NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1—ORGANIZATION AND NATURE OF BUSINESS OPERATIONS
Organization and General
B. Riley Principal 150 Merger
Corp. (the “Company”), a blank check corporation, was incorporated as a Delaware corporation on June 19, 2020. The Company
is an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”),
as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The Company was formed for the purpose of
effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one
or more businesses (a “Initial Business Combination”).
As of June 30, 2021, the
Company had not commenced any operations. All activity of the Company includes the activity of the Company from inception and activity
related to the initial public offering (the “Public Offering”) described below and evaluating prospective acquisition targets.
The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest. The
Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from
the Public Offering described below. The Company has selected December 31st as its fiscal year end.
Public Offering
The Company completed the
sale of 17,250,000 units (the “Units”), including 2,250,000 Units as a result of the underwriters’ exercise of their
over-allotment option in full, at an offering price of $10.00 per Unit in the Public Offering on February 23, 2021. B. Riley Principal
150 Sponsor Co., LLC (the “Sponsor”), a Delaware limited liability company and a wholly-owned indirect subsidiary of B. Riley
Financial, Inc. (“B. Riley Financial”), purchased an aggregate of 520,000 Units at a price of $10.00 per Unit (the “Private
Placement Units”) in a private placement that closed on February 23, 2021 simultaneously with the Public Offering (the “Private
Placement”). The sale of the 17,250,000 Units in the Public Offering (the “Public Units”) generated gross proceeds of
$172,500,000, less underwriting commissions of $3,450,000 (2% of the gross proceeds of the Public Offering) and other offering costs of
$485,257. The Private Placement Units generated $5,200,000 of gross proceeds.
Each Unit consists of one
share of the Company’s Class A common stock, $0.0001 par value (each a “public share”), and one-third of one redeemable
warrant, with each whole warrant exercisable for one share of Class A common stock (each, a “Warrant” and, with respect
to the warrants underlying the Private Placement Units, the “Private Placement Warrants” and, collectively, the “Warrants”).
One Warrant entitles the holder thereof to purchase one whole share of Class A common stock at a price of $11.50 per share.
Sponsor and Note Payable - Related Party
The Company had a note payable
to Sponsor which allowed the Company to borrow up to $300,000 without interest to be used for a portion of the expenses of this offering.
The notes payable was payable on the earlier of: (i) December 31, 2021 or (ii) the date on which the Company consummated
an initial public offering of its securities. Borrowings on the note payable due to related party was $40,000 on the date of the Public
Offering. On March 1, 2021, such amount was repaid using proceeds from the Public Offering and the Private Placement.
The Trust Account
Upon completion of the Public
Offering, $172,500,000 of proceeds were held in the Company’s trust account at J.P. Morgan Chase Bank, N.A., with Continental Stock
Transfer & Trust Company acting as trustee (the “Trust Account”) and will be invested in permitted United States “government
securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, which we refer to as the Investment
Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act that invest only in direct U.S. government treasury obligations. Unless and until the Company completes the
Initial Business Combination, it may pay its expenses only from the net proceeds of the Public Offering and the Private Placement held
outside the Trust Account, which was $117,169 on June 30, 2021.
Except with respect to interest
earned on the funds held in the Trust Account that may be released to the Company to pay its taxes, the proceeds from the Public Offering
may not be released from the Trust Account until the earliest of: (i) the completion of the Initial Business Combination; (ii) the
redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated
certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of its public shares if
it does not complete the Initial Business Combination within 24 months from the closing of the Public Offering; or (iii) the redemption
of all of the Company’s public shares if the Company is unable to complete the Initial Business Combination within 24 months from
the closing of the Public Offering (at which such time up to $100,000 of interest shall be available to the Company to pay dissolution
expenses), subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s
creditors, if any, which could have priority over the claims of the holders of the Company’s public shares (the “public stockholders”).
Initial Business Combination
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of
the net proceeds of the Public Offering and the Private Placement are intended to be generally applied toward consummating an Initial
Business Combination. The Initial Business Combination must occur with one or more businesses or assets with a fair market value equal
to at least 80% of the assets held in the Trust Account. There is no assurance that the Company will be able to successfully effect an
Initial Business Combination.
The Company will provide its
public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the Initial Business
Combination, either (i) in connection with a stockholder meeting called to approve the Initial Business Combination or (ii) by
means of a tender offer. However, in no event will the Company redeem its public shares in an amount that would cause its net tangible
assets to be less than $5,000,001.
If the Company holds a stockholder
meeting to approve the Initial Business Combination, a public stockholder will have the right to redeem its public shares for an amount
in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the
consummation of the Initial Business Combination, including interest but less taxes payable. As a result, such shares of Class A
common stock have been recorded at redemption amount and classified as temporary equity upon the completion of the Public Offering, in
accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480,
“Distinguishing Liabilities from Equity.”
Pursuant to the Company’s
amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business Combination within 24 months
from the closing of the Public Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but no 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 the Company to pay franchise and income 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), subject to applicable law, 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.
The Sponsor and the Company’s
officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to waive their rights
to liquidating distributions from the Trust Account with respect to any Founder Shares and Private Placement Shares (as defined below)
held by them if the Company fails to complete the Initial Business Combination within 24 months of the closing of the Public Offering.
However, if the Sponsor or any of the Company’s directors or officers acquires public shares in or after the Public Offering, they
will be entitled to liquidating distributions from the Trust Account with respect to such public shares if the Company fails to complete
the Initial Business Combination within the prescribed time period.
In the event of a liquidation,
dissolution or winding up of the Company after an Initial Business Combination, the Company’s remaining stockholders are entitled
to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for
each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or other subscription
rights. The Company will provide its stockholders with the opportunity to redeem their public shares for cash equal to their pro rata
share of the aggregate amount then on deposit in the Trust Account, under the circumstances, and, subject to the limitations, described
herein.
Going Concern Consideration
The Company has principally
financed its operations from inception using proceeds from the promissory note from the Sponsor prior to the Public Offering and such
amount of proceeds from the Public Offering and Private Placement that were placed in a bank account outside of the Trust Account for
working capital purposes. In connection with the closing of the Public Offering and the Private Placement on February 23, 2021, an amount
of $172,500,000 (or $10.00 per Class A common stock sold to the public in the Public Offering included in the Public Units) was placed
in the Trust Account. As of June 30, 2021, the Company had $117,169 in its operating bank account, $172,510,336 in cash and cash equivalents
held in the Trust Account to be used for an Initial Business Combination or to repurchase or redeem its public shares in connection therewith
and working capital deficit of $667,531, which excludes Delaware franchise taxes payable of $100,000 (which is included in accounts payable
and accrued expenses at June 30, 2021) as franchise taxes are paid from the Trust Account from interest income earned.
If our funds are insufficient
to meet the expenditures required for operating our business in the attempt to find an Initial Business Combination as more fully described
in Note 1 or in the event that an Initial Business Combination is not consummated, we will likely need to raise additional funds in order
to meet the expenditures required for operating our business. The Company may not be able to obtain additional financing or raise additional
capital to finance its ongoing operations. If the Company is unable to raise additional capital, it may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit
of a potential transaction and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available
to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue
as a going concern through August 10, 2022. These financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The financial statements of
the Company are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
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 Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not
to opt out of such extended transition period which means that when 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 statement 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.
The Company’s unaudited
condensed interim financial statements have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC for
interim financial information and the instructions to Form 10-Q. Accordingly, the financial statements do not include all of
the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments considered for a fair presentation
have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2021 or any other period. The accompanying unaudited condensed interim financial
statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s
prospectus filed with the SEC on February 19, 2021, as well as the Company’s audited balance sheet statement and notes thereto included
in the Company’s Form 8-K filed with the SEC on March 2, 2021, and the Company’s unaudited condensed interim financial
statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 25, 2021.
Loss Per Common Share
The Company complies with
accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per common share is computed by dividing
net loss by the weighted average number of common shares outstanding for the period, excluding shares of common stock subject to forfeiture.
Net loss per common share is computed by dividing net gain/(loss) applicable to common stockholders by the weighted average number of
common shares outstanding during the period, plus, to the extent dilutive, the incremental number of shares of common stock to settle
warrants, as calculated using the treasury stock method. At June 30, 2021, the Company did not have any dilutive securities and other
contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company under the
treasury stock method. As a result, diluted loss per common share is the same as basic loss per common share for the periods.
Reconciliation of Income (Loss) Per Common
Share
The
Company’s net loss is adjusted for the portion of income that is attributable to shares of common stock subject to possible redemption,
as these shares only participate in the earnings of the Trust Account and not the income or losses of the Company. Accordingly, basic
and diluted loss per share is calculated as follows:
|
|
Three
|
|
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Six
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Common stock subject to possible redemption
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|
|
|
|
|
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Numerator: Net income allocable to Class A common stock subject to possible redemption
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|
|
|
|
|
|
Interest income
|
|
$
|
6,261
|
|
|
$
|
10,336
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|
Less: interest available to be withdrawn for payment of taxes
|
|
|
(6,261
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)
|
|
|
(10,336
|
)
|
Net income allocable to Class A common stock subject to possible redemption
|
|
$
|
—
|
|
|
$
|
—
|
|
Denominator: Weighted Average Redeemable Class A common stock
|
|
|
|
|
|
|
|
|
Redeemable Class A common stock, Basic and Diluted
|
|
|
16,121,666
|
|
|
|
11,349,111
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|
Basic and Diluted net income per share, Redeemable Class A
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
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|
|
|
|
|
|
|
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Numerator: Net income minus redeemable Net Earnings
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|
|
|
|
|
|
|
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Net loss
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|
$
|
(1,822,466
|
)
|
|
$
|
(2,410,066
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)
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Redeemable Net Earnings
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|
|
—
|
|
|
|
—
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Non-Redeemable Net Loss
|
|
$
|
(1,822,466
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)
|
|
$
|
(2,410,066
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)
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Denominator: Weighted Average Non-Redeemable Common Stock
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|
|
|
|
|
|
|
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Weighted average shares outstanding, basic and diluted
|
|
|
5,960,834
|
|
|
|
5,431,842
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|
Basic and diluted net loss per common share
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|
$
|
(0.31
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)
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|
$
|
(0.44
|
)
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Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity date 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 31, 2020.
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times,
may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts and management
believes the Company is not exposed to significant risks on such accounts.
Fair Value 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 balance sheet, primarily due to their short-term nature.
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Deferred Offering Costs
The Company complies with
the requirements of the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — “Expenses of Offering.” Deferred
offering costs of $80,000 as of December 31, 2020, consisted principally of costs incurred in connection with preparation for the Public
Offering. The total offering costs incurred by the Company in connection with the Public Offering was $485,257. These costs in addition
to the underwriting discount of $3,450,000 was charged to capital upon completion of the Public Offering on February 23, 2021.
Income Taxes
Prior to the change in ownership
on February 23, 2021 as a result of the Public Offering, the Company was included in the consolidated tax return of B. Riley Financial
(the “Parent”). During this period, the Company calculated the provision for income taxes by using a “separate
return” method. Under this method the Company is assumed to file a separate return with the tax authority, thereby reporting
its taxable income or loss and paying the applicable tax to, or receiving the appropriate refund from, the Parent. The current provision
was the amount of tax payable or refundable on the basis of a hypothetical, current year, separate return. Following changes in ownership
on February 23, 2021, the Company deconsolidated from the Parent for tax purposes. Beginning February 23, 2021, the Company files separate
corporate federal and state and local income tax returns.
Any difference between the
tax provision (or benefit) allocated to the Company under the separate return method and payments to be made by (or received from) the
Parent for tax expense are treated as either dividends or capital contribution. Accordingly, the amount by which the Company’s
tax liability under the separate return method exceeds the amount of tax liability ultimately settled as a result of using incremental
expenses of the Parent is periodically settled as a capital contribution from the Parent to the Company.
The Company complies with
the accounting and reporting requirements of ASC Topic 740 “Income Taxes,” which requires an asset and liability approach
to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted
tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 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.
As of June 30, 2021, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company may be subject
to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may
include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal,
state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially
change over the next twelve months.
The provision for income taxes
was deemed to be immaterial.
Unrecognized Tax Benefits
The Company recognizes tax
positions in its financial statements only when it is more likely than not that the position will be sustained on examination by the relevant
taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount
of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions
taken in a tax return and amounts recognized in the financial statements. There were no unrecognized tax benefits as of June 30,
2021. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts
were accrued for interest expense and penalties related to income tax matters as of June 30, 2021. The Company is subject to income
tax examinations by major taxing authorities since inception.
Warrant Liability
The Company accounts for warrants
for shares of the Company’s common stock that are not indexed to its own stock as liabilities at fair value on the balance sheet.
The warrants will be re-evaluated for the proper accounting treatment at each reporting period and are subject to remeasurement at
each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the statement of operations.
The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the common
stock warrants. At that time, the portion of the liability related to the common stock warrants will be reclassified to additional paid-in capital.
At June 30, 2021, there were 5,923,333 Warrants issued in connection with the Public Offering (the 5,750,000 public Warrants and the 173,333
Private Placement Warrants).
Note Payable — Related Party
The Company had a Note Payable
to the Sponsor which allowed the Company to borrow up to $300,000 without interest to be used for a portion of the expenses associated
with the Public Offering. The Note Payable was payable on the earlier of: (i) December 31, 2021 or (ii) the date on which the Company
consummated an initial public offering of its securities. At February 23, 2021, the Note Payable balance was $40,000. The Note Payable
was paid in full using proceeds from the Public Offering and the Private Placement on March 1, 2021.
Recent Accounting Pronouncements
In August 2020, the FASB issued
Accounting Standards Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20)
and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity’s Own Equity”, which simplifies accounting for convertible instruments by removing major separation
models required under current U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts
to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The new
standard is effective for the Company on January 1, 2024, although early adoption is permitted. The ASU allows the use of the modified
retrospective method or the fully retrospective method. The Company is still in the process of evaluating the impact of this new standard;
however, the Company does not believe the initial impact of adopting the standard will result in any changes to the Company’s statements
of financial position, operations or cash flows.
NOTE 3 — RELATED PARTY TRANSACTIONS
Founder Shares
On June 19, 2020, 4,312,500 shares
of our Class B common stock were issued to B. Riley Principal Investments, LLC (the “Founder Shares”). All of the Founder
Shares were contributed to the Sponsor in June 2020. As used herein, unless the context otherwise requires, Founder Shares shall
be deemed to include the shares of Class A common stock issuable upon conversion thereof. The Founder Shares are identical to the
Class A common stock included in the Units sold in the Public Offering, except that the Founder Shares automatically convert into
shares of Class A common stock at the time of the Initial Business Combination and are subject to certain transfer restrictions,
as described in more detail below, and the holders of the Founder Shares, as described in more detail below, have agreed to certain restrictions
and will have certain registration rights with respect thereto. The number of Founder Shares issued was determined based on the expectation
that the Founder Shares would represent 20% of the outstanding shares of common stock upon completion of the Public Offering excluding
the shares underlying the Private Placement Units (the “Private Placement Shares”).
The Company’s initial
stockholders, officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any Founder Shares held
by them until the earlier to occur of: (i) one year after the completion of the Initial Business Combination, (ii) the last sale price
of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Initial Business Combination,
or (iii) the date following the completion of the Initial Business Combination on which the Company completes a liquidation, merger, stock
exchange, reorganization 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.
Business Combination Marketing Agreement
Pursuant to a business combination
marketing agreement, the Company engaged B. Riley Securities, Inc. as advisors in connection with its Initial Business Combination to
assist it in arranging meetings with its stockholders to discuss a potential business combination and the target business’ attributes,
introduce it to potential investors that may be interested in purchasing its securities, assist it in obtaining stockholder approval for
its Initial Business Combination and assist it with the preparation of press releases and public filings in connection with the Initial
Business Combination. The Company will pay B. Riley Securities, Inc. for such services upon the consummation of the Initial Business Combination
a cash fee in an amount equal to 3.5% of the gross proceeds of the Public Offering (exclusive of any applicable finders’ fees which
might become payable) ($6,037,500 since the underwriters’ over-allotment option was exercised in full). Pursuant to the terms
of the business combination marketing agreement, no fee will be due if the Company does not complete an Initial Business Combination.
Administrative Fees
Commencing on February 19,
2021, the Company agreed to pay an affiliate of the Sponsor a total of $3,750 per month for office space, utilities and secretarial and
administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, it will cease paying these
monthly fees. At June 30, 2021, amounts due to related party includes $18,750 for administrative fees payable to the Sponsor.
Registration Rights
The holders of Founder Shares
(and any shares of Class A common stock issuable upon conversion of the Founder Shares), Private Placement Units, Private Placement Shares,
Private Placement Warrants (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants) and any
securities that may be issued upon conversion of working capital loans, if any, have registration rights to require the Company to register
the resale of any of its securities held by them (in the case of the Founder Shares, only after conversion of such shares to shares of
Class A common stock) pursuant to a registration rights agreement. These holders are also entitled to certain piggyback registration
rights. 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 for the securities to be registered. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
Note Payable — Related Party
The Company had a Note Payable
to the Sponsor which allowed the Company to borrow up to $300,000 without interest to be used for a portion of the expenses associated
with the Public Offering. The Note Payable was payable on the earlier of: (i) December 31, 2021 or (ii) the date on which the Company
consummated an initial public offering of its securities. At February 23, 2021, the Note Payable balance was $40,000. The Note Payable
was paid in full using proceeds from the Public Offering and the Private Placement on March 1, 2021.
NOTE 4 — RECURRING FAIR VALUE MEASUREMENTS
The Company follows the guidance
in ASC Topic 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and
non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
Level 2:
|
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
|
|
Level 3:
|
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The Company’s Warrants
are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the condensed balance
sheet. The warrant liabilities 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 statements of operations.
The
following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring
basis as of June 30, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair
value.
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Prices In
|
|
|
Other
|
|
|
Other
|
|
|
|
|
|
|
Active
|
|
|
Observable
|
|
|
Observable
|
|
|
|
June 30,
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
2021
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash held in Trust Account
|
|
$
|
172,510,336
|
|
|
$
|
172,510,336
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
172,510,336
|
|
|
|
172,510,336
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private Placement Warrants
|
|
$
|
161,200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
161,200
|
|
Public Warrants
|
|
|
6,900,000
|
|
|
|
6,900,000
|
|
|
|
—
|
|
|
|
—
|
|
Warrant Liability
|
|
$
|
7,061,200
|
|
|
$
|
6,900,000
|
|
|
$
|
—
|
|
|
$
|
161,200
|
|
The changes in Level 3 fair value hierarchy during the three and six
months ended June 30, 2021 included (1) the fair value of the public Warrants of $5,411,933 which transferred from the Level 3 fair value
hierarchy to Level 1 fair value hierarchy when the public Warrants started trading on a national market exchange and (2) the change in
fair value of the Private Placement Warrants was a decrease in fair value of $6,900.
Warrants
The
Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the 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 Statement of Operations.
Initial Measurement
The Company established the initial fair value for the Warrants on
February 23, 2021, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model for the public Warrants,
and the Black-Sholes Model for Private Placement Warrants based on their relative fair values at the initial measurement date. The Warrants
were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
The
key inputs into the Monte Carlo simulation model and Black-Scholes Model were as follows at initial measurement:
|
|
February 23,
|
|
|
|
2021
|
|
|
|
(Initial
|
|
Input
|
|
Measurement)
|
|
Risk-free interest rate
|
|
|
0.9
|
%
|
Expected term (years)
|
|
|
6.4
|
|
Expected volatility
|
|
|
14.0
|
%
|
Exercise price
|
|
$
|
11.50
|
|
|
|
June 30,
|
|
|
|
2021
|
|
Input
|
|
Measurement
|
|
Risk-free interest rate
|
|
|
1.0
|
%
|
Expected term (years)
|
|
|
6.0
|
|
Expected volatility
|
|
|
14.0
|
%
|
Exercise price
|
|
$
|
11.50
|
|
Subsequent Measurement
At
June 30, 2021, the same valuation methodology as indicated above was used to measure the warrant liabilities.
NOTE 5 — STOCKHOLDER’S EQUITY
Common Stock
The authorized common stock of the Company includes up to 100,000,000
shares of Class A common stock and 10,000,000 shares of Class B common stock. If the Company enters into an Initial Business
Combination, it may (depending on the terms of such an Initial Business Combination) be required to increase the number of shares of Class A
common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on the Initial Business
Combination, to the extent the Company seeks stockholder approval in connection with the Initial Business Combination. Holders of the
Company’s common stock are entitled to one vote for each share of common stock.
Preferred Stock
The Company is authorized
to issue 1,000,000 shares of preferred stock 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, 2021 and December 31, 2020, there were no shares of preferred stock
issued or outstanding.
Warrants
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 Warrants will become exercisable on the later of (a) 30 days after the completion of the Initial Business Combination or (b) 12 months
from the closing of the Public Offering; provided in each case that the Company has an effective registration statement under the Securities
Act covering the shares of Class A common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available
(or the Company permits holders to exercise their Warrants on a cashless basis and such cashless exercise is exempt from registration
under the Securities Act). The Company will as soon as practicable, but in no event later than 15 business days, after the closing of
the Initial Business Combination, use its best efforts to file with the Securities and Exchange Commission (“SEC”) a registration
statement for the registration, under the Securities Act, of 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 after the closing of the Initial 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 Company’s warrant agreement. If the shares issuable upon exercise of the Warrants are not registered under the Securities
Act by the 60th business day after the closing of the Initial Business Combination, the Company will be required to permit
holders to exercise their Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another
exemption. Notwithstanding the above, if the Company’s 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 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 elects, the Company will not be required
to file or maintain in effect a registration statement, but 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.
The Warrants will expire at 5:00 p.m., New York City time, five years
after the completion of an Initial Business Combination or earlier upon redemption or liquidation.
The Private Placement Warrants
are identical to the Warrants underlying the Units sold in the Public Offering, except that the Private Placement Warrants and the shares
of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until
30 days after the completion of the Initial Business Combination, subject to certain limited exceptions. Additionally, the Private Placement
Warrants will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants
are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company
and exercisable by such holders on the same basis as the Warrants.
The Company may call the Warrants
for redemption (except with respect to the Private Placement Warrants):
|
●
|
in whole and not in part;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
upon a minimum of 30 days’ prior written notice of redemption (the
“30-day redemption period”); and
|
|
●
|
if, and only if, the 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 on the third trading day prior to the date on which the Company
sends the notice of redemption to the warrant holders.
|
If the Company calls the Warrants
for redemption, management will have the option to require all holders that wish to exercise the 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 share dividend, or recapitalization,
reorganization, merger or consolidation. In addition, if (x) the Company issues additional shares of Class A common stock or securities
convertible into or exercisable or exchangeable for shares of Class A common stock for capital raising purposes in connection with the
closing of the Initial Business Combination, at an issue price or effective issue price of less than $9.20 per share of Class A common
stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in
the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or
such 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 funding the Initial Business
Combination, and (z) the volume weighted average trading price of the Class A common stock during the 20 trading day period starting on
the trading day prior to the day on which the Company consummates the Initial Business Combination (the “Market Value”) is
below $9.20 per share, the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of
the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the
nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. Additionally, in no event will the
Company be required to net cash settle any Warrant. In the event that a registration statement is not effective for the exercised Warrants,
the purchaser of a Unit containing such Warrant will have paid the full purchase price for the Unit solely for the share of Class A common
stock underlying such Unit. There will be no redemption rights or liquidating distributions with respect to the Warrants, which will expire
worthless if the Company fails to complete an Initial Business Combination within the 24-month time period.
NOTE 6 — SUBSEQUENT EVENTS
The Company evaluates subsequent
events and transactions that occurred after the balance sheet date up to the date the financial statement were issued. Based upon this
review, other than disclosed, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the financial statements.