Soundhound Ai, Inc 10-Q/A for FY2021 Q3
Soundhound Ai, Inc. (SOUN)
About this 10-Q/A
Soundhound Ai, Inc filed this 10-Q/A on January 10, 2022, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $191.08K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
File No.
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one subunit and one-quarter of one warrant | The | |||
| Subunits included as part of the units, each consisting of one share of common stock, $0.0001 par value, and one-quarter of one warrant | ATSPT | The Nasdaq Stock Market LLC | ||
| ATSP | The Nasdaq Stock Market LLC | |||
| Redeemable warrants | ATSPW | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer |
| ☒ | |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of January 10, 2022, there
were
EXPLANATORY NOTE
References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q to “we,” “us,” the “Company” or “our company” are to Archimedes Tech SPAC Partners Co., unless the context otherwise indicates.
On November 15, 2021, Archimedes Tech SPAC Partners Co. (the “Company”) filed its Form 10-Q for the quarterly period ending September 30, 2021 (the “Q3 Form 10-Q”), which included a Note 2, Revision of Prior Period Financial Statements, (“Note 2”) that describes a revision to the Company’s classification of public subunits (and the underlying shares of common stock) subject to redemption issued as part of the units sold in the Company’s initial public offering (“IPO”) on March 15, 2021. As described in Note 2, upon its IPO, the Company classified a portion of its public subunits (and the underlying shares of common stock) in permanent equity. The Company’s management re-evaluated the conclusion and, as a result, corrected the error by reclassifying all common stock underlying the public subunits subject to redemption as temporary equity. This resulted in a revision to the initial carrying value of the common stock underlying the public subunits subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), and common stock.
The Company determined the changes were not qualitatively material to the Company’s previously issued financial statements and did not restate its financial statements. Instead, the Company revised its prior period financial statements in Note 2 to its Q3 Form 10-Q. Although the qualitative factors that management assessed tended to support a conclusion that the misstatements were not material, these factors were not strong enough to overcome the significant quantitative errors in the financial statements. The qualitative and quantitative factors support a conclusion that the misstatements are material on a quantitative basis. As such, upon further consideration of the change, the Company determined the change in classification of the common stock underlying the public subunits and change to the Company’s presentation of earnings per share is material quantitatively and the Company should restate its previously issued financial statements.
Therefore, on December 21, 2021, the Company’s management and the audit committee of the Company’s board of directors (the “Audit Committee”) concluded that the Company’s previously issued (i) audited balance sheet as of March 15, 2021 included in the Company’s Form 8-K filed with the SEC on March 19, 2021, (ii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 filed with the SEC on July 27, 2021 (part of the “Affected Periods”), should be restated to report all public subunits as temporary equity and should no longer be relied upon. As such, the Company will restate its financial statements for the aforementioned periods in this Quarterly Report on Form 10-Q/A.
Additionally, the Company had re-evaluated the fair value of the representative shares that had been issued on January 13, 2021, prior to the IPO, and concluded that the fair value the Company had previously used for the representative shares was incorrect. The correction to the value of the representative shares would impact the allocation of the proceeds recorded by the Company upon the closing of the IPO on March 15, 2021, which in turn impacts the deemed dividend and thus the earnings per share of the Company that was reported in the Company’s financial statements as of March 31, 2021, June 30, 2021, and September 30, 2021 included in the Form 10-Q filed on July 27, 2021, August 27, 2021, and November 15, 2021, respectively (part of the “Affected Periods”).
The Company determined the changes were not qualitatively material to the Company’s previously issued financial statements and did not restate or revise its financial statements. However, after management re-evaluated this conclusion in conjunction with the Company’s decision to restate its previously issued financial statements to report all of the Company’s redeemable public subunits as temporary equity, management concluded that the Company should restate its previously issued financial statements to correct the fair value of the representative shares as well.
Therefore, on January 7, 2022, the Company’s management and the audit committee of the Company’s board of directors (the “Audit Committee”) concluded that the Company’s previously issued unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, June 30, 2021, and September 30, 2021 filed with the SEC on July 27, 2021, August 27, 2021, and November 15, 2021, respectively, should be restated to correct the fair value of the representative shares and should no longer be relied upon. As such, the Company will restate its financial statements for the aforementioned periods in this Quarterly Report on Form 10-Q/A.
The Company does not expect any of the above changes will have any impact on its cash position and cash held in the trust account established in connection with the IPO.
After re-evaluation, the Company’s management has concluded that, in light of the errors described above, a material weakness existed in the Company’s internal control over financial reporting during the Affected Periods and that the Company’s disclosure controls and procedures were not effective. The Company’s remediation plan with respect to such material weakness is described in more detail below in this Quarterly Report on Form 10-Q/A.
ARCHIMEDES TECH SPAC PARTNERS CO.
Quarterly Report on Form 10-Q/A
Table of Contents
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ARCHIMEDES TECH SPAC PARTNERS CO.
CONDENSED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalent | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Marketable securities held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accrued offering costs and expenses | $ | $ | ||||||
| Due to related party | - | |||||||
| Total current liabilities | ||||||||
| Warrant liability | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and Contingencies | ||||||||
| Common stock subject to possible redemption, | $ | $ | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ | $ | $ | ||||||
| Common stock, $ | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | $ | $ | ( | ) | ||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed financial statements.
1
ARCHIMEDES TECH SPAC PARTNERS CO.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2021 | For the Period from September 15, 2020 (Inception) to September 30, 2020 | ||||||||||
| Formation and operating costs | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other income | ||||||||||||
| Trust interest income | ||||||||||||
| Unrealized gain on change in fair value of warrants | ||||||||||||
| Total other income | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and diluted weighted average shares outstanding, common stock subject to redemption | ||||||||||||
| Basic and diluted net (loss) income per share attributable to common stock subject to redemption | $ | ( | ) | $ | $ | |||||||
| Basic and diluted weighted average shares outstanding, common stock | ||||||||||||
| Basic and diluted net loss per share attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
ARCHIMEDES TECH SPAC PARTNERS CO.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Sale of | ||||||||||||||||||||
| Sale of | ||||||||||||||||||||
| Sale of | ||||||||||||||||||||
| Issuance of representative shares | ||||||||||||||||||||
| Common stock issued to initial stockholders | ||||||||||||||||||||
| Forfeiture of founder shares | ( | ) | ( | ) | ||||||||||||||||
| Underwriting fee | - | ( | ) | ( | ) | |||||||||||||||
| Offering costs charged to the stockholders’ equity | - | ( | ) | ( | ) | |||||||||||||||
| Initial classification of warrant liability | - | ( | ) | ( | ) | |||||||||||||||
| Reclassification of offering costs related to Public Shares | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Subsequent measurement of common stock subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Subsequent measurement of common stock subject to redemption | - | ( | ) | ( | ) | |||||||||||||||
| Subsequent measurement of common stock subject to redemption (interest earned on trust account) | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Subsequent measurement of common stock subject to redemption (interest earned on trust account) | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance as of September 15, 2020 (inception) | $ | $ | $ | $ | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
ARCHIMEDES TECH SPAC PARTNERS CO.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
| For the Nine Months Ended September 30, 2021 |
For the Period from September 15, 2020 (Inception) to September 30, 2020 |
|||||||
| Cash flows from Operating Activities: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Unrealized gain on change in fair value of warrants | ( |
) | ||||||
| Interest earned on marketable securities held in Trust Account | ( |
) | ||||||
| Changes in current assets and current liabilities: | ||||||||
| Prepaid expenses | ( |
) | ||||||
| Accrued offering costs and expenses | ||||||||
| Due to related party | ( |
) | ||||||
| Net cash used in operating activities | ( |
) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Investment held in Trust Account | ( |
) | ||||||
| Net cash used in investing activities | ( |
) | ||||||
| Cash flows from Financing Activities: | ||||||||
| Proceeds from IPO and over-allotment | ||||||||
| Payment of underwriting fees | ( |
) | ||||||
| Proceeds from private placement | ||||||||
| Proceeds from issuance of promissory note to related party | ||||||||
| Payment to promissory note to related party | ( |
) | ||||||
| Proceeds from issuance of common stock to initial stockholders | ||||||||
| Payment of deferred offering costs | ( |
) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ||||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Initial value of common stock subject to possible redemption | $ | $ | - | |||||
| Reclassification of offering costs related to Public Shares | $ | ( |
) | $ | - | |||
| Subsequent measurement of common stock subject to redemption | $ | $ | - | |||||
| Subsequent measurement of common stock subject to redemption (interest earned on trust account) | $ | $ | - | |||||
| Forfeiture of founder shares | $ | $ | - | |||||
| Initial classification of warrant liability | $ | $ | - | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
ARCHIMEDES
TECH SPAC PARTNERS CO.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Organization and General
Archimedes Tech SPAC Partners Co. (the “Company”) is a blank check company formed under the laws of the State of Delaware on September 15, 2020. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar Business Combination with one or more businesses or entities (the “Business Combination”). The Company’s focus will be on the artificial intelligence, cloud services and automotive technology sectors. However, the Company is not limited to the technology industry, or these sectors therein, and the Company may pursue a Business Combination opportunity in any business or industry it chooses, and it may pursue a company with operations or opportunities outside of the United States.
The Company has selected December 31 as its fiscal year end.
As of September 30, 2021, the Company had not commenced any revenue-generating operations. All activity for the period from September 15, 2020 (inception) through September 30, 2021 relates to the Company’s formation, the initial public offering (the “IPO”) described below, and, since the closing of the IPO, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO and will recognize changes in the fair value of warrant liability as other income or expense, as applicable.
On November 15, 2021, the Company entered into
a definitive merger agreement with SoundHound Inc., a voice artificial intelligence company, pursuant to which the two companies agreed
to consummate a Business Combination (the “Merger Agreement”). The total consideration to be paid by the Company to SoundHound
is $
Additional information about the Merger Agreement and related transactions can be found in the Current Report on Form 8-K filed on November 16, 2021.
The Company’s sponsor is Archimedes Tech SPAC Sponsors LLC, a Delaware limited liability company (the “Sponsor”).
References to the Company’s “initial stockholders” refer to the Company’s stockholders prior to the IPO, excluding the holders of the Representative Shares (See Note 8).
Financing
The registration statement for the Company’s
IPO was declared effective on March 10, 2021 (the “Effective Date”). As discussed in Note 4, on March 15, 2021, the Company
consummated the IPO of
Each Public Unit consists of (i) one subunit (the
“Public Subunit”), which consists of one share of common stock (the “Public Share”) and one-quarter of one redeemable
warrant, and (ii) one-quarter of one redeemable warrant (collectively, the redeemable warrants included in the Public Units and Public
Subunits, the “Public Warrants”); each whole Public Warrant will be exercisable to purchase one share of common stock at a
price of $
Simultaneously with the closing of the IPO, the Company
consummated the sale of
Transaction costs amounted to $
The
Company granted the underwriters in the IPO a 45-day option to purchase up to
5
Trust Account
Following
the closing of the IPO on March 15, 2021 and the underwriters’ partial exercise of over-allotment option on March 19, 2021, $
Initial Business Combination
The
Company must complete one or more initial Business Combinations having an aggregate fair market value of at least
The
shares of common stock subject to redemption are recorded at a redemption value and classified as temporary equity upon the completion
of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from
Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least
$
The
Company will continue in existence only until 18 months from the closing of the IPO (the “Combination Period”). However,
if the Company is unable to complete the initial Business Combination within the Combination Period, the Company will (i) cease all operations
except for the purpose of winding up and (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem
6
The Sponsor, initial stockholders, officers and directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed Business Combination, (2) not to convert any shares in connection with a stockholder vote to approve a proposed initial Business Combination and (3) not to sell any shares in any tender in connection with a proposed initial Business Combination.
The
Sponsor has agreed that it will be liable to ensure that the proceeds in the Trust Account are not reduced below $
Liquidity and Going Concern
As
of September 30, 2021, the Company had cash outside the Trust Account of $
Prior to the completion of the IPO, the Company’s
liquidity needs had been satisfied through receipt of $
In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor, initial stockholders, officers, directors and their affiliates may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 6). To date, there were no amounts outstanding under any Working Capital Loans.
The Company anticipates that the $628,652 outside of the Trust account as of September 30, 2021 will not be sufficient to allow the Company to operate for at least the next 12 months, assuming that a Business Combination is not consummated during that time. Furthermore, if the Company is not able to consummate a Business Combination by September 15, 2022, it will trigger the Company’s automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Note 2 — Restatement of Prior Period Financial Statements
As a result of recent guidance to Special Purpose Acquisition Companies by the SEC regarding redeemable equity instruments, the Company revisited its application of ASC 480-10-S99 on the Company’s financial statements. The Company had previously classified a portion of its Public Subunits (and the underlying shares of common stock) in permanent equity. Subsequent to the re-evaluation, the Company’s management concluded that all of its Public Subunits should be classified as temporary equity. Additionally, the Company’s management re-evaluated the fair value of the Representative Shares and concluded that the fair value the Company had previously used for the Representative Shares were incorrect and needs to be restated. The identified errors impacted the Company’s Form 8-K filing on March 19, 2021 containing the IPO balance sheet as of March 15, 2021, Form 10-Q filing on July 27, 2021 containing financial statements as of March 31, 2021, Form 10-Q filing on August 27, 2021 containing financial statements as of June 30, 2021, and Form 10-Q filing on November 15, 2021 containing financial statements as of September 30, 2021. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the errors and has determined that the related impacts were material to the aforementioned 8-K and 10-Q filings, and that correcting the cumulative impact of such errors would be significant to our financial statements for the three months and nine months ended September 30, 2021. Accordingly, the Company has corrected such material errors by restating its prior financial statements and classified all Public Subunits as temporary equity as well as restating the fair value of the Representative Shares. The Company will also correct previously reported financial information for such material errors in future filings, as applicable. The following summarizes the effect of the revision on each financial statement line item.
7
Impact of the Restatement
The impact of the restatement on the audited balance sheet as of March 15, 2021 and unaudited interim condensed financial statements as of and for the three months ended March 31, 2021, June 30, 2021, and September 30, 2021 are presented below.
| As Previously Reported | Adjustments | As Restated | ||||||||||
| Balance Sheet at March 15, 2021 | ||||||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | ( | ) | ||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Balance Sheet at March 31, 2021 | ||||||||||||
| Common stock subject to possible redemption | $ | $ | $ | |||||||||
| Common stock | ( | ) | ||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Statement of Operations for the three months ended March 31, 2021 | ||||||||||||
| Basic and diluted weighted average shares outstanding, common stock subject to redemption | ||||||||||||
| Basic and diluted weighted average shares outstanding, common stock | ( | ) | ||||||||||
| Basic and diluted net income (loss) per share, common stock subject to redemption | $ | $ | $ | |||||||||
| Basic and diluted net income (loss) per share, common stock not subject to redemption | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2021 | ||||||||||||
| Issuance of representative shares - Additional Paid-in-Capital | $ | $ | $ | |||||||||
| Issuance of representative shares - Stockholders' Equity (Deficit) | ||||||||||||
| Offering costs charged to the Stockholders' equity | ( | ) | ( | ) | ( | ) | ||||||
| Reclassification of offering costs related to public shares | $ | $ | $ | |||||||||
| Subsequent measurement of common stock subject to redemption | $ | $ | ( | ) | $ | ( | ) | |||||
| Statement of Cash Flows for the three months ended March 31, 2021 | ||||||||||||
| Supplemental disclosure of cash flow information | ||||||||||||
| Initial value of common stock subject to possible redemption | $ | $ | $ | |||||||||
| Change in value of common stock subject to possible redemption | $ | $ | ( | ) | $ | |||||||
| Reclassification of offering costs related to public shares | $ | $ | ( | ) | $ | ( | ) | |||||
| Subsequent measurement of common stock subject to redemption | $ | $ | $ | |||||||||
| Subsequent measurement of common stock subject to redemption (interest earned on trust account) | $ | $ | $ | |||||||||
| Statement of Operations for the six months ended June 30, 2021 | ||||||||||||
| Basic and diluted net income (loss) per share, common stock subject to redemption | $ | $ | $ | |||||||||
| Basic and diluted net income (loss) per share, common stock not subject to redemption | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2021 | ||||||||||||
| Issuance of representative shares - Additional Paid-in-Capital | $ | $ | $ | |||||||||
| Issuance of representative shares - Stockholders' Equity (Deficit) | ||||||||||||
| Offering costs charged to the Stockholders' equity | ( | ) | ( | ) | ( | ) | ||||||
| Reclassification of offering costs related to public shares | $ | $ | $ | |||||||||
| Subsequent measurement of common stock subject to redemption | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Statement of Cash Flows for the six months ended June 30, 2021 | ||||||||||||
| Reclassification of offering costs related to public shares | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Subsequent measurement of common stock subject to redemption | $ | $ | $ | |||||||||
| Statement of Operations for the nine months ended September 30, 2021 | ||||||||||||
| Basic and diluted net income (loss) per share, common stock subject to redemption | $ | $ | $ | |||||||||
| Basic and diluted net income (loss) per share, common stock not subject to redemption | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2021 | ||||||||||||
| Issuance of representative shares - Additional Paid-in-Capital | $ | $ | $ | |||||||||
| Issuance of representative shares - Stockholders' Equity (Deficit) | ||||||||||||
| Offering costs charged to the Stockholders' equity | ( | ) | ( | ) | ( | ) | ||||||
| Reclassification of offering costs related to public shares | $ | $ | $ | |||||||||
| Subsequent measurement of common stock subject to redemption | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Statement of Cash Flows for the nine months ended September 30, 2021 | ||||||||||||
| Reclassification of offering costs related to public shares | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Subsequent measurement of common stock subject to redemption | $ | $ | $ | |||||||||
8
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 8-K and the final prospectus filed by the Company with the SEC on March 19, 2021 and March 12, 2021, respectively.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial statement in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statement. Actual results could differ from those estimates.
Cash and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company has $
Marketable Securities Held in Trust Account
At
September 30, 2021, the Company had $
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
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| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses, and due to related party are estimated to approximate the carrying values as of September 30, 2021 due to the short maturities of such instruments.
The Company’s warrant liability and the fair value of its Representative Shares are based on valuation models utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the warrant liability and the fair value of its Representative Shares are classified as Level 3. See Note 7 for additional information on assets, liabilities and Representative Shares measured at fair value.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Net Income (Loss) Per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The statements of operations include
a presentation of income (loss) per redeemable Public Share and income (loss) per founder non-redeemable share following the two-class
method of income (loss) per share. In order to determine the net income (loss) attributable to both the public redeemable shares and
founder non-redeemable shares, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated
using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement
of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public
stockholders. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be
allocated using a ratio of
10
The earnings per share presented in the condensed statements of operations is based on the following:
| For the three months ended | For the nine months ended | |||||||
| September 30, 2021 | September 30, 2021 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Accretion of temporary equity to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of temporary equity to redemption value | $ | ( | ) | $ | ( | ) | ||
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, 2021 | September 30, 2021 | |||||||||||||||
| Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss including accretion of temporary equity | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion of temporary equity to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
In
connection with the underwriters’ partial exercise of their over-allotment option on March 19, 2021,
As of September 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 Company’s earnings. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented.
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs
consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO and were
charged to stockholders’ equity upon the completion of the IPO. Accordingly, as of March 15, 2021, offering costs in the aggregate
of $
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the warrants are a derivative instrument.
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.
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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 September 30, 2021, respectively. 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 deferred tax assets were deemed to be de minimis as of September 30, 2021.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, cash flows and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Note 4 — Initial Public Offering
Pursuant
to the IPO on March 15, 2021, the Company sold
On
March 19, 2021, the underwriters partially exercised the over-allotment option to purchase
Following
the closing of the IPO on March 15, 2021 and the underwriters’ partial exercise of over-allotment option on March 19, 2021, $
Note 5 — Private Placement
Simultaneously
with the closing of the IPO, the Sponsor and EarlyBirdCapital purchased an aggregate of
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On
March 19, 2021, simultaneous with the exercise of the over-allotment option, the Sponsor and EarlyBirdCapital purchased an aggregate
of
The Private Units (and underlying Private Subunits, Private Shares, and Private Warrants) are identical to the Public Units except that the Private Warrants included in the Private Units: (i) will not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchasers or any of their permitted transferees. If the Private Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.
The Company’s initial stockholders have agreed (A) to vote the Private Shares contained in the Private Subunits in favor of any proposed Business Combination, (B) not to convert any Private Subunits in connection with a stockholder vote to approve a proposed initial Business Combination or sell any Private Shares to the Company in a tender offer in connection with a proposed initial Business Combination and (C) that the Private Subunits shall not participate in any liquidating distribution from the Trust Account upon winding up if a Business Combination is not consummated. In the event of a liquidation prior to the initial Business Combination, the Private Units will likely be worthless.
Note 6 — Related Party Transactions
Founder Shares
On
January 4, 2021, the Sponsor paid $
On
the date of the IPO, the Founder Shares were placed into an escrow account maintained in New York, New York by Continental Stock Transfer& Trust Company, acting as escrow agent.
Promissory Note — Related Party
On
January 4, 2021, the Sponsor agreed to loan the Company up to $
On
February 1, 2021, the Sponsor funded to the Company $
Related Party Loans
In
order to meet the working capital needs following the consummation of the IPO if the funds not held in the Trust Account are insufficient,
the Sponsor, initial stockholders, officers, directors and their affiliates may, but are not obligated to, loan the Company funds, from
time to time or at any time, in whatever amount they deem reasonable in their sole discretion (“Working Capital Loans”).
Each Working Capital Loan would be evidenced by a promissory note.
Administrative Service Fee
Commencing
on the Effective Date of the registration statement through the acquisition of a target business, the Company will pay an affiliate of
the Chief Executive Officer, an aggregate fee of $
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Note 7 — Fair Value Measurements
Non-Recurring Fair Value Measurement
The following table presents information about the Company’s Representative Shares that were measured at fair value on a non-recurring basis as of January 13, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| January 13, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Stockholders’ Equity: | ||||||||||||||||
| Representative Shares | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
The estimated fair value of the Representative Shares on January 13, 2021, the date the Representative Shares were issued, was determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model utilizing the probability weighted expected return method are assumptions related to the expected stock-price volatility (pre-merger), the risk-free interest rate, and the expected restricted term. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected restricted term of the Representative Shares. The expected restricted term of the Representative Shares is simulated based on management assumptions regarding the timing and likelihood of completing the IPO and a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
The key inputs into the Monte Carlo simulation model for the Representative Shares were as follows at January 13, 2021:
| Input | January 13, 2021 | |||
| Restricted term (years) | ||||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Stock price | $ | |||
| Dividend yield | % | |||
Recurring Fair Value Measurement
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| September 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| U.S. Mutual Fund held in Trust Account | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant Liability | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
The estimated fair value of the warrant liability on March 15, 2021 and September 30, 2021 is determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model are assumptions related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend yield and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.
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The key inputs into the Monte Carlo simulation model for the warrant liability were as follows at March 15, 2021:
| Input | March 15, 2021 | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Stock price | $ | |||
| Dividend yield | % | |||
| Exercise price | $ | |||
The key inputs into the Monte Carlo simulation model for the warrant liability were as follows at September 30, 2021:
| Input | September 30, 2021 | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Stock price | $ | |||
| Dividend yield | % | |||
| Exercise price | $ | |||
The following table sets forth a summary of the changes in the fair value of the warrant liability for the nine months ended September 30, 2021:
| Warrant Liability | ||||
| Fair value as of December 31, 2020 | $ | |||
| Initial fair value of warrant liability upon issuance at IPO | ||||
| Change in fair value | ( | ) | ||
| Fair value as of September 30, 2021 | $ | |||
Note 8 — Commitments and Contingencies
Registration Rights
The
holders of the Founder Shares and Representative Shares (as defined below) issued and outstanding on the date of the IPO, as well as
the holders of the Private Units and any units the Sponsor, officers, directors or their affiliates may be issued in payment of Working
Capital Loans made to the Company (and all underlying securities), will be entitled to registration rights pursuant to an agreement signed
on March 10, 2021. The holders of a majority of these securities are entitled to make up to two demands that the Company use its best
efforts to register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights
at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders
of a majority of the Representative Shares, Private Units and units issued to the Sponsor, officers, directors or their affiliates in
payment of Working Capital Loans made to the Company (or underlying securities) can elect to exercise these registration rights at any
time after the Company consummates a Business Combination. Notwithstanding anything to the contrary,
Underwriters Agreement
15
On
March 19, 2021, the Underwriters partially exercised the over-allotment option to purchase
EarlyBirdCapital will have the right of first refusal for a period commencing from the consummation of the IPO until the consummation of the initial Business Combination (or the liquidation of the Trust Account in the event that the Company fails to consummate the initial Business Combination within the Combination Period) to act as book running manager, placement agent and/or arranger for all financings where the Company seeks to raise equity, equity-linked, debt or mezzanine financings relating to or in connection with the initial Business Combination.
In
addition, under certain circumstances EarlyBirdCapital will be granted, for a period of one year from the closing of the IPO, the right
to act as lead underwriter for the next U.S. registered public offering of securities, undertaken by any of the Company’s officers,
for the purpose of raising capital and placing
Business Combination Marketing Agreement
The
Company has engaged EarlyBirdCapital as an advisor in connection with the Business Combination to assist the Company in holding meetings
with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company
to potential investors that are interested in purchasing the Company’s securities in connection with the initial Business Combination,
assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and
public filings in connection with the Business Combination.
Representative Shares
On January 13, 2021, the Company has issued to
EarlyBirdCapital and its designees an aggregate of
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following March 10, 2021 pursuant to Rule 5110(g)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold during the IPO, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the March 10, 2021 or commencement of sales of the IPO, except to any underwriter and selected dealer participating in the IPO and their bona fide officers or partners, provided that all securities so transferred remain subject to the lock-up restriction above for the remainder of the time period.
Business Combination Legal Services Agreement
The
Company has entered into an agreement with its legal counsel, Loeb & Loeb (“Loeb”), whereby
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Note 9 — Stockholders’ Equity
Preferred
Stock — The Company is authorized to issue
Common
Stock — The Company is authorized to issue
Public Warrants
Each whole warrant entitles the holder to purchase one common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of an initial Business Combination. The warrants will expire on the fifth anniversary of the completion of an initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
However, no warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within 90 days following the consummation of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value”(defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the trading day prior to the date of exercise.
The
Company may call the warrants for redemption (excluding the Private Warrants and any warrants underlying additional units issued to the
Sponsor, initial stockholders, officers, directors or their affiliates in payment of Working Capital Loans made to the Company), in whole
and not in part, at a price of $
| ● | at any time after the warrants become exercisable, |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder, |
| ● | If, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and |
| ● | if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants. |
In
addition, if (x) the Company issues additional shares of common stock or equity-linked securities 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 (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, initial stockholders or their affiliates, without taking into account any Founder Shares held by them prior
to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest
thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination
(net of redemptions), and (z) 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 greater of (i) the Market Value or (ii) the price at which the Company issues the additional
shares of common stock or equity-linked securities, and the $
Note 10 — Subsequent Events
On November 15, 2021, the Company entered into
the Merger Agreement with SoundHound Inc., a voice artificial intelligence company, pursuant to which the two companies agreed to consummate
a Business Combination. The total consideration to be paid by the Company to SoundHound is $
Additional information about the Merger Agreement and related transactions can be found in the Current Report on Form 8-K filed on November 16, 2021.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “Archimedes Tech SPAC Partners Co.” “our,” “us” or “we” refer to Archimedes Tech SPAC Partners Co. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q/A includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We were formed on September 15, 2020 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Our efforts to identify a prospective target business will not be limited to a particular industry or geographic region, though we intend to focus our search on a business operating in the technology industry. We intend to utilize cash derived from the proceeds of this offering, our securities, debt or a combination of cash, securities and debt, in effecting a business combination.
All activity through September 30, 2021 relates to our formation, IPO, which was consummated on March 15, 2021, and search for a prospective initial business combination target.
On November 15, 2021, we entered into a definitive merger agreement with SoundHound Inc., a voice artificial intelligence company, pursuant to which the two companies agreed to consummate a Business Combination (the “Merger Agreement”). The total consideration to be paid to SoundHound is $2 billion in equity of the Company, with outstanding SoundHound stock options and warrants included on a net exercise basis. In connection with the Business Combination, certain accredited investors committed to purchase 11.1 million shares of Class A common stock of the combined company at a price of $10.00 per share, for total gross proceeds of $111 million, in a private placement that is scheduled to close concurrently with the Business Combination.
Additional information about the Merger Agreement and related transactions can be found in the Current Report on Form 8-K filed on November 16, 2021.
Results of Operations
As of September 30, 2021, we have not commenced any operations. All activity for the period from September 15, 2020 (inception) through September 30, 2021 relates to our formation, IPO and, after our IPO, identifying a target company for a Business Combination. We will not generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We will generate non-operating income in the form of interest income from the proceeds derived from the IPO and placed in the Trust Account.
For the three months ended September 30, 2021, we had a net loss of $191,075, which was comprised of operating costs of $229,484, interest income of $3,352 from marketable securities held in our Trust Account, and unrealized gain on change in fair value of warrants of $35,057.
For the nine months ended September 30, 2021, we had a net loss of $345,648, which was comprised of operating costs of $461,826, interest income of $7,230 from marketable securities held in our Trust Account, and unrealized gain on change in fair value of warrants of $108,948.
For the period from September 15, 2020 (inception) through September 30, 2020, we had a net loss of $716, which was comprised of operating costs of $716.
Liquidity and Capital Resources
On March 15, 2021, we consummated the IPO of 12,000,000 Public Units at a price of $10.00 per Public Unit, generating gross proceeds of $120,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 390,000 Private Units at a price of $10.00 per Private Unit in a private placement to the Sponsor and EarlyBirdCapital, generating gross proceeds of $3,900,000.
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On March 19, 2021, the underwriters partially exercised the over-allotment option to purchase 1,300,000 Public Units, at a purchase price of $10.00 per Public Unit, generating gross proceeds of $13,000,000. In connection with the underwriters’ exercise of their over-allotment option, we also consummated the sale of an additional 26,000 Private Units at $10.00 per Private Unit to the Sponsor and EarlyBirdCapital, generating gross proceeds of $260,000.
Following the closing of the IPO on March 15, 2021 and the underwriters’ partial exercise of over-allotment option on March 19, 2021, $133,000,000 from the net proceeds of the sale of the Public Units in the IPO and the sale of the Private Units was placed in the Trust Account and the remaining net proceeds was deposited in our operating bank account.
As of September 30, 2021, we had $628,652 of cash held outside of the Trust Account for our working capital needs.
Prior to the completion of the IPO, our liquidity needs had been satisfied through a payment from the Sponsor of $25,000 for the founder shares, and the loan under an unsecured promissory note from the Sponsor of $125,000. We fully paid the note to the Sponsor on March 15, 2021. Subsequent to the consummation of the IPO and Private Placement, our liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account.
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor, initial stockholders, officers, directors and their affiliates may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loans.
We anticipate that the $628,652 outside of the Trust account as of September 30, 2021 will not be sufficient to allow us to operate for at least the next 12 months, assuming that a Business Combination is not consummated during that time. Moreover, we may need to obtain additional financing to consummate our Initial Business Combination but there is no assurance that new financing will be available to us on commercially acceptable terms. Furthermore, if we are not able to consummate a Business Combination by September 15, 2022, it will trigger our automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about our ability to continue as a going concern.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have identified the following as our critical accounting policies:
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Net Loss Per Common Share
Net loss per common share is computed by dividing net loss by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted loss per common share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of overallotment and (iii) Private Placement since the exercise price of the warrants is higher than the market price. The warrants are exercisable to purchase 6,858,000 shares of common stock in the aggregate.
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Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 30, 2021, we were not subject to any market or interest rate risk. The net proceeds held in the Trust Account have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less, or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, during the period covered by this report, our disclosure controls and procedures were not effective because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the material weakness identified in our internal controls related to the Company’s accounting for complex financial instruments. This material weakness resulted in the restatement of the Company’s balance sheet as of March 15, 2021, and its interim financial statements for the quarter ended March 31, 2021; June 30, 2021; and September 30, 2021.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter ended September 30, 2021, we have enhanced our internal controls over financial reporting relating to redeemable equity instruments and Representative Shares by continuing to recognize all Public Subunits as temporary equity and adopting a more robust approach to assessing the fair value of our equity instruments. We believe our efforts are effective in identifying and appropriately applying applicable accounting requirements but we believe we will need additional time to monitor and assess our efforts to evaluate their ultimate effectiveness. There have been no changes in our internal controls over financial reporting, except as previously noted, that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Not required for smaller reporting companies. However, as of the date of this Quarterly Report, other than as described below, there have been no material changes to the risk factors disclosed in our final prospectus for our IPO filed with the SEC on March 12, 2021. Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus for our IPO filed with the SEC on March 12, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act and were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by the company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q/A.
| * | Filed herewith. |
| ** | Furnished. |
21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ARCHIMEDES TECH SPAC PARTNERS CO. | ||
| Date: January 10, 2022 | By: | /s/ Stephen N. Cannon |
| Name: | Stephen N. Cannon | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: January 10, 2022 | By: | /s/ Long Long |
| Name: | Long Long | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
22
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen N. Cannon, certify that:
| 1 | I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q of Archimedes Tech SPAC Partners Co.; |
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4 | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | (Paragraph omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)); |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5 | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: January 10, 2022
| /s/ Stephen N. Cannon | |
| Stephen N. Cannon | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Long Long, certify that:
| 1 | I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q of Archimedes Tech SPAC Partners Co.; |
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4 | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | (Paragraph omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)); |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5 | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: January 10, 2022
| /s/ Long Long | |
| Long Long | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Quarterly Report of Archimedes Tech SPAC Partners Co. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, Stephen N. Cannon, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| 1 | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2 | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: January 10, 2022
| /s/ Stephen N. Cannon | |
| Stephen N. Cannon | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Quarterly Report of Archimedes Tech SPAC Partners Co. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, Long Long, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| 1 | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2 | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: January 10, 2022
| /s/ Long Long | |
| Long Long | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |