UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
File No.
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including zip code) |
(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Units, each consisting of one share of Class A Common Stock and one-half of one Redeemable Warrant | PGRWU | The Nasdaq Stock Market LLC | ||
The | ||||
Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 | PGRWW | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer | ☐ Accelerated filer | |
☒ | ||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As
of August 16, 2021, there were
PROGRESS ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
i
PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements
PROGRESS
ACQUISITION CORP.
CONDENSED BALANCE SHEETS
June 30 | December 31, | |||||||
2021 | 2020 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | - | |||||||
Deferred offering costs | - | |||||||
Total current assets | ||||||||
Prepaid expenses, non-current | - | |||||||
Marketable securities held in Trust Account | - | |||||||
Total Assets | $ | $ | ||||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accrued offering costs and expenses | $ | $ | ||||||
Promissory note - related party | ||||||||
Total current liabilities | ||||||||
Warrant liability | ||||||||
Deferred underwriting discount | ||||||||
Total liabilities | ||||||||
Commitments and Contingencies | ||||||||
Class A common stock subject to possible redemption, | ||||||||
Stockholders’ Equity: | ||||||||
Preferred stock, $ | - | |||||||
Class A common stock, $ | ||||||||
Class B common stock, $ | ||||||||
Additional paid-in capital | ||||||||
Retained earnings (accumulated deficit) | ( | ) | ||||||
Total Stockholders’ Equity | ||||||||
Total Liabilities and Stockholders’ Equity | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
PROGRESS
ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the | For the | |||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2021 | June 30, 2021 | |||||||
Formation and operating costs | ||||||||
Loss from operations | ( | ) | ( | ) | ||||
Other income (expense) | ||||||||
Trust interest income | ||||||||
Other expense relating to fair value exceeding amount paid for warrants | ( | ) | ||||||
Unrealized (loss) gain on change in fair value of warrants | ( | ) | ||||||
Total other (expense) income | ( | ) | ||||||
Net (loss) income | $ | ( | ) | $ | ||||
Basic and diluted weighted average shares outstanding, common stock subject to redemption | ||||||||
Basic and diluted net income per share | $ | $ | ||||||
Basic and diluted weighted average shares outstanding, common stock | ||||||||
Basic and diluted net (loss) income per share | $ | ( | ) | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
PROGRESS
ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Additional | Total | |||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Paid-in | Retained | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
Balance as of December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Sale of | ||||||||||||||||||||||||||||
Net income | - | - | - | - | - | |||||||||||||||||||||||
Class A common stock subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Balance as of March 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
Class A common stock subject to possible redemption | - | |||||||||||||||||||||||||||
Balance as of June 30, 2021 | $ | $ | $ | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
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PROGRESS
ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
For the | ||||
Six Months Ended June 30, | ||||
2021 | ||||
Cash flows from Operating Activities: | ||||
Net income | $ | |||
Adjustments to reconcile net income to net cash used in operating activities: | ||||
Other expense relating to fair value exceeding amount paid for warrants | ||||
Unrealized gain on change in fair value of warrants | ( | ) | ||
Interest earned on marketable securities held in Trust Account | ( | ) | ||
Changes in current assets and current liabilities: | ||||
Prepaid expenses | ( | ) | ||
Accrued offering costs and expenses | ||||
Net cash used in operating activities | ( | ) | ||
Cash Flows from Investing Activities: | ||||
Investment held in Trust Account | ( | ) | ||
Net cash used in investing activities | ( | ) | ||
Cash flows from Financing Activities: | ||||
Proceeds from Initial Public Offering, net of underwriters’ fees | ||||
Proceeds from over-allotment, net of underwriters’ fees | ||||
Proceeds from private placement | ||||
Proceeds from issuance of promissory note to related party | ||||
Payment to promissory note to related party | ( | ) | ||
Payment of deferred offering costs | ( | ) | ||
Net cash provided by financing activities | ||||
Net change in cash | ||||
Cash, beginning of the period | ||||
Cash, end of the period | $ | |||
Supplemental disclosure of cash flow information | ||||
Deferred underwriting commissions charged to additional paid in capital | $ | |||
Initial value of Class A common stock subject to possible redemption | $ | |||
Change in value of Class A common stock subject to possible redemption | $ | |||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
PROGRESS ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Organization and General
Progress Acquisition Corp. (the “Company”) was incorporated as a Delaware company on September 23, 2020. The Company was incorporated for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (the “Business Combination”). The Company has not selected any specific Business Combination target and the Company has not, nor has anyone on its behalf, engaged in any substantive discussions, directly or indirectly, with any Business Combination target with respect to the Business Combination.
The Company has selected December 31 as its fiscal year end.
As of June 30, 2021, the Company had not commenced any operations. Significant activity for the period from September 23, 2020 (inception) through June 30, 2021, relates to the Company’s formation and the initial public offering (the “IPO”) described below, and, since the closing of the IPO, the search for a prospective initial Business Combination. 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 IPO and will recognize changes in the fair value of warrant liability as other income (expense).
The Company’s sponsor is Progress Capital I LLC, a Delaware limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s
IPO was declared effective on February 8, 2021 (the “Effective Date”). On February 11, 2021, the Company consummated the IPO
of
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Transaction costs amounted to $
The Company granted the underwriters in the IPO
a 45-day option to purchase up to
Trust Account
Following the closing of the IPO on February 11,
2021, and the underwriters’ full exercise of over-allotment option on February 22, 2021, $
5
Initial Business Combination
The Company must complete one or more initial
Business Combinations having an aggregate fair market value of at least
In connection with any proposed Business Combination, the Company will either (1) seek stockholder approval of the initial Business Combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed Business Combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable), or (2) provide its public stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable).
The shares of common stock subject to redemption
will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with 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’s initial stockholders, officers and directors, and their affiliates have agreed (i) to vote any shares owned by them in favor of any proposed Business Combination, (ii) not to convert any shares in connection with a stockholder vote to approve a proposed initial Business Combination, and (iii) not to sell any shares to the Company in a tender offer in connection with any proposed Business Combination.
Liquidity and Capital Resources
As of June 30, 2021, the Company had approximately
$
Prior to the completion of the Initial Public
Offering, the Company’s liquidity needs had been satisfied through a payment from the Sponsor of $
In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor, officers, directors and their affiliates may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). To date, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
6
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Form 8-K and the final prospectus filed by the Company with the SEC on February 18, 2021 and February 10, 2021, respectively.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
7
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed 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.
Use of Estimates
The preparation of unaudited condensed financial statement 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 statement. 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 did not have any cash equivalents as of June 30, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At June 30, 2021, the assets held in the Trust Account were invested in money market funds.
Fair Value Measurements
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). 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. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses are estimated to approximate the carrying values as of June 30, 2021 and December 31, 2020 due to the short maturities of such instruments.
The Company’s warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the warrant liability is classified as Level 3. See Note 6 for additional information on assets and liabilities measured at fair value.
8
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage of $
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock 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) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted
income (loss) per common share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of overallotment
and (iii) Private Placement since the exercise price of the warrants is higher than the market price. The warrants are exercisable to
purchase
The Company’s statement of operations includes a presentation of income (loss) per share for common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per common share. Net income per common share, basic and diluted, for redeemable common stock is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of redeemable common stock outstanding since original issuance. Net income (loss) per common share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income attributable to redeemable common stock, by the weighted average number of non-redeemable common stock outstanding for the periods. Non-redeemable common stock includes the founder shares as these common stock do not have any redemption features and do not participate in the income earned on the Trust Account.
For the | For the | |||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2021 | June 30, 2021 | |||||||
Common stock subject to possible redemption | ||||||||
Numerator: Net income allocable to common stock subject to possible redemption | ||||||||
Interest income on marketable securities held in trust | $ | $ | ||||||
Less: interest available to be withdrawn for payment of taxes | $ | ( | ) | $ | ( | ) | ||
Net income allocable to common stock subject to possible redemption | $ | $ | ||||||
Denominator: Weighted average redeemable common stock | ||||||||
Redeemable common stock, basic and diluted | ||||||||
Basic and diluted net income per share, redeemable common stock | $ | $ | ||||||
Non-redeemable common stock | ||||||||
Numerator: Net (loss) income minus redeemable net earnings | ||||||||
Net (loss) income | $ | ( | ) | $ | ||||
Redeemable net earnings | $ | $ | ||||||
Non-redeemable net (loss) income | $ | ( | ) | $ | ||||
Denominator: Weighted average non-redeemable basic and diluted weighted average shares outstanding, common stock | ||||||||
Basic and diluted net (loss) income per share, common stock | $ | ( | ) | $ |
9
Offering Costs
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs
consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO and were
charged to stockholders’ equity upon the completion of the IPO. Accordingly, on February 11, 2021, offering costs in the aggregate
of $
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the private placement warrants are a derivative instrument. (See Note 4).
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction.
The Company is subject to income tax examinations by major taxing authorities since inception. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
10
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, cash flows and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statement.
Note 3 — Initial Public Offering
Pursuant to the IPO on February 11, 2021, the
Company sold
On February 22, 2021, the Underwriters exercised
the over-allotment option in full to purchase
Following the closing of the IPO on February 11,
2021, and the underwriters’ full exercise of over-allotment option on February 22, 2021, $
Note 4 — Private Placement Warrants
Simultaneously with the closing of the IPO, the
Sponsor purchased an aggregate of
On February 22, 2021, simultaneously with the
closing of the underwriters’ full exercise of the over-allotment option, the Company completed the private sale of an aggregate
of
The Private Placement Warrants are identical to the warrants sold in the IPO except that the Private Placement Warrants: (i) will not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, as described in the IPO, in each case so long as they are held by the initial purchasers or any of their permitted transferees. If the Private Placement Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the Units being sold in the IPO.
The Company has accounted for the
11
Note 5 — Related Party Transactions
Founder Shares
On October 29, 2020, the Company issued
Holders of the founder shares have agreed not
to transfer, assign or sell (subject to certain limited exceptions set forth below) their founder shares or any shares of the Company’s
Class A common stock issuable upon conversion thereof: (i) with respect to
Promissory Note — Related Party
On September 30, 2020, the Sponsor agreed to loan
the Company up to $
Related Party Loans
In order to meet the Company’s working capital
needs following the consummation of the IPO, the Sponsor, officers, directors and their affiliates may, but are not obligated to, loan
the Company funds (“Working Capital Loans”), from time to time or at any time, in whatever amount they deem reasonable in
their sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of the initial
Business Combination, without interest, or, at holder’s discretion, up to $
Administrative Service Fee
Commencing on February 8, 2021, the Company will make
a payment of a monthly fee of $
Note 6 — Recurring Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
June 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets: | ||||||||||||||||
U.S. Money Market held in Trust Account | $ | $ | $ | $ | ||||||||||||
$ | $ | $ | $ | |||||||||||||
Liabilities: | ||||||||||||||||
Warrant Liability | $ | $ | $ | $ | ||||||||||||
$ | $ | $ | $ |
12
The following table sets forth a summary of the changes in the fair value of the warrant liability for the six months ended June 30, 2021:
Warrant Liability | ||||
Fair value as of January 1, 2021 | $ | |||
Initial fair value of warrant liability upon issuance at IPO | ||||
Initial fair value of warrant liability upon issuance at over-allotment | ||||
Revaluation of warrant liability for the three months ended March 31, 2021 | ( | ) | ||
Fair value as of March 31, 2021 | $ | |||
Revaluation of warrant liability for the three months ended June 30, 2021 | ||||
Fair value as of June 30, 2021 | $ |
Note 7 — Commitments and Contingencies
Registration Rights
The holders of the founder shares and representative
shares issued and outstanding on the date of the IPO, as well as the holders of the Private Placement Warrants and any warrants the Sponsor,
officers, directors or their affiliates may be issued in payment of Working Capital Loans made to the Company (and all underlying securities),
will be entitled to registration rights pursuant to an agreement signed on February 8, 2021. The holders of a majority of these securities
are entitled to make up to two demands that the Company registers such securities. The holders of the majority of the founder shares can
elect to exercise these registration rights at any time commencing three months prior to the date on which the lockup period for these
shares of common stock expires.
Underwriting Agreement
The underwriters have a 45-day option from February
11, 2021 to purchase up to an aggregate of
The underwriters are entitled to a cash underwriting
discount of two percent (
13
Representative’s Common Stock
In December 2020, the Company issued to designees
of EarlyBirdCapital
The representative shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following February 8, 2021 pursuant to Rule 5110(e)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(e)(1), these securities will not be sold during the IPO, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following February 8, 2021 or commencement of sales of the IPO, except to any underwriter and selected dealer participating in the IPO and their bona fide officers or partners, provided that all securities so transferred remain subject to the lockup restriction above for the remainder of the time period.
Right of First Refusal
The Company has granted EarlyBirdCapital a right of first refusal for a period commencing from the consummation of the IPO until the consummation of the initial Business Combination (or the liquidation of the Trust Account in the event that the Company fails to consummate its initial Business Combination within the Combination Period) to act as book running manager, placement agent and/or arranger for all financings where the Company seeks to raise equity, equity-linked, debt or mezzanine financings relating to or in connection with a Business Combination.
In addition, under certain circumstances EarlyBirdCapital will be granted, for a period of 12 months from the closing of the IPO, the right to act as lead underwriter for the next U.S. registered public offering of securities undertaken by the Company or the Sponsor or its affiliates for the purpose of raising up to $150 million in capital and placing 90% or more of the proceeds in a trust or escrow account to be used to acquire one or more operating businesses that have not been identified at the time of the IPO.
Note 8 — Stockholders’ Equity
Preferred Stock — The
Company is authorized to issue
Class A Common Stock —
The Company is authorized to issue
Class B Common Stock —
The Company is authorized to issue
Holders of the founder shares transfer, assign
or sell (subject to certain limited exceptions set forth below) their founder shares and any shares of the Company’s Class A common
stock issuable upon conversion thereof: (i) with respect to
14
Public Warrants
Each whole warrant entitles the holder to purchase
one Class A common stock at a price of $
The warrants will become exercisable 30 days after
the completion of the initial Business Combination, and will expire
No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of Class A common stock. Notwithstanding the foregoing, if a registration statement covering the shares of Class A common stock issuable upon exercise of the public warrants is not effective within a specified period following the consummation of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, or the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. In the event of such cashless exercise, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of Class A common stock for the 5 trading days ending on the trading day prior to the date of exercise.
The Company may call the warrants for redemption
in whole and not in part, at a price of $
● | At any time after the warrants become exercisable, | |
● | Upon not less than 30 days’ prior written notice of redemption to each warrant holder, | |
● | If, and only if, the reported last sale price of the shares of Class A common stock equals or exceeds $ | |
● | if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants. |
If the Company call the warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.”
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statement was issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statement.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “PROGRESS ACQUISITION CORP.,” “our,” “us” or “we” refer to PROGRESS ACQUISITION CORP. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.
Overview
We were formed on September 23, 2020 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Our efforts to identify a prospective target business are not limited to a particular industry or geographic region although we currently are focusing on target businesses in the nexus of media, entertainment and technology. We are intending to utilize cash derived from the proceeds of our initial public offering, our securities, debt or a combination of cash, securities and debt, in effecting a business combination. The issuance of additional shares of common stock or preferred stock:
● | may significantly reduce the equity interest of our stockholders, which dilution would increase if the anti-dilution provisions in our Class B common stock resulted in the issuance of our Class A common stock on a greater than one-to-one basis upon conversion of our Class B common stock; |
● | may subordinate the rights of holders of shares of Class A common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of Class A common stock; |
● | will likely cause a change in control if a substantial number of our shares of Class A common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and |
● | may adversely affect prevailing market prices for our securities. |
Similarly, if we issue debt securities, it could result in:
● | default and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations: |
● | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant; |
● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and |
● | our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding. |
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On February 11, 2021, we consummated our initial public offering of 15,000,000 units. Each unit consists of one share of common stock of the Company, par value $0.0001 per share (“Common Stock”), and one-half of one redeemable warrant of the Company, with each warrant entitling the holder thereof to purchase one share of Common Stock for $11.50 per whole share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $150,000,000.
On February 11, 2021, simultaneously with the consummation of our initial public offering, we completed the private sale of an aggregate of 4,450,000 warrants to our sponsor at a purchase price of $1.00 per private placement warrant, generating gross proceeds of $4,450,000.
On February 22, 2021, the underwriters exercised the over-allotment option in full to purchase 2,250,000 units. On February 22, 2021, simultaneously with the closing of the underwriters’ full exercise of the over-allotment option, we completed the private sale of an aggregate of 200,000 private placement warrants to our sponsor, at a purchase price of $1.00 per private placement warrant, generating gross proceeds of $200,000.
Following the closing of our initial public offering on February 11, 2021 and the underwriters’ full exercise of over-allotment option on February 22, 2021, $172,500,000 from the net proceeds of the sale of the units in our initial public offering, the exercise of the over-allotment option and the sale of the private placement warrants was placed in a trust account established for the benefit of our public stockholders (the “trust account”) and maintained by Continental Stock Transfer & Trust Company, as trustee.
If we are unable to complete our initial business combination by November 11, 2022, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not previously released to us but net of franchise and income taxes payable, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by November 11, 2022 and, in such event, such amounts will be included with the funds held in the trust account that will be available to fund the redemption of the public shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than $10.00.
Our amended and restated certificate of incorporation provides that we will have only until November 11, 2022 to complete an initial business combination. If we have not completed an initial business combination by such date, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not previously released to us but net of taxes payable, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Results of Operations
As of June 30, 2021, we have not commenced any operations. All activity for the period from September 23, 2020 (inception) through June 30, 2021 relates to our formation and initial public offering. We will not generate any operating revenues until after the completion of our initial business combination, at the earliest. We will generate non-operating income in the form of interest income from the proceeds derived from the initial public offering and placed in the trust account.
For the three months ended June 30, 2021, we had a net loss of $1,381,875 which was comprised of operating costs of $245,874, interest income of $3,926 from marketable securities held in our Trust Account, and unrealized loss on change in fair value of warrants of $1,139,927.
For the six months ended June 30, 2021, we had a net income of $601,084 which was comprised of operating costs of $395,460, interest income of $4,450 from marketable securities held in our Trust Account, unrealized gain on change in fair value of warrants of $2,310,445, and other expense relating to fair value exceeding amount paid for warrants of $1,318,351.
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Liquidity and Capital Resources
As of June 30, 2021, we had approximately $0.3 million in our operating bank account, and working capital of approximately $0.4 million.
Prior to the completion of the Initial Public Offering, our liquidity needs had been satisfied through a payment from the Sponsor of $25,000 for the founder shares to cover certain offering costs and the loan under an unsecured promissory note from the Sponsor of $141,700. We fully paid the note to the Sponsor on February 12, 2021. Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account.
In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor, officers, directors and their affiliates may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. We have identified the following as our critical accounting policies:
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the private placement warrants are a derivative instrument.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock 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) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of overallotment and (iii) Private Placement since the exercise of the warrants is higher than the market price. The warrants are exercisable to purchase 13,275,000 shares of common stock in the aggregate.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the report of the independent registered public accounting firm providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of this offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a public statement (the “SEC Warrant Accounting Statement”) on accounting and reporting considerations for warrants issued by special purpose acquisition companies (“SPACs”). The SEC Warrant Accounting Statement discussed “certain features of warrants issued in SPAC transactions” that “may be common across many entities.” The SEC Warrant Accounting Statement indicated that when one or more of such features is included in a warrant, the warrant “should be classified as a lability measured at fair value, with changes in fair value each period reported in earnings.”
The warrant agreement governing the Company’s warrants includes a provision that provides for potential changes to the settlement amounts dependent on the characteristics of the holder of the warrant. Upon review of the statement, the Company’s management further evaluated the warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant.
The Company previously classified the public warrants and private placement warrants issued in connection with the Company’s initial public offering as equity instruments. Upon further consideration of the rules and guidance, management of the Company concluded that the public warrants qualify for equity treatment but the private placement warrants are precluded from equity classification. As a result, the private placement warrants should be recorded as liabilities on the balance sheet and measured at fair value at inception and on a recurring basis in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the statement of operations.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports 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 our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, solely due to the events that led to the Company’s revision of its financial statement described above, as of June 30, 2021, a material weakness existed and our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In light of the above-mentioned revisions to our financial statements, we plan to enhance 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 plans at this time 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. 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Use of Proceeds
On February 11, 2021, we consummated our initial public offering of 15,000,000 units. Each unit consists of one public share and one-half of one public warrant, with each whole public warrant entitling the holder thereof to purchase one public share for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $150,000,000. On February 11, 2021, simultaneously with the consummation of our initial public offering, we completed the private sale of an aggregate of 4,450,000 warrants to our sponsor at a purchase price of $1.00 per private placement warrant, generating gross proceeds of $4,450,000.
On February 22, 2021, the underwriters exercised the over-allotment option in full to purchase 2,250,000 units. On February 22, 2021, simultaneously with the closing of the underwriters’ full exercise of the over-allotment option, we completed the private sale of an aggregate of 200,000 private placement warrants to our sponsor, at a purchase price of $1.00 per private placement warrant, generating gross proceeds of $200,000.
Following the closing of our initial public offering on February 11, 2021 and the underwriters’ full exercise of over-allotment option on February 22, 2021, $172,500,000 from the net proceeds of the sale of the units in our initial public offering, the exercise of the over-allotment option and the sale of the private placement warrants was placed in a trust account established for the benefit of our public stockholders and maintained by Continental Stock Transfer & Trust Company, as trustee. The proceeds held in the trust account may be invested by the trustee only in U.S. government securities with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act.
There has been no material change in the planned use of the proceeds from our initial public offering and the private placement as is described in the Company’s final prospectus related to our initial public offering.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
* | Filed herewith. |
** | Furnished. |
(1) | Incorporated by reference to the Company’s Form S-1, originally filed with the SEC on January 13, 2021, as amended. |
(2) | Incorporated by reference to the Company’s Form 8-K, filed with the SEC on February 12, 2021. |
(3) | Incorporated by reference to the Company’s Form 10-K, filed with the SEC on April 2, 2021. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PROGRESS ACQUISITION CORP. | ||
Date: August 17, 2021 | By: | /s/ Warren Schlichting |
Name: | Warren Schlichting | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
Date: August 17, 2021 | By: | /s/ Richard Gallagher |
Name: | Richard Gallagher | |
Title: | Chief Financial Officer | |
(Principal Accounting and Financial Officer) |
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