The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are
an integral part of the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Industrial Tech Acquisitions II, Inc. (the “Company”) is
a blank check company incorporated as a Delaware corporation on January 4, 2021. The Company was formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses
(the “Business Combination”). While the Company may pursue an initial Business Combination target in any business, industry
or geographical location, the Company intends to focus its search on targets operating in the technology-focused areas including software,
mobile and Internet of Things (“IoT”) applications, digital and energy transformation, cloud and cyber communications as well
as high bandwidth services, including LTE, remote sensing and 5G communications. The Company has not selected any specific Business Combination
target and the Company has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any
Business Combination target.
The Company has selected December 31 as its fiscal
year end.
As of March 31, 2022, the Company had not commenced
any operations. All activity for the period from January 4, 2021 (inception) through March 31, 2022 relates to the Company’s formation,
the IPO (as defined below), and subsequent to the IPO, identifying a target company for a Business Combination. The Company will not generate
any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating
income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
The Company’s sponsor is Industrial Tech
Partners II, LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s initial public offering
(“IPO”) was declared effective on January 11, 2022. On January 14, 2022, the Company consummated its IPO of 17,250,000 units
(the “Units”), which included 2,250,000 Units issued pursuant to the full exercise of the over-allotment option granted to
the underwriters. Each Unit consists of one share of Class A common stock of the Company (the “Public Shares”), and one-half
of one redeemable warrant of the Company (the “Public Warrants”). Each whole warrant is exercisable to purchase one share
of Class A common stock at $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company
of $172,500,000, which is discussed in Note 3.
Simultaneously with the closing of the IPO, the
Company completed the private sale of an aggregate of 8,037,500 warrants (the “Private Placement Warrants”), at a purchase
price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $8,037,500, which is discussed in Note 4.
Transaction costs amounted to $10,799,030 consisting
of $3,450,000 of underwriting commissions, $6,900,000 of deferred underwriting commissions, and $449,030 of other offering costs, partially
offset by the reimbursement of $1,035,000 of offering expenses by the underwriters. The Company’s remaining cash after payment of
the offering costs is held outside of the Trust Account for working capital purposes.
The Company’s Business Combination must
be with one or more target businesses that together have a fair market value equal to at least 80% of the net balance in the Trust Account
(as defined below) (excluding the amount of deferred underwriting discounts held and taxes payable on the income earned on the Trust
Account) at the time of the signing an agreement to enter into a Business Combination. However, the Company will only complete a Business
Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target
or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company
under the Investment Company Act of 1940, as amended (the “Investment Company Act”). There is no assurance that the Company
will be able to successfully effect a Business Combination.
On January 14, 2022, an amount of $175,950,000 ($10.20 per Unit) from
the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (“Trust
Account”) and would be invested in United States “government securities” within the meaning of Section 2(a)(16) of the
Investment Company Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government treasury obligations. Except with respect to interest earned
on the funds held in the Trust Account that may be released to the Company to pay its franchise and income tax obligations (less up to
$50,000 of interest to pay dissolution expenses), the proceeds from the IPO and the sale of the Private Placement Warrants will not be
released from the Trust Account until the earliest to occur of: (a) the completion of the initial Business Combination, (b) the redemption
of any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate
of incorporation, and (c) the redemption of the Company’s Public Shares if the Company is unable to complete the initial Business
Combination within 15 months from the closing of the IPO (or up to 18 months from the closing of the IPO if the Company extends the period
of time to consummate a Business Combination) (the “Combination Period”), subject to applicable law. The proceeds deposited
in the Trust Account could become subject to the claims of the Company’s creditors, which would have higher priority than the claims
of the Company’s public stockholders.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
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 (i) in connection with
a stockholder meeting called to approve the initial Business Combination or (ii) 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. 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 franchise and income taxes, divided
by the number of then outstanding Public Shares, subject to the limitations described herein. The amount in the Trust Account is initially
$10.20 per Public Share. The per-share amount the Company will distribute to investors who properly redeem their shares will not be reduced
by the deferred underwriting commissions the Company will pay to the underwriters.
All of the Public Shares contain a redemption feature which allows
for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender
offer in connection with the initial Business Combination and in connection with certain amendments to the Company’s amended and
restated certificate of incorporation. In accordance with SEC and its guidance on redeemable equity instruments, which has been codified
in ASC 480-10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified
outside of permanent equity. Given that the Public Shares were issued with other freestanding instruments (i.e., Public Warrants), the
initial carrying value of Class A common stock classified as temporary equity would be the allocated proceeds determined in accordance
with ASC 470-20. The Class A common stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable,
the Company has the option to either (i) 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 (ii) 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 has elected to recognize the changes immediately. While redemptions
cannot cause the Company’s net tangible assets to fall below $5,000,001, the Public Shares are redeemable and would be classified
as such on the balance sheet until such date that a redemption event takes place.
If the Company is unable to complete the initial Business Combination
within the Combination Period, the Company 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 the Company to pay its franchise and income taxes (less up to $50,000 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 the Company’s remaining stockholders and the board of directors,
dissolve and liquidate, subject in each case to the Company’s 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 the Company’s
warrants, which will expire worthless if the Company fails to complete its initial Business Combination within Combination Period.
The Sponsor, officers and directors have agreed to (i) waive their
redemption rights with respect to their founder shares and Public Shares in connection with the completion of the initial Business Combination,
(ii) waive their redemption rights with respect to their founder shares and Public Shares in connection with a stockholder vote to approve
an amendment to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions
from the Trust Account with respect to their founder shares if the Company fails to complete the initial Business Combination within the
Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares
they hold if the Company fails to complete its initial Business Combination within the Combination Period.
The Company’s 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 (i) $10.20 per Public Share and (ii) the actual amount
per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.20 per share due to
reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third
party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not
such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against
certain liabilities, including liabilities under the Securities Act. However, the Company has not asked the Sponsor to reserve for such
indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity
obligations and believes that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that
the Sponsor would be able to satisfy those obligations.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Risks and Uncertainties
Management is currently evaluating 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 and/or search for a target company, the specific impact is not readily determinable as
of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military
action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic
sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is
not determinable as of the date of these condensed financial statements. The specific impact on the Company’s financial condition,
results of operations, and cash flows is also not determinable as of the date of these condensed financial statements.
Liquidity, Going Concern and Capital Resources
As of March 31, 2022, the Company had $987,740 in its operating bank
accounts, $175,951,033 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common
stock in connection therewith and working capital of $1,135,595, which excludes franchise and income taxes payable as such amounts can
be paid from the interest earned in the Trust Account. As of March 31, 2022, approximately $1,262 of the amount on deposit in the Trust
Account represented interest income, which is available to pay the Company’s tax obligations.
In addition, in order to finance transaction
costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). As of March 31,
2022, there were no amounts outstanding under any Working Capital Loans.
In connection with the Company's assessment of going concern considerations
in accordance with Financial Accounting Standard Board's Accounting Standards Update (“ASU”) 2014-15, “Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern,” the Company has until April 2023, to consummate a Business
Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. Additionally, the Company
may not have sufficient liquidity to fund the working capital needs of the Company until one year from the issuance of these financial
statements. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution
of the Company. Management has determined that the mandatory liquidation, should a Business Combination not occur, and potential subsequent
dissolution, raises substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets or liabilities should the Company be required to liquidate after April 2023. The Company intends to complete
a Business Combination before the mandatory liquidation date.
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 (“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 financial statements prepared in accordance with 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 prospectus for its IPO as filed with the SEC on
January 13, 2022, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on January 24, 2022. 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 periods.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of 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 independent registered public
accounting firm 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 stockholder approval of any golden parachute payments not previously approved.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make
comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an
emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use of Estimates
The preparation of the condensed financial statements
in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial
statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current
information becomes available and accordingly the actual results could differ significantly 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 March 31, 2022 and December 31, 2021. The Company held $987,740 and $19,542 in cash as of March 31, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At March 31, 2022, substantially all of the assets
held in the Trust Account were held in U.S. Treasury Bills. All of the Company’s investments held in the Trust Account are classified
as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains
and losses resulting from the change in fair value of investments held in the Trust Account are included in interest earned on marketable
securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held
in Trust Account are determined using available market information.
Class A Common Stock Subject to Possible
Redemption
The Company’s Class A common stock sold as part of the Units
in the IPO contains a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s
liquidation, or if there is a stockholder vote or tender offer in connection with the Company’s initial Business Combination. In
accordance with ASC 480-10-S99, the Company classifies such Public Shares subject to redemption outside of permanent equity as the redemption
provisions are not solely within the control of the Company. The Public Shares sold as part of the Units in the IPO will be issued with
other freestanding instruments (i.e., Public Warrants) and as such, the initial carrying value of Public Shares classified as temporary
equity will be the allocated proceeds determined in accordance with ASC 470-20. The Public Shares are subject to ASC 480-10-S99 and are
currently not redeemable as the redemption is contingent upon the occurrence of events mentioned above. According to ASC 480-10-S99-15,
no subsequent adjustment is needed if it is not probable that the instrument will become redeemable.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
At March 31, 2022, the Class A common stock reflected
in the condensed balance sheets are reconciled in the following table:
| Gross proceeds | |
$ | 172,500,000 | |
| Less: Fair value of Public Warrants at issuance | |
| (5,323,017 | ) |
| Less: Class A common stock issuance costs | |
| (9,435,678 | ) |
| Add: accretion of carrying value to redemption value | |
| 18,208,695 | |
| Class A common stock subject to possible redemption | |
$ | 175,950,000 | |
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of
ASC 340-10-S99-1, SEC Staff Accounting bulletin Topic 5A – “Expenses of Offering”, and SEC Staff Accounting bulletin
Topic 5T – “Accounting for Expenses or Liabilities Paid by Principal Stockholder(s)”. Offering costs consist principally
of professional and registration fees incurred through the balance sheet date that are related to the IPO. Offering costs directly attributable
to the issuance of an equity contract to be classified in equity are recorded as a reduction of equity. Offering costs for equity contracts
that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $10,799,030 as
a result of the IPO (consisting of $3,450,000 of underwriting commissions, $6,900,000 of deferred underwriting commissions and $449,030
of other offering costs), partially offset by the reimbursement of $1,035,000 of offering expenses by the underwriters. The Company immediately
expensed $27,670 of offering costs in connection with the Private Placement Warrants that were classified as liabilities.
Warrant Liabilities
The Company accounts for Private Placement Warrants
for shares of the Company’s common stock that are not indexed to its own shares as liabilities at fair value on the balance sheet.
The Private Placement Warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as
a component of other income (expense), net on the statement of operations. The Company will continue to adjust the liability for changes
in fair value until the earlier of the exercise or expiration of the warrants. At that time, the portion of the warrant liability related
to the warrants will be reclassified to additional paid-in capital.
Income Taxes
The Company accounts for income taxes under ASC
740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit
to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when
it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company
recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax
benefits and no amounts accrued for interest and penalties as of January 14, 2022. 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 effective tax rate differs from the statutory tax rate of 21% for the three
months ended March 31, 2022 and for the period from January 4, 2021 (inception) through March 31, 2021, primarily due to the change m
the fair value of the warrants liabilities and the valuation allowance recorded on the Company’s net operating losses.
The Company may be subject to potential examination
by federal and state taxing authorities in the areas of income taxes. 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.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
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 shares outstanding for the period. Remeasurement adjustment associated
with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates
fair value.
The calculation of diluted income (loss) per common share does not
consider the effect of the warrants issued in connection with the (i) IPO, and (ii) the private placement to purchase an aggregate of
8,037,500 shares of common stock in the calculation of diluted income (loss) per common share, since the exercise of the warrants is contingent
upon the occurrence of future events. As of March 31, 2021, the Company did not have any dilutive securities or other contracts that could
potentially be exercised or converted into shares of common stock and then share in the earnings of the Company. As a result, diluted
net income (loss) per common stock is the same as basic net income (loss) per common share for the periods presented.
The following table reflects the calculation
of basic and diluted net loss per common stock (in dollars, except per share amounts):
| | |
For the Three Months
Ended March 31, | |
| | |
2022 | |
| | |
Class A | | |
Class B | |
| Basic and diluted net income per common share | |
| | |
| |
| Numerator: | |
| | |
| |
| Allocation of net income, as adjusted | |
$ | 1,946,585 | | |
$ | 581,447 | |
| Denominator: | |
| | | |
| | |
| Basic and diluted weighted average stock outstanding | |
| 14,758,333 | | |
| 4,312,500 | |
| | |
| | | |
| | |
| Basic and diluted net income per common share | |
$ | 0.13 | | |
$ | 0.13 | |
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 Deposit Insurance Corporation
coverage of $250,000. The Company has not experienced losses on this account.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurements,” approximates
the carrying amounts represented in the balance sheet primarily due to their short-term nature, except for the warrant liabilities (see
Note 9).
Fair Value Measurements
The fair value of the Company’s assets
and liabilities approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
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. U.S. 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. |
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Derivative Financial Instruments
The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including
issued stock purchase warrants to determine if such instruments are derivatives or contain features that qualify as embedded derivatives,
pursuant to ASC 480 and ASC 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, will be re-assessed at the end of each reporting period.
Derivative warrant liabilities will be classified as non-current liabilities as their liquidation is not reasonably expected to require
the use of current assets or require the creation of current liabilities.
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
on January 1, 2024 for small reporting company and should be applied on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. The Company adopted ASU 2020-06 on January 1, 2022. Adoption of the ASU 2020-06 did not have an impact
the financial position, results of operations or cash flows.
Management does not believe that any recently
issued, but not effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial
statements.
NOTE 3. INITIAL PUBLIC OFFERING
On January 14, 2022, the Company sold 17,250,000 Units, (which included
2,250,000 Units issued pursuant to the full exercise of the over-allotment option) at a purchase price of $10.00 per Unit. Each Unit that
the Company offered had a price of $10.00 and consists of one share of Class A common stock, and one-half of one redeemable warrant. Each
whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.
Each warrant will become exercisable on the later of 30 days after the completion of the initial Business Combination or 12 months from
the closing of the IPO and will expire five years after the completion of the initial Business Combination, or earlier upon redemption
or liquidation.
On January 14, 2022, an amount of $175,950,000 ($10.20 per Unit) from
the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a Trust Account and
would be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company
Act having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act which invest only in direct U.S. government treasury obligations.
NOTE 4. PRIVATE PLACEMENT
The Company’s Sponsor purchased an aggregate of 8,037,500 warrants
at a price of $1.00 per warrant ($8,037,500 in the aggregate) in a private placement that closed simultaneously with the closing of the
IPO. On January 14, 2022, in connection with the underwriters’ election to fully exercise their over-allotment option, the Company
sold an additional 2,250,000 Private Placement Warrants to the Sponsor, at a price of $10.00 per Private Placement Warrant, generating
gross proceeds of $22,500,000. Each whole warrant is exercisable to purchase one share of Class A common stock at $11.50 per share. The
Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor, the underwriters
or their permitted transferees. If the Private Placement Warrants are held by holders other than the Sponsor, the underwriters or 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.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The Sponsor, officers and directors have agreed to (i) waive their
redemption rights with respect to their founder shares and Public Shares in connection with the completion of the initial Business Combination,
(ii) waive their redemption rights with respect to their founder shares and Public Shares in connection with a stockholder vote to approve
an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s
obligation to redeem 100% of the Public Shares if the Company does not complete the initial Business Combination within the Combination
Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity
and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company fails
to complete the initial Business Combination within the Combination Period, although they will be entitled to liquidating distributions
from the Trust Account with respect to any Public Shares they hold if the Company fails to complete the initial Business Combination within
the Combination Period.
The Company accounts for the Private Placement
Warrants in accordance with the guidance contained in FASB ASC 815-40. Such guidance provides that because the warrants do not meet the
criteria for equity treatment thereunder, each warrant must be recorded as a liability due to the existence of provisions whereby adjustments
to the exercise price of the Private Placement Warrants is based on a variable that is not an input to the fair value of a “fixed-for-fixed”
option and the existence of the potential for net cash settlement for the warrant holders (but not all stockholders) in the event of
a tender offer.
The accounting treatment of derivative financial
instruments requires that the Company record the Private Placement Warrants as derivative liabilities at fair value upon the closing
of the IPO. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability
will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company
will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the
warrants will be reclassified as of the date of the event that causes the reclassification.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On January 12, 2021, the Company issued 4,312,500
shares of Class B common stock to the initial stockholders for $25,000 in cash, or approximately $0.006 per share. The founder shares
included an aggregate of up to 562,500 shares subject to forfeiture if the over-allotment option was not exercised by the underwriters
in full. As of January 14, 2022, the over-allotment option was fully exercised and such shares are no longer subject to forfeiture.
The initial stockholders have agreed not to transfer,
assign or sell their founder shares until the earlier to occur of (i) one year after the date of the consummation of the Company’s
initial Business Combination or (ii) the date on which the Company consummates a liquidation, merger, stock exchange or other similar
transaction which results in all of the stockholders having the right to exchange their shares of Class A common stock for cash, securities
or other property. Any permitted transferees will be subject to the same restrictions and other agreements of the Company’s initial
stockholders with respect to any founder shares. Notwithstanding the foregoing, if the closing price of Class A common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing 150 days after the initial Business Combination, the founder shares will no
longer be subject to such transfer restrictions.
On November 29, 2021, the Sponsor entered into a subscription agreement
with Meteora Capital Partners, LP and affiliates (“Meteora”) pursuant to which Meteora commits to purchase 125,000 units of
Sponsor (the “Investor Units”) for an aggregate purchase price of $250,000. Each Investor Unit consists of interest on one
share of the Class B common stock of the Company and one-half of one Private Placement Warrant of the Company. Upon the closing of the
Initial Public Offering, Meteora and one of its affiliates, together purchased a total of 1,250,000 Units sold in the Initial Public Offering
at $10.00 per Unit.
Administrative Services Agreement
Commencing on the date of the IPO, the Company
has agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative
support. Upon completion of the initial Business Combination or liquidation, the Company will cease paying these monthly fees. For the
three months ended March 31, 2022 and 2021, the Company incurred and paid $30,000 and $0 in fees for these services, respectively.
Consulting Agreement
The Sponsor entered into a verbal consulting agreement
with Meteora pursuant to which it agrees to provide consulting services and advice, post the Initial Public Offering, through the business
combination process for $172,500. The amount was paid and expensed during the three months ended March 31, 2022.
Promissory Note — Related Party
On January 8, 2021, the Company issued an unsecured promissory note
to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 to be used for a portion of the
expenses of the IPO. This loan was non-interest bearing, unsecured and due at the earlier of March 31, 2022 or the closing of the IPO.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The loan was repaid in full upon the closing of
the IPO out of the offering proceeds that have been allocated to the payment of offering expenses (other than underwriting commissions).
The Company overpaid $26,615 to the Sponsor, which was returned by the Sponsor on January 19, 2022.
As of March 31, 2022 and December 31, 2021, there was $0 and $127,375
outstanding under the Promissory Note, respectively. The outstanding amount of was repaid at the closing of the IPO on January 14, 2021.
Related Party Loans
In order to finance transaction costs in connection
with an intended initial Business Combination, the Sponsor or 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 (“Working Capital Loans”). If the
Company completes the initial Business Combination, the Company would repay such Working Capital Loans out of the proceeds of the Trust
Account released to the Company. Otherwise, such Working Capital 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 Working Capital Loans but no proceeds from the Trust Account would be used to repay such Working Capital
Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into private placement-equivalent warrants at a price of $1.00
per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants, including as to exercise
price, exercisability and exercise period. At March 31, 2022 and December 31, 2021, no such Working Capital Loans were outstanding.
NOTE 6. COMMITMENTS
Registration Rights
The holders of the founder shares, Private Placement
Warrants, shares of Class A common stock underlying the Private Placement Warrants, and securities that may be issued upon conversion
of Working Capital Loans will have registration rights to require the Company to register a sale of any of the Company’s securities
held by them pursuant to a registration rights agreement to be signed prior to or on the effective date of the IPO. These holders will
be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale
under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities
in other registration statements filed by the Company.
Underwriting Agreement
The underwriters had a 45-day option from the
date of the IPO to purchase up to an additional 2,250,000 Units to cover over-allotments, if any. As of January 14, 2022, the over-allotment
was fully exercised. The underwriters received a cash underwriting discount of approximately 2% of the gross proceeds of the IPO, or $3,450,000.
Additionally, the underwriters are entitled to
a deferred underwriting discount of 4.0% of the gross proceeds of the IPO upon the completion of the Company’s initial Business
Combination. The underwriters also agreed to reimburse the Company $1,035,000 for certain expenses incurred by the Company in connection
with the IPO if the underwriters’ over-allotment option was exercised in full. The Company received the reimbursement on January
14, 2022, upon full exercise of the over-allotment option.
NOTE 7. STOCKHOLDER’S EQUITY (DEFICIT)
AND SHARES SUBJECT TO POSSIBLE REDEMPTION
Preferred Stock — The Company
is authorized to issue a total of 1,000,000 preferred shares at par value of $0.0001 each. At March 31, 2022 and December 31, 2021, there
were no shares of preferred shares issued or outstanding.
Class A Common Stock —
The Company is authorized to issue a total of 100,000,000 Class A common shares at par value of $0.0001 each. At March 31, 2022, there
were 17,250,000 shares of Class A common shares issued and outstanding, which were presented as temporary equity on the balance sheet
as shares subject to possible redemption. At December 31, 2021, there were no shares of Class A common stock issued or outstanding.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Class B Common Stock —
The Company is authorized to issue a total of 10,000,000 Class B common shares at par value of $0.0001 each. As of March 31, 2022 and
December 31, 2021, there were 4,312,500 shares of Class B common shares issued and outstanding. The founder shares included an aggregate
of up to 562,500 shares subject to forfeiture if the over-allotment option is not exercised by the underwriters in full. As of March
31, 2022 and December 31, 2021, the over-allotment option was fully exercised and such shares are no longer subject to forfeiture.
The initial stockholders have agreed not to transfer,
assign or sell their founder shares until the earlier to occur of (i) one year after the date of the consummation of the Company’s
initial Business Combination or (ii) the date on which the Company consummates a liquidation, merger, stock exchange or other similar
transaction which results in all of the stockholders having the right to exchange their shares of Class A common stock for cash, securities
or other property. Any permitted transferees will be subject to the same restrictions and other agreements of the Company’s initial
stockholders with respect to any founder shares. Notwithstanding the foregoing, if the closing price of Class A common stock equals or
exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing 150 days after the initial Business Combination, the founder shares will no
longer be subject to such transfer restrictions.
The shares of Class B common stock will automatically
convert into shares of the Company’s Class A common stock at the time of its initial Business Combination on a one-for-one basis,
subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment
as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued
in excess of the amounts offered in the IPO and related to the closing of the initial Business Combination, the ratio at which shares
of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding
shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number
of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an
as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the IPO plus
all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination.
Holders of the Class A common stock and holders
of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders,
with each share of common stock entitling the holder to one vote.
Public Warrants - Each warrant entitles the holder thereof to purchase one share of the
Company’s Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein. In addition, if (x) the
Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the
closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common
stock (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any
such issuance to the Sponsor or its affiliates, without taking into account any founder shares held by the Sponsor or its affiliates,
prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than
60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the
consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s
common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial
Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be
adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share
redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued
Price.
The warrants will become exercisable on the later
of 12 months from the closing of the IPO or 30 days after the completion of the initial Business Combination, and will expire five years
after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption
or liquidation.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The Company will not be obligated to deliver
any shares of Class A 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 Class A 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 Class A common
stock upon exercise of a warrant unless Class A 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 which case the purchaser of a unit containing such
warrants shall have paid the full purchase price for the unit solely for the shares of Class A common stock underlying such unit. In
no event will the Company be required to net cash settle any warrant.
Once the warrants become exercisable, the Company
may call the warrants for redemption (excluding the Private Placement Warrants):
| ● | in
whole and not in part; |
| |
● |
at a price of $0.01 per
warrant; |
| |
● |
upon not less than 30 days’
prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and |
| | ● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on each of 20 trading days within a 30-trading day period ending on the third business day before the Company sends the notice of redemption to the warrant holders. |
If the Company calls the warrants for redemption
as described above, the management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless
basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the management
will consider, among other factors, the Company’s cash position, the number of warrants that are outstanding and the dilutive effect
on the stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the warrants. If the
management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their 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” shall mean the average reported last sale
price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption
is sent to the holders of warrants.
The Company issued 8,037,500 Public Warrants in
connection with the IPO and accounted for them in accordance with the guidance contained in ASC 815-40. Such guidance provides that the
Public Warrants meet the criteria for equity treatment due to the existence of provisions whereby adjustments to the exercise price of
the warrants is based on a variable that is an input to the fair value of a “fixed-for-fixed” option and no circumstances
under which the Company can be forced to net cash settle the warrants.
INDUSTRIAL TECH ACQUISITIONS II, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 8. FAIR VALUE MEASUREMENTS
The following table presents information about
the Company’s liabilities that are measured at fair value on January 14, 2022 and March 31, 2022, and indicates the fair value
hierarchy of the valuation inputs the Company utilized to determine such fair value:
| | |
January 14,
2022 | | |
Quoted
Prices In
Active
Markets
(Level 1) | | |
Significant
Other
Observable
Inputs
(Level 2) | | |
Significant
Other
Unobservable
Inputs
(Level 3) | |
| Liabilities: | |
| | | |
| | | |
| | | |
| | |
| Warrant liability – Private Placement Warrants | |
$ | 5,084,187 | | |
$ | — | | |
$ | — | | |
$ | 5,084,187 | |
| | |
March 31,
2022 | | |
Quoted
Prices In
Active
Markets
(Level 1) | | |
Significant
Other
Observable
Inputs
(Level 2) | | |
Significant
Other
Unobservable
Inputs
(Level 3) | |
| Liabilities: | |
| | |
| | |
| | |
| |
| Warrant liability – Private Placement Warrants | |
$ | 2,036,091 | | |
$ | — | | |
$ | — | | |
$ | 2,036,091 | |
The Private Placement Warrants were accounted
for as liability in accordance with ASC 815-40 and are presented within liabilities on the balance sheet. The warrant liability is measured
at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability
in the statement of operations.
The Company used a Monte Carlo simulation model
to value the Private Placement Warrants. The Private Placement Warrants were classified within Level 3 of the fair value hierarchy at
the measurement dates due to the use of unobservable inputs. Inherent in pricing models are assumptions related to expected share-price
volatility, expected life and risk-free interest rate. The Company estimates the volatility of its common stock based on historical volatility
that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield
curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed
to be equivalent to their remaining contractual term.
The key inputs into the Monte Carlo simulation
model for the warrant liability were as follows at initial measurement:
| Input | |
January 14,
2022 | | |
March 31,
2022 | |
| Risk-free interest rate | |
| 1.65 | % | |
| 2.41 | % |
| Expected term (years) | |
| 6.13 | | |
| 5.90 | |
| Expected volatility | |
| 10.1 | % | |
| 3.2 | % |
| Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
| Fair value of common stock | |
$ | 9.69 | | |
$ | 9.95 | |
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the 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 condensed financial statements.