UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
NewHold Investment Corp.
12141 Wickchester Ln., Suite 325
Houston, Texas 77079
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
The | ||
The | ||
The |
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.
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).
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.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No
As of August 11, 2021, the registrant had
Evolv Technologies Holdings, Inc.
(formerly NewHold Investment Corp.)
Table of Contents
EXPLANATORY NOTE
On July 16, 2021, subsequent to the fiscal quarter ended June 30, 2021, the fiscal quarter to which this Quarterly Report on Form 10-Q (this “Report”) relates, we consummated the business combination, or the Business Combination, contemplated by the Agreement and Plan of Merger, dated March 5, 2021, with NHIC Sub Inc. (“Merger Sub”), a wholly-owned subsidiary of NewHold Investment Corp. (“NHIC”), a special purpose acquisition company, which is our predecessor, and Evolv Technologies, Inc. dba Evolv Technology, Inc. (“Legacy Evolv”), as amended by that certain First Amendment to Agreement and Plan of Merger dated June 5, 2021 by and among NHIC, Merger Sub and Legacy Evolv (the “Amendment” and as amended, the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub was merged with and into Legacy Evolv, with Legacy Evolv surviving the merger as a wholly owned subsidiary of NHIC (the “Business Combination”). Upon the closing of the Business Combination, NHIC changed its name to Evolv Technologies Holdings, Inc. with its Class A common stock continuing to be listed on Nasdaq under the ticker symbol “EVLV,” its warrants continuing to be listed on Nasdaq under the symbol “EVLVW” and its units continuing to be listed on Nasdaq under the symbol “EVLVU.” Evolv Technologies Holding, Inc. became the successor entity to NHIC pursuant to Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
As used in this Report, unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “company” and “Evolv” refer to the consolidated operations of Evolv Technologies Holdings, Inc. and its subsidiaries. References to “NHIC” refer to the company prior to the consummation of the Business Combination and references to “Legacy Evolv” refer to Evolv Technologies, Inc. dba Evolv Technology, Inc. prior to the consummation of the Business Combination.
Except as otherwise expressly provided herein, the information in this Report does not reflect the consummation of the Business Combination, which, as discussed above, occurred subsequent to the period covered hereunder.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act. All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy, plans and prospects, existing and prospective products, research and development costs, timing and likelihood of success, and plans and objectives of management for future operations and results, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties and assumptions described in the section titled “Risk Factors” in the final prospectus, dated June 28, 2021 (the “Prospectus”), as updated by the risk factors disclosed in the section titled “Risk Factors” in our Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on June 28, 2021 and July 22, 2021, respectively, and as further updated in this Report under Part II. Item 1A. “Risk Factors,” and in our other filings with the SEC, that may cause our actual results, performance or achievements to differ materially and adversely from those expressed or implied by the forward-looking statements.
These forward-looking statements are subject to numerous risks, including, without limitation, the following:
● | expectations regarding Evolv’s strategies and future financial performance, including its future business plans or objectives, prospective performance and opportunities and competitors, revenues, products and services, pricing, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, and Evolv’s ability to invest in growth initiatives and pursue acquisition opportunities; |
● | the risk that the consummation of the Business Combination disrupts Evolv’s current plans; |
● | the ability to recognize the anticipated benefits of the Business Combination; |
● | unexpected costs related to the Business Combination; |
● | the amount of any redemptions by existing holders of common stock being greater than expected; |
● | limited liquidity and trading of NHIC’s securities; |
● | geopolitical risk and changes in applicable laws or regulations; |
● | the possibility that NHIC and/or Evolv may be adversely affected by other economic, business, and/or competitive factors; |
● | operational risk; |
● | risk that the COVID-19 pandemic, and local, state, and federal responses to addressing the pandemic may have an adverse effect on our business operations, as well as our financial condition and results of operations; |
● | litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on Evolv’s resources; and |
● | our ability to successfully deploy the proceeds from the Business Combination. |
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.
You should read this Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Where You Can Find More Information
All reports we file with the SEC are available for download free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also make electronic copies of our reports available for download, free of charge, through our website at https://www.evolvtechnology.com/ as soon as reasonably practicable after filing such material with the SEC. Information contained on our website is not part of this Report.
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEWHOLD INVESTMENT CORP AND SUBSIDIARY.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, |
| December 31, | |||
2021 | 2020 | |||||
(unaudited) | ||||||
ASSETS |
|
|
|
| ||
Current assets: |
|
|
| |||
Cash | $ | | $ | | ||
Prepaid expenses and other assets |
| |
| | ||
Total current assets |
| |
| | ||
Cash and investments held in trust account |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
| ||
Current liabilities: |
|
|
|
| ||
Accounts payable | $ | | $ | | ||
Accrued liabilities, including approximately $ |
| |
| | ||
Accrued income and franchise taxes |
| |
| | ||
Total current liabilities |
| |
| | ||
Other liabilities: |
|
| ||||
Warrant liability |
| |
| | ||
Deferred underwriting compensation | | | ||||
Total liabilities |
| |
| | ||
Common stock subject to possible redemption; |
| |
| | ||
Commitments and contingencies |
|
|
|
| ||
Stockholders’ equity: |
|
| ||||
Preferred stock, $ |
| — |
| — | ||
Class A common stock, $ |
| — |
| — | ||
Class B common stock, $ |
| — |
| — | ||
Additional paid-in-capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Total stockholders’ equity | | | ||||
Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes to condensed consolidated unaudited financial statements
1
NEWHOLD INVESTMENT CORP AND SUBSIDIARY.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the | ||||||||||||
Period From | ||||||||||||
January 24, | ||||||||||||
2020 (date of | ||||||||||||
Three Months | Three Months | Six Months | inception) to | |||||||||
Ended | Ended | Ended | June 30, | |||||||||
June 30, 2021 | June 30, 2020 | June 30, 2021 | 2020 | |||||||||
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) | |||||
| ||||||||||||
Revenues |
| $ | | $ | | $ | | $ | | |||
General and administrative expenses | | | | |||||||||
Loss from operations |
| ( | ( | ( |
| ( | ||||||
Other income (expense) – |
|
| ||||||||||
Income from Trust Account |
| | — |
| — | |||||||
Change in fair value of warrant liability |
| ( | — | ( |
| — | ||||||
|
| |||||||||||
Loss before provision for income tax |
| ( | ( | ( |
| ( | ||||||
Provision for income tax | — | — | — | — | ||||||||
Net loss | $ | ( | ( | $ | ( | $ | ( | |||||
Two Class Method for Per Share Information: |
|
| ||||||||||
Weighted average Class A common shares outstanding - basic and diluted |
| | — |
| — | |||||||
Net income per Class A common share – basic and diluted | $ | | $ | | $ | $ | | |||||
Weighted average Class B common shares outstanding – basic and diluted |
| | |
| | |||||||
Net loss per Class B common share – basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( |
See accompanying notes to condensed consolidated unaudited financial statements
2
NEWHOLD INVESTMENT CORP AND SUBSIDIARY.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the three and six months ended June 30, 2021, for the three months ended June 30, 2020
and for the period from January 24, 2020 (date of inception) to June 30, 2020
(unaudited)
For the three months ended June 30, 2021:
|
|
|
|
|
| ||||||||||||||
Common Stock | Additional | Total | |||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||||
Balances, March 31, 2021, (unaudited) |
| | $ | — | | $ | — | $ | | $ | ( | $ | | ||||||
Change in Class A common stock subject to possible redemption |
| |
| — | — |
| — |
| |
| — |
| | ||||||
Net loss |
| — |
| — | — |
| — |
| — |
| ( |
| ( | ||||||
Balances, June 30, 2021 (unaudited) |
| | $ | — | | $ | — | $ | | $ | ( | $ | |
For the six months ended June 30, 2021:
|
|
|
|
|
|
| |||||||||||||
Common Stock | Additional | Total | |||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||||
Balances, December 31, 2020 |
| | $ | — |
| | $ | — | $ | | $ | ( | $ | | |||||
Change in Class A common stock subject to possible redemption |
| |
| — |
| — |
| — |
| |
| — |
| | |||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Balances, June 30, 2021 (unaudited) |
| | $ | — |
| | $ | — | $ | | $ | ( | $ | |
See accompanying notes to condensed consolidated unaudited financial statements
3
NEWHOLD INVESTMENT CORP AND SUBSIDIARY.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the three and six months ended June 30, 2021, for the three months ended June 30, 2020
and for the period from January 24, 2020 (date of inception) to June 30, 2020, continued
(unaudited)
For the three months ended June 30, 2020:
Common Stock | Additional | ||||||||||||||||||
Class A | Class B | Paid-in | Accumulated |
| Stockholders’ | ||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
|
| Equity | |||||
Balances, March 31, 2020, (unaudited) |
| — | $ | — |
| | $ | — | $ | | $ | — | $ | ||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Balances, June 30, 2020 (unaudited) |
| — | $ | — |
| | $ | — | $ | | $ | ( | $ |
For the period from January 24, 2020 (date of inception) to June 30, 2020:
|
|
|
|
|
|
| |||||||||||||
|
|
| |||||||||||||||||
Common Stock | Additional | ||||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||||
Balances, January 24, 2020, (date of inception) |
| | $ | |
| | $ | | $ | | $ | | $ | | |||||
Sale of shares to Sponsor at $ |
| — |
| — |
| |
| — |
| |
| — |
| | |||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Balances, June 30, 2020 (unaudited) |
| — | $ | — |
| | $ | — | $ | | $ | ( | $ | |
See accompanying notes to condensed consolidated unaudited financial statements
4
NEWHOLD INVESTMENT CORP AND SUBSIDIARY.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
For the period | ||||||
from January 24, | ||||||
For the six | 2020 (date of | |||||
months ended | inception) to | |||||
| June 30, 2021 |
| June 30,2020 | |||
Cash flows from operating activities: |
|
|
| |||
Net loss | $ | ( | ( | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
| |||
Interest income earned on the Trust Account |
| ( |
| — | ||
Change in fair value of warrant liability |
| |
| — | ||
Changes in operating assets and liabilities: |
|
| ||||
Decrease in prepaid expenses and other assets |
| |
| — | ||
Increase in accounts payable |
| ( |
| — | ||
Increase in accounts payable and accrued liabilities |
| |
| | ||
Increase in accrued income and franchise taxes and rounding |
| |
| — | ||
Net cash (used in) provided by operating activities |
| ( |
| — | ||
Cash flows from financing activities: |
|
| ||||
Proceeds from sale of Class B common stock to Sponsor |
| — |
| | ||
Proceeds from Note payable to Sponsor |
| — |
| | ||
Payment of offering costs |
| — |
| ( | ||
Net cash provided by financing activities |
| — |
| — | ||
Net decrease in cash |
| ( |
| — | ||
Cash at beginning of period |
| |
| — | ||
Cash at end of period | $ | | $ | — | ||
Supplemental disclosure of non-cash financing activities: |
| |||||
Offering costs included in accounts payable and accrued liabilities | $ | — | $ | | ||
Change in value of Class A common stock subject to redemption | $ | ( | $ | — | ||
Cost paid directly by Sponsor and included in Notes payable to Sponsor | $ | — | $ | |
See accompanying notes to condensed consolidated financial statements
5
NEWHOLD INVESTMENT CORP AND SUBSIDIARY.
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 1 – DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General:
NewHold Investment Corp. (the “Company”) was incorporated in Delaware on January 24, 2020 as NewHold Industrial Corp. and on February 14, 2020 changed its name to NewHold Investment Corp. The Company was 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 (a “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). On July 16, 2021 in connection with the Company’s initial Business Combination (See Note 9), the Company changed its name to Evolv Technologies Holdings, Inc.
At June 30, 2021, the Company had not commenced any operations. All activity for the period from January 24, 2020 (date of inception) to June 30, 2021 relates to the Company’s formation and the initial public offering (“Public Offering”) described below, and subsequent to the Public Offering, searching for a potential business combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company expects to generate non-operating income in the form of interest income on the proceeds derived from the Public Offering.
All dollar amounts are rounded to the nearest thousand dollars.
Sponsor and Financing:
The Company’s sponsor is NewHold Industrial Technology Holdings LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Public Offering (as described in Note 3) was declared effective by the United States Securities and Exchange Commission (the “SEC”) on July 30, 2020. The Company intends to finance a Business Combination with proceeds from the $
The Trust Account:
The funds in the Trust Account can be invested only in U.S. government treasury bills with a maturity of one hundred and eighty five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of its initial Business Combination or (ii) the distribution of the Trust Account as described below. The remaining funds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisition targets and continuing general and administrative expenses.
The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay tax obligations and up to $
6
Business Combination:
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination with a Target Business. As used herein, “Target Business” is one or more target businesses that together have a fair market value equal to at least
The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable and amounts released for working capital, or (ii) provide stockholders with the opportunity to have their shares redeemed by the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable and amounts released to the Company for working capital. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval unless a vote is required by the rules of the Nasdaq Capital Market. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of Class A and Class B common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $
If the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes payable and amounts released to the Company for working capital. As a result, such shares of Class A common stock will be recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering, in accordance with Financial Accounting Standards Board (“FASB”) ASC 480, “Distinguishing Liabilities from Equity.” In August 2020, the Company deposited an aggregate of $
The Company will have
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the price per Unit in the Public Offering.
7
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, NHIC Sub Inc., a wholly owned subsidiary of the Company, incorporated in Delaware, formed to facilitate the acquisition of Evolv (Note 9). All significant intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation:
The accompanying unaudited condensed consolidated interim financial statements of the Company are presented in U.S. dollars and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 a fair presentation of the financial position as of June 30, 2021, and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year or any later period. Certain reclassifications have been made to the December 31, 2020 balance sheet to conform to the current presentation.
The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s final prospectus dated July 28, 2020, as well as the Company’s Annual Report, Amendment #1 on Form 10-K/A filed with the SEC on May 14, 2021.
At June 30, 2021, the Company has approximately $
Emerging Growth Company
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting 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.
Cash and Cash Equivalents:
The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. The Company had no cash equivalents at June 30, 2021 and December 31, 2020.
8
Deferred Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering.” Costs incurred in connection with preparation for the Offering were approximately $
Redeemable Common Stock:
As discussed in Note 3, all of the
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by adjustments to additional paid-in capital. Accordingly, at June 30, 2021 and December 31, 2020,
Net Income (Loss) per Share
Net income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of
The Company’s statement of operations includes a presentation of income (loss) per share for common stock subject to redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per share, basic and diluted for Class A common stock is calculated by dividing the interest income earned on the funds in the Trust Account, net of income tax expense and franchise tax expense, by the weighted average number of shares of Class A common stock outstanding since their original issuance. Net income (loss) per common share, basic and diluted, for shares of Class B common stock is calculated by dividing the net income (loss), less income attributable to Class A common stock, by the weighted average number of shares of Class B common stock outstanding for the period. Net income (loss) available to each class of common stockholders is as follows for the
9
three and six months ended June 30, 2021 and for the three months ended June 30, 2020 and for the period from January 24, 2020 (date of inception) to June 30, 2020:
|
|
|
| |||||||||
For the Period | For the Period | |||||||||||
From January | From January | |||||||||||
Three months | 24, 2020 (date | Six months | 24, 2020 (date | |||||||||
Ended | of inception) to | Ended | of inception) to | |||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Net income available to Class A common stockholders: |
|
|
|
|
|
|
|
| ||||
Interest income | $ | | $ | — | $ | | $ | — | ||||
Less: Income and franchise taxes |
| ( |
| — |
| ( |
| — | ||||
Net income attributable to Class A common stockholders | $ | — | $ | — | $ | — | $ | — | ||||
Net income available to Class B common stockholders: |
|
|
|
|
|
|
|
| ||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Less: amount attributable to Class A common stockholders |
| — |
| — |
| — |
| — | ||||
Net (loss) attributable to Class B common stockholders | $ | ( | $ | ( | $ | ( | $ | ( |
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. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Financial Instruments:
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB Accounting Standards Codification (“ASC 820”), “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the financial statements.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s 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. 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 statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Income Taxes:
The Company follows the asset and liability method of accounting for income taxes under FASB ASC, 740, “Income Taxes.” Deferred tax assets and liabilities are 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 are 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 is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
10
The Company’s currently taxable income consists of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible. During the three and six months ended June 30, 2021 and the three months ended June 30, 2021 and the period from January 24, 2020 (date of inception) to June 30, 2021, the Company recorded income tax expense of approximately $-
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. There were
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and at fair value in each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated with issuing the warrants accounted for as liabilities are charged to operations when the warrants are issued. The fair value of the public warrants and the private placement warrants were initially estimated using a Monte Carlo simulation approach. Following the separate trading of the Company’s common stock and public warrants, the private placement warrants fair values were estimated using a Black-Scholes-Merton approach.
Recent Accounting Pronouncements:
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently evaluating the impact that the pronouncement will have on the financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
11
Subsequent Events:
Management has evaluated subsequent events to determine if events or transactions occurring after the date of the condensed consolidated balance sheet but before the condensed financial statements were available to be issued require potential adjustment to or disclosure in the condensed consolidated financial statements and has concluded that all such events that would require adjustment or disclosure have been recognized or disclosed, see Note 9.
NOTE 3 – PUBLIC OFFERING
In August 2020, the Company closed on the Public Offering, including the full exercise of the underwriters’ overallotment option, of an aggregate
In addition, if 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 $
The Company paid an underwriting discount of
In addition, the Company expects to pay an underwriting commission of
NOTE 4 – RELATED PARTY TRANSACTIONS
Founder Shares
In February 2020, the Sponsor purchased
12
The Company’s initial stockholders and Anchor Investors have agreed not to transfer, assign or sell any of its Founder Shares until the earlier of (A)
Private Placement Warrants
The Sponsor and the Anchor Investors purchased from the Company an aggregate of
If the Company does not complete a Business Combination, then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution to the public stockholders and the Private Placement Warrants issued to the Sponsor will expire worthless.
Registration Rights
The Company’s initial stockholders and the holders of the Private Placement Warrants will be entitled to registration rights pursuant to a registration rights agreement to be signed on or before the date of the prospectus for the Public Offering. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company register 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. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities under the proposed registration rights agreement.
Related Party Loans
In February 2020, the Sponsor agreed to loan the Company an aggregate of $
13
Working Capital Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. 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. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
Administrative Support Agreement
The Company has agreed to pay $
NOTE 5 - TRUST ACCOUNT AND FAIR VALUE MEASUREMENT
The Company complies with FASB ASC 820, Fair Value Measurements, 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.
Upon the closing of the Public Offering and the Private Placement, a total of approximately $
At June 30, 2021 the proceeds of the Trust Account were invested primarily in a money market fund that invests in U.S. government treasury bills complying with the requirements stated above.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. Since all of the Company’s permitted investments at June 30, 2021 consisted of U.S. government treasury bills and money market
14
funds that invest only in U.S. government treasury bills, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities as follows:
|
|
|
| Quoted Price | |||||
Prices in | |||||||||
Carrying value at | Gross Unrealized | Active Markets | |||||||
Description | June 30, 2021 | Holding Gains | (Level 1) | ||||||
Assets: |
|
|
|
|
|
| |||
Cash and money market funds | $ | | $ | — | $ | | |||
Total | $ | | $ | — | $ | |
Quoted Price | |||||||||
| Prices in | ||||||||
Carrying value at | Gross Unrealized | Active Markets | |||||||
Description |
| December 31, 2020 |
| Holding Gains |
| (Level 1) | |||
Assets: |
|
|
|
|
|
| |||
U.S. government treasury bills | $ | | $ | — | $ | | |||
Total | $ | | $ | — | $ | |
In July 2021, in connection with the Business Combination discussed further in Note 9, holders of
NOTE 6 — ACCOUNTING FOR WARRANT LIABILITY
At June 30, 2021, there were
The Company accounts for its warrants outstanding consistent with the “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (the “Staff Statement”) issued on April 12, 2021 by the staff (the “Staff”) of the Division of Corporation Finance of the SEC. The following table presents information about the Company’s warrant liabilities that are measured at fair value on a recurring basis at June 30, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
|
|
| Significant |
| Significant | |||||||
Quoted Prices | Other | Other | ||||||||||
in Active | Observable | Unobservable | ||||||||||
June 30, | Markets | Inputs | Inputs | |||||||||
Description | 2021 | (Level 1) | (Level 2) | (Level 3) | ||||||||
Warrant Liabilities: |
|
|
|
|
|
|
|
| ||||
Public Warrants | $ | | $ | | $ | — | $ | — | ||||
Private Placement Warrants | $ | | $ | — | $ | — | $ | | ||||
Warrant liability at June 30, 2021 | $ | | $ | | — | $ | |
December 31, 2020 — The following table presents information about the Company’s warrant liabilities that are measured at fair value on a recurring basis at December 31, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
|
|
| Significant |
| Significant | |||||||
Quoted Prices | Other | Other | ||||||||||
in Active | Observable | Unobservable | ||||||||||
December 31, | Markets | Inputs | Inputs | |||||||||
Description | 2020 | (Level 1) | (Level 2) | (Level 3) | ||||||||
Warrant Liabilities: |
|
|
|
|
|
|
|
| ||||
Public Warrants | $ | | $ | — | $ | — | $ | | ||||
Private Placement Warrants |
| |
| — |
| — |
| | ||||
Warrant liability at December 31, 2020 | $ | | $ | — | $ | — | $ | |
15
The Company utilizes a third-party valuation consultant that uses a Black-Scholes-Merton approach to value the Private Placement Warrants for the reporting period ended June 30, 2021, with changes in fair value recognized in the statement of operations. The estimated fair value of the Private Placement Warrant liability is determined using Level 3 inputs. Inherent in a Black-Scholes-Merton option pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The warrant liabilities are not subject to qualified hedge accounting.
There were
, during the period ended June 30, 2021.The following table provides quantitative information regarding Level 3 fair value measurements:
| As of |
| As of | ||||
June 30, | December 31, | ||||||
Private Warrants: | 2021) | 2020 | |||||
Term (in years) |
| |
| |
| ||
Volatility – post announcement |
| | % | | % | ||
Risk-free rate |
| | % | | % | ||
Fair value of warrants | $ | | $ | | |||
Public Warrants: |
|
|
| ||||
Simulated warrant value | $ | | $ | |
| ||
Publicly-traded value | $ | | $ | |
|
The following table presents the changes in the fair value of warrant liabilities:
|
| Private |
| Warrant | |||||
| Public |
| Placement |
| Liabilities | ||||
Fair value measurement on December 31, 2020 | $ | | $ | | $ | | |||
Change in valuation inputs or other assumptions |
| |
| |
| | |||
Fair value as of June 30, 2021 | $ | | $ | | $ | |
NOTE 7 – STOCKHOLDERS’ EQUITY
Common Stock
The authorized common stock of the Company is
Preferred Stock
The Company is authorized to issue
16
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Business Combination Costs
In connection with identifying an initial Business Combination candidate and negotiating an initial Business Combination, the Company has entered into and expects to enter into additional engagement letters or agreements with various consultants, advisors, professionals and others. The services under these engagement letters and agreements are material in amount and in some instances include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
Risks and Uncertainties – COVID-19
Management continues to evaluate the impact of the COVID-19 pandemic on the industry 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 and/or a target company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 9 – SUBSEQUENT EVENT – MERGER
On July 16, 2021, subsequent to the fiscal quarter ended June 30, 2021, the fiscal quarter to which this Quarterly Report on Form 10-Q relates, we consummated the business combination, or the Business Combination, contemplated by the Agreement and Plan of Merger, dated March 5, 2021, with NHIC Sub Inc. (“Merger Sub”), a wholly-owned subsidiary of the Company a special purpose acquisition company, which is our predecessor, and Evolv Technologies, Inc. dba Evolv Technology, Inc. (“Legacy Evolv”), as amended by that certain First Amendment to Agreement and Plan of Merger dated June 5, 2021 by and among the Company, Merger Sub and Legacy Evolv (the “Amendment” and as amended, the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub was merged with and into Legacy Evolv, with Legacy Evolv surviving the merger as a wholly owned subsidiary of the Company (the “Business Combination”). Upon the closing of the Business Combination, the Company changed its name to Evolv Technologies Holdings, Inc. and the officers of NewHold Investments Corp resigned and the officers of Evolv became the officers of the Company. Evolv is engaged in the business of providing artificial intelligence touchless security screening. Evolv is based in Waltham, Massachusetts.
Holders of
Cash proceeds of the Business Combination were funded through a combination of Company cash held in trust, net of redemptions, and $
17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto contained elsewhere in this report.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this section and elsewhere in this Report regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
Overview
As of June 30, 2021 we were a blank check company incorporated on January 24, 2020 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 (the “Initial Business Combination”). We completed our Initial Business Combination on July 16, 2021 (as further discussed below) using cash from the proceeds of our initial public offering that was completed in August 2020 (the “Public Offering”) and the sale of warrants in a private placement (the “Private Placement”) that occurred simultaneously with the completion of the Public Offering (the “Private Placement Warrants”), our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our stock in an Initial Business Combination:
● | may significantly dilute the equity interest of our stockholders; |
● | may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
● | could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and |
● | may adversely affect prevailing market prices for our Class A common stock and/or warrants. |
Similarly, if we issue debt securities or incur other indebtedness to finance our Initial Business Combination, it could result in:
● | default and foreclosure on our assets if our operating revenues after an Initial Business Combination are insufficient to repay our debt obligations; |
● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
18
● | our inability to obtain necessary additional financing if the debt security or other indebtedness contains covenants restricting our ability to obtain such financing while the debt security or other indebtedness is outstanding; |
● | our inability to pay dividends on our common stock; |
● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, or limit our ability to pay expenses, make capital expenditures and acquisitions and fund other general corporate purposes; |
● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and; |
● | other disadvantages compared to our competitors who have less debt. |
At June 30, 2021, we had approximately $181,000 in cash outside of the Trust Account. We expect to incur significant costs in the pursuit of an Initial Business Combination and we cannot assure you that our plans to complete an Initial Business Combination will be successful.
Recent Developments – Merger Agreement
On July 16, 2021, subsequent to the fiscal quarter ended June 30, 2021, the fiscal quarter to which this Report relates, we consummated the business combination, or the Business Combination, contemplated by the Agreement and Plan of Merger, dated March 5, 2021, with NHIC Sub Inc. (“Merger Sub”), a wholly-owned subsidiary of NewHold Investment Corp. (“NHIC”), a special purpose acquisition company, which is our predecessor, and Evolv Technologies, Inc. dba Evolv Technology, Inc. (“Legacy Evolv”), as amended by that certain First Amendment to Agreement and Plan of Merger dated June 5, 2021 by and among NHIC, Merger Sub and Legacy Evolv (the “Amendment” and as amended, the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub was merged with and into Legacy Evolv, with Legacy Evolv surviving the merger as a wholly-owned subsidiary of NHIC. Upon the closing of the Business Combination, NHIC changed its name to Evolv Technologies Holdings, Inc. with its Class A common stock continuing to be listed on Nasdaq under the ticker symbol “EVLV,” its warrants continuing to be listed on Nasdaq under the symbol “EVLVW” and its units continuing to be listed on Nasdaq under the symbol “EVLVU.” Evolv Technologies Holding, Inc. became the successor entity to NHIC pursuant to Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
As used in this Report, unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “company” and “Evolv” refer to the consolidated operations of Evolv Technologies Holdings, Inc. and its subsidiaries. References to “NHIC” refer to the company prior to the consummation of the Business Combination and references to “Legacy Evolv” refer to Evolv Technologies, Inc. dba Evolv Technology, Inc. prior to the consummation of the Business Combination.
Upon the closing of the Business Combination, NHIC changed its name to Evolv Technologies Holdings, Inc. and the officers of NewHold Investments Corp resigned and the officers of Evolv became the officers of the Company. Evolv is engaged in the business of providing artificial intelligence touchless security screening. Evolv is based in Waltham, Massachusetts.
See the Prospectus, dated June 28, 2021 and our Form 8-K filed with the SEC on June 28, 2021 and July 22, 2021, respectively, for additional information about the Merger Agreement.
19
Except as otherwise expressly provided herein, the information in this Report does not reflect the consummation of the Business Combination, which, as discussed above, occurred subsequent to the period covered hereunder.
Recent Developments – COVID-19
Management continues to evaluate the impact of the COVID-19 pandemic on the industry 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 and/or a target company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations and Known Trends or Future Events
For the period from January 24, 2020 (date of inception) to June 30, 2021 our activities consisted of formation and preparation for the Public Offering and, subsequent to the Public Offering, identifying and completing a suitable Initial Business Combination. As such, we had no operations or significant operating expenses until August 2020.
Our normal operating costs include costs associated with our search for an Initial Business Combination, costs associated with our governance and public reporting and state franchise taxes expected to total approximately $17,000 per month (see below), a charge of $15,000 per month from our Sponsor (see Note 1 to condensed consolidated financial statements) for administrative services. Our costs in the three and six months ended June 30, 2021 also include the costs of our public reporting, governance and related costs, subsequent to the Public Offering as well as professional and consulting fees and travel associated with evaluating various Initial Business Combination candidates. Costs associated with our governance and public reporting have increased since the Public Offering and were approximately $129,000 and $178,000, respectively, for the three and six months ended June 30, 2021. Costs associated with professional, due diligence and consulting fees related to our review of business combination candidates were approximately $6,360,000 and $7,539,000, respectively, for the three and six months ended June 30, 2021. As we identify Initial Business Combination candidates, our costs are expected to increase significantly in connection with negotiating and executing a definitive agreement and related agreements as well as additional professional, due diligence and consulting fees and travel costs that will be required in connection with an Initial Business Combination. We expect our costs to increase significantly in connection with negotiating and executing a merger agreement and related agreements as well as additional professional, due diligence and consulting fees and travel costs that will be required in connection with an Initial Business Combination. Costs to adjust our warrant liabilities to market value at each reporting period were approximately $959,000 and $3,605,000, respectively, for the three and six months ended June 30, 2021.
Since our operating costs are not expected to be deductible for federal income tax purposes, we are subject to federal income taxes on the income from the Trust Account less taxes. However, we are permitted to withdraw interest earned from the Trust Account for the payment of taxes.
Our Public Offering and Private Placement closed in August 2020 as more fully described in “Liquidity and Capital Resources” below. The proceeds in the Trust Account were initially invested in a money market fund that invests solely in direct U.S. government obligations meeting the applicable conditions of Rule 2a-7 of the Investment Company Act of 1940. In August 2020, the money market fund was largely liquidated and the trust assets were invested in U.S. government treasury bills which matured in February 2021 and were replaced with U.S. government treasury bills maturing in May 2021. In May 2021, the proceeds from the maturity of the U.S. government treasury bills were invested in a money market fund meeting the conditions previously described. The Company’s U.S. treasury bills yield approximately 0.1% on a yearly basis. Interest on the Trust Account was approximately $10,000 and $29,000, respectively, for the three and six months ended June 30, 2021. At the interest rate earned on the current portfolio in the trust account, it is unlikely that the income on the trust assets will be sufficient to fund the tax and working capital payments that are permitted to be withdrawn from the trust.
As discussed further in Note 6 to the condensed consolidated financial statements, the Company accounts for its outstanding public and private warrants as components as derivative liabilities in the accompanying unaudited condensed consolidated financial statements. As a result, the Company is required to measure the fair value of the public and private warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for each current period.
20
Liquidity and Capital Resources
In August 2020, we consummated the Public Offering of an aggregate of 17,250,000 Units (including the full exercise of the underwriters’ overallotment option) at a price of $10.00 per unit generating gross proceeds of approximately $172,500,000 before underwriting discounts and expenses. Simultaneously with the consummation of the Public Offering, we consummated the Private Placement of 5,700,000 Private Placement Warrants, each exercisable to purchase one share of our Class A common stock at $11.50 per share, to the Sponsor and the Anchor Investor, at a price of $1.00 per Private Placement Warrant, generating gross proceeds, before expenses, of approximately $5,700,000.
The net proceeds from the Public Offering and Private Placement was approximately $174,256,000, net of the non-deferred portion of the underwriting commissions of $3,450,000 and offering costs and other expenses of approximately $494,000. $172,500,000 of the proceeds of the Public Offering and the Private Placement have been deposited in the Trust Account and are not available to us for operations (except for withdrawal of interest amounts, if available, to pay taxes and $250,000 per year in working capital). At June 30, 2021, we had approximately $181,000 of cash available outside of the Trust Account to fund our activities until we consummate an Initial Business Combination. In addition, we are permitted to withdraw cash from interest earned on the trust account for payment of taxes and for up to $250,000 of working capital.
Until the consummation of the Public Offering, the Company’s only sources of liquidity were an initial purchase of shares of our common stock for approximately $30,000 by the Sponsor and the Anchor Investor, and a total of $47,000 loaned by the Sponsor against the issuance of an unsecured promissory note (the “Note”). The Note was non-interest bearing and was paid in full on August 2020 in connection with the closing of the Public Offering.
For the six months ended June 30, 2021, cash used in operating activities was approximately $1,147,000. Net loss of approximately $11,708,000 was affected by other expense for the change in the fair value of the warrant liability of $3,605,000 as well as income earned on investments held in the Trust Account of approximately $29,000. Changes in operating assets and liabilities provided approximately $6,985,000 of cash for operating activities. For the period from January 24, 2020 (inception) to June 30, 2020, the Company’s cash needs were funded primarily with $25,000 contributed by the initial shareholders in connection with their purchase of Class B common stock and $25,000 borrowed from the Sponsor under a note that was paid at the closing of the Company’s Public Offering in January 2021.
For the period from January 24, 2020 to June 30, 2020, our activities were funded primarily by (a) $25,000 investment in our Class B common stock by our initial shareholders and (b) $25,000 in loans from our Sponser.
The Company believes that it has sufficient working capital available to it at June 30, 2021 to fund its operations at least until it completes its Business Combination or for the next twelve months.
The Company has until August 4, 2022 to complete an Initial Business Combination. If the Company does not complete an Initial Business Combination by August 4, 2022, the Company will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares for a per share price equal to a pro rata portion of the Trust Account, including interest, but less taxes payable (and less up to $100,000 of interest to pay dissolution expenses) and (iii) as promptly as reasonably possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its creditors and remaining stockholders, as part of its plan of dissolution and liquidation. The initial stockholders have waived their redemption rights with respect to their founder shares; however, if the initial stockholders or any of their affiliates acquire shares of Class A common stock in or after the Public Offering, they will be entitled to a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete an Initial Business Combination within the required time period.
In the event of such liquidation, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the price per unit in the Public Offering. At the interest rate earned on the current portfolio in the trust account, it is unlikely that the income on the trust assets will be sufficient to fund the tax and working capital payments that are permitted from the trust.
As discussed in Recent Developments – Merger Agreement, on July 16, 2021 the Company’s Initial Business Combination was consummated.
21
Off-balance sheet financing arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any agreements for non-financial assets.
As discussed in Recent Developments – Merger Agreement, on July 16, 2021 the Company’s Initial Business Combination was consummated.
Contractual obligations
At June 30, 2021, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. In connection with the Public Offering, we entered into an Administrative Support Agreement with an affiliate of our Sponsor, pursuant to which the Company pays that affiliate $15,000 per month for office space, utilities and secretarial and administrative support.
Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying or accruing these monthly fees.
In connection with identifying an Initial Business Combination candidate, the Company expects to enter into engagement letters or agreements with various consultants, advisors, professionals and others in connection with an Initial Business Combination. The services under these engagement letters and agreements are likely to be material in amount and in some instances include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that an Initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
As discussed in Recent Developments – Merger Agreement, on July 16, 2021 the Company’s Initial Business Combination was consummated.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with 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. The Company has identified the following as its critical accounting policies:
Emerging Growth Company
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting 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.
22
Deferred Offering Costs:
The Company complies with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — ”Expenses of Offering”. Costs incurred in connection with preparation for the Offering were approximately $9,981,000 including underwriters’ discount paid and deferred of $9,488,000. Such costs were allocated among the equity and warrant liability components based on the relative fair value of the warrants and approximately $9,596,000 has been charged to equity for the equity components and approximately $390,000 has been charged to other expense for the warrant liability components upon completion of the Public Offering.
Redeemable Common Stock:
As discussed in Note 3, all of the 17,250,000 public shares sold as part of Units in the Public Offering contain a redemption feature which allows for the redemption of public shares if the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination. In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its public shares in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001 upon the closing of a Business Combination.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by adjustments to additional paid-in capital. Accordingly, at June 30, 2021 and December 31 2020, 12,906,585 and 14,077,350 shares, respectively, of the 17,250,000 public shares were classified outside of permanent equity.
Net Income (Loss) per Share
Net income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 14,325,000 shares of Class A common stock in the calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted income (loss) per common share is the same as basic loss per common share for the period.
23
The Company’s statement of operations includes a presentation of income (loss) per share for common stock subject to redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per share, basic and diluted for Class A common stock is calculated by dividing the interest income earned on the funds in the Trust Account, net of income tax expense and franchise tax expense, by the weighted average number of shares of Class A common stock outstanding since their original issuance. Net income (loss) per common share, basic and diluted, for shares of Class B common stock is calculated by dividing the net income (loss), less income attributable to Class A common stock, by the weighted average number of shares of Class B common stock outstanding for the period. Net income (loss) available to each class of common stockholders is as follows for the three and six months ended June 30, 2021 and for the three months ended June 30, 2020 and for period from January 24, 2020 (date of inception) to June 30, 2020:
For the Period | For the Period | |||||||||||
From January | From January | |||||||||||
Three months | 24, 2020 (date | Six months | 24, 2020 (date | |||||||||
Ended | of inception) to | Ended | of inception) to | |||||||||
| June 30, |
| June 30, |
| June 30, |
| June 30, | |||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Net income available to Class A common stockholders: | ||||||||||||
Interest income | $ | 9,000 | $ | — | $ | 28,000 | $ | — | ||||
Less: Income and franchise taxes |
| (9,000) |
| — |
| (28,000) |