NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
Note 1 – Description of Organization and Business Operations
LF Capital Acquisition Corp.
II (the “Company”) was incorporated in Delaware on February 19, 2021. The Company is a blank check company formed for the
purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar
business combination with one or more businesses or entities (the “Business Combination”). The Company has selected December
31 as its fiscal year end.
The Company is not limited to
a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging
growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2023, the Company
had not commenced any operations. All activity from February 19, 2021 (inception) through March 31, 2023, relates to the Company’s
formation and Initial Public Offering (“IPO”), which is described below and, since the IPO, the search for a prospective Business
Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the
earliest. The Company will generate non-operating income in the form of interest income earned on investments from the proceeds derived
from the IPO. The registration statement for the Company’s IPO was declared effective on November 16, 2021. On November 19, 2021,
the Company consummated the IPO and sold 22,500,000 units (“Units”) with each Unit consisting of one share of Class
A Common Stock and one-half of one redeemable warrant to purchase one share of Class A Common Stock at $11.50 per share (each, a
“Public Warrant”) at $10.00 per Unit, generating gross proceeds of $225,000,000, which is discussed in Note 3.
Simultaneously with the closing
of the IPO, the Company consummated the sale of warrants at a price of $1.00 per warrant in a private placement
(“Private Placement Warrants”) to the Company’s Sponsor, Level Field Capital II, LLC (the “Sponsor”), the
underwriter of the IPO and certain funds and accounts managed by subsidiaries of a strategic investor (the “anchor investor”),
generating gross proceeds of $ which is described in Note 4.
Simultaneously with the closing
of the IPO, the Company consummated the closing of the sale of 3,375,000 additional Units upon receiving notice of the underwriter’s
election to fully exercise its overallotment option (“Overallotment Units”), generating additional gross proceeds of $33,750,000.
Simultaneously with the exercise of the overallotment, the Company consummated the Private Placement of an additional 1,350,000 Private
Placement Warrants to the Sponsor and the underwriter, generating gross proceeds of $.
Offering costs for the IPO and
the exercise of the underwriter’s over-allotment option amounted to $15,030,508, consisting of $14,231,250 of underwriting
fees, of which $9,056,250 is deferred and held in the Trust Account (defined below) and $799,258 of other offering costs. As
described in Note 5, the $9,056,250 of deferred underwriting fees payable is contingent upon the consummation of a Business Combination
within 15 months from the closing of IPO (or, following the extension of the period of time to complete the initial business combination
up to six times by an additional period of one month each time for a total of up to 21 months), subject to the terms of the underwriting
agreement.
Following the closing of the
IPO and the exercise of the underwriter’s over-allotment option, $263,925,000 ($10.20 per Unit) from the net proceeds
from the sale of the Units in the IPO and the Private Placement Warrants were placed in a trust account (“Trust Account”)
and have been invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of
1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company
that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of
Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account, as described below.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the IPO 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. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial
Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the
deferred underwriting fees and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial
Business Combination. However, the Company will only complete a Business Combination if the post-transaction 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. There is no assurance the Company will be
able to successfully effect a Business Combination.
The Company will provide the
holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the
Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business
Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares
for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20 per Public Share, plus any pro rata
interest then in the Trust Account, net of taxes payable). The warrants will subject to redemption, as further described in Note 6.
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 Company’s Business Combination and in connection with certain amendments
to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”) 480, “Distinguishing
Liabilities from Equity” (“ASC 480”) Subtopic 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
was the allocated proceeds determined in accordance with ASC 470-20 “Debt with Conversion and other Options”. 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. Although redemptions cannot cause the Company’s
net tangible assets to fall below $5,000,001, the Public Shares are redeemable and are classified as such on the balance sheet until the
date on which such a redemption event takes place.
Redemptions of the Company’s
Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to
the Company’s Business Combination. If the Company seeks stockholder approval of the Business Combination, the Company will proceed
with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such other vote as required
by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the
Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to the Certificate of Incorporation,
conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements,
or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction
with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval
in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 4) and any Public Shares
purchased during or after the IPO in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem
their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing,
the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person
with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate
of 15% or more of the Class A Common Stock sold in the Initial Public Offering, without the prior consent of the Company.
The Company’s Sponsor,
officers and directors (collectively, the “Initial Stockholders”) have agreed not to propose an amendment to the Certificate
of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the
Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their
shares of Class A Common Stock in conjunction with any such amendment.
If the Company is unable to complete
a Business Combination within 15 months from the closing of the IPO (unless extended in connection with an Extension Election as described
below or as a result of an amendment to our amended and restated certificate of incorporation, which would require the approval of the
holders of at least 65% of all of the Company’s then outstanding common stock) (“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 the Company’s
franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding
Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive
further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the Company’s remaining stockholders and the Company’s 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.
On February 14, 2023, pursuant
to the terms of the Amended and Restated Certificate of Incorporation of the Company, our Sponsor, the holder of an aggregate of 6,388,750
shares of the Company’s Class B Common Stock, par value $0.0001 per share (“Class B Common Stock”), elected to convert
6,268,750 shares of the Class B Common Stock held by it on a one-for-one basis into Class A Common Stock, par value $0.0001 per share
(“Class A Common Stock”) of the Company, with immediate effect. Following such conversion, as of February 14, 2023, the Company
had an aggregate of 32,143,750 shares of Class A Common Stock issued and outstanding and 200,000 shares of Class B Common Stock issued
and outstanding.
On February 15, 2023, the Company
signed a letter of intent with the Target Company for a potential business combination which, if completed, would qualify as its initial
business combination. The letter of intent is non-binding with respect to all its material terms, except with respect to provisions regarding
a limited period of exclusivity. The Target Company is a US-based manufacturer in the packaging industry with industry-leading profitability
serving diversified end markets and with an established and highly attractive, blue-chip customer base that are subject to multi-year
contracts.
On February 15, 2023,
the Company held a special meeting of its stockholders (the “Special Meeting”) to vote on a proposal to amend the Company’s
Amended and Restated Certificate of Incorporation (the “Charter”) to increase the monthly extension payment per one-month
extension of the deadline to complete the initial business combination to $0.04 per share of the Company’s Class A Common
Stock (the “Charter Amendment Proposal”). The Company convened and adjourned the Special Meeting, without conducting
any business and the Company adjourned the meeting until February 17, 2023. On February 17, 2023, the Company reconvened the Special
Meeting at which its stockholders approved the Charter Amendment Proposal. In connection with the vote to approve the Charter Amendment
Proposal, holders of 14,574,581 shares of Class A Common Stock properly exercised their right to redeem their shares of Class A
Common Stock at a redemption price of approximately $10.35 per share, for an aggregate redemption amount of approximately $150,738,777.
As such, approximately 56% of the Class A Common Stock outstanding with redemption rights was redeemed and approximately 11,300,419
shares of the Class A Common Stock remain outstanding.
On February 21, 2023, the Company
issued a promissory note (the “2023 Note”) in the aggregate principal amount of up to $2,712,101 (the “Extension Funds”)
to our Sponsor, pursuant to which a portion of the Extension Funds may be deposited into the Trust Account for each share of Class A Common
Stock sold in the Company’s initial public offering that was not redeemed in connection with increase of the redemption price set
forth in the Charter Amendment Proposal. On February 21, 2023 and April 19, 2023, the Company drew down $452,016.76 under the 2023 Note
to fund the extension payments. As of March 31, 2023, the amount borrowed against the 2023 Note was $904,034 and $1,808,067 is available
for withdrawal.
On March 13, 2023, Scott Reed
resigned from the board of directors of the Company and from his positions as President and Chief Executive Officer. Mr. Reed did not
resign as a result of any dispute or disagreement with the Company or board of directors on any matters relating to the Company’s
operations, policies or practices. Mr. Reed will continue to serve as an advisor to the Company. On March 13, 2023, Elias Farhat, who
is also a member of the board of directors, was appointed as the new Chief Executive Officer.
On March 13, 2023, the Company
announced that Djemi Traboulsi, Senior Vice President and Managing Director of the Company, was appointed to the board of directors, to
serve until the 2024 annual meeting of stockholders of the Company and until his successor is elected and qualified.
On March 21, 2023, Djemi Traboulsi
resigned from his position as Senior Vice President and Managing Director. Mr. Traboulsi did not resign as a result of any dispute or
disagreement with the Company or board of directors on any matters relating to the Company’s operations, policies or practices.
Mr. Traboulsi will continue to serve as a member of the board of directors of the Company.
The Initial Stockholders have
agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within
the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the Initial Public Offering, they
will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete
a Business Combination within the Combination Period. The underwriter has agreed to waive its rights to its deferred underwriting fees
(see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period,
and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption
of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available
for distribution (including Trust Account assets) will be only $10.20 per share held in the Trust Account. In order to protect the amounts
held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party
who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims
under the Company’s indemnity of the underwriter against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against
a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to
reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all
vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or
other entities with which the Company does business, execute agreements waiving any right, title, interest or claim of any kind in or
to monies held in the Trust Account.
Risks
and Uncertainties
In March 2020,
the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread
throughout the United States and the world. As of the date the financial statements were issued, there is considerable uncertainty around
the expected duration of this pandemic. Management continues to evaluate the impact of the COVID-19 pandemic, and the Company has concluded
that, while it is reasonably possible that COVID-19 could have a negative effect on the Company’s ability to identify a target company
for a Business Combination, the specific impact is not readily determinable as of the date of the unaudited condensed financial statements.
The unaudited condensed 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 are not determinable as of the date of these financial statements and 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
financial statements.
Inflation Reduction Act of 2022
On August 16, 2022,
the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things,
a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic
subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing
corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market
value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations
are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the
same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”)
has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other
repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject
to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination,
extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases
in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and
amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection
with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and
other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder,
the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available
on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
Liquidity
and Going Concern
As of March 31, 2023, the Company
had $118,929 in its operating bank account, $118,600,787 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 deficit of $2,561,887.
In connection with the
Company’s assessment of going concern considerations in accordance with the authoritative guidance in FASB Accounting Standards
Update (“ASU”) Subtopic 205-40, “Presentation of Financial Statements-Going Concern,” management has determined
that should the Company be unable to complete a Business Combination, the mandatory liquidation and subsequent dissolution described
in Note 1 of the financial statements that would follow, raises substantial doubt about the Company’s ability to continue
as a going concern. The Company originally had until February 19, 2023 to consummate a Business Combination. On February 15, 2023,
the Company held a special meeting of its stockholders (the “Special Meeting”) to vote on a proposal to amend the
Company’s Amended and Restated Certificate of Incorporation (the “Charter”) to increase the monthly extension
payment per one-month extension of the deadline to complete the initial business combination to $0.04
per share of the Company’s Class A Common Stock (the “Charter Amendment Proposal”). The Company convened and
adjourned the Special Meeting, without conducting any business and the Company adjourned the meeting until February 17, 2023.
On February 17, 2023, the Company reconvened the Special Meeting at which its stockholders approved the Charter Amendment Proposal
which included extending the Business Combination Period to August 19, 2023. In connection with the vote to approve the Charter
Amendment Proposal, holders of 14,574,581 shares of Class A Common Stock properly
exercised their right to redeem their shares of Class A Common Stock at a redemption price of approximately $10.35
per share, for an aggregate redemption amount of approximately $150,738,777.
As such, approximately 56% of the Class A Common Stock outstanding
with redemption rights was redeemed and approximately 11,300,419 shares of the redeemable Class A Common
Stock remain outstanding. It is uncertain that the Company will be able to consummate a Business Combination by the specified
period. If a Business Combination is not consummated by August 19, 2023, there will be a mandatory
liquidation and subsequent dissolution.
On February 21, 2023, the Company
issued a promissory note (the “2023 Note”) in the aggregate principal amount of up to $2,712,101 to our Sponsor (the “Extension
Funds”), pursuant to which the Extension Funds will be deposited into the Trust Account for each share of Class A Common Stock of
the Company that was not redeemed in connection with increase of the redemption price set forth in the Charter Amendment Proposal. On
February 21, 2023, the Company drew down $452,016.76 under the 2023 Note to fund the first extension payment.
Also, in connection with the
Company’s assessment of going concern considerations in accordance with the ASU Subtopic 205-40 management has determined that if
the Company is unable to raise additional funds to alleviate liquidity needs as well as complete a Business Combination by August 19,
2023 (or such earlier date if the Company does not exercise its option(s) to extend the deadline) then the Company will cease all operations
except for the purpose of liquidating. The liquidity condition as well as the date for mandatory liquidation and subsequent dissolution
raise substantial doubt about the Company’s ability to continue as a going concern..
These financial statements do
not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
Note 2 — Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying unaudited condensed
financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of
America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do
not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the unaudited condensed financial
statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and
results for the periods presented. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results
that may be expected through December 31, 2023.
The accompanying unaudited condensed
financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report
on Form 10-K filed by the Company with the SEC on March 23, 2023.
Emerging Growth Company
The Company is an emerging growth
company as defined in Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which 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 an emerging
growth 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 an 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, will adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the
Company’s unaudited condensed financial statement with those of another public company that is neither an emerging growth company
nor an emerging growth company that 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 financial
statements in conformity with U.S. 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. Making estimates requires management to exercise significant judgment. Such estimates may be
subject to change as more current information becomes available and accordingly the actual results could differ significantly from those
estimates. It is at least reasonably possible that the estimate of the effects 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. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term
investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any
cash equivalents as of March 31, 2023 and December 31, 2022.
Investments Held in Trust Account
At March 31, 2023 and December
31, 2022, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities. 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 Trust Account are included
in unrealized gains on marketable securities held in Trust Account in the accompanying unaudited condensed statements of operations. The
estimated fair values of investments held in Trust Account are determined using available market information.
Convertible Promissory Note
The Company accounts
for its convertible promissory note under ASC 815, “Derivatives and Hedging” (“ASC 815”). Under 815-15-25, the
election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825, “Financial
Instruments” (“ASC 825”). The Company has made such election for its convertible promissory note. Using the fair value
option, the convertible promissory note is required to be recorded at its initial fair value on the date of issuance and each balance
sheet date thereafter. Differences between the face value of the note and fair value at issuance are recognized as either an expense in
the statements of operations (if issued at a premium) or as a capital contribution (if issued at a discount). Changes in the estimated
fair value of the notes are recognized as non-cash gains or losses in the condensed statements of operations.
Offering Costs Associated with the Initial Public
Offering
Offering costs amounted
to $15,030,508, of which $14,621,728 and $408,779 were charged against the carrying value of Class A Common Stock and public
and private warrants, respectively, as of November 19, 2021, based on the relative value of the common shares and public and private Warrants.
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times,
may exceed the Federal Depository Insurance Corporation limit of $250,000. At March 31, 2023 and December 31, 2022, the Company has not
experienced losses on these accounts, and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,”
equals or approximates the carrying amounts represented in the accompanying unaudited condensed balance sheets, primarily due to their
short-term nature.
Income Taxes
The Company accounts for income
taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities
and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of March
31, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it.
The Company’s effective tax rate was 33.55% and 0.00% for the three months ended March 31, 2023 and 2022, respectively. The effective tax rate differs from the
statutory tax rate of 21% for the three months ended March 31, 2023 and 2022, due to the change in valuation allowance on the deferred
tax assets.
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 has identified the
United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities
since inception. The company has not recorded any unrecognized tax benefits since inception. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Class A Common Stock Subject to Possible Redemption
The Company follows the two-class
method to calculate earnings per ordinary share. The Company accounts for its Class A Common Stock subject to possible redemption in accordance
with the guidance in ASC 480. Conditionally redeemable Class A Common Stock (including Class A 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 the
Company’s control) is classified as temporary equity. At all other times, Class A Common Stock is classified as stockholders’
equity. The Company’s Class A Common Stock sold in the IPO and in connection with the exercise of the underwriter’s over-allotment
option feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of
uncertain future events. Accordingly, on March 31, 2023 and December 31, 2022, 11,300,419 shares of Class A Common Stock subject
to possible redemption is presented as temporary equity.
In connection with the
vote to approve the Charter Amendment Proposal, holders of 14,574,581
shares of Class A Common Stock properly exercised their right to redeem their shares of Class A Common Stock at a redemption price
of approximately $10.35 per share, for an aggregate redemption amount
of approximately $150,738,777. As such, approximately 56%
of the Class A Common Stock outstanding with redemption rights was redeemed and approximately 11,300,419
shares of the redeemable Class A Common Stock remain outstanding.
On February 21, 2023, the Company
issued a promissory note (the “2023 Note”) in the aggregate principal amount of up to $2,712,101 (the “Extension Funds”)
to our Sponsor, pursuant to which a portion of the Extension Funds may be deposited into the Trust Account for each share of Class A Common
Stock sold in the Company’s initial public offering that was not redeemed in connection with increase of the redemption price set
forth in the Charter Amendment Proposal. On February 21, 2023 and April 19, 2023, the Company drew down $452,017 under the 2023 Note to
fund the extension payments. As of March 31, 2023, the amount borrowed against the 2023 Note was $904,034 and contributed to the Trust
Account.
Immediately upon the closing
of the IPO and the exercise of the underwriter’s over-allotment option, the Company recognized the accretion from the initial book
value to redemption amount value. The change in the carrying value of redeemable shares of Class A Common Stock resulted in charges against
additional paid-in capital and accumulated deficit.
As of March 31, 2023 and December
31, 2022 the shares of Class A Common Stock reflected on the unaudited condensed balance sheet are reconciled on the following table:
Schedule of reconciled balance sheet | |
| | |
Gross proceeds | |
$ | 258,750,000 | |
Less | |
| | |
Fair value of Public Warrants at issuance | |
| (6,727,500 | ) |
Class A shares issuance costs | |
| (14,621,728 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 26,524,228 | |
Class A Common Stock subject to possible redemption at December 31, 2021 | |
| 263,925,000 | |
Remeasurement of carrying value to redemption value | |
| 2,671,313 | |
Class A Common Stock subject to possible redemption at December 31, 2022 | |
| 266,596,313 | |
Less: Redemptions | |
| (150,738,777 | ) |
Plus: Remeasurement of Class A ordinary shares to redemption value | |
| 2,500,216 | |
Class A Common Stock subject to possible redemption at March 31, 2023 | |
$ | 118,357,752 | |
Net income (loss) per Common Share
The Company has two classes of
shares, which are referred to as Class A Common Stock and Class B Common Stock (the “Founder Shares”). Earnings and losses
are shared pro rata between the two classes of shares. A total of 12,937,500 Public Warrants (see Note 3) and 12,350,000 Private
Placement Warrants (see Note 4) to purchase an aggregate of 25,287,500 shares of Class A Common Stock at $11.50 per
share were issued on November 19, 2021. At March 31, 2023, no Public Warrants or Private Placement Warrants have been exercised.
The 25,287,500 shares of Class A Common Stock for which the outstanding Public Warrants and Private Placement Warrants are exercisable
were excluded from diluted earnings per share for the period ended March 31, 2023 and 2022 because they are contingently exercisable,
and the contingencies have not yet been met. The calculation does not include the warrants that could be issued as a result of the conversion
option in the convertible promissory note. As a result, diluted net loss per share of common stock is the same as basic net income loss
per share of common stock for the period. The table below presents a reconciliation of the numerator and denominator used to compute basic
and diluted net loss per share for each class of stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, |
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
|
Class A-redeemable common stock |
|
|
|
and Class B non- redeemable Common stock |
|
|
|
Class-A redeemable common stock |
|
|
|
Class-B non-redeemable common stock |
|
Basic and diluted net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net income (loss) |
|
$ |
638,635 |
|
|
$ |
217,463 |
|
|
$ |
(254,043 |
) |
|
|
(63,511 |
) |
Remeasurement for Class A Common Stock to redemption value |
|
|
2,500,216 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss) |
|
$ |
3,138,851 |
|
|
$ |
217,463 |
|
|
$ |
(254,043 |
) |
|
|
(63,511 |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
18,997,108 |
|
|
|
6,468,750 |
|
|
|
25,875,000 |
|
|
|
6,468,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and dilution net income (loss) per share |
|
$ |
0.17 |
|
|
$ |
0.03 |
|
|
$ |
(0.01 |
) |
|
|
(0.01 |
) |
Warrant Instruments
The Company accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable
authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the instruments are free standing financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements
for equity classification under ASC 815, including whether the instruments are indexed to the Company’s
own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside
of the Company’s control, among other conditions for equity classification. This assessment,
which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date
while the instruments are outstanding. Management has concluded that the Public Warrants
and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
Stock Compensation Expense
In connection with the Company’s
IPO, founder’s shares were sold to certain independent directors by the Sponsor at the price of $ per share.
The Company accounts for stock-based
compensation expense in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”) under which
stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the
requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a
given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized
once the event is deemed probable to occur. Forfeitures are recognized as incurred.
The fair value of the 80,000
founder shares sold to certain independent directors as of November 19, 2021, was $627,119, or $7.84 per share. The Company used
a Monte Carlo Model Simulation to arrive at the fair value of the stock compensation. The key assumptions in the option pricing model
utilized are assumptions related to expected separation date of Units, anticipated business combination date, purchase price, share-price
volatility, expected term, exercise date, risk-free interest rate and present value. The expected volatility as of the IPO Closing Date
was derived based upon similar SPAC warrants and technology exchange traded funds which aligns with Company’s stated industry target
and present value factor was based on risk-free rate and terms until the exercise date. The Company’s Founder Shares sold to independent
directors (see Note 4) were deemed within the scope of ASC 718 and are subject to a performance condition, namely the occurrence of a
Business Combination. Compensation expense related to the Founder Shares transferred is recognized only when the performance condition
is probable of occurrence, or more specifically when a Business Combination is consummated. Therefore, no stock-based compensation expense
has been recognized during the period from February 19, 2021 (inception) through March 31, 2023.
Recent Accounting Pronouncements
The Company has reviewed recent
accounting pronouncements and concluded that they are either not applicable to the Company, or no material effect is expected on the financial
statement as a result of future adoption.
Note 3 — Initial Public Offering
Pursuant to the IPO, and including
the underwriter’s exercise of its over-allotment option, the Company sold 25,875,000 Units at a price of $10.00 per
Unit resulting in gross proceeds of $258,750,000 and net proceeds of $243,738,425 after deduction of offering costs. Each Unit
consists of one Public Share and one-half of one Public Warrant. Each Public Warrant entitles the holder to purchase one share of Class
A Common Stock at a price of $11.50 per share, subject to adjustment (see Note 6).
Note 4 — Related Party Transactions
Founder Shares
On March 5, 2021, the Sponsor
acquired shares of the Company’s common stock. On March 15, 2021, the Company effectuated a recapitalization of the
Company, which included a 64,687.50-for-1 stock split, resulting in an aggregate of 6,468,750 Founder Shares outstanding. On
June 21, 2021, the Company effectuated a recapitalization of the Company, which included a 1.11-for-1 stock split, resulting in an
aggregate of 7,187,500 Founder Shares outstanding. On October 26, 2021, the Company effectuated a recapitalization of the Company,
which included a 1-for-1.11 reverse stock split, resulting in an aggregate of 6,468,750 Founder Shares outstanding (up
to 843,750 of which were subject to forfeiture if the underwriter’s over-allotment option was not exercised in full).
Since the underwriter exercised its over-allotment option in full, the Sponsor did not forfeit any Founder Shares. The Sponsor subsequently
transferred an aggregate of 80,000 Founder Shares to the members of the Company’s board of directors for the same per-share
consideration that it originally paid for such shares, resulting in the Sponsor holding Founder Shares.
The Founder Shares will automatically
convert into shares of Class A Common Stock at the time of the Company’s initial Business Combination and are subject to certain
transfer restrictions. Holders of Founder Shares may also elect to convert their shares of Class B Common Stock into an equal number of
shares of Class A Common Stock, subject to adjustment, at any time.
On February 14, 2023, pursuant
to the terms of the Amended and Restated Certificate of Incorporation of the Company, our Sponsor, the holder of an aggregate of
shares of the Company’s Class B Common Stock, par value $0.0001 per share (“Class B Common Stock”), elected to convert
6,268,750 shares of the Class B Common Stock held by it on a one-for-one basis into Class A Common Stock, par value $0.0001 per share
(“Class A Common Stock”) of the Company Following such conversion, as of February 14, 2023, the Company had an aggregate of
32,143,750 shares of Class A Common Stock issued and outstanding and 200,000 shares of Class B Common Stock issued and outstanding. All of the Class A Common Stock converted from Class B Common Stock, was still considered non-redeemable
with the same restrictions as the Class B Common Stock prior to the conversion. This resulted in 25,875,000 shares of Class A Common
Stock being redeemable and 6,268,750 Class A Common Stock being non-redeemable. Following the conversion, in connection with the
extension, the 14,574,581 Class A Common Stock was redeemed, resulting in 11,300,419 redeemable Class A Common Stock and 6,268,750
of non-redeemable Class A Common Stock remaining.
The Initial Stockholders have
agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A)
one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last
sale price of the 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 at least 150 days after the initial
Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction
that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
Private Placement
On November 19, 2021, simultaneously
with the consummation of the IPO and the underwriter’s exercise of its over-allotment option, the Company consummated the issuance
and sale of 12,350,000 Private Placement Warrants in a Private Placement at a price of $1.00 per Private Placement Warrant,
generating gross proceeds of $12,350,000. Each Private Placement Warrant is exercisable to purchase one share of Class A Common Stock
at a price of $11.50 per share. A portion of the proceeds from the Private Placement was added to the proceeds from the IPO being
held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the
sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable
law), and the Private Placement Warrants and all underlying securities will be worthless.
Convertible Promissory Note – Related Party
On April 13, 2022, the Sponsor
agreed to loan the Company an aggregate of up to $1,500,000 pursuant to a promissory note (the “Convertible Note”). The Convertible
Note is non-interest bearing and payable in full on February 19, 2023, unless extended. At the Company’s discretion, the Convertible
Note may be converted into warrants of the Company at a price of $1.00 per warrant. The warrants would be identical to the Private Placement
Warrants.
On April 13, 2022, June 30, 2022
and August 31, 2022, the Company drew down $250,000, $200,000 and $175,000, respectively, under the Convertible Note. The fair value of
the $250,000 drawn on April 13, 2022 was estimated by the Company to be $229,333 at initial measurement. The $20,668 excess proceeds over
fair value was recognized in additional paid-in capital. The fair value of the $200,000 drawn on June 30, 2022 was estimated to be
$183,030 at initial measurement. The $16,970 excess proceeds over fair value was recognized in additional paid-in capital. The
fair value of the $175,000 drawn on August 31, 2022 was estimated to be $88,784 at initial measurement. The $123,853 excess
proceeds over fair value was recognized in additional paid-in capital.
On January 31, 2023, the Company
drew down $225,000 under the Convertible Note. The fair value of the $225,000 drawn was estimated by the Company to be $38,999 at initial
measurement. The $186,001 excess proceeds over fair value was recognized in additional paid-in capital. The aggregate fair value of the
Convertible Note was estimated to be $151,473 and $75,851 at March 31, 2023 and December 31, 2022, respectively.
Related Party Loans
On March 5, 2021, the Sponsor
agreed to loan the Company an aggregate of up to $ to cover expenses related to the IPO pursuant to a promissory note (the
“Note”). On June 18, 2021, the Sponsor amended the Note to increase the principal amount to $. The loan was non-interest
bearing and payable on the earlier of March 31, 2022 or the completion of the IPO. A total of $ under the Note was borrowed
from the Sponsor and repaid in full from the proceeds of the Initial Public Offering not being placed in the Trust Account on November
19, 2021.
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, loan the Company funds as may be required (“Working Capital Loans”).
If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing,
the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.
The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s
discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity
at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
On February 21, 2023, the Company
issued a promissory note (the “2023 Note”) in the aggregate principal amount of up to $ (the “Extension Funds”)
to our Sponsor, pursuant to which a portion of the Extension Funds may be deposited into the Trust Account for each share of Class A Common
Stock sold in the Company’s initial public offering that was not redeemed in connection with increase of the redemption price set
forth in the Charter Amendment Proposal. On February 21, 2023 and April 19, 2023, the Company drew down $ under the 2023 Note to
fund the extension payments. As of March 31, 2023, the amount borrowed against the 2023 Note was $ and $ is available
for withdrawal.
Support Services
Effective November 16, 2021,
the Company entered into an Administrative Support Agreement with an entity affiliated with the Sponsor for office space and administrative
support services at a monthly fee of $15,000. Since the consummation of the IPO, the Company has paid, and intends to continue paying
until the earlier of the consummation of the Business Combination or the Company’s liquidation, a fee of approximately $15,000 per
month. The Company recognized $45,000 for the three months ending March 31, 2023 and 2022, respectively, of which such amounts has
been accrued for these services and is included in “Accounts payable and accrued expenses” in the accompanying unaudited condensed
balance sheets.
Note 5 — Commitments and Contingencies
Registration Rights
The holders of Founder Shares,
Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration
rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A Common Stock) pursuant to a registration
rights agreement, dated November 16, 2021. These holders will be entitled to certain demand and “piggyback” registration rights.
However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities
Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear
the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter
a 45-day option from the date of the final prospectus relating to the IPO to purchase up to 3,375,000 additional Units
to cover over-allotments, if any, at the IPO price less underwriting fees. On November 19, 2021, the underwriter elected to fully exercise
its over-allotment option, purchasing 3,375,000 of such additional Units.
The underwriter was paid a cash
underwriting discount of $0.20 per Unit sold in the IPO, including the Units issued in connection with the underwriter’s exercise
of its over-allotment option, or $5,175,000 in the aggregate at the closing of the IPO. In addition, the underwriter is entitled
to a deferred underwriting fee of $0.35 per unit, or $9,056,250, from the closing of the IPO and the exercise of the underwriter’s
over-allotment option. The deferred underwriting fees will become payable to the underwriter from the amounts held in the Trust Account
solely if the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Excise Tax
In connection with the vote to approve the Charter Amendment Proposal, holders of 14,574,581 shares of Class A Common Stock
properly exercised their right to redeem their shares of Class A Common Stock for an aggregate redemption amount of approximately $150,738,777.
As such the Company has recorded a 1% excise tax liability in the amount of $1,507,388 on the condensed balance sheets as of March 31,
2023. The liability does not impact the condensed statements of operations and is offset against additional paid-in capital or accumulated
deficit if additional paid-in capital is not available. This excise tax liability can be offset by future share issuances within the same
fiscal year which will be evaluated and adjusted in the period in which the issuances occur. Should the Company liquidate prior to December
31, 2023, the excise tax liability will not be due.
Note 6 — Stockholders’ Deficit
Common stock
Class A Common Stock—The
Company is authorized to issue 100,000,000 shares of Class A Common Stock with a par value of $0.0001 per share. As of March 31, 2023
and December 31, 2022, there were 6,268,750 and 0 (excluding 11,300,419 and 25,875,000 shares of Class A Common Stock subject to possible
redemption) shares of Class A Common Stock issued and outstanding, respectively.
Class B Common Stock—The
Company is authorized to issue 10,000,000 shares of Class B Common Stock with a par value of $0.0001 per share. As of March 31, 2023 and
December 31, 2022, there were 200,000 and 6,468,750 shares of Class B Common Stock issued and outstanding, respectively.
Preferred Stock—The
Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations,
voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. For the period
presented, there were no shares of preferred stock issued or outstanding.
Warrants—As
of March 31, 2023 and December 31, 2022, the Company had 12,937,500 Public Warrants and 12,350,000 Private Placement Warrants outstanding.
The Company has determined that warrants issued in connection with its IPO in November 2021 are subject to treatment as equity. At IPO,
the Company utilized a Monte Carlo simulation model to value the Warrants. Inherent in a Monte Carlo simulation are assumptions related
to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of
its ordinary shares 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 dividend rate is based on the historical
rate, which the Company anticipates to remain at zero, the fair value of the Public and Private Placement warrants on IPO was $0.52/warrant.
The Public Warrants will become
exercisable 30 days after the completion of a Business Combination. No warrants will be exercisable for cash unless the Company has an
effective and current registration statement covering the shares of Class A Common Stock issuable upon exercise of the warrants and a
current prospectus relating to such shares of Class A Common Stock. Notwithstanding the foregoing, if a registration statement covering
the shares of Class A Common Stock issuable upon exercise of the Public Warrants is not effective within a specified period following
the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during
any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant
to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another
exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire
five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Redemption of warrants when the price per share
of Class A Common Stock equals or exceeds $18.00
Once the warrants become exercisable, the Company
may redeem the outstanding warrants:
|
● |
in whole and not in part; |
|
|
|
|
● |
at a price of $0.01 per warrant; |
|
|
|
|
● |
upon a minimum of 30 days’ prior written notice of redemption, which we refer to as the “30-day redemption period” and |
|
|
|
|
● |
if, and only if, the last reported sale price of our Class A Common Stock for any 20 trading days within a 30-day trading period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities). |
The Company will not redeem the
warrants as described above unless an effective registration statement under the Securities Act covering the Class A Common Stock issuable
upon exercise of the warrants is effective and a current prospectus relating to those Class A Common Stock is available throughout the
30-day redemption period. If and when the warrants become redeemable by us, we may exercise our redemption right even if the Company is
unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class
A Common Stock equals or exceeds $10.00
Once the warrants become exercisable, the Company
may redeem the outstanding warrants:
|
● |
in whole and not in part |
|
|
|
|
● |
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table set forth in the warrant agreement, subject to certain exceptions; and |
|
|
|
|
● |
if, and only if, the Reference Value of the Company’s Class A Common Stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities). |
The “fair market value”
of the Company’s Class A Common Stock for the above purpose means the volume weighted average price of our Class A Common Stock
during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. The Company
will provide its warrant holders with the final fair market value no later than one business day after the 10-trading day period described
above ends. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 Class A Common
Stock per warrant (subject to adjustment). Any redemption of the warrants for Class A Common Stock will apply to both the Public Warrants
and the Private Placement Warrants.
No fractional Class A Common
Stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, the
Company will round down to the nearest whole number of the number of Class A Common Stock to be issued to the holder. Please see the section
entitled “Description of Securities—Warrants—Public Stockholders’ Warrants” for additional information.
If the Company calls the Public
Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on
a “cashless basis,” as described in the warrant agreement.
The Private Placement Warrants
will be identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the
shares of Class A Common Stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable
until after the completion of a Business Combination, subject to certain limited exceptions.
The exercise price and number
of shares of Class A Common Stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event
of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, the warrants will
not be adjusted for issuances of shares of Class A Common Stock at a price below their respective exercise prices. Additionally, in no
event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within
the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such
funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust
Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if the Company issues
additional shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection with the closing of a
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 Company’s board of directors, and in the case of any such issuance
to the initial stockholders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance),
(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 a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the
volume weighted average trading price of the Company’s Class A Common Stock during the 10 trading day period starting on the trading
day prior to the day on which the Company consummates a 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 greater of (i) the Market
Value or (ii) the price at which the Company issues the additional shares of Class A Common Stock or equity-linked securities.
Note 7 — Fair Value Measurements
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical
assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with
sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs.
Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets
or liabilities in markets that are not active.
Level 3: Unobservable inputs based on the Company’s
assessment of the assumptions that market participants would use in pricing the asset or liability.
At March 31, 2023 and December
31, 2022, the assets held in the Trust Account were held in U.S. treasury funds. All of the Company’s investments held in the Trust
Account are classified as trading securities.
The following table presents
information about the Company’s liabilities that are measured at fair value on a recurring basis at March 31, 2023 and December
31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
Schedule of fair value of recurring basis | |
| | | |
| | | |
| | | |
| | |
| |
| |
Quoted Prices in | |
Significant Other | |
Significant Other |
March 31, 2023 | |
| |
Active Markets | |
Observable Inputs | |
Unobservable Inputs |
| |
Level | |
(Level 1) | |
(Level 2) | |
(Level 3) |
Assets: | |
| | | |
| | | |
| | | |
| | |
U.S. Treasury Securities | |
| 1 | | |
$ | 118,600,787 | | |
| — | | |
| — | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Convertible promissory note | |
| 3 | | |
| — | | |
| — | | |
$ | 151,473 | |
| |
| |
Quoted Prices in | |
Significant Other | |
Significant Other |
December 31, 2022 | |
| |
Active Markets | |
Observable Inputs | |
Unobservable Inputs |
| |
Level | |
(Level 1) | |
(Level 2) | |
(Level 3) |
Assets: | |
| | | |
| | | |
| | | |
| | |
U.S. Treasury Securities | |
| 1 | | |
$ | 266,821,059 | | |
| — | | |
| — | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Convertible promissory note | |
| 3 | | |
| — | | |
| — | | |
$ | 75,851 | |
The following table presents the valuation inputs
of the convertible promissory note as of March 31, 2023 and December 31, 2022:
| |
March 31, 2023 | |
December 31, 2022 |
Risk-free interest rate | |
| 3.53 | % | |
| 3.90 | % |
Time to Expiration (in years) | |
| 5.38 | | |
| 0.63 | |
Expected volatility | |
| 3.0 | % | |
| 3.2 | % |
Exercise Price | |
$ | 11.50 | | |
$ | 11.50 | |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Stock Price | |
$ | 10.50 | | |
$ | 10.26 | |
Probability of completing an initial Business Combination(1) | |
| 17.4 | % | |
| 11.4 | % |
|
(1) |
This probability was arrived at solely for the purpose of the Level 3 input to the convertible promissory note valuation. |
The following table presents the changes in the fair value of the Level 3
convertible promissory note as of March 31, 2023:
Schedule of changes in fair value of plan assets | |
| | |
Fair value as of December 31, 2022 | |
$ | 75,851 | |
Initial measurement of draw on convertible promissory note – related party on January 31, 2023 | |
| 38,999 | |
Change in fair value | |
| 36,623 | |
Fair value as of March 31, 2023 | |
$ | 151,473 | |
Note 8 — Subsequent Events
The Company evaluated subsequent events
and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements
were issued. Based upon this review the Company , other than the below, did not identify any subsequent events that would
have required adjustment or disclosure in the condensed financial statements.
On April 17, 2023, the Company deposited $452,017
into the Trust Account in connection with the extension.
On April 30, 2023, the Company drew down $200,000,
under the Convertible Note.