Integral Acquisition Corp 1 - Quarter Report: 2022 March (Form 10-Q)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware		86-2148394
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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, $0.0001 par value, and one half of one redeemable warrant		INTEU		The NASDAQ Stock Market LLC
Class A common stock, $0.0001 par value		INTE		The NASDAQ Stock Market LLC
Redeemable Warrants, each whole warrant exercisable for one share of Class A Common stock at an exercise price of $11.50		INTEW		The NASDAQ Stock Market LLC

☐		Large accelerated filer		☐		Accelerated filer
☒		Non-accelerated filer		☒		Smaller reporting company
				☒		Emerging growth company

		March 31, 2022				December 31, 2021
		(Unaudited)
Assets
Cash		$	950,360			$	1,309,165
Prepaid expense			285,452				250,943
Total current assets			1,235,812				1,560,108
Investments held in trust account			116,747,688				116,733,409
Other noncurrent assets			133,258				188,526
Total Assets		$	118,116,758			$	118,482,043
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit
Current liabilities:
Accrued offering costs and expenses		$	62,295			$	30,808
Franchise tax payable			50,000				174,845
Total current liabilities			112,295				205,653
Deferred underwriting commission			6,050,000				6,050,000
Forward Purchase Agreement liability			2,013,491				1,007,934
Total liabilities			8,175,786				7,263,587
Commitments and Contingencies (Note 6)
Class A common stock subject to possible redemption, 11,500,000 shares at redemption value of $10.15 per share			116,725,000				116,725,000
Stockholders’ Deficit							—
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding			—				—
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; none issued and outstanding, (excluding 11,500,000 shares subject to possible redemption)
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 2,875,000 shares issued and outstanding			288				288
Additional paid-in capital			—				—
Accumulated deficit			(6,784,316	)			(5,506,832	)
Total stockholders’ deficit			(6,784,028	)			(5,506,544	)
Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit		$	118,116,758			$	118,482,043

		For the Three Months ended March 31, 2022				For the period from February 16, 2021 (inception) through March 31, 2021
Formation and operating costs		$	286,206			$	18,048
Loss from operations			(286,206	)			(18,048	)
Other income (expense)
Unrealized loss on change in fair value of Forward Purchase Agreement liability			(1,005,557	)			—
Interest income			14,279				—
Total other loss			(991,278	)			—
Net loss		$	(1,277,484	)		$	(18,048	)
Basic and diluted weighted average shares outstanding, common stock subject to redemption			14,375,000				—
Basic and diluted net loss per common stock subject to redemption		$	(0.07	)		$	—
Basic and diluted weighted average shares outstanding, non-redeemable common stock			2,875,000				2,500,000
Basic and diluted net loss per non-redeemable common stock		$	(0.07	)		$	(0.01	)

										Additional								Total
		Common stock								Paid-in				Accumulated				Stockholders’
		Shares				Amount				Capital				Deficit				Deficit
Balance as of December 31, 2021			2,875,000			$	288			$	—			$	(5,506,832	)		$	(5,506,544	)
Net loss			—				—				—				(1,277,484	)			(1,277,484	)
Balance as of March 31, 2022 (unaudited)			2,875,000			$	288			$	—			$	(6,784,316	)		$	(6,784,028	)

										Additional								Total
		Common stock								Paid-in				Accumulated				Stockholder’s
		Shares				Amount				Capital				Deficit				Equity
Balance as of February 16, 2021 (inception)			—			$	—			$	—			$	—			$	—
Common stock issued to Sponsors			2,875,000				288				24,712				—				25,000
Net loss			—				—				—				(18,048	)			(18,048	)
Balance as of March 31, 2021 (unaudited)			2,875,000			$	288			$	24,712			$	(18,048	)		$	6,952

		For the three months ended March 31,				For the period from February 16, 2021 (inception) through March 31,
		2022				2021
Cash flows from Operating Activities:
Net loss		$	(1,277,484	)		$	(18,048	)
Adjustments to reconcile net income to net cash used in operating activities:
Formation costs paid by Sponsor in exchange for issuance of Class B common shares			—				2,131
Unrealized loss on change in fair value of Forward Purchase Agreement liability			1,005,557				—
Interest earned on investments held in Trust Account			(14,279	)			—
Changes in current assets and current liabilities:
Prepaid expenses			20,759				—
Accrued offering costs and expenses			31,487				15,917
Due to related party			(124,845	)			—
Net cash used in operating activities			(358,805	)			—
Cash flows from Financing Activities:
Proceeds from issuance of Founder Shares			—				25,000
Net cash provided by financing activities			—				25,000
Net change in cash			(358,805	)			25,000
Cash, beginning of the period			1,309,165				—
Cash, end of the period		$	950,360			$	25,000
Supplemental disclosure of noncash investing and financing activities:
Deferred offering costs paid by Sponsor in promissory note		$	—			$	94,865

Proceeds from IPO		$	115,000,000
Less: Proceeds allocated to Public Warrants			(5,750,000	)
Class A common stock issuance costs			(10,247,056	)
Plus:
Remeasurement of carrying value to redemption value			17,722,056
Class A common stock subject to possible redemption		$	116,725,000

		Three Months Ended March 31, 2022								For the Period from February 16, 2021 (Inception) Through March 31, 2021
		Class A				Class B				Class A				Class B
Basic and diluted net loss per share
Numerator:
Allocation of net loss, as adjusted		$	(1,064,570	)		$	(212,914	)		$	—			$	(18,048	)
Denominator:
Basic and diluted weighted average shares outstanding			14,375,000				2,875,000				—				2,500,000
Basic and diluted net loss per share		$	(0.07	)		$	(0.07	)		$	—			$	(0.01	)

•

to $9.20 if the aggregate purchase price paid by the forward purchaser at $10.00 per share would exceed the lesser of (i) a specified dollar amount and (ii) a specified percentage of the aggregate purchase price paid by the purchasers of the SPAC’s Class A common stock in private placements that occur on or prior to the date of the SPAC’s initial business combination (“PIPEs”);

•

and to below $9.20 if the price per share in any PIPE is less than $9.20 (in which case the price per share paid by the forward purchaser will be at an 8 % discount from the price per share in such PIPE).

•

Each forward purchase share is one share of the Company’s Class A common stock. No payment is due from the forward purchaser until immediately before the initial business combination. The purchase price is $10.00 per forward purchase share, subject to the discounted purchase price. The discounted purchase price is either at $9.20 per share or at an 8% discount to the PIPE price if the PIPE is priced below $9.20.

•

The conditions upon obtaining a $9.20 purchase price are within the control of the holder of the forward purchase share (the “FPA holder”) because the FPA holder will control the aggregate purchase price of the forward purchase shares to be purchased by the FPA holder and, in the case of the forward purchaser that is expected to purchase public units, such forward purchaser and its affiliates will control whether such forward purchaser and its affiliates sell or redeem more than 50% of the public units (or, following the separate trading of the public shares and the public warrants, the public shares) on or prior to the initial business combination. The FPA holder that is expected to purchase public units is assumed to have no negative economic impact from not selling or redeeming more than 50% of the public units (or, following the separate trading of the public shares and the public warrants) on or prior to the initial business combination since such forward purchaser would be selling at market price, without knowledge of future pricing, so that not selling or redeeming and realizing the 8% discount to market price on its future purchase is actually a positive feature to such FPA holder. Therefore, the Company’s management assumed that the likelihood of the FPA holder to have a $10.00 purchase price is de minimus.

•

Management assumed a PIPE would be priced below $9.20 per share only 5% of the time and would be priced at $9.00 per share when it is priced below $9.20 per share.

•

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 given after the warrants become exercisable (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) for any 20 trading days within a 30-trading   day period commencing once the warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders.

				Amortized Cost and Carrying Value				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
March 31, 2022		U.S. Treasury Securities		$	116,747,688				—			$	(18,450	)		$	116,728,888
December 31, 2021		U.S. Treasury Securities		$	116,733,409				—			$	(16,360	)		$	116,716,698

		Level 1				Level 2				Level 3
Assets
Investments held in Trust Account—U.S. Treasury		$	116,728,888			$	—			$	—
Liabilities
FPA		$	—			$	—			$	2,013,491

		Level 1				Level 2				Level 3
Assets
Investments held in Trust Account—U.S. Treasury		$	116,716,698			$	—			$	—
Liabilities
FPA		$	—			$	—			$	1,007,934

Input		March 31, 2022				December 31, 2021
Probability of successful business combination			85	%			85	%
Likelihood by 4/30/2022			0	%			5	%
Likelihood by 4/30/2023			80	%			80	%
Likelihood by 10/31/2023			20	%			15	%
Risk-free rate			1.75	%			0.51	%
Stock price		$	9.90			$	10.00
Estimated term remaining (years)			1.18				1.35

Fair Value at December 31, 2021		$	1,007,934
Change in fair value			1,005,557
Fair Value at March 31, 2022		$	2,013,491

Upon the closing of the IPO, management has agreed that an amount equal to at least $10.15 per Unit sold in the IPO, including the proceeds of the private placement warrants, will be held in a Trust Account (“Trust Account”), located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will invest only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 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 taxes, if any, the proceeds from the IPO and the sale of the private placement warrants will not be released from the Trust Account until the earliest of (i) the completion of initial Business Combination, (ii) the redemption of the Company’s public shares if we are unable to complete an initial Business Combination within 18 months from the closing of the IPO, subject to applicable law, or (iii) the redemption of the Company’s public shares properly submitted in connection with a stockholder vote to amend its amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of its public shares if the Company has not consummated an initial Business Combination within 18 months from the closing of the IPO or with respect to any other material provisions relating to stockholders’ rights or Business Combination activity. The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.

In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution, should we be unable to complete a business combination, raises substantial doubt about our ability to continue as a going concern. We have until May 5, 2023 to consummate a Business Combination. It is uncertain that we will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after May 5, 2023.

Management continues to evaluate the impact of the pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our 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.

As of March 31, 2022, we had not commenced any operations. All activity for the period from February 16, 2021 (inception) through March 31, 2022 relates to our formation and the IPO and since the closing of the IPO, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We will generate income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering and held in out Trust Account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

We comply with the requirements of the ASC Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO. Offering costs are allocated to the separable financial instruments to be issued in the IPO based on a relative fair value basis, compared to total proceeds received. Upon closing of the IPO on November 5, 2021, offering costs amounted to $10,757,787 consisting of $2,000,000 of underwriting commissions, $6,050,000 of deferred underwriting commissions, an excess of fair value of the Founder Shares acquired by the Anchor Investors of $3,386,739, and $556,048 of other offering costs (before $1,235,000 of offering costs reimbursed by the underwriter), of the total offering costs, $10,247,056 was charged to temporary equity and the remaining $510,731 is included in equity.

We account for the 3,000,000 forward purchase shares (as described in Note 6) issued pursuant to the Forward Purchase Agreements (the “FPA”) in accordance with the guidance contained in ASC Such guidance provides that because the FPA shares do not meet the criteria for equity treatment thereunder, each FPA share must be recorded as a liability. Accordingly, we classify each FPA share as a liability at its fair value. This liability is subject tore-measurement at each balance sheet date. With each such the FPA liability will be adjusted to fair value, with the change in fair value recognized in the statement of operations.

All of the 11,500,000 common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all shares of Class A common stock have been classified outside of permanent equity.

We account for the 10,700,000 warrants issued in connection with the IPO (comprised of 5,750,000 Public Warrants and 4,950,000 Private Placement Warrants) in accordance with the guidance contained in ASC Such guidance provides that the warrants described are not precluded from equity classification. Equity-classified contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.

In August 2020, FASB issued Accounting Standards Update (“ASU”) Debt—Debt with Conversion and Other Options (Subtopic and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic (“ASU 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 amends the diluted earnings per share guidance, including the requirement to use the method for all convertible instruments. ASU is effective January 1, 2022 and should be applied on a full or modified retrospective basis. On February 16, 2021, the date of the Company’s inception, the Company adopted the new standard.

The net proceeds of the initial public offering and the sale of the private placement warrants held in the Trust Account at J.P. Morgan Chase Bank, N.A., maintained by Continental, acting as trustee, have been invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2022, as such term is defined in Rules and under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that during the period covered by this report, our disclosure controls and procedures were not effective due to identified material weakness related to errors in fair value calculation of certain financial instruments and unrecorded liabilities. Management plans to enhance internal controls and procedures, including enhancing access to accounting literature, identification and consideration of third-party professionals with whom to consult regarding complex accounting applications and implementing additional layers of reviews in the financial close process.

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2022 covered by this Quarterly Report on that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on