Item 1. Interim Financial Statements.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
CONDENSED BALANCE SHEETS
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash
|
|
$
|
97,381
|
|
|
$
|
156,848
|
|
Prepaid expenses
|
|
|
835,471
|
|
|
|
—
|
|
Total Current Assets
|
|
|
932,852
|
|
|
|
156,848
|
|
|
|
|
|
|
|
|
|
|
Deferred offering costs
|
|
|
—
|
|
|
|
181,027
|
|
Investments held in Trust Account
|
|
|
207,005,566
|
|
|
|
—
|
|
TOTAL ASSETS
|
|
$
|
207,938,418
|
|
|
$
|
337,875
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
1,037,253
|
|
|
$
|
2,528
|
|
Accrued offering costs
|
|
|
118,569
|
|
|
|
12,875
|
|
Promissory note – related party
|
|
|
—
|
|
|
|
300,000
|
|
Total Current Liabilities
|
|
|
1,155,822
|
|
|
|
315,403
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
|
14,368,000
|
|
|
|
—
|
|
Deferred underwriting fee payable
|
|
|
—
|
|
|
|
—
|
|
Total Liabilities
|
|
|
15,523,822
|
|
|
|
315,403
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption 18,741,459 and no shares at redemption value as of June 30, 2021 and December 31, 2020, respectively
|
|
|
187,414,590
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding
|
|
|
—
|
|
|
|
—
|
|
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 1,958,541 and no shares issued and outstanding (excluding 18,741,459 and no shares subject to possible redemption) as of June 30, 2021 and December 31, 2020, respectively
|
|
|
196
|
|
|
|
—
|
|
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,175,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
|
|
|
518
|
|
|
|
518
|
|
Additional paid-in capital
|
|
|
6,983,457
|
|
|
|
24,482
|
|
Retained earnings (accumulated deficit)
|
|
|
(1,984,165
|
)
|
|
|
(2,528
|
)
|
Total Stockholders’ Equity
|
|
|
5,000,006
|
|
|
|
22,472
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
207,938,418
|
|
|
$
|
337,875
|
|
The accompanying notes are an integral part of
the unaudited condensed financial statements.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
2021 (UNAUDITED)
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
General and administrative expenses
|
|
$
|
337,582
|
|
|
$
|
1,527,703
|
|
Loss from operations
|
|
|
(337,582
|
)
|
|
|
(1,527,703
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
3,146
|
|
|
|
5,566
|
|
Loss in initial issuance of Private Placement Warrants
|
|
|
—
|
|
|
|
(1,272,500
|
)
|
Change in fair value of warrants
|
|
|
(2,690,000
|
)
|
|
|
813,000
|
|
Other expense, net
|
|
|
(2,686,854
|
)
|
|
|
(453,934
|
)
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(3,024,436
|
)
|
|
$
|
(1,981,637
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, Class A redeemable common stock
|
|
|
20,700,000
|
|
|
|
20,700,000
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share, Class A redeemable common stock
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, Class B non-redeemable common stock
|
|
|
5,175,000
|
|
|
|
5,107,873
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share, Class B non-redeemable common stock
|
|
$
|
(0.58
|
)
|
|
$
|
(0.39
|
)
|
The accompanying notes are an integral part of
the unaudited condensed financial statements.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
2021
(UNAUDITED)
|
|
Class A
Common Stock
|
|
|
Class B
Common Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance — January 1, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
5,175,000
|
|
|
$
|
518
|
|
|
$
|
24,482
|
|
|
$
|
(2,528
|
)
|
|
$
|
22,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 20,700,000 Class A shares, net of underwriting discounts, offering costs and initial fair value of public warrants
|
|
|
20,700,000
|
|
|
|
2,070
|
|
|
|
—
|
|
|
|
—
|
|
|
|
194,371,691
|
|
|
|
—
|
|
|
|
194,373,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of Class A common stock subject to redemption
|
|
|
(19,043,903
|
)
|
|
|
(1,904
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(190,437,126
|
)
|
|
|
—
|
|
|
|
(190,439,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,042,799
|
|
|
|
1,042,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – March 31, 2021 (unaudited)
|
|
|
1,656,097
|
|
|
$
|
166
|
|
|
|
5,175,000
|
|
|
$
|
518
|
|
|
$
|
3,959,047
|
|
|
$
|
1,040,271
|
|
|
$
|
5,000,002
|
|
Change in value of Class A common stock subject to redemption
|
|
|
302,444
|
|
|
|
30
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,024,410
|
|
|
|
—
|
|
|
|
3,024,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,024,436
|
)
|
|
|
(3,024,436
|
)
|
Balance – June 30, 2021 (unaudited)
|
|
|
1,958,541
|
|
|
$
|
196
|
|
|
|
5,175,000
|
|
|
$
|
518
|
|
|
$
|
6,983,457
|
|
|
$
|
(1,984,165
|
)
|
|
$
|
5,000,006
|
|
The accompanying notes are an integral part of
the unaudited condensed financial statements.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
Cash Flows from Operating Activities:
|
|
|
|
Net loss
|
|
$
|
(1,981,637
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
Change in fair value of warrant liability
|
|
|
(813,000
|
)
|
Loss on issuance of private warrants
|
|
|
1,272,500
|
|
Transaction costs incurred in connection with warrants
|
|
|
50,178
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(5,566
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
Prepaid expenses
|
|
|
(835,471
|
)
|
Accrued expenses
|
|
|
1,034,725
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,278,271
|
)
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
Investment of cash in Trust Account
|
|
|
(207,000,000
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(207,000,000
|
)
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
Proceeds from sale of Units, net of underwriting discounts paid
|
|
|
206,750,001
|
|
Proceeds from sale of Private Placements Warrants
|
|
|
2,000,000
|
|
Proceeds from issuance of private placement-equivalent warrants
|
|
|
6,000
|
|
Repayment of promissory note - related party
|
|
|
(300,000
|
)
|
Payment of offering costs
|
|
|
(237,197
|
)
|
Net cash provided by (used in) financing activities
|
|
$
|
208,218,804
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
(59,467
|
)
|
Cash – Beginning of period
|
|
|
156,848
|
|
Cash – End of period
|
|
$
|
97,381
|
|
|
|
|
|
|
Non-Cash investing and financing activities:
|
|
|
|
|
Offering costs included in accrued offering costs
|
|
$
|
118,569
|
|
Initial classification of common stock subject to possible redemption
|
|
$
|
203,255,750
|
|
Change in value of common stock subject to possible redemption
|
|
$
|
(15,841,160
|
)
|
Initial classification of warrant liability
|
|
|
15,181,000
|
|
The accompanying notes are an integral part of
the unaudited condensed financial statements.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Environmental Impact Acquisition Corp. (the “Company”)
was incorporated in Delaware on July 2, 2020. 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 (the “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early
stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth
companies.
As of December 31, 2020, the Company had not commenced
any operations. All activity for the period from July 2, 2020 (inception) through December 31, 2020, relates to the Company’s formation
and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating
revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income
in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s
Initial Public Offering was declared effective on January 13, 2021. On January 19, 2021 the Company consummated the Initial Public Offering
of 20,700,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public
Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 2,700,000 Units, at
$10.00 per Unit, generating gross proceeds of $207,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 2,000,000 warrants (the “Private Placement Warrants”) at a price of $1.00
per Private Placement Warrant in a private placement to HB Strategies LLC (“HB Strategies”), the anchor investor and an affiliate
of Hudson Bay Capital Management LP, generating gross proceeds of $2,000,000, which is described in Note 4.
Transaction costs amounted to $773,917, consisting
of $250,000 in cash underwriting fees, inclusive of $150,000 paid for underwriters concession fees (see Note 6), and $523,917 of other
offering costs.
Following the closing of the Initial Public Offering
on January 19, 2021, an amount of $207,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public
Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), located in the
United States and will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the “Investment Company Act”) with a maturity of 185 days or less or in any
open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and
(ii) the distribution of the funds held in the Trust Account, as described below.
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. 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 with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets
held in the Trust Account (excluding taxes payable on the interest earned on the Trust Account). 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 a controlling interest in the target business sufficient for it not to be required to register as an investment company under
the Investment Company Act.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The Company will provide the holders of the outstanding
Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination
or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro
rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest
then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with
respect to the Company’s warrants.
The Company will only proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks
stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required
by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other
reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file
tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is
required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business
or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not
pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s
Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public
Offering in favor of approving a Business Combination. In addition, HB Strategies has agreed to vote its Founder Shares in favor of approving
a Business Combination. Each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective
of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company
seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the 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 Securities Exchange Act of
1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate
of 20% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption
rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination, (b) to
waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by July 19, 2022
(or by January 19, 2023 if the Company, by resolution of it board, extends the period of time by an additional six months) and (c) not
to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation
to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the
Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights
or pre-initial business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their
Public Shares in conjunction with any such amendment. HB Strategies has agreed to the foregoing terms with respect to its Founder Shares
but not with respect to any Public Shares it may acquire.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The Company will have until July 19, 2022 (or
until January 19, 2023 if the Company, by resolution of its board, extends the period of time by an additional six months) to complete
a Business Combination (the “Combination Period”). If the Company has not completed a 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 ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to
pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which
redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating
distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s
remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s
obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to
complete a Business Combination within the Combination Period.
In order to protect the amounts held in the Trust
Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or
products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per
Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public Share due
to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third
party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account nor will it apply
to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver
is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party
claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors
by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm),
prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any
right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and capital resources
As of June 30, 2021, the Company had approximately
$97,381 in cash and a working deficit of approximately $222,970.
The Company’s liquidity needs prior to the
consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to purchase the Founder Shares
(as defined in Note 5), and loan proceeds from the Sponsor of $300,000 under the Note (as defined in Note 5). The Company repaid the Note
in full on January 19, 2021. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied
through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account.
The Company may raise additional capital through
loans or additional investments from the Sponsor or its stockholders, officers, directors, or third parties. The Company’s officers
and directors and the Sponsor may but are not obligated to (except as described above), loan the Company funds, from time to time, in
whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Based on the foregoing,
management believes that the Company will have borrowing capacity to meet its needs through the earlier of the consummation of a Business
Combination or one year from this filing. The Company’s Sponsor or an affiliate of the Sponsor, or certain of the Company’s
officers and directors intend, but are not obligated, to provide working capital loans as needed to meet liquidity needs. Over this time
period, the Company will be using the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating
prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures,
selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Risks and Uncertainties
Management continues to evaluate the impact of
the COVID-19 global pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the
Company’s financial position, its results of 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.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain
information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or
omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information
and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management,
the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are
necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on
January 13, 2021, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on January 25, 2021. The interim results
for the three and six and 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 periods.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting
firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation
in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth
company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use of Estimates
The preparation of financial statements in conformity
with GAAP 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 and the reported amounts of expenses during
the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of June 30, 2021 and December 30, 2020.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Class A Common Stock Subject to Possible
Redemption
The Company accounts for its Class A common stock
subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument
and is measured at redemption value. Conditionally redeemable common stock (including common stock that features redemption rights that
is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s
Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to
occurrence of uncertain future events. Accordingly, at June 30, 2021 and December 31, 2020, Class A common stock subject to possible redemption
is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets. Accordingly,
at June 30, 2021 and December 31, 2021, 18,741,459 and no shares of Class A common shares subject to possible redemption are presented
as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
Warrant Liability
The Company accounts for the Warrants in accordance
with the guidance contained in ASC 815-40-15-under which the Warrants do not meet the criteria for equity treatment and must be recorded
as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjust the Warrants to fair value
at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair
value is recognized in our statement of operations. The Private Warrants and the Public Warrants for periods where no observable traded
price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the
Units, the Public Warrant quoted market price was used as the fair value as of each relevant date.
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under 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. As of June 30, 2021 and December 31,
2020, the Company had deferred tax assets with a full valuation allowance recorded against them.
ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of June 30, 2021 and December 31, 2020. The Company is currently not
aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company
is subject to income tax examinations by major taxing authorities since inception.
The Company’s currently taxable income primarily
consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered start-up
costs and are not currently deductible. During the three months and six months ended June 30, 2021, the Company recorded no income tax
expense. The Company’s effective tax rate for the three and six months ended June 30, 2021 was approximately 0%, which differs from
the expected income tax rate mainly due to the change in the fair value of the warrant liabilities and the start-up costs (discussed above)
which are not currently deductible.
Net Income (Loss) Per Common Share
Net income (loss) per share is computed by dividing
net income (loss) by the weighted average number of common shares outstanding for the period. The Company has not considered the effect
of warrants sold in the Initial Public Offering and private placement to purchase 12,350,000 shares of Class A common stock in the
calculation of diluted income per share, since the average stock price of the Company’s common stock for the three and six months
ended June 30, 2021 was less than the exercise price and therefore, the inclusion of such warrants under the treasury stock method would
be anti-dilutive.
The Company’s statement of operations includes
a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method
of income (loss) per share. Net income per common share, basic and diluted, for Class A redeemable common stock is calculated by dividing
the interest income earned on the Trust Account, by the weighted average number of Class A redeemable common stock outstanding since original
issuance. Net loss per share, basic and diluted, for Class A and Class B non-redeemable common stock is calculated by dividing the net
loss, adjusted for income attributable to Class A redeemable common stock, net of applicable franchise and income taxes, by the weighted
average number of Class A and Class B non-redeemable common stock outstanding for the period. Class A and Class B non-redeemable common
stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the
Trust Account.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The following table reflects the calculation of
basic and diluted net income (loss) per common share (in dollars, except per share amounts):
|
|
Three Months
Ended
June 30,
2021
|
|
|
Six Months
Ended
June 30,
2021
|
|
Redeemable Class A Common Stock
|
|
|
|
|
|
|
Numerator: Earnings allocable to Redeemable Class A Common Stock
|
|
|
|
|
|
|
|
|
Interest Income
|
|
$
|
3,146
|
|
|
$
|
5,566
|
|
Less: Income and Franchise Tax available to be withdrawn from the Trust Account
|
|
|
(3,146
|
)
|
|
|
(5,566
|
)
|
Net Earnings
|
|
$
|
--
|
|
|
$
|
--
|
|
Denominator: Weighted Average Redeemable Class A Common Stock
|
|
|
|
|
|
|
|
|
Redeemable Class A Common Stock, Basic and Diluted
|
|
|
20,700,000
|
|
|
|
20,700,000
|
|
Earnings/Basic and Diluted Redeemable Class A Common Stock
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Class B Common Stock
|
|
|
|
|
|
|
|
|
Numerator: Net Loss minus Redeemable Net Earnings
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(3,024,436
|
)
|
|
$
|
(1,981,637
|
)
|
Less: Redeemable Net Earnings
|
|
|
--
|
|
|
|
--
|
|
Non-Redeemable Net Loss
|
|
$
|
(3,024,436
|
)
|
|
$
|
(1,981,637
|
)
|
Denominator: Weighted Average Non-Redeemable Class B Common Stock
|
|
|
|
|
|
|
|
|
Non-Redeemable Class B Common Stock, Basic and Diluted
|
|
|
5,175,000
|
|
|
|
5,107,873
|
|
Loss/Basic and Diluted Non-Redeemable Class B Common Stock
|
|
$
|
(0.58
|
)
|
|
$
|
(0.39
|
)
|
For the three and six months ended June 30, 2021,
basic and diluted shares are the same as there are no non-redeemable securities that are dilutive to the Company’s stockholders.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying
amounts represented in the Company’s balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial
statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company
sold 20,700,000 Units, which includes a full exercise by the underwriters of their over-allotment option in the amount of 2,700,000 Units,
at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant (“Public
Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50
per share, subject to adjustment (see Note 8).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, HB Strategies and/or its affiliates purchased an aggregate of 2,000,000 Private Placement Warrants at a price of $1.00
per Private Placement Warrant ($2,000,000 in the aggregate) from the Company in a private placement. Each Private Placement Warrant will
be exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note
8). A portion of the proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering
held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the
sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to
the requirements of applicable law) and the Private Placement Warrants will expire worthless.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In August and September of 2020, the Company issued
an aggregate of 7,187,500 shares of Class B common stock (the “Founder Shares”) to the Sponsor and HB Strategies (together,
the “Initial Stockholders”) for an aggregate price of $25,000. In December 2020, the Sponsor and HB Strategies returned to
the Company, at no cost, 862,500 and 2,443,750 Founder Shares, respectively, and the Company issued an aggregate of 431,250 Founder Shares
to its independent director nominees, resulting in an aggregate of 4,312,500 Founder Shares issued and outstanding. On January 13, 2021,
the Company effected a stock dividend of 1.2 shares for each share of common stock outstanding, resulting in the Initial Stockholders
holding an aggregate of 5,175,000 Founder Shares. All share and per share amounts have been retroactively restated. The Founder Shares
included an aggregate of up to 675,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised
in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately 20% of the Company’s
issued and outstanding common shares after the Initial Public Offering. As a result of the underwriters’ election to fully exercise
their over-allotment option, no Founder Shares are currently subject to forfeiture.
The Initial Stockholders have agreed, subject
to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) six months after
the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last sale price of the Class A
common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 60 days after a Business Combination,
or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results
in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note — Related
Party
On September 4, 2020, HB Strategies issued an
unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate
principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) March 31, 2021 or (ii) the
consummation of the Initial Public Offering. As of December 31, 2020, there was $300,000 in borrowings outstanding under the Promissory
Note, which was repaid at the closing of the Initial Public Offering on January 19, 2021.
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor, members of the Company’s management team or any of their respective affiliates or other
third parties may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”), which will
be repaid only upon the consummation of a Business Combination. If the Company does not consummate a Business Combination, the Company
may use a portion of any funds held outside the Trust Account to repay the Working Capital Loans; however, no proceeds from the Trust
Account may be used for such repayment. If such funds are insufficient to repay the Working Capital Loans, the unpaid amounts would be
forgiven. Up to $1,500,000 of the Working Capital Loans may be converted into units at a price of $10.00 per unit at the option of the
holder. The units would be identical to the Placement Units. As of December 31, 2020, there were no Working Capital Loans outstanding.
Sponsor and Director Insider Warrants
At the closing of the Initial Public Offering,
the Company issued 600,000 private placement-equivalent warrants to the Sponsor and 50,000 private placement-equivalent warrants to each
of Gov. Patrick, Messrs. Brewster and Seavers, the Company’s independent director nominees. Such warrants were issued for nominal
amount and are identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. The Company
recorded the fair value of these warrants of approximately $0.9 million on the date of issuance which is included in loss on initial issuance
of private warrants in the statement of operations for the six months ended June 30, 2021.
Underwriter
The underwriter is an affiliate of the Sponsor
(see note 6).
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered
into on January 13, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion
of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants
that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration
rights pursuant to a registration rights agreement requiring the Company to register such securities for resale (in the case of the Founder
Shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make
up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to
require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration
rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective
until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such
registration statements. Notwithstanding the foregoing, the Initial Stockholders may not exercise their demand and “piggyback”
registration rights after five and seven years, respectively, after the effective date of the Initial Public Offering and may not exercise
its demand rights on more than one occasion.
In addition, pursuant to a registration agreement
with Hudson Bay Capital Management LP (“Hudson Bay”) and its permitted transferees, the Company is required to register (i) resale
of any securities purchased in the Initial Public Offering by filing a registration statement within 30 days after the closing of
the Initial Public Offering and use its best effort to have such registration statement declared effective within 90 days after the
closing of the Initial Public Offering; and (ii) resale of any Private Placement Warrants and shares of Class A common stock
underlying the Private Placement Warrants by filing a registration statement within 30 days after the completion of a Business Combination
and use its best effort to have such registration statement declared effective within 90 days after the completion of a Business
Combination. In the event of any delay in filing and/or effectiveness of any aforesaid registration statement under the registration agreement
with Hudson Bay and its permitted transferees, the unavailability of such restatement after effectiveness or a public information failure
(each, a “Registration Default”), Hudson Bay and its permitted transferees are entitled to payments from the Company equal
to 2% of the purchase price on the occurrence of each Registration Default and 2% per month (or a portion thereof pro rata) that such
Registration Default continues to exist.
Underwriting Agreement
The Company also engaged a qualified independent
underwriter to participate in the preparation of the registration statement and exercise the usual standards of “due diligence”
in respect thereto. The Company paid the independent underwriter a fee of $100,000 upon the completion of the Initial Public Offering
in consideration for its services and expenses as the qualified independent underwriter. Additionally, the Company agreed to pay the underwriter
$150,000 in expenses to cover seller’s concessions to selling group member in connection with the Initial Public Offering. The independent
underwriter will receive no other compensation.
Business Combination Marketing Agreement
The Company engaged Canaccord Genuity LLC (“Canaccord”)
as advisors in connection with its Business Combination to assist the Company in arranging meetings with its stockholders to discuss the
potential Business Combination and the target business’ attributes, introduce the Company to potential investors that may be interested
in purchasing the Company’s securities, assist the Company in obtaining stockholder approval for the Business Combination and assist
the Company with the preparation of its press releases and public filings in connection with the Business Combination. The Company will
pay Canaccord for such services upon the consummation of a Business Combination a cash fee in an amount equal to 3.76% of the gross proceeds
of the Initial Public Offering. Pursuant to the terms of the business combination marketing agreement, no fee will be due if the Company
does not complete a Business Combination.
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 per share with such designations, voting and other
rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 2020 and December
31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock —
The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A
common stock are entitled to one vote for each share. At June 30, 2021, there were 1,958,541 shares of Class A common stock issued
and outstanding, excluding 18,741,459 shares of Class A common stock subject to possible redemption. At December 31, 2020, there
were no shares of Class A common stock issued or outstanding.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Class B Common Stock —
The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B
common stock are entitled to one vote for each share. At June 30, 2021 and December 31, 2020, there were 5,175,000 shares of Class B
common stock issued and outstanding.
Holders of Class A common stock and holders
of Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders except as otherwise
required by law.
The shares of Class B common stock will automatically
convert into Class A common stock at the time of the Business Combination, on a one-for-one basis, subject to adjustment. In the
case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in connection with
a Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in
the aggregate, on an as-converted basis, 20% of the total number of shares of Class A common stock outstanding after such conversion
(after giving effect to any redemptions of shares of Class A common stock by public stockholders), including the total number of
shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or
rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding
(i) any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A
common stock issued, or to be issued, to any seller in a Business Combination, (ii) any securities issued to the initial stockholders
of the Company upon conversion of Working Capital Loans and (iii) any public shares redeemed by public stockholders in connection with
a Business Combination, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
NOTE 8. WARRANTS
As of June 30, 2021 and December 31, 2020, there
were 10,350,000 and 0 Public Warrants outstanding, respectively. Public Warrants may only be exercised for a whole number of shares. No
fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable
on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public
Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any
shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise
unless a registration statement under the Securities Act with respect to the Class A common stock underlying the warrants is then
effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration.
No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant
unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt
under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable,
but in no event later than 15 business days, after the closing of a Business Combination, it will use its best efforts to file with the
SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration
statement to become effective within 60 business days following a Business Combination and to maintain a current prospectus relating to
those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration
statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business
day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless
basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A
common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition
of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders
of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the
Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration
statement, and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under
applicable blue sky laws to the extent an exemption is not available.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Once the warrants become exercisable, the Company
may redeem the outstanding Public Warrants:
|
●
|
in whole and not in part;
|
|
|
|
|
●
|
at a price of $0.01 per Public Warrant;
|
|
|
|
|
●
|
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
|
|
|
|
|
●
|
if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business trading days before sending the notice of redemption to warrant holders.
|
If and when the warrants become redeemable by
the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale
under all applicable state securities laws.
If the Company calls the Public Warrants for redemption,
management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,”
as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of
the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization,
merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of Class A common stock
at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company
is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account,
holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the
Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional
shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business
Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price
or effective issue price to be determined in good faith by the Company’s board of directors, and, in the case of any such issuance
to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or its affiliates, as applicable,
prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more
than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion
of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A
common stock during the 20 trading day period starting on the trading day after the day on which the Company completes a Business Combination
(such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest
cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price
will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
As of June 30, 2021, there were 2,000,000 Private
Placement Warrants outstanding and 750,000 Insider Warrants outstanding which are identical to the Private Placement Warrants. As of December
31, 2020 there were no Private Placement Warrants outstanding. The Private Placement Warrants are identical to the Public Warrants underlying
the Units sold in the Initial Public Offering, except that (1) the Private Placement Warrants and the Class A common stock issuable
upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion
of a Business Combination, subject to certain limited exceptions, (2) the Private Placement Warrants will be exercisable on a cashless
basis, (3) the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees, and (4) the holders of the Private Placement Warrants and the Class A common stock issuable upon the exercise of
the Private Placement Warrants will have certain registration rights. If the Private Placement Warrants are held by someone other than
the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable
by such holders on the same basis as the Public Warrants.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 9. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
|
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
|
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The Company classifies its U.S. Treasury and equivalent
securities as held-to-maturity in accordance with ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity
securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities
are recorded at amortized cost on the accompanying balance sheets and adjusted for the amortization or accretion of premiums or discounts.
At June 30, 2021, assets held in the Trust Account
were comprised of $207,005,566 in U.S. Treasury securities. During the six months ended June 30, 2021, the Company did not withdraw any
interest income from the Trust Account.
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.
|
|
Level
|
|
|
Fair Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
207,005,566
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Warrant Liability – Public Warrants
|
|
|
1
|
|
|
|
11,178,000
|
|
Warrant Liability – Private Placement Warrants
|
|
|
3
|
|
|
|
2,456,500
|
|
Warrant liability -Sponsor and Directors
|
|
|
3
|
|
|
|
733,500
|
|
Transfers to/from Levels 1, 2 and 3 are recognized
at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public
Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the six months ended June 30, 2021 was approximately
$11.2 million, when the Public Warrants were separately listed and traded.
The Warrants are accounted for as liabilities
in accordance with ASC 815-40 and presented within warrant liabilities on our accompanying June 30, 2021 condensed balance sheet.
The warrant liabilities are 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 Private Warrants were initially valued using
a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes
model’s primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of
the common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’
companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s
own public warrant pricing. A Monte Carlo simulation methodology was used in estimating the fair value of the public warrants for periods
where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private
Warrants. For periods subsequent to the detachment of the warrants from the Units, the close price of the public warrant price was used
as the fair value as of each relevant date.
ENVIRONMENTAL IMPACT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Due to the use of quoted prices in an active market
(Level 1) to measure the fair values of the Public Warrants subsequent to initial measurement, the Company had transfers out of Level
3 totaling $9.0 million during the period from January 11, 2021 through June 30, 2021.
The key inputs into the Black-Scholes-Merton model
for the warrants were as follows:
Input
|
|
January 13,
2021
|
|
|
June 30,
2021
|
|
Risk-free interest rate
|
|
|
0.74
|
%
|
|
|
1.06
|
%
|
Expected term (years)
|
|
|
5.00
|
|
|
|
5.00
|
|
Expected volatility
|
|
|
21
|
%
|
|
|
18
|
%
|
Exercise price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Fair value of Units
|
|
$
|
9.43
|
|
|
$
|
9.81
|
|
The following table presents the changes in the fair value of warrant
liabilities:
|
|
Private
Placement
|
|
|
Public
|
|
|
Warrant
Liabilities
|
|
Fair value as of January 1, 2021
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Initial measurement on January 19, 2021
|
|
|
3,278,500
|
|
|
|
11,902,500
|
|
|
|
15,181,000
|
|
Change in valuation inputs or other assumptions
|
|
|
(82,500
|
)
|
|
|
(724,500
|
)
|
|
|
(807,000
|
)
|
Fair value as of June 30, 2021
|
|
$
|
3,190,000
|
|
|
$
|
11,178,000
|
|
|
$
|
14,368,000
|
|
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and
transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Other
than as described in these condensed financial statements, the Company did not identify any subsequent events that would have
required adjustment or disclosure in the financial statements.
Proposed Business Combination and Related Agreements
On August 9, 2021, the Company entered
into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the
“Business Combination Agreement”) with Honey Bee Merger Sub, Inc., a Delaware corporation and our wholly owned
subsidiary (“ENVI Merger Sub”), and GreenLight Biosciences, Inc., a Delaware corporation
(“GreenLight”).
The Business Combination Agreement provides
for, among other things, the following transactions on the closing date (collectively, the “Business Combination”):
|
•
|
|
The stockholders of GreenLight that have agreed to participate in the transaction will exchange (the “Exchange”) their interests in GreenLight for shares of common stock, par value $0.0001 per share, of the Company (the “ENVI Class A Common Stock”);
|
|
•
|
|
ENVI Merger Sub will merge with and into GreenLight (the “Merger”), with GreenLight as the surviving company (the “Surviving Company”) in the merger and, after giving effect to such merger, becoming a wholly owned subsidiary of the Company;
|
|
•
|
|
In connection with the Merger, each issued and outstanding share of capital stock of GreenLight (other than treasury stock and any dissenting shares) (a “Greenlight Share”) will be converted into a number of shares of ENVI Class A Common Stock equal to the product of (x) the conversion ratio applicable to such Greenlight Share multiplied by (y) the quotient obtained by dividing (a) 120,000,000, by (b) the number of Fully-Diluted Shares (as defined in the Business Combination Agreement) (such ratio, the “Exchange Ratio”);
|
|
•
|
|
Each option to purchase shares of capital stock of GreenLight (“GreenLight Option”) that is outstanding and unexercised immediately prior to the effective time of the Merger shall be converted into an option issued under the Company’s incentive equity plan to purchase a number of common shares of the Company (each, a “Rollover Option”) equal to the product (rounded down to the nearest whole number) of (x) the number of Greenlight Shares subject to such GreenLight Option immediately prior to the effective time of the Merger, multiplied by (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to the quotient of (i) the exercise price per share of such GreenLight Option immediately prior to the effective time of the Merger divided by (ii) the Exchange Ratio. Each Rollover Option shall be subject to the same terms and conditions (including applicable vesting, expiration and forfeiture provisions) that applied to the corresponding GreenLight Option immediately prior to the effective time of the Merger, except (I) as specifically provided above, or (II) as to (1) terms rendered inoperative by reason of the transactions contemplated by the Business Combination Agreement (including any anti-dilution or other similar provisions that may have adjusted or may adjust the number of underlying shares that are subject to any such option until the effective time of the Merger), or (2) such other immaterial administrative or ministerial changes as the Company board of directors (or the compensation committee of the Company board of directors) may determine in good faith are appropriate to effectuate the administration of the Rollover Options;
|
|
•
|
|
Shares of ENVI Class A Common Stock issued in respect of shares of Greenlight common stock that are subject to vesting or forfeiture (“Greenlight Restricted Shares”), shall be subject to the same terms and conditions (including applicable vesting, expiration and forfeiture provisions) that applied to the corresponding Greenlight Restricted Share immediately prior to the effective time of the Merger; and
|
|
•
|
|
Each warrant of GreenLight (“GreenLight Warrant”), to the extent outstanding and unexercised, shall automatically, without any action of any party or any other person (including the holder thereof), be assumed by GreenLight and converted into a warrant to acquire shares of ENVI Class A Common Stock equal to the product (rounded down to the nearest whole number) of (x) the number of common shares of GreenLight (on an as converted basis) subject to such GreenLight Warrant immediately prior to the effective time of the Merger, multiplied by (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to the quotient of (i) the exercise price per share of such GreenLight Warrant immediately prior to the effective time of the Merger, divided by (ii) the Exchange Ratio.
|
Private Placement
Concurrently with the execution of the Business
Combination Agreement, the Company entered into Subscription Agreements with certain investors (collectively, the “Private Placement
Investors”) pursuant to which, among other things, such investors agreed to subscribe for and purchase and the Company agreed
to issue and sell to such investors, an aggregate of 10,525,000 ENVI Class A Shares (the “Private Placement Shares”),
at a purchase price of $10.00 per share (the “Private Placement”). The closing of the Private Placement is contingent
upon, among other things, the substantially concurrent consummation of the Business Combination and related transactions. In connection
with the Private Placement, the Company will grant the Private Placement Investors certain customary registration rights. The Private
Placement Shares have not been registered under the Securities Act, in reliance upon the exemption provided in Section 4(a)(2) of
the Securities Act and/or Regulation D or Regulation S promulgated thereunder without any form of general solicitation or general advertising.
Registration Rights and Transfer Restrictions
Concurrently with the execution of the Business
Combination Agreement, the Company entered into an Investor Rights Agreement (the “Investor Rights Agreement”) with
certain stockholders of GreenLight, ENVI Sponsor, HB Strategies and the other holders of Class B Common Stock, pursuant to which the Company
agreed, following the consummation of the Merger, to register for resale, pursuant to Rule 415 under the Securities Act, certain shares
of common stock of the Company, as well as other equity securities that are held by the parties thereto from time to time.
Additionally, the Investor Rights Agreements
and the Bylaws that will be effective following the consummation of the Business Combination, contain certain restrictions on transfer
with respect to the ENVI Class A Common Stock received as consideration for the Merger. Such restrictions begin at the consummation of
the Business Combination and end at the date that is 180 days after the consummation of the Business Combination (the “Lock-Up
Period”), except that the Lock-Up Period may shorten to 120 days if, following the consummation of the Business Combination,
the last sale price of the ENVI Class A Common Stock equals or exceeds $15.00 per share for any 20 trading days within any 30-trading
day period.
Transaction Support Agreement
Concurrently with the execution of the Business Combination
Agreement, the Company entered into a Transaction Support Agreement (the “Transaction Support Agreement”) with
certain stockholders of GreenLight (the “Supporting Stockholders”). Under the Transaction Support Agreement, the
Supporting Stockholders agreed, within five business days following the declaration by the staff of the SEC that the proxy statement
/ prospectus relating to the approval by the Company’s stockholders of the transactions contemplated in the Business
Combination Agreement is effective, to execute and deliver a written consent with respect to the outstanding Greenlight Shares held
by the Supporting Stockholder adopting the Business Combination Agreement and related transactions and approving the Merger. The
Greenlight Shares owned by the Supporting Stockholders represent a majority of the outstanding voting power (on a converted basis)
of GreenLight.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
References in this report (the “Quarterly
Report”) to “we,” “us” or the “Company” refer to Environmental Impact Acquisition Corp. References
to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor”
refer to CG Investments VI. The following discussion and analysis of the Company’s financial condition and results of operations
should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain
information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical
facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination
(as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations,
are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,”
“estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs,
based on information currently available. A number of factors could cause actual events, performance or results to differ materially from
the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business
Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus
for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities
filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information,
future events or otherwise.
Overview
We are a blank check company formed under the
laws of the State of Delaware on July 2, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our Business Combination
using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or
a combination of cash, stock and debt.
We expect to continue to incur significant costs
in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Proposed Business Combination and Related Agreements
On August 9, 2021, we entered into a Business
Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”)
with Honey Bee Merger Sub, Inc., a Delaware corporation and our wholly owned subsidiary (“ENVI Merger Sub”), and GreenLight
Biosciences, Inc., a Delaware corporation (“GreenLight”).
The Business Combination Agreement provides
for, among other things, the following transactions on the closing date (collectively, the “Business Combination”):
|
•
|
|
The stockholders of GreenLight that have agreed to participate in the transaction will exchange (the “Exchange”) their interests in GreenLight for shares of common stock, par value $0.0001 per share, of the Company (the “ENVI Class A Common Stock”);
|
|
•
|
|
ENVI Merger Sub will merge with and into GreenLight (the “Merger”), with GreenLight as the surviving company (the “Surviving Company”) in the merger and, after giving effect to such merger, becoming a wholly owned subsidiary of the Company;
|
|
•
|
|
In connection with the Merger, each issued and outstanding share of capital stock of GreenLight (other than treasury stock and any dissenting shares) (a “Greenlight Share”) will be converted into a number of shares of ENVI Class A Common Stock equal to the product of (x) the conversion ratio applicable to such Greenlight Share multiplied by (y) the quotient obtained by dividing (a) 120,000,000, by (b) the number of Fully-Diluted Shares (as defined in the Business Combination Agreement) (such ratio, the “Exchange Ratio”);
|
|
•
|
|
Each option to purchase shares of capital stock of GreenLight (“GreenLight Option”) that is outstanding and unexercised immediately prior to the effective time of the Merger shall be converted into an option issued under the Company’s incentive equity plan to purchase a number of common shares of the Company (each, a “Rollover Option”) equal to the product (rounded down to the nearest whole number) of (x) the number of Greenlight Shares subject to such GreenLight Option immediately prior to the effective time of the Merger, multiplied by (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to the quotient of (i) the exercise price per share of such GreenLight Option immediately prior to the effective time of the Merger divided by (ii) the Exchange Ratio. Each Rollover Option shall be subject to the same terms and conditions (including applicable vesting, expiration and forfeiture provisions) that applied to the corresponding GreenLight Option immediately prior to the effective time of the Merger, except (I) as specifically provided above, or (II) as to (1) terms rendered inoperative by reason of the transactions contemplated by the Business Combination Agreement (including any anti-dilution or other similar provisions that may have adjusted or may adjust the number of underlying shares that are subject to any such option until the effective time of the Merger), or (2) such other immaterial administrative or ministerial changes as the Company board of directors (or the compensation committee of the Company board of directors) may determine in good faith are appropriate to effectuate the administration of the Rollover Options;
|
|
•
|
|
Shares of ENVI Class A Common Stock issued in respect of shares of Greenlight common stock that are subject to vesting or forfeiture (“Greenlight Restricted Shares”), shall be subject to the same terms and conditions (including applicable vesting, expiration and forfeiture provisions) that applied to the corresponding Greenlight Restricted Share immediately prior to the effective time of the Merger; and
|
|
•
|
|
Each warrant of GreenLight (“GreenLight Warrant”), to the extent outstanding and unexercised, shall automatically, without any action of any party or any other person (including the holder thereof), be assumed by GreenLight and converted into a warrant to acquire shares of ENVI Class A Common Stock equal to the product (rounded down to the nearest whole number) of (x) the number of common shares of GreenLight (on an as converted basis) subject to such GreenLight Warrant immediately prior to the effective time of the Merger, multiplied by (y) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to the quotient of (i) the exercise price per share of such GreenLight Warrant immediately prior to the effective time of the Merger, divided by (ii) the Exchange Ratio.
|
Private Placement
Concurrently with the execution of the Business
Combination Agreement, the Company entered into Subscription Agreements with certain investors (collectively, the “Private Placement
Investors”) pursuant to which, among other things, such investors agreed to subscribe for and purchase and the Company agreed
to issue and sell to such investors, an aggregate of 10,525,000 ENVI Class A Shares (the “Private Placement Shares”),
at a purchase price of $10.00 per share (the “Private Placement”). The closing of the Private Placement is contingent
upon, among other things, the substantially concurrent consummation of the Business Combination and related transactions. In connection
with the Private Placement, the Company will grant the Private Placement Investors certain customary registration rights. The Private
Placement Shares have not been registered under the Securities Act, in reliance upon the exemption provided in Section 4(a)(2) of
the Securities Act and/or Regulation D or Regulation S promulgated thereunder without any form of general solicitation or general advertising.
Registration Rights and Transfer Restrictions
Concurrently with the execution of the Business
Combination Agreement, the Company entered into an Investor Rights Agreement (the “Investor Rights Agreement”) with
certain stockholders of GreenLight, ENVI Sponsor, HB Strategies and the other holders of Class B Common Stock, pursuant to which the Company
agreed, following the consummation of the Merger, to register for resale, pursuant to Rule 415 under the Securities Act, certain shares
of common stock of the Company, as well as other equity securities that are held by the parties thereto from time to time.
Additionally, the Investor Rights Agreements
and the Bylaws that will be effective following the consummation of the Business Combination, contain certain restrictions on transfer
with respect to the ENVI Class A Common Stock received as consideration for the Merger. Such restrictions begin at the consummation of
the Business Combination and end at the date that is 180 days after the consummation of the Business Combination (the “Lock-Up
Period”), except that the Lock-Up Period may shorten to 120 days if, following the consummation of the Business Combination,
the last sale price of the ENVI Class A Common Stock equals or exceeds $15.00 per share for any 20 trading days within any 30-trading
day period.
Transaction Support Agreement
Concurrently with the execution of the Business
Combination Agreement, the Company entered into Transaction Support Agreement (the “Transaction Support Agreement”)
with certain stockholders of GreenLight (the “Supporting Stockholders”). Under the Transaction Support Agreements,
the Supporting Stockholders agreed, within five business days following the declaration by the staff of the SEC that the proxy statement
/ prospectus relating to the approval by the Company’s stockholders of the transactions contemplated in the Business Combination
Agreement is effective, to execute and deliver a written consent with respect to the outstanding Greenlight Shares held by the Supporting
Stockholder adopting the Business Combination Agreement and related transactions and approving the Merger. The Greenlight Shares owned
by the Supporting Stockholders represent a majority of the outstanding voting power (on a converted basis) of GreenLight.
Results of Operations
We have neither engaged in any operations nor
generated any revenues to date. Our only activities from July 2, 2020 (inception) through June 30, 2021 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below, and 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 in the Trust Account. We incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended June 30, 2021, we had
net loss of approximately $3.0 million, which consists of loss of approximately $2.7 million derived from the changes in fair value of
the warrant liability and operation costs of approximately $0.3 million.
For the six months ended June 30, 2021, we had
net loss of approximately $2.0 million, which consists of income of approximately $0.8 million derived from the changes in fair value
of the warrant liability offset by operation costs of approximately $1.5 million and the loss on initial issuance of Private Placement
Warrants of approximately $1.3 million.
Liquidity and Capital Resources
On January 19, 2021 the Company consummated the
Initial Public Offering of 20,700,000 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount
of 2,700,000 Units, at $10.00 per Unit, generating gross proceeds of $207,000,000 which is described in Note 4. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 2,000,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement with HB Strategies, generating gross proceeds of $2,000,000, which is described in Note 5.
Following the Initial Public Offering, the full
exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $207,000,000 was placed in the Trust
Account. We incurred $773,917 of transaction costs, consisting of $250,000 in cash underwriting fees and $523,918 of other offering costs
in transaction costs related to the Initial Public Offering.
For the six months ended June 30, 2021, cash used
in operating activities was $1,278,271. Net loss of $1,981,637 included noncash charges (income) related to the change in fair value of
the warrant liability of approximately $0.8 million, loss on initial issuance of Private Placement Warrants of approximately $1.3 million
and transaction costs associated with the warrants of approximately $0.05 million. Net changes in operating assets and liabilities used
approximately $0.2 million of cash for operating activities.
As of June 30, 2021, we had marketable securities
held in the Trust Account of $207,005,566 (including approximately $5,566 of interest income consisting of U.S. Treasury Bills with a
maturity of 185 days or less). Interest income on the balance in the Trust Account may be used by us to pay taxes. Through June 30, 2021,
we have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete
our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our
Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the
target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2021, we had cash of $97,381. We
intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence
on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their
representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate
and complete a Business Combination.
In order to fund working capital deficiencies
or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their
affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the
Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of
such loans may be convertible into warrants at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical
to the Private Placement Warrants.
We do not believe we will need to raise additional
funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so,
we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares
upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such
Business Combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of June 30, 2021. 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 purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities.
The Company engaged Canaccord as advisors in connection
with its Business Combination to assist the Company in arranging meetings with its stockholders to discuss the potential Business Combination
and the target business’ attributes, introduce the Company to potential investors that may be interested in purchasing the Company’s
securities, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with the preparation
of its press releases and public filings in connection with the Business Combination. The Company will pay Canaccord for such services
upon the consummation of a Business Combination a cash fee in an amount equal to 3.76% of the gross proceeds of the Initial Public Offering.
Pursuant to the terms of the business combination marketing agreement, no fee will be due if the Company does not complete a Business
Combination.
Critical Accounting Policies
The preparation of condensed financial statements
and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from
those estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for the Warrants in accordance with
the guidance contained in ASC 815-40-15-7D and 7F under which the Warrants do not meet the criteria for equity treatment and must be recorded
as liabilities. Accordingly, we classify the Warrants as liabilities at their fair value and adjust the Warrants to fair value at each
reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value
is recognized in our statement of operations. The Private Warrants and the Public Warrants for periods where no observable traded price
was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units,
the Public Warrant quoted market price was used as the fair value as of each relevant date.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject
to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument
and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified
as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain
redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly,
shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’
equity section of our balance sheets.
Net Income (Loss) Per Common Share
We apply the two-class method in calculating earnings
per share. Net income per common share, basic and diluted for Class A 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 Class A redeemable
common stock outstanding for the period. Net loss per common share, basic and diluted for Class B non-redeemable common stock is
calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number
of Class B non-redeemable common stock outstanding for the period presented.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.