References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer toPTK Acquisition Corp. References to our "management" or our "management team" refer to our officers and directors and references to the "Sponsor" refer toPTK Holdings LLC . 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 Quarterly Report (the "Financial Statements"). Capitalized terms used but not otherwise defined herein have the meaning set forth in the Financial Statements. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Special Note Regarding Forward-Looking Statements This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company's 10-K/A for the fiscal year 2020 filed with theU.S. Securities and Exchange Commission (the "SEC") onJune 14, 2021 (the "FY 2020 10-K/A"). The Company's securities filings can be accessed on the EDGAR section of theSEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview We are a blank check company incorporated inDelaware onAugust 19, 2019 . We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the "Business Combination"). Our sponsor isPTK Holdings LLC , aDelaware limited liability company (the "Sponsor"). The registration statement for the initial public offering (the "Initial Public Offering") was declared effective onJuly 13, 2020 . OnJuly 15, 2020 , we consummated the Initial Public Offering of 11,500,000 units (each, a "Unit" and collectively, the "Units" and, with respect to the common stock included in the Units, the "Public Share(s)"), including the issuance of 1,500,000 Units as a result of the underwriters' exercise of their over-allotment option in full, at$10.00 per Unit, generating gross proceeds of$115.0 million , and incurring offering costs of approximately$7.3 million , inclusive of approximately$4.0 million in deferred underwriting commissions. Simultaneously with the closing of the Initial Public Offering, we consummated the private placement ("Private Placement") of 6,800,000 warrants (each, a "Private Placement Warrant" and collectively, the "Private Placement Warrants"), at a price of$0.50 per Private Placement Warrant to our Sponsor, generating gross proceeds to the Company of$3.4 million . In addition, upon the consummation of our Initial Public Offering, 600,000 additional private placement warrants were issued to our sponsor as a result of the conversion of a promissory note. Upon the closing of the Initial Public Offering and the Private Placement,$115.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account ("Trust Account"), located inthe United States withContinental Stock Transfer & Trust Company acting as trustee, and invested only inU.S. "government securities" within the meaning of Section 2(a)(16) of the Investment 17 -------------------------------------------------------------------------------- Table of Contents Company Act having a maturity of 185 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 directU.S. government treasury obligations, until the distribution of the Trust Account as described below. Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. If we are unable to complete a Business Combination within 18 months from the closing of the Initial Public Offering, orJanuary 15, 2022 (the "Combination Period"), 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 for a pro rata portion of the funds held in the Trust Account (net of interest that may be used by us to pay income taxes or other taxes) which redemption will completely extinguish the 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 holders of common stock and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations underDelaware law to provide for claims of creditors and the requirements of other applicable law. We will pay the costs of any liquidation following the redemptions from our remaining assets outside of the Trust Account. If such funds are insufficient, our Sponsor has agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no more than approximately$50,000 ) and has agreed not to seek repayment for such expenses. Proposed Business Combination OnMay 25, 2021 , we entered into a business combination agreement (as it may be amended, supplemented or otherwise modified from time to time, the "Business Combination Agreement") withValens Semiconductor Ltd. , a limited liability company organized under the laws of theState of Israel ("Valens") andValens Merger Sub, Inc. , aDelaware corporation and wholly owned subsidiary of Valens ("Merger Sub"), which provides for, among other things, a series of transactions where Merger Sub will merge with and into us (the "Business Combination"), with us surviving the Business Combination as a wholly-owned subsidiary of Valens. The Business Combination Agreement and the transactions contemplated thereby were unanimously approved by the Board of Directors of us onMay 24, 2021 . Refer to the preliminary prospectus, as filed with theSEC onJuly 15, 2021 for additional information. Results of Operations Our entire activity since inception throughJune 30, 2021 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for and efforts toward completing an 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 completion of our initial Business Combination. We generate non-operating income in the form of interest income from our investments held in the 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. For the three months endedJune 30, 2021 , we had net loss of approximately$1.3 million , which consisted of approximately$1.2 million general and administrative expenses,$30,000 of related part administrative fees and approximately$50,000 franchise tax expense, partially offset by approximately$3,000 in interest earned from investments held in the Trust Account. For the six months endedJune 30, 2021 , we had net loss of approximately$2.1 million , which consisted of approximately$2.0 million general and administrative expenses,$60,000 of related part administrative fees and approximately$99,000 franchise tax expense, partially offset by approximately$6,000 in interest earned from investments held in the Trust Account. 18 -------------------------------------------------------------------------------- Table of Contents For the three months endedJune 30, 2020 , we had net loss of approximately$98,000 , which consisted of approximately$201 general and administrative expenses and approximately$98,000 franchise tax expense. For the six months endedJune 30, 2020 , we had net loss of approximately$107,000 , which consisted of approximately$7,000 general and administrative expenses and approximately$100,000 franchise tax expense. Liquidity, Capital Resources and Going Concern As ofJune 30, 2021 , we had approximately$53,000 in cash and working capital deficit of approximately$2.2 million (not taken into account tax obligations of approximately$208,000 that may be paid using investment income earned from Trust Account). In order to meet our working capital needs following the consummation of the Initial Public Offering, our sponsor may, but is not obligated to, loan us funds, from time to time or at any time, in whatever amount it deems reasonable in its sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or, at our sponsor's discretion, up to$1.0 million of the notes may be converted upon consummation of our business combination into private warrants at a price of$0.50 per warrant (which, for example, would result in our sponsor being issued 1,000,000 private warrants at a purchase price of$0.50 per warrant if$500,000 of notes were so converted). If we do not complete a business combination, any outstanding loans from our sponsor, will be repaid only from amounts remaining outside our trust account, if any. Prior to the completion of the Initial Public Offering onJuly 15, 2020 , our liquidity needs were satisfied through the receipt of$25,000 from our Sponsor in exchange for the issuance of the founder shares, and a$300,000 promissory note issued to our Sponsor, which was converted into 600,000 private warrants upon closing of the Initial Public Offering. Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs have been satisfied with 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 may, but is 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 has determined that the working capital deficit raises substantial doubt about our ability to continue as a going concern until the earlier of the consummation of the Business Combination or the date we are required to liquidate,January 15, 2022 . The unaudited condensed financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern. OnJanuary 30, 2020 , theWorld Health Organization ("WHO") announced a global health emergency because of a new strain of coronavirus (the "COVID-19 outbreak"). InMarch 2020 , theWHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. Management continues to evaluate the impact of the COVID-19 outbreak and has concluded that the specific impact is not readily determinable as of the date of the balance sheets. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Contractual Obligations Registration Rights The holders of insider shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to certain demand and "piggyback" registration rights. Underwriting Agreement The underwriters were entitled to an underwriting discount of$0.20 per unit, or$2.3 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition,$0.35 per unit, or$4.0 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee is payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement. 19 -------------------------------------------------------------------------------- Table of Contents Right of First Refusal Subject to certain conditions, we grantedChardan Capital Markets, LLC , for a period of 15 months after the date of the consummation of the Business Combination, a right of first refusal to act as either (at our sole discretion) (a) a lead underwriter or (b) minimally as a co-manager, with at least 30% of the economics; or, in the case of a three-handed deal 20% of the economics, for any and all future public and private equity and debt offerings. In accordance with FINRA Rule 5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more than three years from the effective date of the registration statement related to the Initial Public Offering. Administrative Support Agreement We entered into an agreement to pay our Sponsor a total of up to$10,000 per month for overhead and administration support. Upon completion of the initial Business Combination or our liquidation, we will cease paying these monthly fees. We incurred$30,000 and$60,000 of such fees in the three and six months endedJune 30, 2021 , respectively. As ofJune 30, 2021 andDecember 31, 2020 ,$115,000 and$55,000 were included as accrued expenses - related party on the condensed balance sheets, respectively. Critical Accounting Policies and Estimates Use of Estimates This management's discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance withU.S. dollars in conformity with accounting principles generally accepted inthe United States of America ("U.S. GAAP"). The preparation of our unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Investments Held in Trust Account Our portfolio of investments held in the Trust Account is comprised ofU.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest inU.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company's investments held in the Trust Account are comprised ofU.S. government securities, the investments are classified as trading securities. When the Company's investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in net gain from investments held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. Derivative Warrant Liabilities We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate 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 Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity" ("ASC 480") and ASC Topic 815-15 "Derivatives and Hedging - Embedded Derivatives." The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. We account for the warrants issued in connection with its Private Placement and conversion of note payable as derivative liabilities in accordance with "Derivatives and Hedging-Contracts in Entity's Own Equity" ("Subtopic 20 -------------------------------------------------------------------------------- Table of Contents 815-40"): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity . Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The fair value of warrants issued in connection with the Private Placement and conversion of note payable have been estimated using modified Black-Scholes model at each measurement date. The determination of the fair value of the derivative warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are 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. Common Stock Subject to Possible Redemption We account for our stock subject to possible redemption in accordance with the guidance in ASC Topic 480. Common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, atJune 30, 2021 andDecember 31, 2020 , we had 9,840,987 and 10,052,015, respectively, of shares of common stock subject to possible redemption is presented as temporary equity, outside of the stockholders' equity section of our condensed balance sheets. Net Income (Loss) Per Share of Common Stock Net income (loss) per share of common stock is computed by dividing net (income) loss by the weighted-average number of common stock outstanding during the periods. We have not considered the effect of the warrants sold in the Initial Public Offering and Private Placement, as well as the warrants issued on the Note conversion to purchase an aggregate of 18,900,000 shares of common stock in the calculation of diluted loss per common stock, since the exercise of the warrants are contingent upon the occurrence of future events. As a result, diluted net loss per common stock is the same as basic net loss per common stock for the periods presented. Our statements of operations include a presentation of income (loss) per share of common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per share of common stock. Net income per share, basic and diluted, for common stock subject to possible redemption is calculated by dividing the proportionate share of interest income on investments held in Trust Account, net of applicable franchise and income taxes, by the weighted average number of common stock subject to possible redemption outstanding for the periods. Net loss per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the periods. Non-redeemable common stock includes Insider Shares and non-redeemable shares of Public Shares. Non-redeemable common stock participates in the interest income on investments held in Trust Account based on non-redeemable shares' proportionate interest. Recent Accounting Pronouncements InAugust 2020 , theFinancial Accounting Standards Board's ("FASB") issued Accounting Standards Update ("ASU") No. 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): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , which simplifies accounting for convertible instruments by removing major separation models required under currentU.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. We early adopted the ASU onJanuary 1, 2021 . Adoption of the ASU did not impact our financial position, results of operations or cash flows. 21 -------------------------------------------------------------------------------- Table of Contents Our management does not believe that any recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying financial statement. Off-Balance Sheet Arrangements As ofJune 30, 2021 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. Inflation We do not believe that inflation had a material impact on our business, revenues or operating results during the period presented. JOBS Act The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by thePublic Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier.
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