UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
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INDUSTRIAL HUMAN CAPITAL, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022
TABLE OF CONTENTS
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Condensed Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 | 1 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | |
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i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDUSTRIAL HUMAN CAPITAL, INC.
CONDENSED BALANCE SHEETS
March 31, 2022 | December 31, 2021 | |||||
(Unaudited) | ||||||
Assets |
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Current assets: | ||||||
Cash | $ | | $ | | ||
Prepaid expenses | | | ||||
Total current assets | | | ||||
Cash and marketable securities held in Trust Account | | | ||||
Total Assets | $ | | $ | | ||
Liabilities, Redeemable Common Stock and Stockholders' Equity (Deficit) |
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Current liabilities: | ||||||
Accounts payable and accrued expenses | $ | | $ | | ||
Promissory note - Related party | — | | ||||
Working capital loan - Related party | | — | ||||
Due to related party | | | ||||
Total current liabilities | | | ||||
Commitments and Contingencies (Note 6) | ||||||
Common stock subject to redemption, |
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Stockholders’ Equity (Deficit): |
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Common stock, $ | | | ||||
Additional paid-in capital |
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Accumulated deficit |
| ( |
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Total stockholders’ equity (deficit) |
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Total Liabilities, Redeemable Common Stock and Stockholders’ Equity (Deficit) | $ | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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INDUSTRIAL HUMAN CAPITAL, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the | ||||||
Period from | ||||||
February 16, | ||||||
For the | 2021 (Inception) | |||||
Three Months Ended | Through | |||||
March 31, | March 31, | |||||
| 2022 |
| 2021 | |||
Formation cost | $ | | $ | | ||
Loss from operations | ( | ( | ||||
Other income | ||||||
Interest income and unrealized gains on cash and marketable securities held in Trust Account | | — | ||||
Total other income | | — | ||||
Net loss | $ | ( | $ | ( | ||
Basic and diluted weighted average shares outstanding, Redeemable common stock | | — | ||||
Basic and diluted net loss per share, Redeemable common stock | ( | — | ||||
Basic and diluted weighted average shares outstanding, Nonredeemable common stock | ||||||
Basic and diluted net loss per share, Nonredeemable common stock | ( | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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INDUSTRIAL HUMAN CAPITAL, INC.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND FOR THE PERIOD
FROM FEBRUARY 16, 2021 (INCEPTION) THROUGH MARCH 31, 2021
Additional | Total | |||||||||||||
Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | |||||
Balance as of January 1, 2022 | | $ | | $ | | $ | ( | $ | | |||||
Net loss |
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Balance as of March 31, 2022 |
| | $ | | $ | | $ | ( | $ | ( |
Additional | Total | |||||||||||||
Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||
Balance as of February 16, 2021 (inception) | | $ | | $ | | $ | | $ | | |||||
Common stock issued to Sponsor | | | | — | | |||||||||
Net loss |
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| — |
| ( |
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Balance as of March 31, 2021 |
| | $ | | $ | | $ | ( | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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INDUSTRIAL HUMAN CAPITAL, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Period from | ||||||
For the | February 16, 2021 | |||||
Three Months Ended | (Inception) Through | |||||
March 31, | March 31, | |||||
2022 | 2021 | |||||
Cash flows from Operating Activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Formation costs paid by related party | — | |||||
Interest income on cash and marketable securities held in Trust Account | ( | |||||
Changes in current assets and current liabilities: | ||||||
Prepaid expenses | | — | ||||
Accounts payable and accrued expenses | | — | ||||
Due to related party |
| ( | — | |||
Net cash used in operating activities |
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Cash flows from Financing Activities: |
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Proceeds from sale of founder shares | — | | ||||
Proceeds/(payment) from/(of) promissory note - Related Party |
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Proceeds from working capital loan - Related Party |
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Net cash provided by financing activities |
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Net change in cash |
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Cash, beginning of the period |
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Cash, end of the period | $ | | $ | |||
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Supplemental disclosure of noncash investing and financing activities: | ||||||
Deferred offering costs included in due to related party | $ | — | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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INDUSTRIAL HUMAN CAPITAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operation
Industrial Human Capital, Inc. (the “Company”) is a newly organized, blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
As of March 31, 2022, the Company had not commenced any operations. All activity for the period from February 16, 2021 (inception) through March 31, 2022 relates to the Company’s formation and the Public Offering (as defined below). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Public Offering (as defined below). The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is ShiftPixy Investments, Inc. (the “Sponsor”), a wholly owned subsidiary of ShiftPixy, Inc.
The registration statement for the Company’s initial public offering was declared effective on October 19, 2021 (the “Effective Date”). On October 22, 2021, the Company consummated its initial public offering of
Transaction costs amounted to $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering and sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least
Following the closing of the Public Offering on October 22, 2021, $
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the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the public stockholders.
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination either: (1) in connection with a stockholder meeting called to approve the initial Business Combination; or (2) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct 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 require the Company to seek stockholder approval under applicable law or stock exchange listing requirements. The Company will provide its public stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to 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 earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then outstanding Public Shares, subject to limitations. The amount in the trust account is initially anticipated to be $
The shares of common stock subject to redemption are recorded at a redemption value and classified as temporary equity upon the completion of the Public Offering, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $
The Company has only
The Company’s initial stockholders, officers and directors entered into a letter agreement with the Company, pursuant to which they have agreed to: (1) waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with the completion of the initial Business Combination, (2) waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with its initial Business Combination or certain amendments to the Company charter prior thereto or to redeem
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $
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of the Trust Account, if less than $
Liquidity and Capital Resources
As of March 31, 2022, the Company had $
The Company’s liquidity needs up to March 31, 2022 have been satisfied through a payment from the Company’s Sponsor of $
As of March 31, 2022 and December 31, 2021, the Company had cash and marketable securities in the Trust Account of $
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. The Company will need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s Sponsor, officers and directors may, but are not obligated to, loan the Company funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
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Going Concern
We cannot provide any assurance that new financing along the lines detailed above will be available to us on commercially acceptable terms, if at all. Further, we have until October 22, 2022 to consummate a Business Combination, but we cannot provide assurance that we will be able to consummate a Business Combination by that date. If a Business Combination is not consummated by the required date, there will be a mandatory liquidation and subsequent dissolution. In connection with our assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”, management has determined that the uncertainty surrounding obtaining new financing, along with the possibility of mandatory liquidation and subsequent dissolution should we be unable to complete a business combination, raise substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets and liabilities should we be required to liquidate after October 22, 2022, nor do these unaudited condensed financial statements include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and Russia-Ukraine war and has concluded that while it is reasonably possible that the virus and war could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance with US GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for Fiscal 2021, as amended by the Company’s Form 10-K/A for Fiscal 2021, as filed with the SEC on March 25, 2022, and May 13, 2022, respectively, which contain the audited financial statements and notes thereto. The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Business Startups Act of 2012, ( the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an
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“emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.
Use of Estimates
The preparation of these unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company has $
Cash and Marketable Securities Held in Trust Account
At March 31, 2022 and December 31, 2021, the assets held in the Trust Account were held in money market funds and in U.S. Treasury Bills with a maturity of 185 days, respectively. During the three months ended March 31, 2022, the Company did not withdraw any of the interest income from the Trust Account to pay its tax obligations.
The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 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 treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates.
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “interest income” line item in the statements of operations. Interest income is recognized when earned.
The carrying value, excluding gross unrealized holding loss and fair value of held to maturity securities on March 31, 2022 and December 31, 2021 are as follows:
Gross | Gross | |||||||||||
Carrying Value as of | Unrealized | Unrealized | Fair Value as of | |||||||||
| March 31, 2022 |
| Gains |
| Losses |
| March 31, 2022 | |||||
Cash | $ | | $ | | $ | | $ | | ||||
Money Market Funds |
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$ | | $ | | $ | | $ | |
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Gross | Gross | |||||||||||
Carrying Value as of | Unrealized | Unrealized | Fair Value as of | |||||||||
| December 31, 2021 |
| Gains |
| Losses |
| December 31, 2021 | |||||
Cash | $ | | $ | | $ | | $ | | ||||
U.S. Treasury Securities |
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$ | | $ | | $ | | $ | |
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 Company coverage of $
Offering Costs Associated with Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A—”Expenses of Offering”. Offering costs consist of legal, accounting, underwriting and other costs incurred through the balance sheet date that are related to the Public Offering. Offering costs amounted to $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to its short-term nature.
Fair Value Measurement
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s financial instruments are classified as either Level 1, Level 2 or Level 3. These tiers include:
● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Common Stock Subject to Possible Redemption
The Company accounts for its shares of common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ equity. The Company’s shares of common stock sold in the Public Offering feature certain redemption rights that are
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considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021,
Warrants
The Company must account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant 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 warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for the warrants as equity-classified.
Net Loss Per Common Stock
Net loss per share of common stock is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted loss per share does not consider the effect of the
For the Three Months Ended | For the period from February 16, 2021 | |||||||||||
| March 31, |
| (Inception) Through March 31, | |||||||||
2022 | 2021 | |||||||||||
| Redeemable |
| Nonredeemable |
| Redeemable |
| Nonredeemable | |||||
Basic and diluted net loss per share: | ||||||||||||
Numerator: | ||||||||||||
Allocation of net loss |
| $ | ( | $ | ( | $ | | $ | ( | |||
Denominator: | ||||||||||||
Weighted-average shares outstanding, including common stock subject to redemption |
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Basic and diluted net loss per share |
| ( | ( | | ( |
Income Taxes
The Company accounts for income taxes under FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon
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examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
The Company has identified the United States as its only “major” tax jurisdiction.
The Company is subject to income tax examinations by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Standards
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 January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The guidance was adopted starting January 1, 2022. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
Note 3 — Initial Public Offering
On October 22, 2021, the Company consummated its Public Offering of
All of the
The shares of common stock are accounted for in accordance with ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value
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immediately as they occur. Immediately upon the closing of the Public Offering, the Company recognized the remeasurement from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital and accumulated income.
As of March 31, 2022 and December 31, 2021, the common stock reflected on the balance sheet is reconciled in the following table:
Gross proceeds from the Public Offering |
| $ | |
Less: |
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Proceeds allocated to Public Warrants |
| ( | |
Common stock issuance costs |
| ( | |
Plus: |
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Remeasurement of carrying value to redemption value |
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Contingently redeemable common stock | $ | |
Note 4 — Private Placement
Simultaneously with the closing of the Public Offering and the sale of the Units, the Sponsor purchased an aggregate of
Private Placement Warrants
The Private Placement Warrants are identical to the warrants sold in the Public Offering except that the Private Placement Warrants will not be transferable, assignable or saleable except as defined in the warrant agreement.
Note 5 - Related Party Transactions
Founder Shares
On February 18, 2021, the Sponsor purchased
The
The Company’s Founder Shares are subject to transfer restrictions pursuant to lock-up provisions in a letter agreement with the Company entered into by the initial stockholders, and officers and directors. Those lock-up provisions provide that such securities are not transferable or salable until the earlier to occur of: (1)
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subsequent to the initial business combination if the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the public stockholders having the right to exchange their Public Shares for cash, securities or other property. Notwithstanding the foregoing, the Sponsor has the right to transfer its ownership in the Founder Shares at any time, and to any transferee, to the extent that the sponsor determines, in good faith, that such transfer is necessary to ensure that it and/or any of its parents, subsidiaries or affiliates are in compliance with the Investment Company Act of 1940. Further, and notwithstanding the foregoing, if subsequent to the initial Business Combination the reported last sale price of the common stock equals or exceeds $
As noted above, prior to the closing of the Public Offering, our Sponsor transferred
Promissory Note — Related Party
The Sponsor has agreed to loan the Company up to $
Working Capital Loans
In order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor, an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes an initial Business Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account released to the Company. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $
Administrative Service Fee
The Company entered into an administrative services agreement pursuant to which the Company will pay an affiliate of the Sponsor a total of $
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months ended March 31, 2022 and for the period from February 16, 2021 (inception) through March 31, 2021, the Company had incurred $
Note 6 — Commitments & Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement Warrants (including the underlying shares of common stock) and warrants (including the underlying shares of common stock) that may be issued upon conversion of Working Capital Loans, are entitled to registration rights pursuant to a registration rights agreement signed as of the effective date of the Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to common stock). The holders of the majority of these securities are entitled to make up to
Underwriting Agreement
The Company granted the underwriters a 45-day option to purchase up to
The underwriters earned an underwriting discount of one percent (
Business Combination Marketing Agreement
The Company has engaged AGP as an advisor in connection with its Business Combination to assist the Company in holding meetings with stockholders to discuss the potential business combination and the target businesses’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with its initial Business Combination, assist the Company in obtaining stockholder approval for the business combination, and assist the Company with press releases and public filings in connection with the initial Business Combination. The Company will pay AGP a cash fee for such services upon the consummation of its initial Business Combination in an amount equal to
Representative Founder Shares
The representative purchased an aggregate of
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Note 7 - Stockholder’s Equity (Deficit)
Common Stock — The Company is authorized to issue
Common stockholders of record are entitled to
Warrants — Each warrant entitles the holder to purchase one share of the Company’s common stock at a price of $
The warrants will expire at 5:00 p.m., New York City time on the warrant expiration date, which is
The Company will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of common stock upon exercise of a warrant unless the common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of common stock underlying such unit.
16
The Company has not registered the shares of common stock issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than
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 $ |
● | upon not less than |
● | If, and only if, the reported last sale price of the common stock equals or exceeds $ |
The “fair market value” for this purpose shall mean the average reported last sale price of the common stock for the
Note 8 — Fair Value Measurements
The following table presents information about the Company’s assets that is measured at fair value on March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description |
| Level |
| March 31, 2022 |
| December 31, 2021 | ||
Assets: |
|
|
|
|
| |||
Cash and marketable securities held in Trust Account |
| 1 | $ | | $ | |
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to through the date that the unaudited condensed financial statements were issued. Based upon this review the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us” or “we” refer to Industrial Human Capital, Inc. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report, as well as the information contained in our Annual Report on Form 10-K and amended by our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 (“Fiscal 2021”), filed with the SEC on March 25, 2022, and May 16, 2022, respectively.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings, including those found in Item 1A of our Annual Report on Form 10-K and 10-K/A for Fiscal 2021, filed with the SEC on March 25, 2022, and May , 2022, respectively .
Overview
We are a blank check company incorporated as a Delaware corporation on February 16, 2021. We were incorporated for the purpose of effecting a Business Combination.
Our Sponsor is ShiftPixy Investments, Inc., a wholly owned subsidiary of ShiftPixy, Inc.
The registration statement for our IPO was declared effective on October 19, 2021 (the “Effective Date”). On October 22, 2021, we consummated our IPO of 11,500,000 units (the “Units” and, with respect to the common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit (which included the full exercise of the underwriters’ over-allotment option), which is discussed in Note 3 (the “IPO”) and the sale of 4,639,102 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor that closed simultaneously with the IPO.
Transaction costs amounted to $11,381,640 consisting of costs of $1,896,783 including $1,150,000 of underwriting commissions, and $746,783 of other offering costs and $9,484,857 of non-cash costs representing excess fair value attributable to the representative shares transferred in April, 2021 to the underwriter of our IPO, AGP.
Following the closing of our IPO on October 22, 2021, $116,725,000 ($10.15 per Unit) from the net proceeds sold in the IPO, including the proceeds of the sale of the Private Placement Warrants, was deposited in a Trust Account (“Trust Account”) that has been invested only in U.S. government treasury obligations 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, which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to pay our tax obligations and up to $100,000 of interest that may be used for the dissolution expenses, the proceeds from the IPO and the sale of the Placement Warrants held in the Trust Account will not be released from the Trust Account until the earliest to occur of: (1) the completion of the initial Business Combination, (2) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend the amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with the initial Business Combination or certain amendments to our charter prior thereto or to redeem 100% of the Public Shares if we do not complete our initial Business Combination within 12 months from the closing of the IPO or (ii) with respect to any other provision relating to stockholder’s rights or pre-Business Combination activity, and (3) the redemption of the Public Shares if we are unable to complete our initial Business Combination within 12 months from the closing of the IPO, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of the public stockholders.
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If we have not completed a Business Combination within 12 months from the closing of our IPO, or October 22, 2022, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 12-month time period.
Results of Operations
All of our activity from February 16, 2021 (inception) through October 19, 2021, was in preparation for an IPO, and since our IPO, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended March 31, 2022, we had a net loss of $1,338,730, which consisted of formation and operating costs of $1,342,792, offset by interest income of $4,062. For the period from February 16, 2021 (inception) through March 31, 2021, we had a net loss of $365, which consisted solely of formation and operating costs.
Liquidity and Capital Resources
As of March 31, 2022, we had $27,661 in cash and a working capital deficit of $938,567, excluding franchise tax payable of $50,000.
Our liquidity needs up to March 31, 2022 have been satisfied through a payment from our Sponsor of $25,000 for the Founder Shares, the loan under an unsecured promissory note from our Sponsor of up to $500,000, and the net proceeds from the consummation of the IPO, the Private Placement Warrants held outside of the Trust Account located in the United States at J.P. Morgan Chase Bank, N.A. and a working capital loan from our Sponsor as disclosed in Note 5 (“Related Party Transactions”). As of March 31, 2022 and December 31, 2021, there was $0 and $150,000 of unsecured promissory notes outstanding, respectively. For the three months ended March 31, 2022 and for the period from February 16, 2021 (inception) through March 31, 2021, we received $0 and $75,000 of proceeds from issuance of promissory note, respectively. As of March 31, 2022, the promissory note has been paid in full. Furthermore, as of March 31, 2022 and December 31, 2021, the company had $175,000 and $0 loans outstanding under the working capital loan, respectively. For the three months ended March 31, 2022 and for the period from February 16, 2021 (inception) through March 31, 2021, we received $175,000 and $0 of proceeds from issuance of working capital loan, respectively.
As of March 31, 2022 and December 31, 2021, we had cash in the Trust Account of $116.7 million. 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 deferred underwriting commissions) to complete our initial Business Combination. We may withdraw interest to pay taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete its 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.
Until the consummation of a Business Combination, we will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. We will need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors, or third parties. Our Sponsor, officers and directors may, but are not obligated to, loan us funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses.
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Going Concern
We cannot provide any assurance that new financing along the lines detailed above will be available to us on commercially acceptable terms, if at all. Further, we have until October 22, 2022 to consummate a Business Combination, but we cannot provide assurance that we will be able to consummate a Business Combination by that date. If a Business Combination is not consummated by the required date, there will be a mandatory liquidation and subsequent dissolution. In connection with the our assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”, management has determined that the uncertainty surrounding obtaining new financing, along with the possibility of mandatory liquidation and subsequent dissolution should we be unable to complete a business combination, raise substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets and liabilities should we be required to liquidate after October 22, 2022, nor do these unaudited condensed financial statements include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Commitments and Contractual Obligations
Registration Rights
The holders of the Founder Shares, Private Placement Warrants (including the underlying shares of common stock) and warrants (including the underlying shares of common stock) that may be issued upon conversion of Working Capital Loans, are entitled to registration rights pursuant to a registration rights agreement signed as of the effective date of the IPO, requiring us to register such securities for resale (in the case of the Founder Shares, only after conversion to common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of the initial Business Combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option to purchase up to 1,500,000 additional Units to cover any over-allotments, if any, at the IPO price less the underwriting discounts and commissions. The underwriters exercised the full over-allotment at the consummation of the IPO on October 22, 2021, which was the date of the IPO.
The underwriters earned an underwriting discount of one percent (1%) of the gross proceeds of the IPO, or $1,150,000, which was paid in cash at closing of the offering. In addition, AGP purchased 750,000 Representative Founder Shares, of which 97,826 were subject to forfeiture if the over-allotment option was not exercised, at a purchase price of $9,639. Due to the underwriters’ full exercise of their over-allotment option on October 22, 2021, these 97,826 Representative Founder Shares are no longer subject to forfeiture.
Business Combination Marketing Agreement
We engaged AGP as an advisor in connection with our initial Business Combination to assist us in structuring and negotiating a definitive purchase agreement with respect to an initial Business Combination, holding meetings with our stockholders to discuss the potential Business Combination and the target businesses’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with our initial Business Combination, assist us in obtaining stockholder approval for the Business Combination, and assist us with press releases and public filings in connection with the initial Business Combination. We will pay AGP a cash fee for such services upon the consummation of our initial Business Combination in an amount equal to 3% of the gross proceeds of our IPO, exclusive of any applicable finders’ fees which might become payable. If the Business Combination is not consummated for any reason, no fee shall be due or payable to AGP.
20
Representative Founder Shares
The representative purchased an aggregate of 750,000 Representative Founder Shares, of which 97,826 were subject to forfeiture if the over-allotment option was not exercised, at a purchase price of $9,639. The underwriters’ over-allotment option was exercised in full on October 22, 2021 and thus no Representative Founder Shares are subject to forfeiture. Our Founder Shares are subject to transfer restrictions pursuant to lock-up provisions in a letter agreement with us entered into by the Representative, the Sponsor, and officers and directors. In addition, the holders of the Representative Founder Shares have agreed (i) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete our initial business combination within 12 months from the closing of our IPO. The Representative Founder Shares have been deemed compensation by FINRA and are therefore subject to a lock-up until October 14, 2022 pursuant to Rule 5110(e)(1) of the FINRA Manual.
Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and result of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We will evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We will 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.
We believe that the application of the following accounting policies, each of which require significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results. Our significant accounting policies are more fully described in Note 2, Summary of Significant Accounting Policies, to our unaudited condensed financial statements appearing elsewhere in this Form 10-Q.
Offering Costs Associated with Initial Public Offering
We comply with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A—"Expenses of Offering”. Offering costs consist of legal, accounting, underwriting and other costs incurred through the balance sheet date that are related to the IPO. Offering costs amounted to $11,381,640 and were charged to temporary equity upon the completion of the IPO.
Common Stock Subject to Possible Redemption
We account for our shares of common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ equity (deficit). Our shares of common stock sold in the IPO feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31, 2021, 11,500,000 shares of common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity (deficit) section of our balance sheets.
Net Loss Per Common Stock
Net loss per share of common stock is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted loss per share does not consider the effect of the 16,139,102 warrants issued in connection with the IPO and Private Placement since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
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Recent Accounting Standards
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 January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The guidance was adopted starting January 1, 2022. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
We do not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
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 unaudited condensed 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 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 PCAOB 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 IPO or until we are no longer an “emerging growth company,” whichever is earlier.
Off-Balance Sheet Arrangements
As of March 31, 2022 and December 31, 2021, we did not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company,” we are not required to provide the information called for by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (Principal Executive Officer) and the Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding
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required disclosure. In designing and evaluating disclosure controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company and |
● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Under the supervision of our Chief Executive Officer and our Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was not effective as of March 31, 2022 due to a material weakness relating to the accounting treatment for complex financial instruments and improper accounting for accruals. A material weakness, as defined in the SEC regulations, is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. This material weakness resulted in the restatement of the Company's audited financial statement as of December 31, 2021 to correct improper accounting for accruals.
We have enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our updated processes include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. We have also enhanced our controls relating to accounting for accruals through the implementation of the company’s enterprise resource planning system. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control over Financial Reporting
Other than the material weakness and remediation efforts mentioned above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for Fiscal 2021, as amended by our Annual Report on Form 10-K/A for Fiscal 2021, filed with the SEC on March 25, 2022, and May 16, 2022, respectively. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
Exhibit |
| Description |
31.1* |
| |
|
|
|
31.2* |
| |
|
|
|
32.1* |
| |
|
|
|
32.2* |
| |
|
|
|
101.INS |
| Inline XBRL Instance Document. |
|
|
|
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Furnished herewith
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Industrial Human Capital, Inc. | |
|
| |
Dated: May 16, 2022 | /s/ Scott W. Absher | |
| Name: | Scott W. Absher |
| Title: | Chairman of the Board of Directors and |
|
| Chief Executive Officer |
|
| (Principal Executive Officer) |
Dated: May 16, 2022 | /s/ Domonic J. Carney | |
| Name: | Domonic J. Carney |
| Title: | Chief Financial Officer |
|
| (Principal Financial and Accounting Officer) |
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