References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to PTK Acquisition Corp. References to our "management" or our
"management team" refer to our officers and directors and references to the
"Sponsor" refer to PTK Holdings LLC. The following discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with the financial statements and the notes thereto contained
elsewhere in this Quarterly Report (the "Financial Statements"). Capitalized
terms used but not otherwise defined herein have the meaning set forth in the
Financial Statements. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are not historical facts, and involve risks and
uncertainties that could cause actual results to differ materially from those
expected and projected. All statements, other than statements of historical fact
included in this Quarterly Report including, without limitation, statements in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's financial position, business strategy and
the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's 10-K/A for the fiscal year 2020 filed with the U.S. Securities and
Exchange Commission (the "SEC") on June 14, 2021 (the "FY 2020 10-K/A"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company incorporated in Delaware on August 19, 2019. We
were formed for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses (the "Business Combination").
Our sponsor is PTK Holdings LLC, a Delaware limited liability company (the
"Sponsor"). The registration statement for the initial public offering (the
"Initial Public Offering") was declared effective on July 13, 2020. On July 15,
2020, we consummated the Initial Public Offering of 11,500,000 units (the
"Units" and, with respect to the common stock included in the Units, the "Public
Shares"), including the issuance of 1,500,000 Units as a result of the
underwriters' exercise of their over-allotment option in full, at $10.00 per
Unit, generating gross proceeds of $115.0 million, and incurring offering costs
of approximately $7.3 million, inclusive of approximately $4.0 million in
deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 6,800,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants"),
at a price of $0.50 per Private Placement Warrant to our Sponsor, generating
gross proceeds to the Company of $3.4 million. In addition, upon the
consummation of our Initial Public Offering, 600,000 additional private
placement warrants were issued to our sponsor as a result of the conversion of a
promissory note.
Upon the closing of the Initial Public Offering and the Private Placement,
$115.0 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in a
trust account ("Trust Account"), located in the United States with Continental
Stock Transfer & Trust Company acting as trustee, and invested only in U.S.
"government securities" within the meaning of Section 2(a)(16) of the Investment
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Company Act having a maturity of 180 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations,
until the distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a Business Combination.
If we are unable to complete a Business Combination within 18 months from the
closing of the Initial Public Offering, or January 15, 2022 (the "Combination
Period"), 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 for a pro rata portion
of the funds held in the Trust Account (net of interest that may be used by us
to pay income taxes or other taxes) which redemption will completely extinguish
the 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 holders of common stock 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. We will pay the costs of any liquidation
following the redemptions from our remaining assets outside of the Trust
Account. If such funds are insufficient, our Sponsor has agreed to pay the funds
necessary to complete such liquidation (currently anticipated to be no more than
approximately $50,000) and has agreed not to seek repayment for such expenses.
Results of Operations
Our entire activity since inception through March 31, 2021 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We generate non-operating income
in the form of income from our investments held in the Trust Account. We expect
to incur increased expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the three months ended March 31, 2020, we had net loss of approximately
$9,000, which consisted of approximately $7,000 in general and administrative
expenses and approximately $2,000 of franchise tax expense.
Liquidity, Capital Resources and Going Concern
As of March 31, 2021, we had approximately $178,000 in cash and working capital
deficit of approximately $948,000 (not taken into account tax obligations of
approximately $158,000 that may be paid using investment income earned from
Trust Account). In order to meet our working capital needs following the
consummation of the Initial Public Offering, our sponsor may, but is not
obligated to, loan us funds, from time to time or at any time, in whatever
amount it deems reasonable in its sole discretion. Each loan would be evidenced
by a promissory note. The notes would either be paid upon consummation of our
initial business combination, without interest, or, at our sponsor's discretion,
up to $1.0 million of the notes may be converted upon consummation of our
business combination into private warrants at a price of $0.50 per warrant
(which, for example, would result in our sponsor being issued 1,000,000 private
warrants at a purchase price of $0.50 per warrant if $500,000 of notes were so
converted). If we do not complete a business combination, any outstanding loans
from our sponsor, will be repaid only from amounts remaining outside our trust
account, if any.
Prior to the completion of the Initial Public Offering on July 15, 2020, our
liquidity needs were satisfied through the receipt of $25,000 from our Sponsor
in exchange for the issuance of the founder shares, and a $300,000 promissory
note issued to our Sponsor, which was converted into 600,000 private warrants
upon closing of the Initial Public Offering. Subsequent to the consummation of
the Initial Public Offering and Private Placement, our liquidity needs have been
satisfied with the proceeds from the consummation of the Private Placement not
held in the Trust Account.
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In addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor may, but is not obligated to, provide us working
capital loans. To date, there were no amounts outstanding under any working
capital loans.
Based on the foregoing, management has determined that the working capital
deficit raises substantial doubt about our ability to continue as a going
concern until the earlier of the consummation of the Business Combination or the
date we are required to liquidate, January 15, 2022. The financial statements do
not include any adjustment that might be necessary if we are unable to continue
as a going concern.
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus (the "COVID-19
outbreak"). In March 2020, the WHO classified the COVID-19 outbreak as a
pandemic, based on the rapid increase in exposure globally. Management continues
to evaluate the impact of the COVID-19 pandemic and has concluded that the
specific impact is not readily determinable as of the date of the balance sheet.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Related Party Transactions
Insider Shares
In October 2019, our Sponsor purchased 2,875,000 shares of common stock, par
value $0.0001, (the "Insider Shares"), for an aggregate price of $25,000. Our
Sponsor has agreed to forfeit up to 375,000 Insider Shares to the extent that
the over-allotment option is not exercised in full by the underwriters. On
July 15, 2020, the over-allotment option was exercised in full. Accordingly, no
Insider Shares were forfeited.
Our Sponsor and our officers and directors agreed to place their Insider Shares
into an escrow account maintained by Continental Stock Transfer & Trust Company,
acting as escrow agent. Subject to certain limited exceptions, 50% of these
shares will not be transferred, assigned, sold or released from escrow until the
earlier of nine months after the date of the consummation of the initial
Business Combination and the date on which the closing price of the Company's
common stock equals or exceeds $12.50 per share (as adjusted for stock splits,
stock dividends, reorganizations and recapitalizations) for any 20 trading days
within any 30-trading day period commencing after the consummation of the
initial Business Combination and the remaining 50% of the Insider Shares will
not be transferred, assigned, sold or released from escrow until nine months
after the date of the consummation of the initial Business Combination, or
earlier, in either case, if, subsequent to the initial Business Combination, we
complete a liquidation, merger, stock exchange or other similar transaction
which results in all of the Company's stockholders having the right to exchange
their shares of common stock for cash, securities or other property. The limited
exceptions referred to above include (1) transfers among the insiders, to the
our officers, directors, advisors and employees, (2) transfers to an insider's
affiliates or its members upon its liquidation, (3) transfers to relatives and
trusts for estate planning purposes, (4) transfers by virtue of the laws of
descent and distribution upon death, (5) transfers pursuant to a qualified
domestic relations order, (6) private sales made at prices no greater than the
price at which the securities were originally purchased or (7) transfers to us
for cancellation in connection with the consummation of an initial Business
Combination, in each case (except for clause 7) where the transferee agrees to
the terms of the escrow agreement and forfeiture, as the case may be, as well as
the other applicable restrictions and agreements of the holders of the Insider
Shares.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, our Sponsor
purchased an aggregate of 6,800,000 Private Placement Warrants, at a price of
$0.50 per Private Placement Warrant to the Sponsor, generating gross proceeds to
the Company of $3.4 million. A portion of the proceeds from the Private
Placement Warrants were added to the proceeds from the Initial Public Offering
held in the Trust Account. If we do not complete a Business Combination within
the Combination Period, the Private Placement Warrants will expire worthless.
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Related Party Loans
On October 10, 2019, our Sponsor agreed to loan us an aggregate of up to
$300,000 to cover expenses related to the Initial Public Offering pursuant to a
promissory note (the "Note"). This loan was non-interest bearing, and on July 9,
2020 the Company amended such loan to provide that such loan: (A) was
convertible into 600,000 private warrants issuable to the Sponsor at a purchase
price of $0.50 per warrant upon the consummation of the Initial Public Offering;
or (B) due in cash to the Sponsor on the date we determine not to proceed with
the Initial Public Offering. The amendment was recognized as an extinguishment,
but did not result in a gain or loss. We fully borrowed the Note amount of
$300,000 and, on July 15, 2020, the Note was converted into 600,000 private
warrants upon the consummation of the Initial Public Offering. Upon conversion,
the carrying value of the note was reclassified to additional paid-in-capital
within stockholders' equity.
Contractual Obligations
Registration Rights
The holders of Insider Shares, Private Placement Warrants, and warrants that may
be issued upon conversion of Working Capital Loans, if any, will be entitled to
registration rights pursuant to a registration rights agreement. These holders
will be entitled to certain demand and "piggyback" registration rights.
Underwriting Agreement
We granted the underwriters a 45-day option from the final prospectus relating
to the Initial Public Offering to purchase up to 1,500,000 additional Units to
cover over-allotments, if any, at the Initial Public Offering price less the
underwriting discounts and commissions. The underwriters fully exercised their
over-allotment option on July 15, 2020.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
$2.3 million in the aggregate, paid upon the closing of the Initial Public
Offering. In addition, $0.35 per unit, or $4.0 million in the aggregate will be
payable to the underwriters for deferred underwriting commissions. The deferred
fee is payable to the underwriters from the amounts held in the Trust Account
solely in the event that we complete a Business Combination, subject to the
terms of the underwriting agreement.
Right of First Refusal
Subject to certain conditions, we granted Chardan, for a period of 15 months
after the date of the consummation of the Business Combination, a right of first
refusal to act as either (at our sole discretion) (a) a lead underwriter or
(b) minimally as a co-manager, with at least 30% of the economics; or, in the
case of a three-handed deal 20% of the economics, for any and all future public
and private equity and debt offerings. In accordance with FINRA Rule
5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more
than three years from the effective date of the registration statement related
to the Initial Public Offering.
Administrative Support Agreement
We entered into an agreement to pay our Sponsor a total of up to $10,000 per
month for overhead and administration support. Upon completion of the Initial
Business Combination or our liquidation, we will cease paying these monthly
fees. We incurred $30,000 of such fees in the three months ended March 31, 2021
which is payable as of March 31, 2021.
Critical Accounting Policies and Estimates
Use of Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of our financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and
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expenses and the disclosure of contingent assets and liabilities in our
financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical experience, known trends
and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Investments Held in Trust Account
Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. Our investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these investments are included in interest earned from
investments held in Trust Account in the statement of operations. The estimated
fair values of investments held in the Trust Account are determined using
available market information, other than for investments in open-ended money
market funds with published daily net asset values ("NAV"), in which case the
Company uses NAV as a practical expedient to fair value. The NAV on these
investments is typically held constant at $1.00 per unit.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of its financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15. The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is re-assessed
at the end of each reporting period.
We issued 7,400,000 warrants in connection with its Private Placement
(6,800,000) and conversion of note payable (600,000) which are recognized as
derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize
the warrant instruments as liabilities at fair value and adjust the instruments
to fair value at each reporting period. The liabilities are subject to
re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in our statement of operations. The fair value of
warrants issued in connection with the Private Placement and conversion of note
payable have been estimated using a Modified Black-Scholes model for the
Affective Periods.
Class A Common Stock Subject to Possible Redemption
We account for our stock subject to possible redemption in accordance with the
guidance in ASC Topic 480 "Distinguishing Liabilities from Equity." Common stock
subject to mandatory redemption (if any) is classified as a liability instrument
and measured at fair value. Conditionally redeemable common stock (including
common stock that features redemption rights that are either within the control
of the holder or subject to redemption upon the occurrence of uncertain events
not solely within our control) is classified as temporary equity. At all other
times, common stock is classified as stockholders' equity. Our common stock
features certain redemption rights that are considered to be outside of our
control and subject to the occurrence of uncertain future events. Accordingly,
at March 31, 2021 and December 31, 2020, the Company had 9,969,788 and
10,052,015, respectively, of shares of common stock subject to possible
redemption is presented as temporary equity, outside of the stockholders' equity
section of the Company's condensed balance sheets.
Net Income (Loss) Per Share of Common Stock
Net income (loss) per share is computed by dividing net loss by the
weighted-average number of common stock outstanding during the periods. We have
not considered the effect of the warrants sold in the Initial Public Offering
and Private Placement, as well as the warrants issued on the Note conversion to
purchase an aggregate of 18,900,000 shares of common stock in the calculation of
diluted loss per common stock, since the exercise of the warrants are contingent
upon the occurrence of future events. As a result, diluted net loss per common
stock is the same as basic net loss per common stock for the periods presented.
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Our statements of operations include a presentation of income (loss) per share
for common stock subject to possible redemption in a manner similar to the
two-class method of income (loss) per share. Net income (loss) per common stock,
basic and diluted, for common stock subject to possible redemption is calculated
by dividing the proportionate share of income or loss on marketable securities
held by the Trust Account, net of applicable franchise and income taxes, by the
weighted average number of Common stock subject to possible redemption
outstanding since original issuance.
Net income (loss) per share, basic and diluted, for non-redeemable common stock
is calculated by dividing the net income (loss), adjusted for income or loss on
marketable securities attributable to common stock subject to possible
redemption, by the weighted average number of non-redeemable common stock
outstanding for the period.
Non-redeemable common stock includes Insider Shares and non-redeemable shares of
Public Shares. Non-redeemable common stock participates in the income or loss on
marketable securities based on non-redeemable shares' proportionate interest.
Recent Adopted Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in
Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity, which simplifies accounting for
convertible instruments by removing major separation models required under
current GAAP. The ASU also removes certain settlement conditions that are
required for equity-linked contracts to qualify for the derivative scope
exception and it also simplifies the diluted earnings per share calculation in
certain areas. We early adopted the ASU on January 1, 2021. Adoption of the ASU
did not impact our financial position, results of operations or cash flows.
Recent Issued Accounting Standards
Our management does not believe that any recently issued, but not yet effective,
accounting standards updates, if currently adopted, would have a material effect
on the accompanying financial statement.
Off-Balance Sheet Arrangements
As of March 31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
We do not believe that inflation had a material impact on our business, revenues
or operating results during the period presented.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are 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, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
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
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auditor'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 Public Company Accounting Oversight
Board regarding mandatory audit firm rotation or a supplement to the auditor's
report 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 our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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