NOTES
TO CONDENSED FINANCIAL STATEMENTS
JUNE
30, 2021
(Unaudited)
Note
1 — Organization and Business Operations
Viveon
Health Acquisition Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware company on August
7, 2020. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or more businesses or entities (“Business Combination”).
We
have neither engaged in any operations nor generated any revenues to date. Our only activities from August 7, 2020 (inception) through
June 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, after
our Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues
until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable
securities held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses. The Company’s sponsor is Viveon Health LLC, a
Delaware limited liability company (the “Sponsor”).
Upon
closing of the IPO and the sale of the Over-Allotment Units, $203,262,500 (approximately $10.10 per Unit) from net offering proceeds
of the sale of the Units in the IPO and the sale of the Private Warrants was placed in a trust account (the “Trust Account”)
and invested in U.S. government securities, with a maturity of 180 days or less or in money market funds meeting certain conditions under
Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Except with respect to
interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations, the proceeds from
the IPO will not be released from the Trust Account until the earliest to occur of (1) the completion of the Company’s initial
Business Combination within 15 months and (2) the Company’s redemption of 100% of the outstanding public shares if the Company
has not completed a business combination in the required time period.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially
all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the
Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations
having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (net of amounts disbursed
to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time
of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the
post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended
(the “Investment Company Act”).
In
connection with any proposed initial Business Combination, the Company will either (1) seek stockholder approval of such initial
Business Combination at a meeting called for such purpose at which public stockholders may seek to convert their public shares, regardless
of whether they vote for or against the proposed business combination, into their pro rata share of the aggregate amount then on deposit
in the trust account (net of taxes payable) or (2) provide its public stockholders with the opportunity to sell their public shares
to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share
of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described
herein.
If
the Company determines to engage in a tender offer, such tender offer will be structured so that each public stockholder may tender any
or all of his, her or its public shares rather than some pro rata portion of his, her or its shares. If enough stockholders tender their
shares so that the Company is unable to satisfy any applicable closing condition set forth in the definitive agreement related to its
initial Business Combination, or the Company is unable to maintain net tangible assets of at least $5,000,001, the Company will not consummate
such initial Business Combination. The decision as to whether it will seek stockholder approval of a proposed business combination or
will allow stockholders to sell their shares to the Company in a tender offer will be made by the Company based on a variety of factors
such as the timing of the transaction or whether the terms of the transaction would otherwise require us to seek stockholder approval.
If
the Company provides stockholders with the opportunity to sell their shares to it by means of a tender offer, it will file tender offer
documents with the SEC which will contain substantially the same financial and other information about the initial Business Combination
as is required under the SEC’s proxy rules. If the Company seeks stockholder approval of its initial Business Combination, the
Company will consummate the business combination only if a majority of the outstanding shares of common stock present in person or by
proxy at a meeting of the Company are voted in favor of the business combination.
Notwithstanding
the foregoing redemption rights, if the Company seeks stockholder approval of its initial Business Combination and the Company does not
conduct redemptions in connection with its initial Business Combination pursuant to the tender offer rules, the Amended and Restated
Certificate of Incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person
with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will
be restricted from redeeming its shares with respect to more than an aggregate of 20% of the shares sold in this offering, without the
Company’s prior consent. The Company’s sponsor, officers and directors (the “initial stockholders”) have agreed
not to propose any amendment to the Amended and Restated Certificate of Incorporation (a) that would modify the substance or timing
of the Company’s obligation to provide for the redemption of its public shares in connection with an initial Business Combination
or to redeem 100% of its public shares if the Company does not complete its initial Business Combination within 15 months from the closing
of the IPO (the “Combination Period”) or (b) with respect to any other material provisions relating to stockholders’
rights or pre-initial Business Combination activity, unless the Company provide its public stockholders with the opportunity to redeem
their shares of common stock in conjunction with any such amendment.
If
the Company is unable to complete its initial Business Combination within the Combination Period, the Company will: (i) cease all
operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business days thereafter,
redeem 100% of the outstanding public shares (including any public units in this offering or any public units or shares that its initial
stockholders or their affiliates purchased in this offering or later acquired in the open market or in private transactions), which will
completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably practicable following such redemption, subject to the approval
of the Company’s remaining holders of common stock and its board of directors, proceed to commence a voluntary liquidation and
thereby a formal dissolution of the Company, subject (in the case of (ii) and (iii) above) to its obligations to provide for
claims of creditors and the requirements of applicable law.
The
Company’s initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to
any founder shares held by them if the Company fails to complete its initial Business Combination within the Combination Period. However,
if the initial stockholders acquire public shares in or after the IPO, they will be entitled to liquidating distributions from the Trust
Account with respect to such public shares if the Company fails.
Risks
and Uncertainties
Management
is currently continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the
virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company,
the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Liquidity
and Capital Resources
As
of June 30, 2021, the Company had $1,056,622 of cash and cash equivalents held outside the Trust Account available for working capital
needs. All remaining cash held in the Trust Account is generally unavailable for the Company’s use, prior to an initial business
combination, and is restricted for use either in a Business Combination or to redeem common stock. As of June 30, 2021 and December 31,
2020, none of the amount in the Trust Account was available to be withdrawn as described above.
The
Company anticipates that the $1,056,622 outside of the Trust Account as of June 30, 2021, will be sufficient to allow the Company to
operate for at least the next 12 months from the issuance of the financial statements, assuming that a Business Combination is not consummated
during that time. Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account,
and any additional Working Capital Loans (as defined in Note 5) from the initial stockholders, the Company’s officers and directors,
or their respective affiliates (which is described in Note 5), for identifying and evaluating prospective acquisition candidates, performing
business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business
to acquire and structuring, negotiating and consummating the Business Combination.
Emerging
Growth Company
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 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 of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy
statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval
of any golden parachute payments not previously approved.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In
other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.
Note
2 — Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of
the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited
condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement
of the balances and results for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the
Company’s Annual Report on Form 10-K/A for the year ended December 31, 2020 as filed with the SEC on July 2, 2021, which contains
the audited financial statements and notes thereto. The interim results for the six months ended June 30, 2021 are not necessarily indicative
of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
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 cash equivalents in the amount of $950,419 and $3,092,771, were held in money market funds as of June 30, 2021 and December 31, 2020,
respectively.
Marketable
Securities Held in Trust Account
At
June 30, 2021 and December 31, 2020, substantially all of the assets held in the Trust Account were held in mutual funds which invest
in U.S. Treasury securities. The mutual fund assets in the amount of $203,272,741 and $203,262,660 were held in the Trust Account as
of June 30, 2021 and December 31, 2020, respectively.
Warrants
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 in Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“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 common shares and whether the warrant holders could
potentially require “net cash settlement” in a circumstance outside of the Company’s control, 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 for Private Warrants 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 at their initial fair value on the date of issuance and recorded as a warrant liability. Changes
in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
Common
Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if
any) is classified as a liability instrument and is 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) is classified as temporary equity. At all other times, common stock is classified
as stockholders’ equity. The Company’s common stock feature certain redemption right that is considered to be outside of
the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption
is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance
sheet. At June 30, 2021 and December 31, 2020, 18,396,227 and 18,084,699 shares of common stock subject to possible redemption are presented
as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes” (“ASC
740”). 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.
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 no unrecognized tax benefits as of June 30, 2021. The Company’s management
determined that the United States is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and
penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties
for the three-month period ending June 30, 2021. The Company is currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities
since inception.
Net
Income Per Common Share
Net
loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The
calculation of diluted loss per common share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii)
exercise of over-allotment and (iii) Private Placement since the exercise of the warrants are contingent upon the occurrence of future
events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable to purchase 19,062,500 shares of common
stock in the aggregate.
The
Company’s statement of operations includes a presentation of net income per share for common stock subject to possible redemption
in a manner similar to the two-class method. Net income per common share, basic and diluted, for redeemable Common Stock is calculated
by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number
of redeemable common stock outstanding since original issuance.
Reconciliation
of Net Income per Common Share
Net
income per common share, basic and diluted, for redeemable common stock is calculated by dividing the interest income earned on the Trust
Account, by the weighted average number of redeemable common stock outstanding since original issuance. Net income per common stock,
basic and diluted, for non-redeemable Common Stock is calculated by dividing the net income, adjusted for income attributable to redeemable
common stock, by the weighted average number of non-redeemable common stock outstanding for the periods. Non-redeemable common stock
includes the Founder Shares as these shares of common stock do not have any redemption features and do not participate in the income
earned on the Trust Account. Accordingly, basic and diluted income per common share is calculated as follows:
|
|
|
Three Months
Ended
June 30,
2021
|
|
|
Six Months
Ended
June 30,
2021
|
|
|
Common stock subject to possible redemption
|
|
|
|
|
|
|
|
Numerator: Net income allocable to common stock subject to possible redemption
|
|
|
|
|
|
|
|
Accretion of interest income on marketable securities held in trust
|
|
$
|
5,069
|
|
|
$
|
10,081
|
|
|
Less: interest available to be withdrawn for payment of taxes
|
|
|
(5,069
|
)
|
|
|
(10,081
|
)
|
|
Net income allocable to Common Stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Denominator: Weighted Average Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
Redeemable Common Stock, Basic and Diluted
|
|
|
18,436,292
|
|
|
|
18,263,412
|
|
|
Basic and Diluted net income per share, Redeemable Common Stock
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
Numerator: Net (Loss) Income minus Redeemable Net Earnings
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
(409,152
|
)
|
|
$
|
3,172,181
|
|
|
Redeemable Net Earnings
|
|
|
—
|
|
|
|
—
|
|
|
Non-Redeemable Net income
|
|
$
|
(409,152
|
)
|
|
$
|
3,172,181
|
|
|
Denominator: Weighted Average Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding, Common Stock
|
|
|
6,719,958
|
|
|
|
6,892,838
|
|
|
Basic and diluted net income per share, Common Stock
|
|
$
|
(0.06
|
)
|
|
$
|
0.46
|
|
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.
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
|
●
|
Level 1, defined as observable
inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
|
|
●
|
Level 2, defined as inputs
other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments
in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
|
|
●
|
Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations
derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, (excluding the warrant liability) which qualify as financial instruments under
the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the balance sheet primarily due to their short-term nature.
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”. The Company’s derivative instruments are recorded
at fair value 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 the warrants are a derivative
instrument. As the warrants meet the definition of a derivative the warrants are measured at fair value at issuance and at each reporting
date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the statement of operations in the
period of change. In accordance with ASC 825-10 “Financial Instruments”, the Company has concluded that a portion of the
transaction costs which directly related to the IPO and the Private Placement, should be allocated to the Warrants based on their relative
fair value against total proceeds, and recognized as transaction costs in the statement of operations.
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
Public
Units
On
December 28, 2020, the Company sold 17,500,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Common
Stock, par value $0.0001 per share, one redeemable warrant (the “Public Warrants”) and one right. Each right entitles the
holder thereof to receive one-twentieth (1/20) of a share of common stock upon consummation of our initial business combination.
On
December 28, 2020, the Underwriters fully exercised the over-allotment option by purchasing 2,625,000 Units (the “Over-Allotment
Units”), generating aggregate of gross proceeds of $26,250,000.
Note
4 — Private Placement
Simultaneously
with the closing of the IPO, the Sponsor purchased an aggregate of 18,000,000 warrants at a price of $0.50 per warrant ($9,000,000
in the aggregate), each exercisable to purchase one-half of a share common stock at a price of $11.50 per whole share, in a private placement
that closed simultaneously with the closing of this offering. A portion of the purchase price of the private placement warrants was added
to the proceeds from this offering to be held in the Trust Account
Note
5 — Related Party Transactions
Founder
Shares
In
August 2020, the Sponsor paid $25,000, or approximately $0.007 per share, to cover certain offering costs in consideration for 3,593,750
shares of common stock, par value $0.0001 (the “Founder Shares”). On December 3, 2020, the Company declared a share dividend
of 0.36 for each outstanding share, resulting in 4,887,500 shares outstanding, and on December 22, 2020 the Company declared a
share dividend of 0.03 resulting in 5,031,250 shares which includes an aggregate of up to 656,250 shares that are subject to forfeiture
to the extent that the underwriters’ over-allotment option is not exercised in full or in part, and up to an aggregate of 1,006,250
shares of common stock (or 875,000 shares of common stock to the extent that the underwriters’ over-allotment is not exercised,
pro rata) that are subject to forfeiture to the extent that rights are exercised upon consummation of an initial business combination. In
connection with the underwriters’ fully exercise of their over-allotment option on December 30, 2020 (see Note 3), the 656,250
shares were no longer subject to forfeiture.
The
founder shares were placed into an escrow account maintained by Continental Stock Transfer & Trust Company acting as escrow
agent. 50% of these shares will not be transferred, assigned, sold or released from escrow until the earlier of (i) 6 months 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 common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations
and recapitalizations) for any 20 trading days within any 30-trading day period commencing after its initial business combination and
the remaining 50% of the founder shares will not be transferred, assigned, sold or released from escrow until 6 months after the date
of the consummation of the Company’s initial business combination, or earlier, in either case, if, subsequent to its initial business
combination, the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all
of its stockholders having the right to exchange their shares of common stock for cash, securities or other property.
During
the escrow period, the holders of these shares will not be able to sell or transfer their securities except (1) to any persons (including
their affiliates and stockholders) participating in the private placement of the private warrants, officers, directors, stockholders,
employees and members of the Company’s sponsor and its affiliates, (2) amongst initial stockholders or their respective affiliates,
or to the Company’s officers, directors, advisors and employees, (3) if a holder is an entity, as a distribution to its, partners,
stockholders or members upon its liquidation, (4) by bona fide gift to a member of the holder’s immediate family or to a trust,
the beneficiary of which is a holder or a member of a holder’s immediate family, for estate planning purposes, (5) by virtue
of the laws of descent and distribution upon death, (6) pursuant to a qualified domestic relations order, (7) by certain pledges
to secure obligations incurred in connection with purchases of the Company’s securities, (8) by private sales at prices no
greater than the price at which the shares were originally purchased or (9) for the cancellation of up to 656,250 shares of common
stock subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part or in connection
with the consummation of the Company’s initial business combination, in each case (except for clause 9 or with the Company’s
prior consent) where the transferee agrees to the terms of the escrow agreement and the insider letter.
Promissory
Note — Related Party
The
Sponsor agreed to loan the Company an aggregate of up to $500,000 to cover expenses related to the Initial Public Offering pursuant to
a promissory note (the “Note”). This loan is non-interest bearing and payable on the earlier of March 31, 2021 or the completion
of the Initial Public Offering. On January 13, 2021, the Company paid the $228,758 balance
on the note from the proceeds of the IPO. As of June 30, 2021, the Company had no balance
under the Note.
Working
Capital Loans
In
addition, 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”). Each loan would be evidenced by a promissory note. The notes would be repaid upon consummation of the Company’s
initial business combination, without interest. As of June 30, 2021 and December 31, 2020, the Company had no borrowings under the Working
Capital Loans.
Administrative
Service Fee
Commencing
on the date of the final prospectus, the Company has agreed to pay the Sponsor a total of $20,000 per month for office space, utilities
and secretarial support. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease
paying these monthly fees. The Company has incurred $120,000 and accrued $110,000 of administrative service fees for the six months
ended June 30, 2021 and any unpaid amounts are accrued in Due to related party.
Note
6 — Commitments and Contingencies
Underwriting
Agreement
The
underwriters were entitled to deferred underwriting fee of 3.5% of the gross proceeds of the
IPO, or $7,043,750 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust
Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Registration
Rights
The
holders of the Company’s insider shares issued and outstanding on the date of this prospectus, as well as the holders of the private
warrants (and underlying securities) will be entitled to registration rights pursuant to an agreement to be signed prior to or on the
effective date of this offering. The holders of a majority of these securities are entitled to make up to two demands that the Company
registers such securities. The holders of the majority of the insider shares can elect to exercise these registration rights at any time
commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority
of the private warrants (and underlying securities) can elect to exercise these registration rights at any time after the Company consummates
a business combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to the Company’s consummation of a business combination. The Company will bear the expenses incurred
in connection with the filing of any such registration statements.
Note
7 — Stockholders’ Equity
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 and with
such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.
As of June 30, 2021 and December 31, 2020, there was no preferred stock issued or outstanding.
Common
Stock — The Company is authorized to issue 60,000,000 shares of common stock with a par value of $0.0001 per share.
Holders are entitled to one vote for each share of common stock. As of June 30, 2021, 2021 and December 31, 2020, there were 6,760,023
and 7,071,551 shares of common stock issued and outstanding, excluding 18,396,227 and 18,084,699 shares of common stock subject to possible
redemption, respectively.
Rights
—Except in cases where the Company is not the surviving company in a business combination, each holder of a right will automatically
receive one-twentieth (1/20) of a share of common stock upon consummation of the initial business combination. In the event the Company
will not be the surviving company upon completion of the initial business combination, each holder of a right will be required to affirmatively
convert his, her or its rights in order to receive the one-twentieth (1/20) of a share underlying each right upon consummation of the
business combination. The Company will not issue fractional shares in connection with an exchange of rights. Fractional shares will either
be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General
Corporation Law. As a result, holders must hold rights in multiples of 20 in order to receive shares for all rights upon closing of a
business combination. If the Company is unable to complete an initial business combination within the required time period and the Company
redeems the public shares for the funds held in the trust account, holders of rights will not receive any of such funds for their rights
and the rights will expire worthless.
Note
8 — Warrants
Public
Warrants
Each
warrant entitles the holder thereof to purchase one-half (1/2) of a share of common stock at a price of $11.50 per whole share,
subject to adjustment as described in this prospectus. Each right entitles the holder thereof to receive one-twentieth (1/20) of
a share of common stock upon consummation of our initial business combination. Pursuant to the warrant agreement, a warrant holder may
exercise its public warrants only for a whole number of shares. This means that only an even number of public warrants may be exercised
at any given time by a warrant holder.
The
Company may call the warrants for redemption (except the Private Warrants):
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●
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in whole and not in part;
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at a price of $0.01 per warrant;
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●
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upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and
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if and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.
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If
the Company calls the warrants for redemption as described above, its management will have the option to require all holders that wish
to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering
the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number
of shares of 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 Company’s 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. Whether the Company will exercise our option to require all holders to exercise
their warrants on a “cashless basis” will depend on a variety of factors including the price of our common shares at the
time the warrants are called for redemption, its cash needs at such time and concerns regarding dilutive share issuances.
If
(x) the Company issues additional shares of 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 $9.50 per share of common
stock (with such issue price or effective issue price to be determined in good faith by its board of directors, and in the case of any
such issuance to its sponsor, initial stockholders or their affiliates, without taking into account any founders’ shares held by
them prior to such issuance), (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 our initial business combination on the date of the consummation of our initial business
combination (net of redemptions), and (z) the Market Value is below $9.50 per share, the exercise price of the warrants will be
adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at which the Company
issues the additional shares of common stock or equity-linked securities and the $16.50 per share redemption trigger price described
above will be adjusted (to the nearest cent) to be equal to 165% of the Market Value. The warrants may be exercised upon surrender of
the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse
side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified
or official bank check payable to the Company, for the number of warrants being exercised. The warrant holders do not have the rights
or privileges of holders of shares of common stock and any voting rights until they exercise their warrants and receive shares of common
stock. After the issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote for each
share held of record on all matters to be voted on by stockholders.
Private
Warrants
The
private warrants are identical to the warrants sold as part of the public units in this offering except that the private warrants will
be non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers
or their permitted transferees. Additionally, if public units or shares of common stock are purchased by any of the directors, officers
or initial stockholders, they will be entitled to funds from the trust account to the same extent as any public stockholder upon our
liquidation but will not have redemption rights related thereto.
Note
9 — Fair Value Measurements
The
following table presents information about the Company’s assets and 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:
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June 30,
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2021
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(Level 1)
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(Level 2)
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(Level 3)
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Assets:
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Mutual Funds held in Trust Account
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$
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203,272,741
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$
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203,272,741
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$
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—
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$
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—
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$
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203,272,741
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$
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203,272,741
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$
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—
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$
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—
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Liabilities:
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Private Warrant Liability
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$
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6,631,815
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$
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—
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$
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—
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6,631,815
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|
|
|
|
$
|
6,631,815
|
|
|
$
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—
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|
|
$
|
—
|
|
|
$
|
6,631,815
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|
The
Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Condensed
Balance Sheet. The warrant liabilities were measured at fair value at inception and on a recurring basis, with changes in fair value
presented within change in fair value of warrant liabilities in the Condensed Statement of Operations.
The
Company established the initial fair value of the Private Warrants on December 28, 2020, the date of the Company’s Initial Public
Offering, and revalued on December 31, 2020 and on June 30, 2021 , using a Monte Carlo simulation model. The Warrants were classified
as Level 3 at the initial measurement date due to the use of unobservable inputs.
The
key inputs into the Monte Carlo simulation as of December 31, 2020 and June 30, 2021 were as follows:
|
Inputs
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December 31,
2020
|
|
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June 30,
2021
|
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Risk-free interest rate
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|
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0.52
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%
|
|
|
0.98
|
%
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Expected term remaining (years)
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6.12
|
|
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5.63
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Expected volatility
|
|
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24.2
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%
|
|
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13.4
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%
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Stock price
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$
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9.625
|
|
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$
|
9.900
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|
The
change in the fair value of the Private Warrant liability for the period ended June 30, 2021 is summarized as follows:
|
Fair value at December 31, 2020
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$
|
10,763,361
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|
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Change in fair value
|
|
|
(4,131,546
|
)
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Fair Value at June 30, 2021
|
|
$
|
6,631,815
|
|
Note
10 — Subsequent Events
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements
were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure
in the financial statements.