INDUSTRIAL TECH ACQUISITIONS, INC.
CONDENSED
BALANCE SHEETS
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
198,930
|
|
|
$
|
406,381
|
|
Prepaid assets
|
|
|
114,514
|
|
|
|
110,466
|
|
Total current assets
|
|
|
313,444
|
|
|
|
516,847
|
|
Marketable securities held in Trust Account
|
|
|
77,004,391
|
|
|
|
77,000,788
|
|
Total Assets
|
|
$
|
77,317,835
|
|
|
$
|
77,517,635
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
6,209
|
|
|
$
|
109,432
|
|
Due to related party
|
|
|
1,816
|
|
|
|
1,816
|
|
Total current liabilities
|
|
|
8,025
|
|
|
|
111,248
|
|
Warrant Liability
|
|
|
14,871,126
|
|
|
|
13,391,430
|
|
Deferred underwriters’ discount
|
|
|
2,668,260
|
|
|
|
2,668,260
|
|
Total liabilities
|
|
|
17,547,411
|
|
|
|
16,170,938
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption, 7,623,600 and 5,578,881 shares at redemption value, respectively
|
|
|
77,004,391
|
|
|
|
56,346,693
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 151,236 and 2,195,955 shares issued and outstanding (excluding 7,623,600 and 5,578,881 shares subject to possible redemption), respectively
|
|
|
15
|
|
|
|
220
|
|
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 1,905,900 shares issued and outstanding
|
|
|
191
|
|
|
|
191
|
|
Additional paid-in capital
|
|
|
24,794
|
|
|
|
7,256,247
|
|
Accumulated deficit
|
|
|
(17,258,967
|
)
|
|
|
(2,256,654
|
)
|
Total stockholders’ equity (deficit)
|
|
|
(17,233,967
|
)
|
|
|
5,000,004
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity (Deficit)
|
|
$
|
77,317,835
|
|
|
$
|
77,517,635
|
|
The accompanying notes are an integral part of
these unaudited condensed financial statements.
INDUSTRIAL TECH ACQUISITIONS, INC.
UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
Operating costs
|
|
$
|
100,324
|
|
Loss from operations
|
|
|
(100,324
|
)
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
Bank interest income
|
|
|
144
|
|
Trust interest income
|
|
|
3,603
|
|
Unrealized loss on change in fair value of warrants
|
|
|
(1,479,696
|
)
|
Total other expense
|
|
|
(1,475,949
|
)
|
|
|
|
|
|
Net loss
|
|
$
|
(1,576,273
|
)
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, common stock subject to redemption (Note 2)
|
|
|
7,623,600
|
|
Basic and diluted net income per Class A common stock (Note 2)
|
|
$
|
0.00
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, common stock (Note 2)
|
|
|
2,057,136
|
|
Basic and diluted net loss per common stock (Note 2)
|
|
$
|
(0.77
|
)
|
The accompanying notes are an integral part of
these unaudited condensed financial statements.
INDUSTRIAL TECH ACQUISITIONS, INC.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN
STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2021
|
|
Class A
|
|
|
Class B
|
|
|
Additional
|
|
|
|
|
|
Total
Stockholders’
|
|
|
|
Common
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares (1)
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2020
|
|
|
2,195,955
|
|
|
|
220
|
|
|
|
1,905,900
|
|
|
$
|
191
|
|
|
$
|
7,256,247
|
|
|
$
|
(2,256,654
|
)
|
|
$
|
5,000,004
|
|
Change in Class A common stock subject to possible redemption
|
|
|
(2,044,719
|
)
|
|
|
(205
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,231,453
|
)
|
|
|
(13,426,040
|
)
|
|
|
(20,657,698
|
)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,576,273
|
)
|
|
|
(1,576,273
|
)
|
Balance
as of March 31, 2021
|
|
|
151,236
|
|
|
|
15
|
|
|
|
1,905,900
|
|
|
$
|
191
|
|
|
$
|
24,794
|
|
|
$
|
(17,258,967
|
)
|
|
$
|
(17,233,967
|
)
|
The accompanying notes are an integral part of
these unaudited condensed financial statements.
INDUSTRIAL TECH ACQUISITIONS, INC.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
Cash Flows from Operating Activities:
|
|
|
|
Net loss
|
|
$
|
(1,576,273
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(3,603
|
)
|
Unrealized loss on change in fair value of warrants
|
|
|
1,479,696
|
|
Changes in current assets and current liabilities:
|
|
|
|
|
Prepaid assets
|
|
|
(4,048
|
)
|
Accounts payable
|
|
|
(103,223
|
)
|
Net cash used in operating activities
|
|
|
(207,451
|
)
|
|
|
|
|
|
Net Change in Cash
|
|
|
(207,451
|
)
|
Cash - Beginning
|
|
|
406,381
|
|
Cash - Ending
|
|
$
|
198,930
|
|
The accompanying notes are an integral part of
these unaudited condensed financial statements.
INDUSTRIAL TECH ACQUISITIONS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Organization and General
Industrial Tech Acquisitions,
Inc. is a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”). The Company
is an “emerging growth company”, as defined in Section 2(a) of the Securities Act of 1933, as amended (the Securities Act”),
as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The Company’s efforts to identify a
prospective target business will not be limited to a particular industry or geographic location.
The Company has selected December
31 as its fiscal year end.
As of March 31, 2021, the
Company had not yet commenced any operations. All activity for the period from June 2, 2020 (inception) through March 31, 2021 relates
to the Company’s formation and the Initial Public Offering (“IPO”) described below, and, since the closing of the IPO, the search for a prospective initial
Business Combination. The Company will not generate any
operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating
income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO and will recognize changes in
the fair value of warrant liability as other income (expense).
Financing
The registration statement
for the Company’s IPO was declared effective on September 8, 2020 (the “Effective Date”). On September 11, 2020, the
Company consummated the IPO of 7,500,000 units (the “Units” and, with respect to the shares of Class A common stock included
in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $75,000,000, which is described
in Note 4.
Simultaneously with the closing
of the IPO, the Company consummated the sale of 3,075,000 warrants (the “Private Placement Warrants”) at a price of $1.00
per Private Placement Warrant in a private placement to Industrial Tech Partners, LLC, a Delaware limited liability company (the “Sponsor”),
generating gross proceeds of $3,075,000, which is described in Note 5.
On October 13, 2020, the Company
consummated the sale of an additional 123,600 Units (the “Over-Allotment Units) that were subject to the underwriters’ over-allotment
option at $10.00 per Unit, generating gross proceeds of $1,236,000. In connection with the closing of the purchase of the Over-Allotment
Units, the Company sold an additional 37,080 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant,
generating gross proceeds of $37,080. Following the closing of the over-allotment option, additional $1,248,360 has been placed in the
Company’s Trust Account (defined as below) established in connection with the IPO.
Transaction costs amounted
to $4,729,424 consisting of $1,149,720 of underwriting fee, $2,668,260 of deferred underwriting fee, the fair value of the option granted
to the underwriters of $390,000, the fair value of the shares issued to the underwriters of $2,016 deemed as underwriters’ compensation,
and $519,428 of other offering costs.
Trust Account
Following the closing of the
IPO on September 11, 2020 and the sale of Over-allotment Units on October 13, 2020, an amount of $76,998,360 ($10.10 per Unit) from the
net proceeds of the sale of the Units in the IPO, the sale of the Private Placement Warrants, and the sale of Over-allotment Units was
placed in a trust account (“Trust Account”) which will be invested in U.S. government securities, within the meaning set forth
in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds
itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. Except
with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its franchise and income
tax obligations (less up to $50,000 of interest to pay dissolution expenses), the proceeds will not be released from the Trust Account
until the earliest of (a) the completion of the Company’s initial Business Combination, (b) the redemption of any public shares
properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation,
and (c) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination within
15 months from the closing of the IPO (or up to 21 months from the closing of the IPO if the Company extends the period of time to consummate
a Business Combination), subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of
the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Initial Business Combination
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the IPO, the sale of the Over-allotment Units and
the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. The Company’s Business Combination must be with one or more target businesses that together have a fair
market value equal to at least 80% of the balance in the Trust Account at the time of the signing an agreement to enter into a Business
Combination. However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires
50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will
be able to successfully effect a Business Combination.
The Company will provide its
public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business
Combination either (i) in connection with a stockholder meeting called to approve the initial Business Combination or (ii) by means of
a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct
a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro
rata portion of the amount then on deposit in the Trust Account (initially approximately $10.10 per share, plus any pro rata interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The shares of common
stock subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO,
in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon
such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares
voted are voted in favor of the Business Combination.
The Company will have 15 months
from the closing of the IPO (or up to 21 months from the closing of the IPO if the Company extends the period of time to consummate a
Business Combination) to consummate a Business Combination (the “Combination Period”). However, if the Company is unable to
complete a Business Combination within the Combination Period, the Company will redeem 100% of the outstanding public shares for a pro
rata portion of the funds held in the Trust Account, equal to the aggregate amount then on deposit in the Trust Account including interest
earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes, divided
by the number of then outstanding public shares, subject to applicable law and as further described in registration statement, and then
seek to dissolve and liquidate.
The Sponsor, officers and
directors have agreed to (i) waive their redemption rights with respect to their founder shares and public shares in connection with the
completion of the initial Business Combination, (ii) waive their redemption rights with respect to their founder shares and public shares
in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation,
and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company fails
to complete the initial Business Combination within the Combination Period.
On October 30, 2020, the holders
of Units may elect to separately trade the shares of Class A common stock and warrants included in the Units. The Units not separated
will continue to trade on the NASDAQ Capital Market under the symbol “ITACU.” Shares of Class A common stock and the warrants
are expected to trade on the NASDAQ Capital Market under the symbols “ITAC” and “ITACW,” respectively.
Liquidation
The Sponsor, officers and
directors have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if
the Company fails to complete the initial Business Combination within the Combination Period. In the event of such distribution, the Company’s
Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products
sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality
or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.10
per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust
Account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability
will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies
held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity
of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. The Company will 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 for the Company’s independent registered public accounting firm), prospective target businesses or other
entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any
kind in or to monies held in the Trust Account.
Liquidity
As of March 31, 2021, the
Company had cash outside the Trust Account of $198,930 available for working capital needs. All remaining cash held in the Trust Account
are generally unavailable for the Company’s use, prior to an initial Business Combination, and is restricted for use either in a
Business Combination or to redeem common stock. As of March 31, 2021, none of the amount in the Trust Account was available to be withdrawn
as described above.
Through March 31, 2021, the
Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the founder shares, advances from the Sponsor
in an aggregate amount of $175,000 which were repaid upon the IPO (as described in Note 6) and the remaining net proceeds from the IPO,
the sale of the Over-allotment Units and the sale of Private Placement Warrants (as described in Note 4 and 5).
In order to finance transaction
costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working
Capital Loans would be convertible into private placement-equivalent warrants at a price of $1.00 per warrant (which, for example, would
result in the holders being issued 1,500,000 warrants if $1,500,000 of notes were so converted), at the option of the lender. Such warrants
would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period.
Based on the foregoing, management
believes that the Company has sufficient liquidity to meet its anticipated obligations until the earlier of the consummation of the initial
Business Combination or liquidation.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited
condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted
in the United States of America and pursuant to the rules and regulations of the SEC, and reflect all adjustments, consisting only of
normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the financial position as
of March 31, 2021 and the results of operations and cash flows for the period presented and should be read in conjunction with the Company’s
prospectus for its Initial Public Offering as filed with the SEC on September 10, 2020. The interim results for the three months ended
March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
Emerging Growth Company Status
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified
by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not
limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use of Estimates
The preparation of financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all
short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have
any cash equivalents as of March 31, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At March 31, 2021 and December
31, 2020, the assets held in the Trust Account were held in treasury funds.
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times,
may exceed the Federal Depository Insurance Coverage of $250,000. As of March 31, 2021 and December 31, 2020, the Company has not experienced
losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Common Stock Subject to Possible Redemption
The Company accounts for its
Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified
as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption
rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within
the Company’s control) are classified as temporary equity. At all other times, common stock are classified as stockholders’
equity. The Company’s common stock feature certain redemption rights that are considered to be outside of the Company’s control
and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2021 and December 31, 2020, 7,623,600 and 5,578,881
shares of Class A common stock subject to possible redemption, respectively, are presented at redemption value as temporary equity, outside
of the stockholders’ equity section of the Company’s balance sheets.
Net Loss Per Common Stock
The Company’s statements
of operations include a presentation of loss per share for common stock subject to possible redemption in a manner similar to the two-class
method of loss per share. Net loss per share is computed by dividing net loss by the weighted-average number of common stock outstanding
during the period. An aggregate of 7,623,600 Class A common stock subject to possible redemption at March 31, 2021 was excluded from the
calculation of basic loss per share of common stock since such shares, if redeemed, only participate in their pro rata share of the Trust
Account earnings. The Company has not considered the effect of the warrants sold in the IPO and Private Placement to purchase an aggregate
of 10,938,976 shares of the Company’s Class A common stock in the calculation of diluted loss per share, since they are not yet
exercisable.
Below is a reconciliation of the net loss per common
stock:
|
|
For the
Three Months
Ended
March 31,
2021
|
|
Redeemable Class A Common Stock
|
|
|
|
Numerator: Earnings allocable to Redeemable Class A Common Stock
|
|
|
|
Interest income on marketable securities held in Trust Account
|
|
$
|
3,603
|
|
Net earnings
|
|
$
|
3,603
|
|
Denominator: Weighted average Redeemable Class A Common Stock
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Redeemable Class A Common Stock
|
|
|
7,623,600
|
|
Basic and diluted net earnings per share, Redeemable Class A Common Stock
|
|
$
|
0.00
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
Numerator: Net loss minus net earnings
|
|
|
|
|
Net loss
|
|
$
|
(1,576,273
|
)
|
Net earnings attributable to Redeemable Class A Common Stock
|
|
|
(3,603
|
)
|
Non-redeemable net loss
|
|
$
|
(1,579,876
|
)
|
Denominator: Weighted average Non-Redeemable Common Stock
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Non-Redeemable Common Stock
|
|
|
2,057,136
|
|
Basic and diluted net loss per share, Non-Redeemable Common Stock
|
|
$
|
(0.77
|
)
|
Offering Costs
The Company complies with the requirements of the ASC 340-10-S99-1
and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs consist principally
of professional and registration fees incurred through the balance sheet date that were related to the IPO. Offering costs were allocated
to the separable financial instruments issued in the IPO based on a relative fair value basis compared to total proceeds received. Offering
costs associated with warrant liabilities were expensed, and offering costs associated with the Class A common stock were charged to the
stockholders’ equity.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet.
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. US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
●
|
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
|
●
|
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
|
●
|
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
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.
The
Company’s warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable
markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result
in a material change in fair value. The fair value of the warrant liability is classified as level 3. See Note 6 for additional information
on assets and liabilities measured at fair value.
Derivative Financial Instruments
The Company evaluates its
financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance
with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued
at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are
classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument
could be required within 12 months of the balance sheet date. The Company has determined that both the Public Warrants and Private Placement
Warrants are derivative instruments (See Note 3 and Note 4).
Income Taxes
The Company accounts for income
taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for
both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future
tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established
when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and
transition.
The Company recognizes
accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits
and no amounts accrued for interest and penalties as of March 31, 2021 and December 31, 2020. The Company is currently not aware of
any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject
to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include
questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state
tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over
the next twelve months.
Risks and Uncertainties
Management continues to evaluate
the impact of the COVID-19 pandemic on the Company’s financial statements 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 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.
Recent Accounting Pronouncements
Management does not believe
that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s
financial statements.
Note 3 — Initial Public Offering
Pursuant to the IPO on September
11, 2020, the Company sold 7,500,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common
stock, and one warrant to purchase one share of Class A common stock. Each warrant will entitle the holder to purchase one share of Class
A common stock at a price of $11.50 per share, subject to adjustment. Each warrant will become exercisable on the later of 30 days after
the completion of the initial Business Combination or 12 months from the closing of the IPO and will expire five years after the completion
of the initial Business Combination, or earlier upon redemption or liquidation.
Warrants
Each warrant entitles the
holder thereof to purchase one share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment
as discussed herein. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for
capital raising purposes in connection with the closing of 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 be determined in good faith by
the Company’s board of directors and, in the case of any such issuance to the Company’s sponsor or its affiliates, without
taking into account any founder shares held by the Company’s sponsor or its affiliates, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest
thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination
(net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day
period starting on the trading day prior to the day on which the Company consummates the initial Business Combination (such price, the
“Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be
equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described
below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market
Value and the Newly Issued Price.
The warrants will become exercisable
on the later of 15 months from the closing of the IPO (or up to 21 months from the closing of the IPO if the Company extends the period
of time to consummate a Business Combination) or 30 days after the completion of its initial Business Combination, and will expire five
years after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption
or liquidation.
The Company will not be obligated
to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant
exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants
is then effective and a prospectus is current. No warrant will be exercisable and the Company will not be obligated to issue shares of
Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will
the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised
warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of
Class A common stock underlying such unit.
Once the warrants become exercisable,
the Company may call the warrants for redemption (excluding the Private Placement Warrants but including any outstanding warrants issued
upon exercise of the unit purchase option issued to the representative and/or its designees):
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and
|
|
●
|
if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.
|
If the Company calls the warrants
for redemption as described above, the management will have the option to require any holder that wishes to exercise its warrant to do
so on a “cashless basis.” If the management takes advantage of this option, all holders of warrants would pay the exercise
price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x)
the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise
price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value”
shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior
to the date on which the notice of redemption is sent to the holders of warrants.
The exercise price and number
of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock
dividend, extraordinary dividend or the Company’s recapitalization, reorganization, merger or consolidation. However, the warrants
will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices.
Note 4 — Private Placement
Simultaneously with the closing
of the IPO, the Company consummated the Private Placement with the Company’s Sponsor purchasing an aggregate of 3,075,000 warrants
at a price of $1.00 per warrant, for an aggregate purchase price of $3,075,000. The proceeds from the sale of the Private Placement Warrants
were added to the proceeds from the IPO held in the Trust Account. The Private Placement Warrants are identical to the warrants sold in
the IPO except that the Private Placement Warrants, so long as they are held by the Sponsor or their permitted transferees, (i) will not
be redeemable by the Company, (ii) may not (including the Class A common stock issuable upon exercise of these warrants), subject to certain
limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the Company’s initial
Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights.
The Private Placement Warrants
will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor, the underwriters or their permitted
transferees. If the Private Placement Warrants are held by holders other than the Sponsor, the underwriters or their permitted transferees,
the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included
in the Units being sold in the IPO. In addition, for as long as the Private Placement Warrants are held by the underwriters or their designees
or affiliates, they may not be exercised after five years from the Effective Date.
Note 5 — Related Party Transactions
Promissory Note — Related Party
On June 24, 2020, the Company
issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000
to be used for a portion of the expenses of the IPO. This loan is non-interest bearing, unsecured and due at the earlier of December 31,
2020 or the closing of the IPO. The loan would be repaid upon the closing of the IPO out of the offering proceeds not held in the Trust
Account. On September 11, 2020, the Company had drawn down $175,000 under the promissory note with the Sponsor to pay for offering expenses.
On September 14, 2020, the Company repaid $175,000 to the Sponsor.
Due to Related Parties
As of March 31, 2021 and December
31, 2020, related parties paid an aggregate of $1,816 on behalf of the Company to pay for formation costs.
Related Party Loans
In order to finance transaction
costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working
Capital Loans would be convertible into private placement-equivalent warrants at a price of $1.00 per warrant (which, for example, would
result in the holders being issued 1,500,000 warrants if $1,500,000 of notes were so converted), at the option of the lender. Such warrants
would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. In the event
that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working
Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of March 31, 2021 and December 31, 2020, the Company had no Working Capital Loans.
On June 3, 2021, the Company
issued a convertible promissory note to the Sponsor, pursuant to which the Sponsor agreed to loan to the Company up to $250,000. The convertible
promissory note is non-interest bearing and payable on the date on which the Company consummates a Business Combination. The unpaid principal
amount under the convertible promissory note (up to $250,000) may be converted at the option of the Sponsor into warrants to purchase
shares of Class A common stock at a price of $1.00 per warrant upon the consummation of a Business Combination. The warrants would be
identical to the Private Placement Warrants. As of June 3, 2021, the outstanding balance under the convertible promissory note was $100,000.
Related Party Extension Loans
The Company will have until
15 months from the closing of the IPO to consummate an initial Business Combination. However, if the Company anticipates that it may not
be able to consummate its initial Business Combination within 15 months, the Company may extend the period of time to consummate a Business
Combination up to two times, each by an additional three months (for a total of up to 21 months to complete a Business Combination). In
order to extend the time available for the Company to consummate its initial Business Combination, the Company’s Sponsor or its
affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the Trust Account $750,000,
or up to $862,500 if the underwriters’ over-allotment option is exercised in full ($0.10 per share in either case) on or prior to
the date of the applicable deadline, for each three month extension (up to an aggregate of $1,500,000 (or up to $1,725,000 if the underwriters’
over-allotment option is exercised in full), or $0.20 per share, if the Company extends for the full six months). Any such payments would
be made in the form of a loan. Any such loans will be non-interest bearing and payable upon the consummation of the Company’s initial
Business Combination. If the Company completes its initial Business Combination, the Company would repay such loaned amounts out of the
proceeds of the Trust Account released to the Company. If the Company does not complete a Business Combination, the Company will not repay
such loans. Furthermore, the letter agreement with the Company’s initial stockholders contains a provision pursuant to which he
Sponsor has agreed to waive its right to be repaid for such loans out of the funds held in the Trust Account in the event that the Company
does not complete a Business Combination. The Sponsor and its affiliates or designees are not obligated to fund the Trust Account to extend
the time for the Company to complete its initial Business Combination.
Founder Shares
On June 24, 2020, the Company
issued 1,725,000 shares of Class B common stock to the Sponsor for $25,000 in cash, or approximately $0.014 per share, in connection with
formation. On August 13, 2020, the Company effected a 0.25 for 1 stock dividend for each share of Class B common stock outstanding, resulting
in the sponsor holding an aggregate of 2,156,250 founder shares (up to 281,250 shares of which are subject to forfeiture depending on
the extent to which the underwriters’ over-allotment option is exercised). On October 13, 2020, 250,350 founder shares were forfeited.
The Sponsor has agreed not
to transfer, assign or sell its founder shares until the earlier of (i) one year after the date of the consummation of the Company’s
initial Business Combination or (ii) the date on which the closing price of the Company’s shares of Class A common stock equals
or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing 150 days after the Company’s initial Business Combination. Notwithstanding
the foregoing, if, subsequent to the Company’s initial Business Combination, the Company consummates a liquidation, merger, stock
exchange or other similar transaction which results in all of its stockholders having the right to exchange their shares of Class A common
stock for cash, securities or other property.
Administrative Support Agreement
Commencing on September 8,
2020, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities, secretarial and administrative
support services. For the three months ended March 31, 2021, the Company incurred $30,000 of administrative services under this arrangement.
Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees.
Note 6 — Recurring Fair Value Measurements
The following table presents
information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2021,
and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
|
March 31,
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
|
|
2021
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Money Market held in Trust Account
|
|
$
|
77,004,391
|
|
|
$
|
77,004,391
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
$
|
77,004,391
|
|
|
$
|
77,004,391
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability
|
|
$
|
14,871,126
|
|
|
$
|
8,614,668
|
|
|
$
|
-
|
|
|
$
|
6,256,458
|
|
|
|
$
|
14,871,126
|
|
|
$
|
8,614,668
|
|
|
$
|
-
|
|
|
$
|
6,256,458
|
|
The following table presents
information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of December 31,
2020, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
|
December 31,
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
|
|
2020
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Money Market held in Trust Account
|
|
$
|
77,000,788
|
|
|
$
|
77,000,788
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
$
|
77,000,788
|
|
|
$
|
77,000,788
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability
|
|
$
|
13,391,430
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13,391,430
|
|
|
|
$
|
13,391,430
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13,391,430
|
|
The
following table sets forth a summary of the changes in the fair value of the warrant liability for the three months ended March 31, 2021:
|
|
Warrant Liability
|
|
Fair value as of December 31, 2020
|
|
$
|
13,391,430
|
|
Revaluation of warrant liability included in other expense within the statement of operations for the three months ended March 31, 2021
|
|
|
1,479,696
|
|
Fair value as of March 31, 2021
|
|
$
|
14,871,126
|
|
Note 7 — Commitments
Registration Rights
The holders of the founder
shares, Private Placement Warrants, shares of Class A common stock underlying the Private Placement Warrants, securities underlying the
unit purchase option, and securities that may be issued upon conversion of Working Capital Loans will be entitled to registration rights
pursuant to a registration rights agreement signed on September 8, 2020. These holders will be entitled to make up to three demands, excluding
short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders
will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company.
Notwithstanding the foregoing, the underwriters may not exercise their demand and “piggyback” registration rights after five
and seven years, respectively, after the Effective Date and may not exercise their demand rights on more than one occasion.
Underwriters Agreement
The underwriters have a 45-day
option beginning September 11, 2020 to purchase up to an additional 1,125,000 units to cover over-allotments, if any.
On September 11, 2020, the
underwriters were paid a cash underwriting fee of 1.5% of the gross proceeds of the Initial Public Offering, or $1,125,000 (or up to $1,350,000
if the underwriters’ over-allotment is exercised in full). Additionally, the underwriters will be entitled to a deferred underwriting
fee of 3.5% of the gross proceeds of the Initial Public Offering, or $2,625,000 (or up to $3,018,750 if the underwriters’ over-allotment
is exercised in full), upon the completion of the Company’s initial Business Combination.
On October 13, 2020, the Company
consummated the sale of an additional 123,600 Units (the “Over-Allotment Units) that were subject to the underwriters’ over-allotment
option at $10.00 per Unit, generating gross proceeds of $1,236,000. In connection with the closing of the purchase of the Over-Allotment
Units, the Company sold an additional 37,080 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant,
generating gross proceeds of $37,080. Following the closing of the over-allotment option, additional $1,248,360 has been placed in the
Company’s Trust Account (defined as below) established in connection with the IPO. On October 13, 2020, 250,350 founder shares were
forfeited.
As of March 31, 2021 and December
31, 2020, the total amount of deferred underwriting fee was $2,668,260.
Unit Purchase Option
The Company sold to Maxim
Group LLC (“Maxim”), the representative of the underwriters (and/or its designees), for $100, an option to purchase up to
a total of 200,000 units (or 230,000 units if the underwriters’ over-allotment option was exercised in full) exercisable, in whole
or in part, at $11.50 per unit, commencing on the later of (i) the consummation of a Business Combination, or (ii) six months from September
11, 2020. The purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from
the Effective Date. The Company accounted for the Unit Purchase Option, inclusive of the receipt of $100 cash payment, as an expense of
the Initial Public Offering resulting in a charge directly to stockholders’ equity. The Company estimated the fair value of the
unit purchase option is $390,000 (or $1.95 per Unit) using the Black-Scholes option-pricing model. The fair value of the unit purchase
option to be granted to the underwriters is estimated as of the date of grant using the following assumptions: (1) expected volatility
of 27.49%, (2) risk-free interest rate of 0.26% and (3) expected life of five years. The expected volatility was determined by the Company
based on the historical volatilities of a set of comparative special purpose acquisition companies (“SPAC”), and the risk-fee
interest rate was determined by reference to the U.S. Treasury yield curve in effect for time period equals to the expected life of the
unit purchase option. The option and the 200,000 units (or 230,000 units if the underwriters’ over-allotment option is exercised
in full), as well as the 200,000 shares of Class A common stock (or 230,000 shares if the underwriters’ over-allotment option is
exercised in full), and the warrants to purchase 200,000 shares of Class A common stock (or 230,000 shares if the underwriters’
over-allotment option is exercised in full) that may be issued upon exercise of the option, have been deemed compensation by FINRA and
are therefore subject to a lock-up for a period of 180 days immediately following the Effective Date or the commencement of sales in the
IPO pursuant to Rule 5110(g)(1) of FINRA’s Rules, during which time the option may not be sold, transferred, assigned, pledged or
hypothecated, or be subject of any hedging, short sale, derivative or put or call transaction that would result in the economic disposition
of the securities. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period (including
the foregoing 180-day period) following September 11, 2020 except to any underwriter and selected dealer participating in the offering
and their bona fide officers or partners. The option grants to holders demand and “piggy-back” rights for periods of five
and seven years, respectively, from the effective date of the registration statement with respect to the registration under the Securities
Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses attendant
to registering the securities, other than underwriting commissions which will be paid for by the holders themselves. The exercise price
and number of units issuable upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend,
or the Company’s recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances
of shares of Class A common stock at a price below its exercise price. The Company will have no obligation to net cash settle the exercise
of the purchase option or the warrants underlying the purchase option. The holder of the purchase option will not be entitled to exercise
the purchase option or the warrants underlying the purchase option unless a registration statement covering the securities underlying
the purchase option is effective or an exemption from registration is available. If the holder is unable to exercise the purchase option
or underlying warrants, the purchase option or warrants, as applicable, will expire worthless.
Right of First Refusal
Subject to certain conditions,
the Company will grant Maxim, for a period of 12 months after the date of the consummation of a Business Combination, a right of first
refusal to act as lead underwriters or minimally as a co-manager, with at least 75% of the economics; or, in the case of a three-handed
deal 50% of the economics, for any and all future public and private equity and debt offerings. In accordance with FINRA Rule 5110(f)(2)(E)(i),
such right of first refusal shall not have a duration of more than three years from the effective date of the registration statement.
Representative’s Common Stock
On September 11, 2020, the
Company issued to Maxim Partners LLC and/or its designees, 150,000 shares of Class A common stock (the “representative shares”).
On October 13, 2020, the Company issued to Maxim Partners LLC and/or its designees additional 1,236 representative shares. The fair value
of the representative shares was estimated to be $1.3 million and was treated as underwriters’ compensation and charged directly
to stockholders’ equity.
Maxim has agreed not to transfer,
assign or sell any such shares until the completion of the Company’s initial Business Combination. In addition, Maxim has agreed
(i) to waive its redemption rights with respect to such shares in connection with the completion of the Company’s initial Business
Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such shares if the Company
fails to complete its initial Business Combination within 15 months from the closing of the IPO (or up to 21 months from the closing of
the IPO if the Company extends the period of time to consummate a Business Combination).
The shares have been deemed
compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness
of the registration statement pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these
securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition
of the securities by any person for a period of 180 days immediately following the effective date of the registration statement, nor may
they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the
registration statement except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners.
Business Combination Agreement
On March 18, 2021, the Company
entered into a Business Combination Agreement (the “Business Combination Agreement”) with Arbe Robotics Ltd., an Israeli company
(“Arbe”), and Autobot MergerSub, Inc., a Delaware corporation and a wholly owned subsidiary of Arbe (“Merger Sub”).
Pursuant to the Business Combination Agreement, at the closing (the “Closing”) of the transactions contemplated thereunder
(collectively, the “Transaction”), (i) Merger Sub will merge with and into the Company, with the Company continuing as the
surviving entity and a wholly owned subsidiary of Arbe (the “Merger”); (ii) the common stock of the Company (including Class
A common stock and Class B common stock) will be converted into ordinary shares of Arbe (“Company Ordinary Shares”) on a one-for-one
basis; (iii) warrants to purchase the Company’s common stock will be converted into warrants to purchase the same number of Company
Ordinary Shares at the same exercise price and for the same exercise period; (iv) the Company will become a wholly owned subsidiary of
Arbe; and (v) the Company will change its corporate name to Autobot HoldCo, Inc., and will have a restated certificate of incorporation
appropriate for a private corporation.
Simultaneously with the execution
of the Business Combination Agreement, the Company and Arbe entered into subscription agreements (collectively, the “Subscription
Agreements”) with certain investors (the “PIPE Investors”) for an aggregate of $100,000,000 for 10,000,000 shares of
the Company’s Class A common stock, par value $0.0001 per share (or at Arbe’s sole election, Company Ordinary Shares (the
“PIPE Shares”), at a price of $10.00 per share in a private placement to be consummated simultaneously with the closing of
the Transaction (the “PIPE Investment”). The consummation of the transactions contemplated by the Subscription Agreements
is conditioned on the concurrent Closing and other customary closing conditions. Among other things, each PIPE Investor agreed in the
Subscription Agreement that it and its affiliates will not have any right, title, interest or claim of any kind in or to any monies in
the Company’s Trust Account held for its public stockholders, and agreed not to, and waived any right to, make any claim against
the Trust Account (including any distributions therefrom). In addition, Arbe granted certain customary resale registration rights to the
PIPE Investors in the Subscription Agreements.
Note 8 — Stockholders’ Equity
Preferred Stock —
The Company is authorized to issue a total of 1,000,000 preferred shares at par value of $0.0001 each. At March 31, 2021 and December
31, 2020, there were no shares of preferred shares issued or outstanding.
Class A Common
Stock — The Company is authorized to issue a total of 100,000,000 shares of Class A common stock at par value
of $0.0001 each. At March 31, 2021 and December 31, 2020, the Company has issued an aggregate of 151,236 and 2,195,955 shares of Class
A common stock, excluding 7,623,600 and 5,578,881 shares of Class A common stock subject to possible redemption, respectively.
The Company determined the
common stock subject to redemption to be equal to the amount of the marketable securities held in the Trust Account while also taking
into consideration that a redemption cannot result in net tangible assets being less than $5,000,001. Upon considering the impact of the
PIPE Investment and associated PIPE Subscription Agreements, it was concluded that the redemption value should include all the
Public Shares resulting in the common stock subject to possible redemption being equal to $77,004,391 (approximately $10.10 per share).
This resulted in a measurement adjustment to the initial carrying value of the common stock subject to redemption with the offset recorded
to additional paid-in capital and accumulated deficit.
Class B Common
Stock — The Company is authorized to issue a total of 20,000,000 shares of Class B common stock at par value of
$0.0001 each. At June 24, 2020, the Company issued 1,725,000 shares of Class B common stock to its initial stockholder, Industrial Tech
Partners, LLC, for $25,000, or approximately $0.014 per share. The founder shares include an aggregate of up to 225,000 shares subject
to forfeiture if the over-allotment option is not exercised by the underwriters in full. On August 13, 2020, the Company effected a 0.25
for 1 stock dividend for each share of Class B common stock outstanding, resulting in the initial stockholder holding an aggregate of
2,156,250 shares of Class B common stock (up to 281,250 shares of which are subject to forfeiture depending on the extent to which the
underwriters’ over-allotment option is exercised). On October 13, 2020, 250,350 founder shares were forfeited. As of March 31, 2021
and December 31, 2020, there were 1,905,900 shares of Class B common stock issued and outstanding.
The Company’s initial
stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier of (i) one year after the date
of the consummation of the Company’s initial Business Combination or (ii) the date on which the Company consummates a liquidation,
merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange their shares
of Class A common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and
other agreements of the initial stockholders with respect to any founder shares. Notwithstanding the foregoing, if the closing price of
the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing 150 days after the Company’s
initial Business Combination, the founder shares will no longer be subject to such transfer restrictions. Any permitted transferees will
be subject to the same restrictions and other agreements of the Company’s initial stockholders with respect to any founder shares.
The shares of Class B common
stock will automatically convert into shares of the Company’s Class A common stock at the time of its initial Business Combination
on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and
subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in the IPO and related to the closing of the initial Business Combination,
the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed
issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal,
in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion
of the IPO (not including the shares of Class A common stock issuable to Maxim) plus all shares of Class A common stock and equity-linked
securities issued or deemed issued in connection with the initial Business Combination (excluding any shares or equity-linked securities
issued, or to be issued, to any seller in the initial Business Combination or any private placement-equivalent units issued to the Sponsor,
its affiliates or certain of officers and directors upon conversion of Working Capital Loans made to the Company).
Holders of the Class A common
stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s
stockholders, with each share of common stock entitling the holder to one vote.
Note 9 — Subsequent Events
On June 3, 2021, the Company
issued a convertible promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Sponsor agreed to loan
to the Company up to an aggregate principal amount of $250,000 to be used for the Company’s operating costs. The Promissory
Note is non-interest bearing, unsecured and payable on the date on which the Company consummates a Business Combination. The unpaid
principal amount of the Promissory Note (up to $250,000) may be converted by the Sponsor into warrants exercisable for one share of Class
A common stock of the Company (the “Conversion Warrants”) upon the consummation of a Business Combination at a price of $1.00
per Conversion Warrant. The terms of the Conversion Warrants will be identical to the Private Placement Warrants issued by the Company
to the Sponsor in connection with the Company’s IPO. As of June 3, 2021, the outstanding balance under the Promissory Note
was $100,000.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
References
to “we”, “us”, “our” or the “Company” are to Industrial Tech Acquisitions, Inc., except
where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed financial statements
and related notes thereto included elsewhere in this report.
Cautionary Note Regarding
Forward-Looking Statements
This
Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have
based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements
are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed
or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”)
filings.
Overview
We
are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We have not selected any
specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or
indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds
of the initial public offering (the “IPO”) and the private placement of the private placement warrants (“Private Placement
Warrants”), the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to forward
purchase agreements or backstop agreements we may enter into following the consummation of this offering or otherwise), shares issued
to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
On September
11, 2020, we consummated our IPO of 7,500,000 units (the “Units”). Each Unit consists of one share of Class A common stock,
$0.0001 par value per share, and one warrant, each warrant exercisable into one share of Class A common stock at an exercise price of
$11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $75,000,000. The Company
granted the underwriters in the IPO a 45-day option to purchase up to 1,125,000 additional Units solely to cover over-allotments, if any.
Simultaneously with the consummation of the IPO, we consummated the private placement of 3,075,000 warrants to Industrial Tech Partners,
LLC (the “Sponsor”) at a price of $1.00 per Private Placement Warrant, generating total proceeds of $3,075,000. We paid
an underwriting discount at the closing of the IPO of $1,125,000. An additional fee of $2,625,000 was deferred and will become payable
upon our completion of an initial business combination. The deferred portion of the discount will become payable to the underwriters from
the amounts held in the trust account solely in the event we complete our initial business combination.
On September 11, 2020, an
amount of $75,750,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement
Warrants was placed in a trust account (“Trust Account”) maintained by Continental Stock Transfer & Trust Company, acting
as trustee.
On
October 13, 2020, we consummated the sale of an additional 123,600 Units that were subject to the underwriters’ over-allotment option
at $10.00 per Unit, generating gross proceeds of $1,236,000. Simultaneously with the sale of the over-allotment option Units, the Company
consummated the private sale of an additional 37,080 Private Placement Warrants, generating gross proceeds of $37,080. Following the closing
of the over-allotment option, an aggregate amount of $76,998,600 has been placed in our Trust Account established in connection with the
IPO. The Sponsor forfeited 253,350 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriters.
The Company paid an additional underwriting discount at the closing of the additional Units sold pursuant to the underwriters’ over-allotment
option of $24,720, and an additional fee of $43,260 was deferred and will become payable upon the Company’s completion of an initial
business combination. The deferred portion of the additional discount will become payable to the underwriters from the amounts held in
the trust account solely in the event the Company complete our initial business combination.
Results of Operations
Our
entire activity from inception up to September 11, 2020 was related to our formation and the IPO. Since the IPO, our activity has been
limited to the evaluation of business combination candidates, and we will not be generating any operating revenues until the closing and
completion of our initial business combination. We expect to generate small amounts of non-operating income in the form of interest
income on cash and investments. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses. We expect our expenses to increase substantially after this
period.
For
the three months ended March 31, 2021, we had a net loss of $1,576,273 which was comprised of operating costs of $100,324, interest income
of $3,603 from marketable securities held in our Trust Account, interest income of $144 from our bank account, and unrealized loss on
change in fair value of warrants of $1,479,696.
Liquidity and Capital
Resources
As of March 31, 2021, the
Company had cash outside the Trust Account of $198,930 available for working capital needs. All remaining cash held in the Trust Account
are generally unavailable for the Company’s use, prior to an initial Business Combination, and is restricted for use either in a
Business Combination or to redeem common stock. As of March 31, 2021, none of the amount in the Trust Account was available to be withdrawn
as described above.
Through March 31, 2021, the
Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the founder shares, advances from the Sponsor
in an aggregate amount of $175,000 which were repaid upon the IPO (as described in Note 6) and the remaining net proceeds from the IPO,
the sale of the Over-allotment Units and the sale of Private Placement Warrants (as described in Note 4 and 5).
In order to finance transaction
costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working
Capital Loans would be convertible into private placement-equivalent warrants at a price of $1.00 per warrant (which, for example, would
result in the holders being issued 1,500,000 warrants if $1,500,000 of notes were so converted), at the option of the lender. Such warrants
would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period.
On June 3, 2021, the Company
issued a convertible promissory note to the Sponsor, pursuant to which the Sponsor agreed to loan to the Company up to $250,000. The convertible
promissory note is non-interest bearing and payable on the date on which the Company consummates a Business Combination. The unpaid principal
amount under the convertible promissory note (up to $250,000) may be converted at the option of the Sponsor into warrants to purchase
shares of Class A common stock at a price of $1.00 per warrant upon the consummation of a Business Combination. The warrants would be
identical to the Private Placement Warrants. As of June 3, 2021, the outstanding balance under the convertible promissory note was $100,000.
On January 30, 2020, the World
Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19
outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s results of operations,
financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories
and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly
uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s
results of operations, financial position and cash flows may be materially adversely affected.
Based
on the foregoing, management believes that the Company has sufficient liquidity to meet its anticipated obligations until the earlier
of the consummation of the initial Business Combination or liquidation.
Critical Accounting
Policies
Management’s
discussion and analysis of our results of operations and liquidity and capital resources are based on our unaudited financial information.
We describe our significant accounting policies in Note 2—Significant Accounting Policies, of the Notes to Financial Statements
included in this report. Our unaudited financial statements have been prepared in accordance with U.S. GAAP. Certain of our accounting
policies require that management apply significant judgments in defining the appropriate assumptions integral to financial estimates.
On an ongoing basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements
are presented fairly and in accordance with U.S. GAAP. Judgments are based on historical experience, terms of existing contracts, industry
trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent
degree of uncertainty, and, therefore, actual results could differ from our estimates.
Off-Balance Sheet Arrangements
As
of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did
not have any commitments or contractual obligations.
JOBS Act
The
JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify
as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable
to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally,
we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject
to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions
we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report
on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure
that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement
to the report of the independent registered public accounting firm providing additional information about the audit and the financial
statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation
between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These
exemptions will apply for a period of five years following the completion of this offering or until we are no longer an “emerging
growth company,” whichever is earlier.