ITEM 1. FINANCIAL STATEMENTS
NEWHOLD INVESTMENT CORP. II
CONDENSED BALANCE SHEETS
| |
June 30, 2022 | | |
December 31, 2021 | |
ASSETS | |
(unaudited) | | |
| |
Current assets | |
| | |
| |
Cash | |
$ | 1,162,000 | | |
$ | 1,972,000 | |
Prepaid expenses | |
| 530,000 | | |
| 708,000 | |
Total current assets | |
| 1,692,000 | | |
| 2,680,000 | |
Cash and investments held in Trust | |
| 197,193,000 | | |
| 196,865,000 | |
Total assets | |
$ | 198,885,000 | | |
$ | 199,545,000 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Current liabilities – | |
| | | |
| | |
Accounts payable | |
$ | 103,000 | | |
$ | 108,000 | |
Accrued liabilities and taxes | |
| 84,000 | | |
| 203,000 | |
Total current liabilities | |
| 187,000 | | |
| 311,000 | |
Other liabilities – Deferred underwriting compensation | |
| 6,822,000 | | |
| 6,822,000 | |
Total liabilities | |
| 7,009,000 | | |
| 7,133,000 | |
Commitments and contingencies | |
| — | | |
| — | |
Class A common shares subject to possible redemption, $0.0001 par value; 19,490,000 shares issues and outstanding (at $10.10 per share redemption value) | |
| 196,849,000 | | |
| 196,849,000 | |
Stockholder’s deficit: | |
| | | |
| | |
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, none issued or outstanding | |
| — | | |
| — | |
Class A common stock, $0.0001 par value, 45,000,000 shares authorized, no shares issued and outstanding | |
| — | | |
| — | |
Class B common stock, $0.0001 par value, 6,000,000 shares authorized, 4,872,500 issued and outstanding | |
| 1,000 | | |
| 1,000 | |
Additional paid-in-capital | |
| — | | |
| — | |
Accumulated deficit | |
| (4,974,000 | ) | |
| (4,438,000 | ) |
Total stockholders’ deficit | |
| (4,973,000 | ) | |
| (4,437,000 | ) |
Total liabilities and stockholders’ deficit | |
$ | 198,885,000 | | |
$ | 199,545,000 | |
See accompanying notes to unaudited condensed financial
statements.
NEWHOLD INVESTMENT CORP. II
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
| |
For the three
months ended
June 30,
2022 | | |
For the three
months ended
June 30,
2021 | | |
For the six
months ended
June 30, 2022 | | |
For the Period from February 25, 2021 (inception) to June 30, 2021 | |
| |
| | |
| | |
| | |
| |
General and administrative expenses | |
$ | 349,000 | | |
$ | - | | |
$ | 878,000 | | |
$ | 2,000 | |
Net loss from operations | |
| (349,000 | ) | |
| - | | |
| (878,000 | ) | |
| (2,000 | ) |
Interest income on Trust Account | |
| 304,000 | | |
| - | | |
| 372,000 | | |
| - | |
Loss before income tax | |
| (45,000 | ) | |
| | | |
| (506,000 | ) | |
| | |
Income tax provision | |
| 30,000 | | |
| - | | |
| 30,000 | | |
| - | |
Net loss attributable to common shares | |
$ | (75,000 | ) | |
$ | - | | |
$ | (536,000 | ) | |
$ | (2,000 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average Class A common shares outstanding – basic and diluted | |
| 19,490,000 | | |
$ | - | | |
| 19,490,000 | | |
| - | |
Net loss per Class A common share basic and diluted | |
$ | (0.00 | ) | |
$ | 0.00 | | |
$ | (0.02 | ) | |
$ | (0.00 | ) |
Weighted average Class B common shares
outstanding – basic and diluted(1) | |
| 4,872,500 | | |
| 4,375,000 | | |
| 4,872,500 | | |
| 4,375,000 | |
Net loss per Class A common share basic and diluted(1) | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.02 | ) | |
$ | (0.00 | ) |
| (1) | In 2021, excludes an aggregate of
656,250 shares of Class B common stock held by the Sponsor that were subject to forfeiture to the extent that the underwriters’
over-allotment option was not exercised in full. |
See accompanying notes to unaudited condensed financial
statements.
NEWHOLD INVESTMENT CORP. II
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(unaudited)
For the three months ended June 30, 2022:
| |
Class B Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balances, March 31, 2022 | |
| 4,872,500 | | |
$ | 1,000 | | |
$ | — | | |
$ | (4,899,000 | ) | |
$ | (4,898,000 | ) |
Net loss attributable to common shares | |
| — | | |
| — | | |
| — | | |
| (75,000 | ) | |
| (75,000 | ) |
Balances, June 30, 2022 | |
| 4,872,500 | | |
$ | 1,000 | | |
$ | — | | |
$ | (4,974,000 | ) | |
$ | (4,973,000 | ) |
For the six months ended June 30, 2022:
| |
Class B Common Stock(1) | | |
Additional Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity | |
Balances, December 31, 2021 | |
$ | 4,872,500 | | |
$ | 1,000 | | |
$ | — | | |
$ | (4,438,000 | ) | |
$ | (4,437,000 | ) |
Net loss attributable to common shares | |
| — | | |
| — | | |
| — | | |
| (536,000 | ) | |
| (536,000 | ) |
Balances, June 30, 2022 | |
| 4,872,500 | | |
$ | 1,000 | | |
$ | — | | |
$ | (4,974,000 | ) | |
$ | (4,973,000 | ) |
For the three months ended June 30, 2021:
| |
Class B Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balances, March 31, 2021 | |
| 5,031,250 | | |
$ | 1,000 | | |
$ | 24,000 | | |
$ | (2,000 | ) | |
$ | 23,000 | |
Net loss attributable to common shares | |
| — | | |
| — | | |
| — | | |
| - | | |
| - | |
Balances, June 30, 2021 | |
| 5,031,250 | | |
$ | 1,000 | | |
$ | 24,000 | | |
$ | (2,000 | ) | |
$ | 23,000 | |
For the period from February 25, 2021 (inception) to June 30,
2021:
| |
Class B Common Stock(1) | | |
Additional Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity | |
Balances, February 25, 2021 (inception) | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
Sale of Class B common stock to Sponsor at approximately $0.005 per share | |
| 5,031,250 | | |
$ | 1,000 | | |
$ | 24,000 | | |
$ | — | | |
$ | 25,000 | |
Net loss attributable to common shares | |
| — | | |
| — | | |
| — | | |
| (2,000 | ) | |
| (2,000 | ) |
Balances, June 30, 2021 | |
| 5,031,250 | | |
$ | 1,000 | | |
$ | 24,000 | | |
$ | (2,000 | ) | |
$ | 23,000 | |
| (1) | Includes an aggregate of 656,250
shares of Class B common stock held by the Sponsor that were subject to forfeiture to the extent that the underwriters’ over-allotment
option is not exercised in full. |
See accompanying notes to unaudited condensed financial
statements.
NEWHOLD INVESTMENT CORP. II
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
| |
For the six months ended June 30, 2022 | | |
For the Period from February 25, 2021 (inception) to June 30, 2021 | |
Cash flows from operating activities: | |
| | |
| |
Net loss | |
$ | (536,000 | ) | |
$ | (2,000 | ) |
Interest income retained in the Trust account | |
| (372,000 | ) | |
| — | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Decrease in prepaid expenses | |
| 178,000 | | |
| — | |
Decrease in accounts payable | |
| (5,000 | ) | |
| — | |
Decrease in accrued liabilities | |
| (119,000 | ) | |
| 2,000 | |
Net cash used in operating activities | |
| (854,000 | ) | |
| — | |
Cash flows from financing activities: | |
| | | |
| | |
Withdrawal of interest from Trust Account | |
| 44,000 | | |
| — | |
Proceeds from sale of Class B common stock to Sponsor | |
| — | | |
| 25,000 | |
Net cash provided by financing activities | |
| 44,000 | | |
| 25,000 | |
(Decrease) increase in cash | |
| (810,000 | ) | |
| 25,000 | |
Cash at beginning of period | |
| 1,972,000 | | |
| — | |
Cash at end of period | |
$ | 1,162,000 | | |
$ | 25,000 | |
| |
| | | |
| | |
Supplemental disclosure of noncash activities: | |
| | | |
| | |
Deferred offering costs included in accounts payable and accrued liabilities | |
$ | 70,000 | | |
$ | 1,000 | |
See accompanying notes to unaudited condensed financial
statements.
NEWHOLD INVESTMENT CORP. II
Notes to Condensed Financial Statements
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General:
NewHold Investment Corp. II (the “Company”)
was incorporated in Delaware on February 25, 2021 as NewHold Industrial Corp. II. The Company was formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses
(the “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of
the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of
2012 (the “JOBS Act”).
At June 30, 2022, the Company had not commenced
any operations. All activity for the period from February 25, 2021 (inception) to June 30, 2022 relates to the Company’s formation
and the initial public offering (“Public Offering”) described below and, subsequent to the Public Offering, identifying and
completing a suitable Business Combination. The Company will not generate any operating revenues until after completion of its initial
Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash and investments
from the proceeds derived from the Public Offering.
All dollar amounts are rounded to the nearest
thousand dollars.
Sponsor and Financing:
The Company’s sponsor is NewHold Industrial
Technology Holdings LLC II, a Delaware limited liability company (the “Sponsor”). The Company intends to finance a Business
Combination with proceeds from the $194,900,000 Public Offering (Note 3) and a $9,254,705 private placement (Note 4), including the partial
exercise of the underwriters’ over-allotment option. Upon the closing of the Public Offering and the private placement, $196,849,000
was placed in a trust account (the “Trust Account”).
The Trust Account:
The funds in the Trust Account are invested only
in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain
conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds
will remain in the Trust Account until the earlier of (i) the consummation of its initial Business Combination or (ii) the distribution
of the Trust Account as described below. The remaining funds outside the Trust Account may be used to pay for business, legal and accounting
due diligence on prospective acquisition targets and continuing general and administrative expenses.
The Company’s amended and restated certificate
of incorporation provides that, other than the withdrawal of interest to pay tax obligations and up to $250,000 per year for working capital
purposes, if any, (less up to $100,000 of interest to pay dissolution expenses), none of the funds held in the Trust Account will be released
until the earliest of: (a) the completion of the initial Business Combination, (b) the redemption of any public shares properly
submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (i) to modify
the substance or timing of the ability of holders of the public shares to seek redemption in connection with the Company’s initial
Business Combination or the Company’s obligation to redeem 100% of the public shares if the Company does not complete the initial
Business Combination within 18 months from the closing of the Public Offering (or 24 months from the closing of the Public Offering if
the Company has filed a proxy statement, registration statement or similar filing for an initial business combination but has not completed
the initial business combination within such 18-month period) or (ii) with respect to any other provision relating to stockholders’
rights or pre-Business Combination activity, and (c) the redemption of the public shares if the Company is unable to complete the
initial Business Combination within 18 months from the closing of the Public Offering (or 24 months from the closing of the Public Offering
if the Company has filed a proxy statement, registration statement or similar filing for an initial business combination but has not completed
the initial business combination within such 18-month period), subject to applicable law. The proceeds deposited in the Trust Account
could become subject to the claims of creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Business Combination:
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of
the Public Offering are intended to be generally applied toward consummating a Business Combination with a Target Business. As used herein,
“Target Business” is one or more target businesses that together have a fair market value equal to at least 80% of the balance
in the Trust Account (less deferred underwriting commissions and any taxes payable on interest earned) at the time of signing a definitive
agreement in connection with the Company’s initial Business Combination. There is no assurance that the Company will be able to
successfully effect a Business Combination.
The Company, after signing a definitive agreement
for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose
in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination,
for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the
consummation of the initial Business Combination, including interest but less taxes payable and amounts released for working capital,
or (ii) provide stockholders with the opportunity to have their shares redeemed by the Company by means of a tender offer (and thereby
avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in
the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest but less taxes
payable and amounts released to the Company for working capital. The decision as to whether the Company will seek stockholder approval
of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its
discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would
otherwise require the Company to seek stockholder approval unless a vote is required by the rules of The Nasdaq Global Market. If the
Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of Class A
and Class B common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its public
shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of a Business Combination. In
such case, the Company would not proceed with the redemption of its public shares and the related Business Combination, and instead may
search for an alternate Business Combination
If the Company holds a stockholder vote or there
is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares
for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days
prior to the consummation of the initial Business Combination, including interest but less taxes payable and amounts released to the Company
for working capital. As a result, such shares of Class A common stock will be recorded at redemption amount and classified as temporary
equity upon the completion of the Public Offering, in accordance with Financial Accounting Standards Board Accounting Standards Codification
(“FASB ASC”) 480, “Distinguishing Liabilities from Equity.” The amount in the Trust Account is initially anticipated
to be $10.10 per public common share ($196,849,000 held in the Trust Account divided by 19,490,000 public shares including the underwriters’
partial exercise of their over-allotment option).
The Company will have 18 months from the closing
date of the Public Offering, until April 25, 2023 (or 24 months from the closing of the Public Offering if the Company has filed a proxy
statement, registration statement or similar filing for an initial business combination but has not completed the initial business combination
within such 18-month period). If the Company does not complete a Business Combination within this period of time, it shall (i) cease
all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days
thereafter, subject to lawfully available funds therefor, redeem 100% of the public shares of Class A common stock for a per share
pro rata portion of the Trust Account, including interest, but less taxes payable and amounts released for working capital (less up to
$100,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve
and liquidate the balance of the Company’s net assets to its creditors and remaining stockholders, as part of its plan of dissolution
and liquidation. The initial stockholders have entered into letter agreements with us, pursuant to which they have waived their rights
to participate in any redemption with respect to their initial shares; however, if the initial stockholders or any of the Company’s
officers, directors or affiliates acquire shares of Class A common stock in or after the Public Offering, they will be entitled to
a pro rata share of the Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete a
Business Combination within 18 months from the closing of the Public Offering, until April 25, 2023 (or 24 months from the closing of
the Public Offering if the Company has filed a proxy statement, registration statement or similar filing for an initial business combination
but has not completed the initial business combination within such 18-month period).
In the event of such distribution, it is possible
that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than
the price per Unit in the Public Offering.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The accompanying financial statements are
presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and
pursuant to the rules and regulations of the SEC. The accompanying unaudited financial statements as of June 30, 2022 and for the
period from February 25, 2021 (inception) to June 30, 2021 have been prepared in accordance with U.S. GAAP for interim financial
information and Article 8 of Regulation S-X. In the opinion of management of the Company, all adjustments (consisting of normal
accruals) considered for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022
are not necessarily indicative of the results that may be expected for the period ending December 31, 2022 or any future
periods.
Liquidity and Going Concern:
In connection with the Company’s assessment
of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to
Continue as a Going Concern,” as of June 30, 2022, management has determined that the Company’s current liquidity is sufficient
to fund the working capital needs of the Company until one year from the date of issuance of these financial statements. However, if the
Company cannot complete a Business Combination prior to April 25, 2023 (or October 25, 2023 if certain conditions are met), it could be
forced to wind up its operations and liquidate unless it receives an extension approval from its shareholders. This condition raises
substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date
that the financial statements are issued. The Company’s plan to deal with this uncertainty is to complete a Business Combination
prior to April 25, 2023. There is no assurance that the Company’s plans to consummate a Business Combination will be successful
or successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Emerging Growth Company
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means
that when an accounting 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.
Net Loss Per Common Share:
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income or loss per common share is computed by dividing net
income or loss applicable to common shareholders by the weighted average number of common shares outstanding during the period plus, to
the extent dilutive, the incremental number of common shares to settle warrants, as calculated using the treasury stock method.
The Company has not considered the effect of the
warrants sold in the Public Offering and Private Placement to purchase an aggregate of 18,999,705 Class A common shares in the calculation
of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted
income (loss) per common share is the same as basic income (loss) per common share for the periods presented.
The Company has two classes of shares, which are
referred to as Class A common shares and Class B common shares. Income and losses are shared pro rata among the two classes of shares.
Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding
during the respective period.
The following table reflects the net loss per
share for the three and six months ended June 30, 2022 after allocating income between the shares based on outstanding shares. This presentation
assumes a business combination as the most likely outcome.
| |
For the three months ended June 30, 2022 | | |
For the six months ended June 30, 2022 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income (loss) | |
$ | (60,000 | ) | |
$ | (15,000 | ) | |
$ | (429,000 | ) | |
$ | (107,000 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding | |
| 19,490,000 | | |
| 4,872,500 | | |
| 19,490,000 | | |
| 4,872,500 | |
Basic and diluted net income (loss) per share | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.02 | ) | |
$ | (0.02 | ) |
The Company did not have two classes of stock
outstanding during the periods ended June 30, 2021 and therefore net loss of approximately $-0- and $2,000, respectively, in the three
months ended June 30, 2021 and the period from February 25, 2021 (inception) to June 30 2021 was allocated 100% to Class B shareholders,
net of shares that were subject to forfeiture, leading to net loss per share in that period of $0.00 and $0.00 respectively. The weighted average number of class B common shares outstanding for the three months ended June 30, 2021 and for the period from February
25, 2021 (inception) to June 30, 2021 was 4,375,000 in both periods.
Accounting for Warrants:
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers
whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC
480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments
are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while
the instruments are outstanding.
Management has concluded that the Public Warrants
and Private Warrants issued in connection with the Public Offering in October 2021, pursuant to the warrant agreement, qualify for equity
accounting treatment.
Cash and Cash Equivalents:
The Company considers all highly liquid instruments
with original maturities of three months or less when acquired, to be cash equivalents. The Company had no cash equivalents at June 30,
2022 or December 31, 2021.
Concentration of Credit Risk:
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal
Deposit Insurance Corporation coverage of $250,000. The Company has not experienced losses on these accounts and management believes the
Company is not exposed to significant risks on such accounts.
Financial Instruments:
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the condensed balance sheets primarily due to their short-term nature.
Use of Estimates:
The preparation of financial statements in conformity
with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods presented.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed as of June 30, 2022 or December 31, 2021, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Offering Costs:
The Company complies with the requirements of
the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering.” Costs incurred
in connection with preparation for the Public Offering totaled approximately $19,374,000 including Company costs of approximately $635,000
together with $10,720,000 of underwriters’ discount and approximately $8,019,000 in fair value over cost of Sponsor shares forfeited
and purchased by anchor investors in connection with their investment in the Company. Such costs have been allocated to the redeemable
Class A common stock subject to redemption issued upon completion of the Public Offering. None of the Public Warrants or Private Placement
Warrants are classified as liabilities and so there is no charge to operations for costs related to their issuance.
Class A Common Stock Subject to Possible Redemption:
All of the 19,490,000 shares of Class A common
stock sold as part of of a Unit in the Public Offering discussed in Note 3 contain a redemption feature which allows for the redemption
of common shares under the Company’s liquidation or tender offer/stockholder approval provisions. In accordance with FASB ASC 480,
redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity.
Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded
from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its articles of association
provide that in no event will it redeem its Public Shares in an amount that would cause its net tangible assets (tangible assets less
intangible assets and liabilities) to be less than $5,000,001. However, because all of the shares of Class A common stock are redeemable,
all of the shares will be recorded as Class A common stock subject to redemption on the Company’s condensed balance sheet.
The Company recognizes changes immediately as
they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying
amount of redeemable Class A common stock are affected by adjustments to additional paid-in capital. Accordingly, at June 30, 2022 and
December 31, 2021, all of the 19,490,000 Public Shares were classified outside of permanent equity. Class A common stock subject to redemption
consist of:
Gross proceeds of Public Offering | |
$ | 194,900,000 | |
Less: Offering costs | |
| (32,347,000 | ) |
Plus: Accretion of carrying value to redemption value | |
| 34,296,000 | |
Class A common shares subject to redemption | |
$ | 196,849,000 | |
Income Taxes:
The Company follows the asset and liability method
of accounting for income taxes under FASB 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.
The Company’s currently taxable income consists
of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered start-up
costs and are not currently deductible. During the three and six months ended June 30, 2022 the Company recorded income tax expense of
approximately $30,000 and $30,000, respectively, representing the tax on interest income after deducting franchise taxes. For the three
months ended June 30, 2021 and for the period from February 25, 2021 (inception) to June 30, 2021 there was no taxable interest income
and therefore no income tax. The Company’s effective tax rate for three and six months ended June 30, 2022 was negative due to start-up
costs (discussed above) which are not currently deductible and business combination costs which may not be deductible. For the three months
ended June 30, 2021 and the period from February 25, 2021 (inception) to June 30, 2021 the Company’s effective tax rate was zero
in both periods because there was no taxable interest income and therefore no tax provision. At June 30, 2022, the Company had deferred
tax assets of approximately $180,000 primarily related to start-up costs. Management has determined that a full valuation allowance of
the deferred tax asset is appropriate at this time.
FASB 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. There were no unrecognized tax benefits as of June 30, 2022 and December 31, 2021. The Company recognizes accrued interest
and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties
at June 30, 2022 or December 31, 2021. 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 management does not expect that the total amount of unrecognized tax benefits will materially change
over the next twelve months.
Recent Accounting Pronouncements:
In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“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) (“ASU 2020-06”)
to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining
to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings
per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective
in the fiscal year beginning after December 15, 2023, which in our case would be January 1, 2024 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently evaluating the impact that the pronouncement may have on the financial statements.
Management does not believe that any other recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial
statements.
Subsequent Events:
The Company evaluated subsequent events and transactions
that occurred after June 30, 2022 up to the date that the unaudited interim condensed financial statements were available to be issued.
Based upon this review, the Company has concluded that all such events and transactions that would require adjustment or disclosure in
the financial statements have been recognized or disclosed.
NOTE 3 — PUBLIC OFFERING
On October 25, 2021 and October 29, 2021, the
Company closed on the sale of an aggregate 19,490,000 units at a price of $10.00 per unit (the “Units”). Each Unit consists
of one share of the Company’s Class A common stock, $0.0001 par value and one-half of one redeemable warrant (the “Warrants”).
Each whole Warrant offered in the Public Offering is exercisable to purchase one share of our Class A common stock for $11.50 per
share as further discussed in Note 5.
The Company granted the underwriters a 45-day
option to purchase up to 2,625,000 additional Units to cover any over-allotments, at the Public Offering price less the underwriting discounts
and commissions and on October 29, 2021 the underwriter exercised its option and purchased 1,990,000 units. The Warrants that were issued
in connection with 1,990,000 over-allotment units are identical to the public Warrants and have no net cash settlement provisions.
The Company paid an underwriting discount of 2.0%
of the per Unit price to the underwriters, an aggregate fee of $3,898,000, at the closings of the Public Offering with an additional fee
(the “Deferred Discount”) of 3.5% ($6,821,500 including the underwriters’ over-allotment option exercise) of the gross
offering proceeds payable upon the consummation of the initial Business Combination. The Deferred Discount will become payable to the
underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.
Certain funds and accounts managed by UBS O’Connor
LLC, Magnetar Financial LLC, Kepos Capital LP, Meteora Capital Partners, L.P., Polar Asset Management Partners Inc., Sandia Investment
Management L.P., Radcliffe Capital Management, L.P., RiverNorth Capital Management, LLC, Highbridge Capital Management, LLC, Marshall
Wace LLP, Aristeia Capital, L.L.C. and Periscope Capital Inc. (collectively, the “anchor investors”) purchased an aggregate
of $172,900,000 of units in the Public Offering, the full amount required for them not to forfeit any of their Founder Shares purchased.
The excess of the fair value of the Founder Shares
purchased by the anchor investors of approximately $8,019,000 has been determined to be an offering cost in accordance with Staff Accounting
Bulletin Topic 5A. Accordingly, the offering cost was allocated to the Public Shares and Public Warrants (being accounted for as equity
instruments) and was charged to the carrying value of the Class A Common Stock upon the completion of the Public Offering.
NOTE 4 — RELATED PARTY TRANSACTIONS
Founder Shares
In February 2021, the Sponsor purchased 5,031,250
shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.005 per share (up to 656,250 of
which were subject to forfeiture by the Sponsor to the extent the underwriters’ over-allotment option is not exercised in full by
the underwriters’). The Founder Shares are identical to the Class A common stock included in the Units being sold in the Public
Offering. The forfeiture would be adjusted to the extent that the over-allotment option is not exercised in full by the underwriters so
that the initial stockholders will own 20.0% of the Company’s issued and outstanding shares of common stock after the Public Offering.
In connection with the Public Offering 158,750 Founder Shares were forfeited in December in connection with the underwriters’ partial
exercise of their over-allotment option. See also Notes 3 and 5.
The Founder Shares are identical to the Class A
common stock included in the Units being sold in the Public Offering except that the Founder Shares automatically convert into shares
of Class A common stock at the time of the initial Business Combination and are subject to certain transfer restrictions, as described
in more detail below.
The Company’s initial stockholders agreed
not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or (B), subsequent to the Company’s initial Business Combination, if (x) the last sale price
of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s
initial Business Combination or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar
transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange
their shares of Class A common stock for cash, securities or other property.
The Company’s sponsor forfeited 1,635,126
Founder Shares and the anchor investors purchased 1,635,126 Founder Shares in connection with the Public Offering and the anchor investors
investment.
The excess of the fair value of the Founder Shares
purchased by the anchor investors of approximately $8,019,000 was determined to be an offering cost in accordance with Staff Accounting
Bulletin Topic 5A. Accordingly, offering costs allocated to the Public Shares and Public Warrants (being accounted for as equity instruments)
were charged to temporary equity upon the completion of the Public Offering. The fair value of the Founder Shares was determined based
upon 18 months to acquisition, 3.37% discount rate, 65% probability of acquisition, 21.3% discount for lack of marketability and results
in a per share fair value of $4.87.
Private Placement Warrants
In October 2021, the Sponsor and certain funds
and accounts managed by UBS O’Connor LLC, Magnetar Financial LLC, and Kepos Capital LP purchased from the Company, collectively,
an aggregate of 9,254,705 warrants at a price of $1.00 per warrant, a purchase price of $9,254,705 including the underwriter’s partial
exercise of their overallotment option, in a private placement that occurred simultaneously with the completion of the Public Offering
(the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one share of Class A
common stock at $11.50 per share. A portion of the purchase price of the Private Placement Warrants will be added to the proceeds from
the Public Offering to be held in the Trust Account pending completion of the Company’s initial Business Combination. The Private
Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable,
assignable or salable until 30 days after the completion of the initial Business Combination. Otherwise, the Private Placement Warrants
have terms and provisions that are identical to those of the Warrants being sold as part of the Units in the Public Offering and have
no net cash settlement provisions.
If the Company does not complete a Business Combination,
then the proceeds from the sale of the Private Placement Warrants will be part of the liquidating distribution to the public stockholders
and the Private Placement Warrants issued to the Sponsor will expire worthless.
Registration Rights
The Company’s initial stockholders and the
holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement signed in connection
with the Public Offering. These holders will be entitled to make up to three demands, excluding short form registration demands, that
the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back”
registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses
incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering
the securities under the Public registration rights agreement.
Related Party Loans
On March 5, 2021, the Sponsor agreed to loan the
Company an aggregate of $300,000 by drawdowns against the issuance of an unsecured promissory note (the “Note”) to cover expenses
related to the Public Offering. The Note is non-interest bearing and payable promptly after the earlier of the date on which the Company
consummates the Public Offering and the date on which the Company determines not to conduct the Public Offering. As of the date of the
Public Offering, the Sponsor had loaned $85,000 to the Company under the Note and on October 25, 2021, the Note was repaid in full upon
the consummation of the Public Offering and there is no further availability to borrow under the Note.
If the Sponsor, an affiliate of the Sponsor or
certain of the Company’s officers and directors make any loans to the Company to finance the transaction costs of an intended initial
business combination, up to $100,000 of such loans may be converted into warrants, at the price of $1.00 per warrant, at the option of
the lender. Such warrants would be identical to the Private Placement Warrants. As of June 30, 2022 and December 31, 2021, no such loans
had been made to the Company.
Administrative Support Agreement
On October 25, 2021, the Company agreed to pay
$25,000 a month for office space, utilities and secretarial and administrative support to the Sponsor. Services commenced on the date
the securities were first listed on The Nasdaq Global Market and will terminate upon the earlier of the consummation by the Company of
an initial Business Combination or the liquidation of the Company. The Company paid and charged to operations $75,000 and $150,000, respectively,
for the three and six months ended June 30, 2022 for these services and there were no amounts unpaid at that date.
NOTE 5 — TRUST ACCOUNT AND FAIR VALUE MEASUREMENT
The Company complies with FASB ASC 820, Fair Value
Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial
assets and liabilities that are re-measured and reported at fair value at least annually.
Upon the closing of the Public Offering and the
Private Placement, a total of $196,849,000 was deposited into the Trust Account. The proceeds in the Trust Account may be invested in
either U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7 under the Investment Company Act of 1940, as amended, and that invest solely in U.S. government treasury obligations.
At December 31, 2021, the proceeds of the Trust
Account were invested primarily in U.S. government Treasury bills maturing in April 2022. Upon maturity, such U.S. government treasury
bills were invested in U.S. government treasury bills maturing in July 2022. The Company classifies its U.S. government treasury bills
and equivalent securities as held-to-maturity in accordance with FASB ASC 320, “Investments – Debt and Equity Securities.”
Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity
U.S. government treasury bills are recorded at amortized cost on the accompanying condensed balance sheets at June 30, 2022 and December
31, 2021 adjusted for the amortization of discounts.
The following table presents information about
the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 and indicates
the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. Since all of the Company’s
permitted investments at June 30, 2022 and December 31, 2021 consisted of U.S. government treasury bills or money market funds that invest
only in U.S. government treasury bills, fair values of its investments are determined by Level 1 inputs utilizing quoted prices (unadjusted)
in active markets for identical assets or liabilities as follows:
Description | |
Carrying
value at June 30, 2022 | | |
Gross
Unrealized Holding
Gains
(Losses) | | |
Quoted
Price Prices in Active
Markets (Level 1) | |
Assets: | |
| | |
| | |
| |
U.S. government treasury bills | |
$ | 197,193,000 | | |
$ | (19,000 | ) | |
$ | 197,174,000 | |
Description | |
Carrying value at December 31, 2021 | | |
Gross Unrealized Holding Gains | | |
Quoted Price Prices in Active Markets (Level 1) | |
Assets: | |
| | |
| | |
| |
U.S. government treasury bills | |
$ | 196,865,000 | | |
$ | 3,000 | | |
$ | 196,868,000 | |
Upon maturity on January 27, 2022, the Company
reinvested the proceeds in a U.S. government treasury bill maturing on April 28, 2022. And on maturity at April 28, 2022, the Company
reinvested the proceeds in a U.S. government treasury bill maturing on July 28, 2022.
In March 2022, the Company withdrew $44,000 from
the Trust Account to pay taxes. Subsequent to June 30, 2022, in July 2022, the Company withdrew approximately $56,000 from the Trust Account
to pay taxes.
NOTE 6 — STOCKHOLDERS’ DEFICIT
Common Stock
According to an amendment to the Company’s
certificate of incorporation that was filed with the Secretary of State of the State of Delaware on March 1, 2021, the Company is authorized
to issue 51,000,000 shares of common stock, including 45,000,000 shares of Class A common stock, par value, $0.0001 and 6,000,000
shares of Class B common stock par value $0.0001. Upon completion of the Public Offering, the Company may (depending on the terms
of the Business Combination) be required to increase the authorized number of shares at the same time as its stockholders vote on the
Business Combination to the extent the Company seeks stockholder approval in connection with its Business Combination. Holders of the
Company’s Class A and Class B common stock vote together as a single class and are entitled to one vote for each
share of Class A and Class B common stock. At both June 30, 2022 and December 31, 2021, there were 4,872,500 shares of Class B
common stock issued and outstanding and no shares of Class A common stock issued or outstanding.
The Class B common shares are identical to
the Class A common stock included in the Units sold in the Public Offering except that the Class B common shares automatically
convert into shares of Class A common stock at the time of the initial Business Combination and are subject to certain transfer restrictions,
as described in more detail in Note 4.
Warrants
As of June 30, 2022 and December 31, 2021, there
were 9,745,000 Public Warrants and 9,254,705 Private Placement Warrants outstanding (an aggregate of warrants to purchase 18,999,705 Class
A common shares).
Each whole Warrant issued in the Public Offering
is exercisable to purchase one share of our Class A common stock for $11.50 per share. Only whole Warrants may be exercised. Warrants
may only be exercised for a whole number of shares. No fractional Warrants will be issued upon separation of the Units and only whole
Warrants will trade. The Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and
(b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement
under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current
prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or
blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their warrants on a cashless basis
under the circumstances specified in the warrant agreement). The Company agreed that as soon as practicable, but in no event later than
30 business days after the closing of the initial Business Combination, the Company will use its commercially reasonable efforts to file
with the SEC a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants,
and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing
of the initial Business Combination and to maintain the effectiveness of such registration statement.
The Warrants have an exercise price of $11.50 per
share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or
liquidation. In addition, if the Company issues additional shares of Class A common stock or equity-linked securities for capital
raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less
than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the
Company’s board of directors and, in the case of any such issuance to the initial stockholders or their affiliates, without taking
into account any Founder Shares held by them, as applicable, prior to such issuance) (the “newly issued price”), the exercise
price of the Warrants and the Private Placement Warrants (as defined below) will be adjusted (to the nearest cent) to be equal to 115%
of the newly issued price.
The Private Placement Warrants are identical to
the Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common
stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the
completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable
and will be exercisable at the election of the holder on a “cashless basis”, so long as they are held by the initial purchasers
or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the holders of our Founder
Shares or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders
on the same basis as the Warrants.
Redemption of Warrants: Once the Warrants become exercisable,
the Company may redeem the outstanding Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’
prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the last reported
sale price of the shares of Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30
trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
The Company will not redeem the Warrants as described
above unless an effective registration statement under the Securities Act covering the Class A common stock issuable upon exercise of
the Warrants is effective and a current prospectus relating to those of Class A common stock is available throughout the 30-day redemption
period or the Company has elected to require the exercise of the warrants on a “cashless basis.” If and when the warrants
become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying
securities for sale under all applicable state securities laws.
If the Company is unable to complete a Business
Combination within 18 months from the closing date of the Public Offering (or 24 months under certain circumstances as discussed in Note
1), and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect
to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect
to such Warrants. Accordingly, the Warrants may expire worthless.
See also Note 4 – Related Party Transactions
for further information on the Private Placement warrants.
Preferred Stock
According to an amendment to the Company’s
certificate of incorporation that was filed with the Secretary of State of the State of Delaware on March 1, 2021, the Company is authorized
to issue 1,000,000 shares of preferred stock, par value $0.0001 with such designations, voting and other rights and preferences as may
be determined from time to time by the Company’s board of directors. As of June 30, 2022 and December 31, 2021 there were no shares
of preferred stock issued or outstanding.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties — COVID-19 —
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible
that the virus could have an effect on the Company’s financial position, results of its operations and/or search for a target company
and/or a target company’s financial position and results of its operations, the specific impact is not readily determinable as of
the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Risks and uncertainties — Hostilities
in Ukraine — In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine.
As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation
and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these
financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
References in this report to “we,”
“us” or the “Company” refer to NewHold Investment Corp. II. References to our “management” or our
“management team” refer to our officers and directors and references to the “Sponsor” refer to NewHold Industrial
Technology Holdings LLC II, a Delaware limited liability company. The following discussion and analysis of the Company’s financial
condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained
elsewhere in this report.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical
fact included in this section and elsewhere in this Quarterly Report on Form 10-Q regarding the Company’s financial position, business
strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly
Report on Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend”
and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking
statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s
management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors
detailed in our filings with the SEC.
Overview
We are a blank check company incorporated on February
25, 2021 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more businesses (the “Initial Business Combination”).
We intend to effectuate our Initial Business Combination using cash from the proceeds of our initial public offering that was completed
in October 2021 (the “Public Offering”) and the sale of warrants in a private placement (the “Private Placement”)
that occurred simultaneously with the completion of the Public Offering (the “Private Placement Warrants”), shares issued
to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
We have not selected any specific business combination
target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business
combination target. However, our management team had been actively in discussions with potential business combination partners in their
capacity as officers of NewHold Investment Corp. (“NHIC I”), which completed its business combination with Evolv Technologies,
Inc., a company specializing in artificial intelligence enabled touchless security screening, on July 19, 2021. Our management team may
pursue business combination partners that had previously been in discussions with NHIC I’s management team.
The issuance of additional shares in connection
with an initial business combination to the owners of the target or other investors:
| ● | may significantly dilute the
equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B common
stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock; |
| ● | may subordinate the rights of
holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| ● | could cause a change in control
if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating
loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying
or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us;
and |
| ● | may adversely affect prevailing
market prices for our Class A common stock and/or warrants. |
Similarly, if we issue debt securities
or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our
assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations
to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the
maintenance of certain financial ratios or reserves 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; |
| ● | our inability to obtain necessary
additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security
is outstanding; |
| ● | our inability to pay dividends
on our common stock; |
| ● | using a substantial portion
of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if
declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; |
| ● | limitations on our flexibility
in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse
changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to
borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy;
and |
| ● | other purposes and other disadvantages
compared to our competitors who have less debt. |
As indicated in the accompanying financial statements,
at June 30, 2022, we had approximately $1,162,000 in cash, current liabilities of approximately $187,000 and a loss from operations for
the six months ended June 30, 2022 of approximately $878,000. We expect to incur significant costs in the pursuit of an Initial Business
Combination and we cannot assure you that our plans to complete an Initial Business Combination will be successful.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated
any operating revenues to date. Our only activities from February 25, 2021 (inception) to June 30, 2022 were organizational activities,
those necessary to prepare for the Public Offering and, after the Public Offering, efforts to identify a target company for a business
combination. We do not expect to generate any operating revenues until after the completion of our Initial Business Combination. We generate
non-operating income in the form of interest income on cash and investments held after the Public Offering. We incur 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 June 30, 2021 and
for the period from February 25, 2021 (inception) through June 30, 2021, we had a net loss of approximately $-0- and $2,000,
respectively, which resulted entirely from formation costs.
For the three and six months ended June 30, 2022
we had a loss from operations of approximately $349,000 and $878,000, respectively, consisting primarily of our costs associated with
maintaining our status as a public reporting company as well as approximately $96,000 and $281,000 of consulting and travel costs associated
with our search for a business combination partner, approximately $75,000 and $150,000, respectively, in administrative charges from our
Sponsor and approximately $20,000 and $70,000, respectively, in franchise taxes. For the three and six months ended June 30, 2022, the
Company had non-operating income from investments in the Trust Account of approximately $304,000 and $372,000, respectively.
After Public Offering, we are incurring 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.
Liquidity and Capital Resources
In October 2021, we consummated the Public Offering
of an aggregate of 19,490,000 Units (including the partial exercise of the underwriters’ overallotment option) at a price of $10.00
per unit generating gross proceeds of approximately $194,900,000 before underwriting discounts and expenses. Simultaneously with the consummation
of the Public Offering, we consummated the Private Placement of 9,254,705 Private Placement Warrants, each exercisable to purchase one
share of our Class A common stock at $11.50 per share, to the Sponsor and certain funds and accounts managed by Magnetar Financial LLC,
UBS O’Connor LLC, and Kepos Capital, L.P., at a price of $1.00 per Private Placement Warrant, generating gross proceeds, before
expenses, of approximately $9,254,705.
The net proceeds from the Public Offering and Private
Placement were approximately $199,622,000, net of the non-deferred portion of the underwriting commissions of $3,898,000 and offering
costs and other expenses of approximately $635,000. $196,849,000 of the proceeds of the Public Offering and the Private Placement have
been deposited into a trust account, with Continental Stock Transfer & Trust Company acting as trustee (the “Trust Account”),
and are not available to us for operations (except amounts to pay taxes).
For the period from February 25, 2021
(inception) through June 30, 2021, there was no net cash used in operating or investing activities and approximately $25,000
generated from financing activities.
In the six months ended June 30, 2022, the Company
used approximately $854,000 of cash in operations and raised approximately $44,000 from withdrawals of interest income from the Trust
Account to pay taxes.
We intend to use substantially all of the funds
held in the Trust account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting
commissions), to complete our Initial Business Combination. We may withdraw interest income (if any) to pay income taxes, if any. Our
annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account.
We do not expect the interest income earned on the amount in the Trust Account (if any) will be sufficient to pay our income and franchise
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.
We expect to account for all of the Class A common
stock issued in our Public Offering as redeemable stock and not permanent equity and so we expect to report negative stockholders’
equity.
Subsequent to our Public Offering and prior to
the completion of our Initial Business Combination, we currently have available to us approximately $1,162,000 of proceeds held outside
the Trust Account for working capital at June 30, 2022. We will use these funds primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses,
structure, negotiate and complete a business combination, and to pay taxes to the extent the interest earned on the Trust Account is not
sufficient to pay our taxes.
Liquidity and Going Concern
In connection with the Company’s assessment
of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to
Continue as a Going Concern,” as of June 30, 2022, management has determined that the Company’s current liquidity is sufficient
to fund the working capital needs of the Company until one year from the date of issuance of these financial statements. However, if the
Company cannot complete a Business Combination prior to April 25, 2023 (or October 25, 2023 if certain conditions are met), it could be
forced to wind up its operations and liquidate unless it receives an extension approval from its shareholders. This condition raises
substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date
that the financial statements are issued. The Company’s plan to deal with this uncertainty to complete a Business Combination prior
to January 14, 2023. There is no assurance that the Company’s plans to consummate a Business Combination will be successful or successful
within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We do not believe we will need to raise additional
funds following our Public Offering in order to meet the expenditures required for operating our business. However, if our estimates of
the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial 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 initial business
combination. Moreover, we may need to obtain additional financing either to complete our Initial Business Combination or because we become
obligated to redeem a significant number of our public shares upon completion of our Initial Business Combination, in which case we may
issue additional securities or incur debt in connection with such business combination.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations;
Quarterly Results
We have no obligations, assets or liabilities which
would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated
entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose
of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet
financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into
any agreements for non-financial assets.
Contractual Obligations
In March 2021, our Sponsor agreed to loan us up
to $300,000 to be used for a portion of the expenses of the Public Offering pursuant to a promissory note. Prior to the Public Offering
we had borrowed approximately $85,000 under the promissory note. The note was non-interest bearing, unsecured and payable promptly after
the earlier of the date on which the Company consummates an initial public offering or the date on which the Company determines not to
conduct an initial public offering of its securities. On October 25, 2021, the Company repaid the outstanding balance under the promissory
note and the Note is no longer available to the Company.
Critical Accounting Estimates and Policies
The preparation of financial statements and related
disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during
the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting
estimates and policies:
Emerging Growth Company
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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means
that when an accounting 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.
Net Loss Per Common Share:
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income or loss per common share is computed by dividing net
income or loss applicable to common shareholders by the weighted average number of common shares outstanding during the period plus, to
the extent dilutive, the incremental number of common shares to settle warrants, as calculated using the treasury stock method.
The Company has not considered the effect of the
warrants sold in the Public Offering and Private Placement to purchase an aggregate of 18,999,705 Class A common shares in the calculation
of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted
income (loss) per common share is the same as basic income (loss) per common share for the period presented.
The Company has two classes of shares, which are
referred to as Class A common shares and Class B common shares. Income and losses are shared pro rata among the two classes of shares.
Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding
during the respective period.
The following table reflects the net loss per
share for the three months ended June 30, 2022 after allocating income between the shares based on outstanding shares.
| |
For the three months ended June 30, 2022 | | |
For the six months ended June 30, 2022 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income (loss) | |
$ | (60,000 | ) | |
$ | (15,000 | ) | |
$ | (429,000 | ) | |
$ | (107,000 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding | |
| 19,490,000 | | |
| 4,872,500 | | |
| 19,490,000 | | |
| 4,872,500 | |
Basic and diluted net income (loss) per share | |
$ | (0.00 | ) | |
$ | (0.00 | ) | |
$ | (0.02 | ) | |
$ | (0.02 | ) |
The Company did not have two classes of stock
outstanding during the periods ended June 30, 2021 and therefore net loss of approximately $-0- and $2,000, respectively, in the three
months ended June 30, 2022 and the period from February 25, 2021 (inception) to June 30 2021 was allocated 100% to Class B shareholders,
net of shares that were subject to forfeiture, leading to net loss per share in that period of $0.00 and $0.00 respectively. The weighted average number of class B common shares outstanding for the three months ended June 30, 2021 and for the period from February
25, 2021 (inception) to June 30, 2021 was 4,375,000 in both periods.
Accounting for Warrants:
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers
whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC
480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments
are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while
the instruments are outstanding.
Management has concluded that the Public Warrants
and Private Warrants issued in connection with the Public Offering in October 2021, pursuant to the warrant agreement, qualify for equity
accounting treatment.
Cash and Cash Equivalents:
The Company considers all highly liquid instruments
with original maturities of three months or less when acquired, to be cash equivalents. The Company had no cash equivalents at June 30,
2022 or December 31, 2021.
Concentration of Credit Risk:
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal
Deposit Insurance Corporation coverage of $250,000. The Company has not experienced losses on these accounts and management believes the
Company is not exposed to significant risks on such accounts.
Financial Instruments:
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the condensed balance sheets primarily due to their short-term nature.
Use of Estimates:
The preparation of financial statements in conformity
with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods presented.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed as of June 30, 2022 or December 31, 2021, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Offering Costs:
The Company complies with the requirements of
the FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A — “Expenses of Offering.” Costs incurred
in connection with preparation for the Public Offering totaled approximately $19,374,000 including Company costs of approximately $635,000
together with $10,720,000 of underwriters’ discount and approximately $8,019,000 in fair value over cost of Sponsor shares forfeited
and purchased by anchor investors in connection with their investment in the Company. Such costs have been allocated to the redeemable
Class A common stock subject to redemption issued upon completion of the Public Offering. None of the Public Warrants or Private Placement
Warrants are classified as liabilities and so there is no charge to operations for costs related to their issuance.
Class A Common Stock Subject to Possible Redemption:
All of the 19,490,000 shares of Class A common
stock sold as part of of a Unit in the Public Offering discussed in Note 3 contain a redemption feature which allows for the redemption
of common shares under the Company’s liquidation or tender offer/stockholder approval provisions. In accordance with FASB ASC 480,
redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity.
Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded
from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its articles of association
provide that in no event will it redeem its Public Shares in an amount that would cause its net tangible assets (tangible assets less
intangible assets and liabilities) to be less than $5,000,001. However, because all of the shares of Class A common stock are redeemable,
all of the shares will be recorded as Class A common stock subject to redemption on the Company’s condensed balance sheets.
The Company recognizes changes immediately as
they occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying
amount of redeemable Class A common stock are affected by adjustments to additional paid-in capital. Accordingly, at December 31, 2021,
all of the 19,490,000 Public Shares were classified outside of permanent equity. Class A common stock subject to redemption consist of:
Gross proceeds of Public Offering | |
$ | 194,900,000 | |
Less: Offering costs | |
| (32,347,000 | ) |
Plus: Accretion of carrying value to redemption value | |
| 34,296,000 | |
Class A common shares subject to redemption | |
$ | 196,849,000 | |
Income Taxes:
The Company follows the asset and liability method
of accounting for income taxes under FASB 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.
The Company’s currently taxable income consists
of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered start-up
costs and are not currently deductible. During the three and six months ended June 30, 2022 the Company recorded income tax expense of
approximately $30,000 and $30,000, respectively, representing the tax on interest income after deducting franchise taxes. For the three
months ended June 30, 2021 and for the period from February 25, 2021 (inception) to June 30, 2021 there was no taxable interest income
and therefore no income tax. The Company’s effective tax rate for three and six months ended June 30, 2022 was negative due to start-up
costs (discussed above) which are not currently deductible and business combination costs which may not be deductible. For the three months
ended June 30, 2021 and the period from February 25, 2021 (inception) to June 30, 2021 the Company’s effective tax rate was zero
in both periods because there was no taxable interest income and therefore no tax provision. At June 30, 2022, the Company had deferred
tax assets of approximately $180,000 primarily related to start-up costs. Management has determined that a full valuation allowance of
the deferred tax asset is appropriate at this time.
FASB 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. There were no unrecognized tax benefits as of June 30, 2022 and December 31, 2021. The Company recognizes accrued interest
and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties
at June 30, 2022 or December 31, 2021. 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 management does not expect that the total amount of unrecognized tax benefits will materially change
over the next twelve months.