exceed $120,000
in any calendar year, (2) we or any of our subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election
as a director, (b) greater than 5% beneficial owner of our shares of common stock, or (c) immediate family member, of the persons referred
to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director
or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has
interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also arise if a
person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
Our audit committee, pursuant
to its written charter, was responsible for reviewing and approving related-party transactions to the extent we enter into such transactions.
The audit committee considered all relevant factors when determining whether to approve a related party transaction, including whether
the related party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third-party under
the same or similar circumstances and the extent of the related party’s interest in the transaction. No director may have participated
in the approval of any transaction in which he is a related party, but that director was required to provide the audit committee with
all material information concerning the transaction. We also required each of our directors and executive officers to complete a directors’
and officers’ questionnaire that elicits information about related party transactions.
These procedures were intended
to determine whether any such related party transaction impaired the independence of a director or presents a conflict of interest on
the part of a director, employee or officer.
To further minimize conflicts
of interest, we agreed not to consummate an initial business combination with an entity that was affiliated with any of our sponsor, officers
or directors unless we had obtained an opinion from an independent investment banking firm, or another independent entity that commonly
renders valuation opinions, that the business combination was fair to our unaffiliated stockholders from a financial point of view. We
would also have needed to obtain approval of a majority of our disinterested independent directors.
Director Independence
Nasdaq listing standards
required that a majority of our board of directors be independent. An “independent director” is defined generally as a person
other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion
of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out
the responsibilities of a director. Prior to the Closing of the Codere Business Combination and to the Company’s delisting from
Nasdaq, our board of directors determined that Dr. Ortiz and Messrs. Valdez, Solís Cámara and Campos were “independent
directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors had regularly scheduled
meetings at which only independent directors were present. Any affiliated transactions would have been on terms no less favorable to us
than could be obtained from independent parties. Our board of directors would have reviewed and approved all affiliated transactions with
any interested director abstaining from such review and approval.
Item 14. Principal Accountant Fees and Services.
Marcum LLP (“Marcum”)
acts as our independent registered public accounting firm. The following is a summary of fees paid to Marcum for services rendered.
Audit Fees. Audit fees
consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally
provided by Marcum in connection with regulatory filings. The aggregate fees billed by Marcum for professional services rendered for the
audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and
other required filings with the SEC for the period from September 30, 2020 (inception) through September 30, 2021 totaled $110,657. The
above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees. Audit-related
services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of
our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required
by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay Marcum for consultations
concerning financial accounting and reporting standards for the period from September 30, 2020 (inception) through September 30, 2021.
Tax Fees. We did not
pay Marcum for tax planning and tax advice for the period from September 30, 2020 (inception) through September 30, 2021.
All Other Fees. We
did not pay Marcum for other services for the period from September 30, 2020 (inception) through September 30, 2021.
Pre-Approval Policy
Prior to Closing of the Codere
Business Combination, our board of directors had an audit committee which was composed solely of independent directors. Our audit committee
was formed in connection with the consummation of our initial public offering. As a result, our audit committee did not pre-approve all
of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of
directors. Since the formation of our audit committee and up to Closing of the Business Combination, the audit committee pre-approved
all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject
to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior
to the completion of the audit).
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Codere Online U.S. Corp.
(f/k/a DD3 Acquisition Corp. II) (the “Company”) was incorporated in Delaware on September 30, 2020. The Company was formed
for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization
or similar business combination with one or more businesses or entities (a “Business Combination”).
As of September 30, 2021,
the Company had not commenced any operations. All activity through September 30, 2021 relates to the Company’s formation, the initial
public offering (the “Initial Public Offering”), which is described below, and identifying a target for a Business Combination.
We do not expect to generate any operating revenues. The Company generates non-operating income in the form of interest income from the
proceeds derived from the Initial Public Offering.
The registration statements
for the Company’s Initial Public Offering were declared effective on December 7, 2020. On December 10, 2020, the Company consummated
the Initial Public Offering of 12,500,000 units (the “Units” and, with respect to the shares of Class A common stock
included in the Units sold, the “Public Shares”), which includes the partial exercise by the underwriters of their over-allotment
option in the amount of 1,500,000 Units, at $10.00 per Unit, generating gross proceeds of $125,000,000, which is described in Note 4.
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the sale of an aggregate of 370,000 units (each, a “Private Unit”
and, collectively, the “Private Units”) at a price of $10.00 per Private Unit in a private placement to DD3 Sponsor Group,
LLC (the “Sponsor”) and the Forward Purchase Investors (as defined in Note 5), generating gross proceeds of $3,700,000, which
is described in Note 5.
Transaction costs amounted
to $2,966,508, consisting of $2,500,000 of underwriting fees and $466,508 of other offering costs.
Following the closing of
the Initial Public Offering on December 10, 2020, an amount of $125,000,000 ($10.00 per Unit) from the net proceeds of the sale of the
Units in the Initial Public Offering and the sale of the Private Units was placed in a trust account (the “Trust Account”),
located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of
the Investment Company Act of 1940, as amended (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 selected by the Company meeting the conditions of Rule 2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the funds in the Trust Account, as described below.
The Company’s management
had broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private
Units, although substantially all of the net proceeds were intended to be applied generally toward consummating a Business Combination.
The Company was required to complete a Business Combination with one or more target businesses that together had an aggregate fair market
value of at least 80% of the assets held in the Trust Account (excluding taxes payable on interest earned on the Trust Account) at the
time of the agreement to enter into a Business Combination. The Company would only complete a Business Combination if the post-transaction
company owned or acquired 50% or more of the outstanding voting securities of the target or otherwise acquired a controlling interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company was required to provide
its public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination,
either (i) in connection with a stockholder meeting called to approve such Business Combination or (ii) by means of a tender offer. The
public stockholders were entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account, calculated as
of two business days prior to the completion of a Business Combination, including 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. There would be no redemption rights upon the completion
of a Business Combination with respect to the Company’s warrants. As a result, shares of common stock are recorded at their redemption
amount and classified as temporary equity, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity” (“ASC 480”).
The Company would only proceed
with a Business Combination if the Company had net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation
of a Business Combination and, if the Company sought stockholder approval, a majority of the shares voted were voted in favor of the Business
Combination. If a stockholder vote was not required by law and the Company did not decide to hold a stockholder vote for business or other
reasons, the Company would, pursuant to its Amended and Restated Certificate of Incorporation in effect prior to Closing of the Codere
Business Combination (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender
offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior
to completing a Business Combination. If, however, stockholder approval of the transaction was required by law, or the Company decided
to obtain stockholder approval for business or other reasons, the Company would offer to redeem shares in conjunction with a proxy solicitation
pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company sought stockholder approval in connection
with a Business Combination, the Company’s Sponsor, initial stockholders, officers and directors agreed to vote their Founder Shares
(as defined in Note 5), Private Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public
Offering in favor of approving a Business Combination. Additionally, each public stockholder could elect to convert their Public Shares
irrespective of whether they vote for or against the proposed transaction or do not vote at all.
If the Company sought stockholder
approval of a Business Combination and it did not conduct conversions pursuant to the tender offer rules, the Amended and Restated Certificate
of Incorporation provided that a public stockholder, together with any affiliate of such stockholder or any other person with whom such
stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)), would be restricted from converting its shares with respect to more than an aggregate of
15% or more of the Public Shares, without the prior consent of the Company.
The Company’s Sponsor,
initial stockholders, officers and directors agreed (a) to waive their conversion rights with respect to any Founder Shares, Private
Shares and Public Shares held by them in connection with the completion of a Business Combination or any amendment to the Amended and
Restated Certificate of Incorporation prior thereto and (b) not to propose an amendment to the Amended and Restated Certificate of
Incorporation (i) to modify the substance or timing of the Company’s obligations with respect to conversion rights as described
in the Company’s final prospectus for its Initial Public Offering or (ii) with respect to any other provision relating to stockholders’
rights or pre-initial Business Combination activity, unless the Company provided the public stockholders with the opportunity to convert
their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding Public
Shares.
The Company had until December
10, 2022 to complete a Business Combination (the “Combination Period”). If the Company was unable to complete a Business Combination
within the Combination Period, the Company would have (i) ceased all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeemed the Public Shares, at a per-share price, payable
in cash, 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 to pay its tax obligations, divided by the number of then outstanding Public Shares, which
redemption would have completely extinguished public stockholders’ rights as stockholders (including the right to receive further
liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the Company’s remaining stockholders and the Company’s board of directors, dissolved and liquidated, subject in each case
to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
There would be no conversion rights or liquidating distributions with respect to the Company’s warrants, which would expire worthless
if the Company failed to complete a Business Combination within the Combination Period.
The Company’s Sponsor,
initial stockholders, officers and directors agreed to waive their liquidation rights with respect to the Founder Shares if the Company
had failed to complete a Business Combination within the Combination Period. However, if the Company’s Sponsor, initial stockholders,
officers or directors acquired Public Shares in or after the Initial Public Offering, such Public Shares would have been entitled to liquidating
distributions from the Trust Account if the Company failed to complete a Business Combination within the Combination Period. In the event
of such distribution, it is possible that the per share value of the assets remaining available for distribution would have been less
than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts
held in the Trust Account, the Sponsor agreed to 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 discussed entering into a transaction
agreement, reduced the amount of funds in the Trust Account to below (1) $10.00 per Public Share or (2) the actual amount per Public
Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets,
in each case net of the interest which may be withdrawn to pay the Company’s taxes. This liability would not apply with respect
to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims
under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver was deemed
to be unenforceable against a third party, the Sponsor would not be responsible to the extent of any liability for such third-party claims.
The Company would seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors
by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective
target businesses or other entities with which the Company did business, executed agreements with the Company waiving any right, title,
interest or claim of any kind in or to monies held in the Trust Account.
Business Combination
On June 21, 2021, we entered
into the Business Combination Agreement with Codere Newco, S.A.U., a corporation (sociedad anónima unipersonal) registered
and incorporated under the laws of Spain (“Codere Newco”), Servicios de Juego Online S.A.U., a corporation (sociedad anónima
unipersonal) registered and incorporated under the laws of Spain (“SEJO”), Codere Online Luxembourg, S.A., a limited liability
company (société anonyme) governed by the laws of the Grand Duchy of Luxembourg (“Holdco”) and Codere Online
U.S. Corp., a Delaware corporation (“Merger Sub”) (the “Business Combination Agreement”), which provided for the
business combination that resulted, among other things, in the Company and SEJO becoming wholly-owned subsidiaries of Holdco (the “Codere
Business Combination”). In connection with the Codere Business Combination, Holdco filed a registration statement on Form F-4 (File
No. 333-258759) (as subsequently amended, the “Form F-4”) with the U.S. Securities and Exchange Commission (the “SEC”)
on August 12, 2021 that included a proxy statement with respect to our special meeting of stockholders which was held on November 18,
2021 to approve the Business Combination Agreement, among other matters, as well as a prospectus of Holdco with respect to the issuance
of Holdco securities in the Codere Business Combination.
Pursuant to the Business Combination Agreement,
following the effectiveness of (i) the contribution and exchange, effective at 10:00 a.m. New York time on November 29, 2021 (the “Exchange
Effective Time”), by Codere Newco of its ordinary shares of SEJO, all with a nominal value of €1.00 per share, (the “SEJO
Ordinary Shares”) to Holdco in exchange for additional ordinary shares of Holdco, with a nominal value of €1.00 per share (the
“Holdco Ordinary Shares”), which were subscribed for by Codere Newco (the “Exchange”), as contemplated by and
pursuant to the Contribution and Exchange Agreement, dated as of June 21, 2021, by and between Holdco, SEJO and Codere Newco (the “Contribution
and Exchange Agreement”) and (ii) the merger of Merger Sub with and into the Company, with the Company surviving the merger as a
wholly-owned subsidiary of Holdco (the “Merger”) at 12:01 a.m. New York time on November 30, 2021 (the “Merger Effective
Time”), the parties consummated the Codere Business Combination and SEJO and the Company became direct wholly-owned subsidiaries
of Holdco. Pursuant to the Business Combination Agreement, each of the following transactions occurred in the following order:
| |
● |
pursuant to the Contribution and Exchange Agreement, Codere Newco, effective on the Exchange Effective Time, contributed its SEJO Ordinary Shares constituting all the issued and outstanding share capital of SEJO to Holdco in exchange for additional Holdco Ordinary Shares, which were subscribed for by Codere Newco. As a result of the Exchange, SEJO became a wholly-owned subsidiary of Holdco and Holdco continued to be a wholly-owned subsidiary of Codere Newco at the Exchange Effective Time; |
| |
● |
after the Exchange and immediately prior to the Merger Effective Time, each share of the Company’s Class B common stock automatically converted into and exchanged for one share of the Company’s Class A common stock (the “Class B Conversion”); |
| |
● |
on the Closing date, pursuant to the Merger, Merger Sub merged with and into the Company, with the Company surviving such merger and becoming a direct wholly-owned subsidiary of Holdco and, in connection therewith, the Company’s corporate name changed to “Codere Online U.S. Corp.”; |
| |
● |
in connection with the Merger, all shares of the Company’s Class A common stock issued and outstanding immediately prior to the Merger Effective Time, but after the Class B Conversion, were contributed to Holdco in exchange for the Merger Consideration (as defined in the Business Combination Agreement) in the form of one Holdco Ordinary Share for each share of the Company’s Class A common stock pursuant to the share capital increase of Holdco by way of the issuance of one Holdco Ordinary Share in consideration of each share of the Company’s Class A common stock issued and outstanding immediately prior to the Merger Effective Time (which for the avoidance of doubt did not include shares of the Company’s Class A common stock as to which redemption rights were exercised) (the “Holdco Capital Increase”), as set forth in the Business Combination Agreement; and |
| |
● |
as of the Merger Effective Time, each warrant of the Company that was outstanding immediately prior to the Merger Effective Time no longer represented a right to acquire one share of the Company’s DD3 Class A common stock and instead represented the right to acquire one Holdco Ordinary Share on substantially the same terms. |
Codere Newco held 30,000,000 Holdco Ordinary Shares
upon consummation of the Exchange.
At the Merger Effective Time, each share of the
Company’s Class A common stock issued and outstanding immediately prior to the Merger Effective Time was exchanged for one validly
issued and fully paid Holdco Ordinary Share.
The terms of the Business
Combination Agreement and other related ancillary agreements entered into in connection with the closing of the Codere Business Combination
(the “Closing”) are summarized in more detail in our Current Report on Form 8-K filed with the SEC on June 22, 2021 and in
the Form F-4.
Liquidity and Management’s Plans
As of September 30, 2021, the
Company had approximately $268,360 in cash and a working capital deficit of $583,674. The Company’s liquidity needs through September
30, 2021 and prior to the consummation of the Initial Public Offering were satisfied through the proceeds of $25,000 from the Sponsor
to purchase Founders Shares, and loan proceeds from the Sponsor of up to $300,000 under the promissory note (Note 5). The Company borrowed
and repaid $105,747 as of the date of the Initial Public Offering. Subsequent to the consummation of the Initial Public Offering, the
Company’s liquidity had been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private
Placement held outside of the Trust Account.
Management was of the belief
that the funds which the Company had available at September 30, 2021 were insufficient to sustain operations for a period of at least
one (1) year from the issuance date of this financial statement. Accordingly, substantial doubt about the Company’s ability to continue
as a going concern existed.
On June 21, 2021, the Company
entered into the Business Combination Agreement and subsequently on November 30, 2021, the Codere Business Combination closed, which provided
the Company access to additional capital that is sufficient to sustain operations and meet obligations as they become due within one year.
As such, substantial doubt has been alleviated.
Risks and Uncertainties
Management continues to evaluate
the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect
on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily
determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial
statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of 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
independent registered public accounting firm 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 the condensed
financial statements in conformity with 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 revenues and expenses during the reporting period.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
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.
Marketable Securities Held in Trust Account
At September 30, 2021, substantially
all of the assets held in the Trust Account were held in U.S. Treasury Bills.
Class A Common Stock Subject to Possible
Redemption
The Company accounted for
its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of Class A common stock subject
to mandatory redemption were classified as a liability instrument and were measured at fair value. Conditionally redeemable common stock
(including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon
the occurrence of uncertain events not solely within the Company’s control) was classified as temporary equity. At all other times,
common stock was classified as stockholders’ equity. The Company’s Class A common stock featured certain redemption rights
that were considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at
September 30, 2021, Class A common stock subject to possible redemption was presented at redemption value as temporary equity, outside
of the stockholders’ equity section of the Company’s balance sheet.
Warrant Liabilities
The Company accounted for
the Private Warrants (as defined below) in accordance with the guidance contained in ASC 815-40, under which the Private Warrants do not
meet the criteria for equity treatment and must be recorded as liabilities. Under ASC 815-40, the Company’s Private Warrants were
not indexed to the Company’s common stock in the manner contemplated by ASC 815-40 because the holder of the instrument is not an
input into the pricing of a fixed-for-fixed option on equity shares. Accordingly, the Company classified the Private Warrants as liabilities
at their fair value and adjusted the Private Warrants to fair value at each reporting period. These liabilities were subject to re-measurement
at each balance sheet date until exercised, and any change in fair value was recognized in the statement of operations. The Private Warrants
were valued using a modified Black Scholes model.
Offering Costs
The Company accounted for
offering costs in accordance with the guidance contained in ASC 340, Other assets and deferred costs and Staff Accounting Bulletin
Topic 5A, Miscellaneous Accounting – Expenses of the Offering. Under the guidance, costs consisting of legal, accounting
and other expenses that were incurred directly in relation to the Initial Public Offering were deferred and charged to stockholders’
equity upon consummation of the Initial Public Offering. Offering costs also included underwriting discounts and fees that were due upon
consummation of the Initial Public Offering, although these costs were not deferred as they were not incurred until the date of the Initial
Public Offering. The Company incurred $2,966,508 related to the issuance of Class A common stock which was charged to stockholders’
equity, consisting of $2,500,000 of underwriting fees and $466,508 of other offering costs.
Income Taxes
The Company followed the
asset and liability method of accounting for income taxes under ASC 740, “Income Taxes” (“ASC 740”). Deferred
tax assets and liabilities were recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities were
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates was recognized in income in the period
that included the enactment date. Valuation allowances were established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
FASB ASC 740 prescribes a
recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company recognized 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. 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 may be subject
to potential examination by federal, state and city 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,
state and city 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.
Net Loss Per Common Share
Net loss per share was computed
by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Shares of common stock subject
to possible redemption at September 30, 2021, which were not redeemable and were not redeemable at fair value, were excluded from the
calculation of basic net loss per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account
earnings. The Company had not considered the effect of the warrants sold in the Initial Public Offering and the private placement to purchase
an aggregate of 370,000 Units in the calculation of diluted loss per share, since the exercise of the warrants was contingent upon the
occurrence of future events and the inclusion of such warrants would be anti-dilutive. As a result, diluted net loss per common share
was the same as basic net loss per common share for the periods presented.
The Company’s statement
of operations included a presentation of net earnings (loss) per share of common stock subject to possible redemption and allocated the
net income (loss) into the two classes of stock in calculating net earnings (loss) per common share, basic and diluted. For Class A redeemable
common stock, net earnings (loss) per common share was calculated by dividing the net loss by the weighted average number of Class A common
stock subject to possible redemption outstanding since original issuance. For Class B non-redeemable common stock, neat earnings (loss)
per share was calculated by dividing the net loss by the weighted average number of Class B nonredeemable common stock outstanding for
the period. Class B non-redeemable common stock included the Founder Shares as these shares do not have any redemption features and do
not participate in the income earned on the Trust Account.
The following table
reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):
| Schedule of basic and diluted net income loss per common share | |
| | |
| | |
For the Period from
September 30,
2020 (Inception)
Through
September 30,
2021 | |
| Class A common stock subject to possible redemption | |
| | |
| Numerator: Earnings attributable to Class A common stock subject to possible redemption | |
| | |
| Net loss | |
$ | (1,194,483 | ) |
| Net loss attributable to Class A common stock subject to possible redemption | |
$ | (1,194,483 | ) |
| Denominator: Weighted average Class A common stock subject to possible redemption | |
| | |
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 10,102,740 | |
| Basic and diluted net loss per share, Class A common stock subject to possible redemption | |
$ | (0.12 | ) |
| | |
| | |
| Non-Redeemable Class B common stock | |
| | |
| Numerator: Net loss minus net earnings | |
| | |
| Net loss | |
$ | (385,644 | ) |
| Non-redeemable net loss | |
$ | (385,644 | ) |
| Denominator: Weighted average non-redeemable Class B common stock | |
| | |
| Basic and diluted weighted average shares outstanding, non-redeemable Class B common stock | |
| 3,261,712 | |
| Basic and diluted net loss per share, non-redeemable Class B common stock | |
$ | (0.12 | ) |
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consisted of a cash account in a financial institution, which, at times,
may exceed the Federal Depository Insurance Coverage of $250,000. The Company had not experienced losses on this account.
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:
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Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
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● |
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. |
In some circumstances, the
inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair
value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the
fair value measurement.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement” (“ASC 820”),
approximated the carrying amounts represented in the condensed balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the
FASB issued ASU No. 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. ASU 2020-06 removes certain settlement conditions that are required for equity
contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain
areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years, with early adoption permitted. We have not yet assessed the impact, if any, that ASU 2020-06 would have on our financial
position, results of operations or cash flows.
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
Company’s condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company sold 12,500,000 Units, which includes a partial exercise by the underwriters of their over-allotment option in the
amount of 1,500,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock 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, subject to adjustment (see Note 8).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing
of the Initial Public Offering, the Sponsor and the Forward Purchase Investors purchased an aggregate of Private Units at a price
of $ per Private Unit, for an aggregate purchase price of $, in a private placement. The Sponsor purchased an aggregate
of Private Units and Forward Purchase Investors purchased an aggregate of 74,000 Private Units. Each Private Unit consists of
one share of Class A common stock (“Private Share”) and one-half of one redeemable warrant (“Private Warrant”).
Each whole Private Warrant entitles the holder to purchase one share of Class A common stock at a price of $ per share, subject
to adjustment (see Note 8). A portion of the proceeds from the Private Units were added to the proceeds from the Initial Public Offering
held in the Trust Account. The Private Units are identical to the Units sold in the Initial Public Offering, except as described in Note 8.
If the Company does not complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Units will
be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and underlying securities will be
worthless.
Certain funds affiliated
with Baron Capital Group, Inc., which are members of the Sponsor, and MG Partners Multi-Strategy Fund LP (collectively, the “Forward
Purchase Investors”) entered into contingent forward purchase agreements with the Company as described in Note 6. Contemporaneously
with the execution and delivery of the Business Combination Agreement, the Company entered into two separate Subscription Agreements with
DD3 Capital Partners S.A. de C.V. (“DD3 Capital”) and Larrain Investment Inc. (“Larrain”) (the “Subscription
Agreements”) as described in Note 6.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On October 13, 2020, the
Sponsor purchased shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price
of $. On December 7, 2020, the Company effected a stock dividend of 287,500 shares with respect to the Class B common stock, resulting
in an aggregate of 3,162,500 Founder Shares issued and outstanding. All share and per-share amounts have been retroactively restated to
reflect the stock dividend effectuated on December 7, 2020. The Founder Shares included an aggregate of up to 412,500 shares subject to
forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the initial
stockholders would own, on an as-converted basis, 20.0% of the Company’s issued and outstanding shares after the Initial Public
Offering (excluding the Private Shares). As a result of the underwriters’ election to partially exercise their over-allotment option,
a total of 37,500 Founder Shares were forfeited, resulting in an aggregate of 3,125,000 Founder Shares issued and outstanding.
The Company’s Sponsor,
initial stockholders, officers and directors agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the
Founder Shares until the earlier of one year after the date of the consummation of a Business Combination and the date on which the closing
price of the Class A common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and
recapitalizations) for any 20 trading days within a 30-trading day period commencing 150 days after a Business Combination, or earlier
if, subsequent to a Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which
results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other
property.
Due from Sponsor
As of December 10, 2020,
the Company advanced the Sponsor an aggregate of $, which is included in prepaid expenses in the accompanying condensed balance
sheet. The outstanding balance of the $ due was repaid on January 11, 2021.
Administrative Services Agreement
The Company entered into
an agreement, commencing on December 7, 2020 through the earlier of the Company’s consummation of a Business Combination and its
liquidation, to pay the Sponsor a total of up to $10,000 per month for office space, utilities and administrative support. For the period
from September 30, 2020 (inception) through September 30, 2021, the Company incurred $100,000, respectively, in fees for these services,
of which $80,000 is included in accrued expenses in the accompanying condensed balance sheet at September 30, 2021.
Promissory Note — Related Party
On October 13, 2020, the
Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company could borrow
up to an aggregate principal amount of $. The Promissory Note was non-interest bearing and payable on the earlier of (i) March
31, 2021 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $105,747 was
repaid at the closing of the Initial Public Offering on December 10, 2020.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights Agreement
The holders of the Founder
Shares, as well as certain holders of the Private Units (and all underlying securities), were entitled to certain registration rights
pursuant to a registration rights agreement, dated as of December 7, 2020, among the Company and such holders. Such agreement was terminated
and superseded by the Registration Rights and Lock-Up Agreement which the Company, Codere Newco, Holdco, the Sponsor, the Forward Purchase
Investors and the other parties thereto entered into at Closing (the “Registration Rights and Lock-Up Agreement”), which provides
customary demand and piggyback registration rights. Pursuant to the Registration Rights and Lock-Up Agreement, Holdco agreed that, within
30 calendar days after the Closing date, it will file with the SEC a registration statement to permit the public resale of certain Holdco
Ordinary Shares and Holdco warrants (including underlying securities) held by the Holders (as defined in the Registration Rights and Lock-Up
Agreement), and that it will use its reasonable best efforts to have the registration statement declared effective as soon as practicable
after the filing thereof, but no later than 60 calendar days following the filing deadline, provided that the effectiveness deadline will
be extended to 90 calendar days after the filing deadline if the registration statement is reviewed by, and receives comments from, the
SEC.
Underwriting Agreement
The underwriters were paid
a cash underwriting discount of $0.20 per Unit, or $2,500,000 in the aggregate, payable upon the closing of the Initial Public Offering.
Business Combination Marketing Agreement
The Company engaged the underwriters
as an advisor in connection with a Business Combination to assist the Company in holding meetings with its shareholders to discuss the
potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested
in purchasing the Company’s securities in connection with a Business Combination, provide financial advisory services to assist
the Company in the Company’s efforts to obtain any 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 underwriters a cash fee for
such services upon the consummation of a Business Combination in an amount equal to, in the aggregate, 3.5% of the gross proceeds of Initial
Public Offering (exclusive of any applicable finders’ fees which might become payable).
Forward Purchase Agreements
In connection with the Codere
Business Combination, (i) Baron Global Advantage Fund, Baron Emerging Markets Fund and Destinations International Equity Fund, certain
funds affiliated with Baron Capital Group, Inc. (collectively, “Baron”) elected to purchase an aggregate of 2,500,000 shares
of the Company’s Class A common stock for an aggregate purchase price of $25,000,000, at a price of $10.00 per each share of the
Company’s Class A common stock, pursuant to the terms of the Forward Purchase Agreement, dated as of November 17, 2020, by and between
the Company and Baron, as amended on June 21, 2021 (the “Baron Forward Purchase Agreement”), and (ii) MG Partners Multi-Strategy
Fund LP (“MG”) elected to purchase an aggregate of 2,500,000 shares of the Company’s Class A common stock for an aggregate
purchase price of $25,000,000, at a price of $10.00 per each share of the Company’s Class A common stock, pursuant to the terms
of the Forward Purchase Agreement, dated as of November 19, 2020, by and between DD3 and MG, as amended on June 21, 2021 (the “MG
Forward Purchase Agreement”), in each case in a private placement that occurred immediately prior to the Merger.
Subscription Agreements
Contemporaneously with the
execution and delivery of the Business Combination Agreement, the Company entered into two separate Subscription Agreements with DD3 Capital
and Larrain, in each case to which Holdco is also a party, pursuant to which the Company issued and sold, in a private placement that
closed immediately prior to the Merger, (i) an aggregate of 500,000 shares of the Company’s Class A common stock, for an aggregate
purchase price of $5,000,000, at a price of $10.00 per each share of the Company’s Class A common stock, to DD3 Capital and its
permitted transferees, and (ii) an aggregate of 1,224,000 shares of the Company’s Class A common stock, for an aggregate purchase
price of $12,240,000, at a price of $10.00 per each share of the Company’s Class A common stock, to Larrain and its permitted transferees.
Holdco also granted certain registration rights to DD3 Capital, Larrain and their permitted transferees under the Subscription Agreements.
Warrant Amendment Agreement
In connection with the Closing of the Codere Business
Combination, the Company, Holdco and Continental Stock Transfer & Trust Company, as warrant agent, entered into an agreement at Closing
(the “Warrant Amendment Agreement”) to amend the warrant agreement, dated as of December 7, 2020, by and between the Company
and Continental, as warrant agent, governing the Public Warrants and Private Warrants entered into by the Company, Holdco and Continental,
as warrant agent (the “Original Warrant Agreement”), pursuant to which, among others, as of the Merger Effective Time, (i)
each of the issued Public Warrants and Private Warrants that was outstanding immediately prior to the Merger Effective Time ceased to
represent a right to acquire one share of the Company’s Class A common stock and instead represented the right to acquire one Holdco
Ordinary Share on substantially the same terms as set forth in the Original Warrant Agreement and (ii) the Company assigned to Holdco
all of the Company’s right, title and interest in and to the Original Warrant Agreement and Holdco assumed, and agreed to pay, perform,
satisfy and discharge in full, all of the Company’s liabilities and obligations under the Original Warrant Agreement arising from
and after the Merger Effective Time.
Baron Support Agreement
Contemporaneously with the
execution and delivery of the Business Combination Agreement, the Company entered into the Investor Support Agreement with Baron (the
“Baron Support Agreement”), pursuant to which Baron irrevocably waived its redemption rights with respect to 996,069 public
shares acquired by Baron in the Company’s Initial Public Offering (the “Baron IPO Shares”) and agreed not to (a) redeem,
or exercise any of its redemption rights with respect to, any Baron IPO Shares in connection with the Company’s special meeting
of stockholders to approve the Business Combination Agreement and the Codere Business Combination and (b) to certain transfer restrictions
with respect to the Baron IPO Shares. The Baron Support Agreement and the obligations of Baron under the Baron Support Agreement automatically
terminated upon the Closing of the Codere Business Combination. The Baron Support Agreement was subject to customary conditions, covenants,
representations and warranties.
Pursuant to the Business
Combination Agreement, the Company undertook not to amend, modify, waive or otherwise change any of the Baron Support Agreement, Forward
Purchase Agreements and Subscription Agreements without the prior written consent of SEJO, such consent not to be unreasonably withheld,
delayed or conditioned.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock
— At September 30, 2021, the Company was authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per
share with such designations, voting and other rights and preferences as may have been determined from time to time by the Company’s
board of directors. At September 30, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock
— At September 30, 2021, the Company was authorized to issue up to 100,000,000 shares of Class A common stock with a par
value of $0.0001 per share. Holders of Class A common stock were entitled to one vote for each share. At September 30, 2021, there were
12,870,000 shares of Class A common stock issued and outstanding, including 12,500,000 shares of Class A common stock subject to possible
redemption.
Class B Common Stock
— At September 30, 2021, the Company was authorized to issue up to 10,000,000 shares of Class B common stock with a par
value of $0.0001 per share. Holders of Class B common stock were entitled to one vote for each share. At September 30, 2021, there were
3,125,000 shares of Class B common stock issued and outstanding.
At September 30, 2021, only
holders of Class B common stock had the right to vote on the election of directors prior to a Business Combination. Holders of Class A
common stock and Class B common stock would vote together as a single class on all other matters submitted to a vote of stockholders,
except as required by law.
After the Exchange and immediately
prior to the Merger Effective Time, each share of the Company’s Class B common stock automatically converted into and exchanged
for one share of the Company’s Class A common stock (the Class B Conversion).
At February 16, 2022, the
Company is authorized to issue up to 1,000 shares of common stock with a par value of $0.01 per share. At February 16, 2022, there were
100 shares of common stock issued and outstanding.
NOTE 8. WARRANTS
In connection with the Closing of the Codere Business
Combination, the Company, Holdco and Continental Stock Transfer & Trust Company, as warrant agent, entered into the Warrant Amendment
Agreement, pursuant to which, among others, as of the Merger Effective Time, (i) each of the issued Public Warrants and Private Warrants
that was outstanding immediately prior to the Merger Effective Time ceased to represent a right to acquire one share of the Company’s
Class A common stock and instead represented the right to acquire one Holdco Ordinary Share on substantially the same terms as set forth
in the Original Warrant Agreement and (ii) the Company assigned to Holdco all of the Company’s right, title and interest in and
to the Original Warrant Agreement and Holdco assumed, and agreed to pay, perform, satisfy and discharge in full, all of the Company’s
liabilities and obligations under the Original Warrant Agreement arising from and after the Merger Effective Time.
The Holdco public warrants
became exercisable as of December 30, 2021. The Holdco public warrants will expire five years after the consummation of the Codere Business
Combination or earlier upon redemption or liquidation.
Under the terms of the Original
Warrant Agreement, Public Warrants were only exercisable for a whole number of shares. No fractional shares were issuable upon exercise
of the Public Warrants. The Company could redeem the Public Warrants (excluding the Private Warrants):
| |
● |
in whole and not in part; |
| |
|
|
| |
● |
at a price of $0.01 per warrant; |
| |
|
|
| |
● |
at any time after the warrants become exercisable; |
| |
|
|
| |
● |
upon not less than 30 days’ prior written notice of redemption to each warrant holder; |
| |
● |
if, and only if, the reported last sale price of the shares of Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day commencing at any time after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and |
| |
|
|
| |
● |
if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying the warrants. |
If and when the warrants
became redeemable by the Company, the Company may have exercised its redemption right even if it were unable to register or qualify the
underlying securities for sale under all applicable state securities laws.
Under the terms of the Original
Warrant Agreement, if the Company called the Public Warrants for redemption, management would have the option to require all holders that
wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the Original Warrant Agreement. The exercise
price and number of shares of Class A common stock issuable upon exercise of the warrants may have been adjusted in certain circumstances
including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described
below, the warrants would not have been adjusted for issuances of Class A common stock at a price below its exercise price. Additionally,
in no event would the Company have been required to net cash settle the warrants. If the Company had been unable to complete a Business
Combination within the Combination Period and the Company liquidated the funds held in the Trust Account, holders of warrants would not
have received any of such funds with respect to their warrants, nor will they have received any distribution from the Company’s
assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants could have expired worthless.
In addition, under the terms
of the Original Warrant Agreement, if (x) the Company issued additional shares of Class A common stock or equity-linked securities for
capital raising purposes in connection with the closing of its initial 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 have been determined in good faith
by the Company’s board of directors and, in the case of any such issuance to the Sponsor, initial stockholders or their affiliates,
without taking into account any Founder Shares held by the Sponsor, initial stockholders or their affiliates, as applicable, prior to
such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represented more than 60%
of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the
date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price
of the Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummated
its initial Business Combination (such price, the “Market Value”) was below $9.20 per share, then the exercise price of the
warrants would have been adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the Newly Issued
Price, and the $18.00 per share redemption trigger price of the warrants would have been adjusted (to the nearest cent) to be equal to
180% of the greater of (i) the Market Value or (ii) the Newly Issued Price.
The Private Warrants were
identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the shares
of Class A common stock that were issuable upon the exercise of the Private Warrants would not have been transferable, assignable or salable
until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants would
have been exercisable on a cashless basis and would be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Warrants were held by someone other than the initial purchasers or their permitted transferees, the Private
Warrants would be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance
in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial
assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| |
Level 1: |
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| |
|
|
| |
Level 2: |
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| |
|
|
| |
Level 3: |
Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents
information about the Company’s assets and liabilities 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:
| Schedule of fair value on a recurring basis |
|
|
|
|
|
|
| Description |
|
Level |
|
September 30,
2021 |
|
| Assets: |
|
|
|
|
|
|
| Marketable securities held in Trust Account |
|
1 |
|
$ |
125,056,567 |
|
| |
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
| Warrant Liability – Private Warrants |
|
3 |
|
$ |
223,850 |
|
The Private Warrants are
accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the accompanying condensed
balance sheet. The Private Warrants are measured at fair value at inception and on a recurring basis, with changes in fair value presented
in the condensed statement of operations.
The Private Warrants were
valued using a modified Black Scholes model, which is considered to be a Level 3 fair value measurement. The modified Black Scholes model’s
primary unobservable input utilized in determining the fair value is the expected volatility of the common stock. The expected volatility
as of the valuation dates was implied from the Company’s own Public Warrant pricing.
The following table presents
the quantitative information regarding Level 3 fair value measurements of the warrant liability as of September 30, 2021:
| Schedule of quantitative information |
|
|
|
|
| Risk-free interest rate |
|
|
0.98 |
% |
| Effective expiration date |
|
|
12/07/2026 |
|
| Dividend yield |
|
|
0.00 |
% |
| Expected volatility |
|
|
18.25 |
% |
| Exercise price |
|
$ |
11.50 |
|
| Unit Price |
|
$ |
1.22 |
|
The following table presents
the changes in the fair value of Private Warrants:
| Schedule of changes in the fair value of Private Warrants | |
| | |
| Fair value as of September 30, 2020 (inception) | |
$ | — | |
| Change in fair value | |
| 223,850 | |
| Fair value as of September 30, 2021 | |
$ | 223,850 | |
There were no transfers in
or out of Level 3 from other levels in the fair value hierarchy during the period from September 30, 2020 (inception) through September
30, 2021.
NOTE 10. INCOME TAX
The Company’s net deferred
tax assets at September 30, 2021 is as follows:
| Schedule of net deferred
tax assets | |
| | |
| | |
September 30, | |
| | |
2021 | |
| Startup/organization expenses | |
$ | 256,543 | |
| Unrealized gains on marketable securities | |
| (1,341 | ) |
| Net operating loss | |
| 52,538 | |
| Total deferred tax assets | |
| 307,740 | |
| Valuation allowance | |
| (307,740 | ) |
| Deferred tax assets | |
$ | — | |
The income tax provision for the
year ended September 30, 2021 consists of the following:
| Schedule of income tax provision | |
| | |
| | |
September 30, | |
| | |
2021 | |
| Current expense (benefit) | |
| | |
| Federal | |
$ | — | |
| State | |
| — | |
| | |
| | |
| Deferred expense (benefit) | |
| | |
| Federal | |
| (307,740 | ) |
| State | |
| — | |
| | |
| | |
| Change in Valuation Allowance | |
| 307,740 | |
| | |
| | |
| Income tax provision | |
$ | — | |
As of September 30, 2021, the
Company had a federal net operating loss carryover of $250,181 available to offset future taxable income. The federal net operating loss
will be carryforward indefinitely while any state net operating loss will carryforward a maximum of 20 years.
In assessing the realization of
the deferred tax assets, management considers whether it is more likely than not that some portion of all the deferred tax assets will
not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled
reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration
of all of the information available, management believes that significant uncertainty exists with respect to future realization of the
deferred tax assets and has therefore established a full valuation allowance. For the year ended September 30, 2021, the change in the
valuation allowance was $307,740.
A reconciliation of the federal
income tax rate to the Company’s effective tax rate at September 30, 2021 is as follows:
| Schedule of reconciliation of federal
income tax rate of effective tax rate | |
| | |
| | |
September 30, | |
| | |
2021 | |
| Statutory federal income tax rate | |
| 21.00 | % |
| State taxes, net of federal tax benefit | |
| 0.00 | % |
| Change in fair value of warrant liabilities | |
| (1.52 | )% |
| Valuation allowance | |
| (19.48 | )% |
| Income tax provision | |
| 0.00 | % |
The Company’s effective
tax rates for the periods presented differ from the expected (statutory) rates due to changes in fair value in warrants and the recording
of full valuation allowances on deferred tax assets.
The Company files income tax
returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities. The Company’s tax returns
for the year ended September 30, 2021 remain open and subject to examination. The Company considers Delaware to be a significant state
tax jurisdiction.
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to 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, other than those identified below.
As described above, on November
30, 2021, the Codere Business Combination was completed pursuant to the terms of the Business Combination Agreement, which among other
things provided for the Merger. In connection with the consummation of the Codere Business Combination , “DD3 Acquisition Corp.
II” was renamed “Codere Online U.S. Corp.” Also in connection with the consummation of the Codere Business Combination,
the Company became a direct, wholly-owned subsidiary of Holdco.
On November 30, 2021, the
Nasdaq Stock Market LLC filed a Form 25 (Notification of Removal from Listing) with the SEC relating to the delisting of our units, warrants
and Class A common stock. As a result, the Company’s units, warrants and Class A common stock were delisted on the Nasdaq. On December
14, 2021, the Company filed a Form 15 certifying the deregistration of its units, warrants and Class A common stock under Section 12(g)
of the Exchange Act and suspension of its duty to file reports under Sections 13 and 15(d) of the Exchange Act. The Company’s reporting
obligations under Section 15(d) of the Exchange Act have been suspended.
On January 27, 2022, the
Company filed amended 10-Q/A Quarterly Reports for the periods ending December 31, 2020, March 31, 2021 and June 30, 2021 to restate the
financial statements to correct accounting errors related to the classification Private Placement Warrants and shares subject to possible
redemption.
