References to the "Company," "PROGRESS ACQUISITION CORP.," "our," "us" or "we"
refer to PROGRESS ACQUISITION CORP. 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 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 23, 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 are not
limited to a particular industry or geographic region although we currently are
focusing on target businesses in the nexus of media, entertainment and
technology. We are intending to utilize cash derived from the proceeds of our
initial public offering, our securities, debt or a combination of cash,
securities and debt, in effecting a business combination. The issuance of
additional shares of common stock or preferred stock:
? may significantly reduce the equity interest of our stockholders, which
dilution would increase if the anti-dilution provisions in our Class B common
stock resulted in the issuance of our Class A common stock on a greater than
one-to-one basis upon conversion of our Class B common stock;
? may subordinate the rights of holders of shares of Class A common stock if we
issue shares of preferred stock with rights senior to those afforded to our
shares of Class A common stock;
? will likely cause a change in control if a substantial number of our shares of
Class A common stock are issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and most likely
will also result in the resignation or removal of our present officers and
directors; and
? may adversely affect prevailing market prices for our securities.
Similarly, if we issue debt securities, it could result in:
? default and foreclosure on our assets if our operating revenues after a
business combination are insufficient to pay our debt obligations:
? acceleration of our obligations to repay the indebtedness even if we have made
all principal and interest payments when due if the debt security contains
covenants that required the maintenance of certain financial ratios or
reserves and we breach any such covenant without a waiver or renegotiation of
that covenant;
? our immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand; and
? our inability to obtain additional financing, if necessary, if the debt
security contains covenants restricting our ability to obtain additional
financing while such security is outstanding.
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On February 11, 2021, we consummated our initial public offering of 15,000,000
units. Each unit consists of one share of common stock of the Company, par value
$0.0001 per share ("Common Stock"), and one-half of one redeemable warrant of
the Company, with each warrant entitling the holder thereof to purchase one
share of Common Stock for $11.50 per whole share. The units were sold at a price
of $10.00 per unit, generating gross proceeds to the Company of $150,000,000.
On February 11, 2021, simultaneously with the consummation of our initial public
offering, we completed the private sale of an aggregate of 4,450,000 warrants to
our sponsor at a purchase price of $1.00 per private placement warrant,
generating gross proceeds of $4,450,000.
On February 22, 2021, the underwriters exercised the over-allotment option in
full to purchase 2,250,000 units. On February 22, 2021, simultaneously with the
closing of the underwriters' full exercise of the over-allotment option, we
completed the private sale of an aggregate of 200,000 private placement warrants
to our sponsor, at a purchase price of $1.00 per private placement warrant,
generating gross proceeds of $200,000.
Following the closing of our initial public offering on February 11, 2021 and
the underwriters' full exercise of over-allotment option on February 22, 2021,
$172,500,000 from the net proceeds of the sale of the units in our initial
public offering, the exercise of the over-allotment option and the sale of the
private placement warrants was placed in a trust account established for the
benefit of our public stockholders (the "trust account") and maintained by
Continental Stock Transfer & Trust Company, as trustee.
If we are unable to complete our initial business combination by November 11,
2022, we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem 100% of the outstanding public shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the trust
account, including any interest not previously released to us but net of
franchise and income taxes payable, 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 liquidation
distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and liquidate,
subject (in the case of (ii) and (iii) above) to its obligations under Delaware
law to provide for claims of creditors and the requirements of other applicable
law. There will be no redemption rights or liquidating distributions with
respect to our warrants, which will expire worthless if we fail to complete our
initial business combination by November 11, 2022 and, in such event, such
amounts will be included with the funds held in the trust account that will be
available to fund the redemption of the public shares. In the event of such
distribution, it is possible that the per share value of the assets remaining
available for distribution will be less than $10.00.
Our amended and restated certificate of incorporation provides that we will have
only until November 11, 2022 to complete an initial business combination. If we
have not completed an initial business combination by such date, we will (i)
cease all operations except for the purpose of winding up, (ii) as promptly as
reasonably possible but not more than ten business days thereafter, redeem 100%
of the outstanding public shares, at a per-share price, payable in cash, equal
to the aggregate amount then on deposit in the trust account, including any
interest not previously released to us but net of taxes payable, 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 liquidation distributions, if any), subject to applicable law,
and (iii) as promptly as reasonably possible following such redemption, subject
to the approval of our remaining stockholders and our board of directors,
dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
Results of Operations
As of September 30, 2021, we have not commenced any operations. All activity for
the period from September 23, 2020 (inception) through September 30, 2021
relates to our formation and initial public offering. 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 initial public offering
and placed in the trust account.
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For the three months ended September 30, 2021, we had a net income of $475,754
which was comprised of operating costs of $270,269, interest income of $3,545
from marketable securities held in our Trust Account, and unrealized gain on
change in fair value of warrants of $742,478.
For the nine months ended September 30, 2021, we had a net income of $1,076,838
which was comprised of operating costs of $665,729, interest income of $7,995
from marketable securities held in our Trust Account, unrealized gain on change
in fair value of warrants of $3,052,923, and other expense relating to fair
value exceeding amount paid for warrants of $1,318,351.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $0.2 million in our operating
bank account, and working capital of approximately $0.2 million.
Prior to the completion of the Initial Public Offering, our liquidity needs had
been satisfied through a payment from the Sponsor of $25,000 for the Founder
Shares to cover certain offering costs and the loan under an unsecured
promissory note from the Sponsor of $141,700. We fully paid the note to the
Sponsor on February 12, 2021. Subsequent to the consummation of the Initial
Public Offering 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, officers, directors and their affiliates may, but are
not obligated to, provide us Working Capital Loans, as defined below. To date,
there were no amounts outstanding under any Working Capital Loans.
We anticipate that the $0.2 million 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. Until consummation of the Business Combination, we will be using the funds
not held in the Trust Account, and any additional Working Capital Loans, for
identifying and evaluating prospective acquisition candidates, performing
business due diligence on prospective target businesses, traveling to and from
the offices, plants or similar locations of prospective target businesses,
reviewing corporate documents and material agreements of prospective target
businesses, selecting the target business to acquire and structuring,
negotiating and consummating the Business Combination.
We believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. We will need to raise
additional capital through loans from our Sponsor, officers, directors, or third
parties. None of the Sponsor, officers or directors are under any obligation to
advance funds to, or to invest in, us. If we are unable to raise additional
capital, we 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 our business plan, and reducing overhead expenses. We
cannot provide any assurance that new financing will be available to us on
commercially acceptable terms, if at all.
Going Concern Consideration
As of September 30, 2021, we had approximately $0.2 million in our operating
bank account, and working capital of approximately $0.2 million. We have
incurred and expects to continue to incur significant costs in pursuit of our
financing and acquisition plans. These conditions raise substantial doubt about
the our ability to continue as a going concern one year from the issuance date
of the condensed financial statements. We plan to address this uncertainty
through loans from our Sponsor, officers, directors, or third parties. None of
the Sponsor, officers or directors are under any obligation to advance funds to,
or to invest in, us. There is no assurance that the our plans to raise capital
or to consummate a Business Combination will be successful. The condensed
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
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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:
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 private placement warrants are a derivative
instrument.
Common Stock Subject to Possible Redemption
All of the 17,250,000 Class A common stock sold as part of the Units in the IPO
contain a redemption feature which allows for the redemption of such public
shares in connection with the Company's liquidation, if there is a stockholder
vote or tender offer in connection with the Business Combination and in
connection with certain amendments to the Company's amended and restated
certificate of incorporation. In accordance with SEC and its staff's guidance on
redeemable equity instruments, which has been codified in ASC 480-10-S99,
redemption provisions not solely within the control of the Company require
common stock subject to redemption to be classified outside of permanent equity.
Therefore, all Class A common stock has been classified outside of permanent
equity.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable common stock are affected by charges against
additional paid in capital and accumulated deficit.
Net Income Per Common Stock
Earnings and losses are shared pro rata between the redeemable shares and
non-redeemable shares. The 13,275,000 potential common stock for outstanding
warrants to purchase the Company's shares were excluded from diluted earnings
per share for the three and nine months ended September 30, 2021 because the
warrants are contingently exercisable, and the contingencies have not yet been
met. As a result, diluted net income per common stock is the same as basic net
income per common stock for the periods
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.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We will qualify as an
"emerging growth company" and under the JOBS Act will be allowed to comply with
new or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
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Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an independent registered public accounting firm's
attestation report on our system of internal controls over financial reporting
pursuant to Section 404, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies under the Dodd-Frank
Wall Street Reform and Consumer Protection Act, (iii) comply with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the report of the independent registered public
accounting firm providing additional information about the audit and the
financial statements (auditor discussion and analysis), and (iv) disclose
certain executive compensation related items such as the correlation between
executive compensation and performance and comparisons of the CEO's compensation
to median employee compensation. These exemptions will apply for a period of
five years following the completion of this offering or until we are no longer
an "emerging growth company," whichever is earlier.
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