References to the "Company," "us," "our" or "we" refer to Progress Acquisition
Corp. The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our audited financial
statements and related notes included herein.
17
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.
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.
18
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 December 31, 2020, we have not commenced any operations. All activity for
the period from September 23, 2020 (inception) through December 31, 2020,
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.
For the period from September 23, 2020 (Inception) through December 31, 2020, we
had a net loss of $2,579. We incurred $2,579 of formation and operating costs
(not charged against stockholders' equity), consisting mostly of general and
administrative expenses.
Liquidity and Capital Resources
As of December 31, 2020, we had $560 in cash and a working capital deficit of
$78,100 (excluding deferred offering costs).
On February 11, 2021, we consummated our initial public offering of 15,000,000
units. Each unit consists of one share of our common stock, par value $0.0001
per share and one-half of one redeemable warrant, with each warrant entitling
the holder thereof to purchase one share of our common stock for $11.50 per
whole share. The units were sold at a price of $10.00 per unit, generating gross
proceeds to us 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 the trust account maintained by
Continental Stock Transfer & Trust Company, as trustee.
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest earned on the trust account to
complete our initial business combination. We may withdraw interest to pay our
taxes and liquidation expenses if we are unsuccessful in completing a business
combination. We may pay our franchise tax from funds from the initial public
offering held outside of the trust account or from interest earned on the funds
held in the trust account and released to us for this purpose. Our annual income
tax obligations will depend on the amount of interest and other income earned on
the amounts held in the trust account reduced by our operating expense and
franchise taxes. We expect the interest earned on the amount in the trust
account will be sufficient to pay our income taxes. To the extent that our
equity or debt is used, in whole or in part, as consideration to complete our
initial business combination, the remaining proceeds held in the trust account
will be used as working capital to finance the operations of the target business
or businesses, make other acquisitions and pursue our growth strategies.
19
Further, our Sponsor, officers and directors and their affiliates may, but are
not obligated to, loan us funds ("Working Capital Loans"), from time to time or
at any time, in whatever amount they deem reasonable in their sole discretion.
Each loan would be evidenced by a promissory note. The notes would either be
paid upon consummation of the initial business combination, without interest,
or, at holder's discretion, up to $1,500,000 of the notes may be converted into
warrants at a price of $1.00 per warrant. The warrants would be identical to the
private placement warrants. In the event that the initial business combination
does not close, we may use a portion of the working capital held outside the
trust account to repay such loaned amounts, but no proceeds from the trust
account would be used for such repayment. At December 31, 2020, no such Working
Capital Loans were outstanding.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business upon the consummation of the
initial public offering. However, if our estimate of the costs of identifying a
target business, undertaking in-depth due diligence and negotiating a business
combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our business
combination. Moreover, we may need to obtain additional financing either to
complete our business combination or because we become obligated to redeem a
significant number of our public shares upon consummation of our business
combination, in which case we may issue additional securities or incur debt in
connection with such business combination. Subject to compliance with applicable
securities laws, we would only complete such financing simultaneously with the
completion of our business combination. If we are unable to complete our
business combination because we do not have sufficient funds available to us, we
will be forced to cease operations and liquidate the trust account. In addition,
following our business combination, if cash on hand is insufficient, we may need
to obtain additional financing in order to meet our obligations.
Related Party Transactions
Founder Shares
On October 29, 2020, we issued 3,593,750 shares of Class B common stock to our
sponsor for $25,000 in cash, or approximately $0.007 per share, up to 468,750
shares of which were subject to forfeiture depending on the extent to which the
underwriters' over-allotment option was exercised. In February 2021, we effected
a stock dividend of 0.2 shares for each founder share outstanding, resulting in
an aggregate of 4,312,500 founder shares outstanding and held by our sponsor (up
to 562,500 of which were subject to forfeiture by our sponsor if the
underwriters' over-allotment option was not exercised in full). On February 22,
2021, the underwriter exercised its over-allotment option in full, hence, the
562,500 founder shares were no longer subject to forfeiture. The founder shares
will automatically convert into shares of our Class A common stock at the time
of the consummation of our initial business combination, and are subject to
certain transfer restrictions, as described in more detail below.
Our initial stockholders have agreed not to transfer, assign or sell (subject to
certain limited exceptions set forth below) their founder shares and any shares
of our Class A common stock issuable upon conversion thereof: (i) with respect
to 50% of such shares, the earlier of one year after the date of the
consummation of our initial business combination and the date on which the
closing price of our common stock equals or exceeds $12.50 per share (as
adjusted for share splits, share dividends, reorganizations and
recapitalizations) for any 20 trading days within any 30-trading day period
commencing after our initial business combination and (ii) with respect to the
remaining 50% of such shares, one year after the date of the consummation of our
initial business combination, or earlier, in either case, if, subsequent to our
initial business combination, we consummate a liquidation, merger, stock
exchange or other similar transaction which results in all of our stockholders
having the right to exchange their shares of common stock for cash, securities
or other property.
Private Placement Warrants
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, 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.
20
Promissory Note - Related Party
On September 30, 2020, our sponsor agreed to loan us up to $300,000 to be used
for a portion of the expenses of our initial public offering pursuant to a
promissory note (the "Note"). The Note was non-interest bearing, unsecured, and
was due upon the completion of our initial public offering. We borrowed $56,000
under the Note. The Note balance was paid in full at closing of our initial
public offering on February 12, 2021.
Administrative Support Agreement
We agreed to pay $10,000 a month for office space, utilities and secretarial
support to our sponsor. Services commenced on the date the securities were first
listed on Nasdaq and will terminate upon the earlier of our initial business
combination or our liquidation.
Critical Accounting Policies
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 shareholder 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.
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes ("ASC 740").
ASC 740 requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statement and tax basis
of assets and liabilities and for the expected future tax benefit to be derived
from tax loss and tax credit carry forwards. ASC 740 additionally requires a
valuation allowance to be established when it is more likely than not that all
or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized
in an enterprise's financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a
tax position 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. ASC 740 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
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 December 31, 2020. The
Company is currently not aware of any issues under review that could result in
significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only "major" tax
jurisdiction.
The Company is subject to income tax examinations by major taxing authorities
since inception. These potential examinations may include questioning the timing
and amount of deductions, the nexus of income among various tax jurisdictions
and compliance with federal and state tax laws. The Company's management does
not expect that the total amount of unrecognized tax benefits will materially
change over the next twelve months.
The provision for income taxes was deemed to be immaterial for the period from
September 23, 2020 (inception) through December 31, 2020.
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Off-Balance Sheet Arrangements
As of December 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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