Item 13.Certain Relationships and Related Transactions, and Director Independence
On January 20, 2021, the Company issued 4,562,500 shares of common stock to our sponsor and EBC and its designees for $25,000 in cash, at a purchase price of approximately $0.006 per share, in connection with our organization. Approximately 4,312,500 shares of common stock were issued to the sponsor and approximately 250,000 shares were issued to EBC and its designees. On March 22, 2021, our sponsor and EBC effected a surrender of 862,500 and 50,000 shares of common stock to the Company, respectively, for no consideration. This resulted in a decrease in the total number of shares of common stock outstanding from 4,562,500 to 3,650,000.
On March 30, 2021, the underwriters partially exercised their over-allotment option to purchase an additional 843,937 units at $10.00 per unit. As a result of the underwriters’ election to partially exercise the over-allotment option, an aggregate of 239,016 founder shares has been forfeited by the sponsor.
Our sponsor has purchased an aggregate of 354,715 private units and EBC has purchased an aggregate of 52,164 private units, at a price of $10.00 per unit, for an aggregate purchase price of $ 4,068,970 in a private placement that occurred simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The private units are identical to the units sold in this offering except that the private warrants included in the private units: (i) will not be redeemable by us and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchaser or any of their permitted transferees. Once the private warrants are transferred to anyone other than a permitted transferee, the private warrants will be redeemable by us and exercisable by the holders on the same basis as the public warrants. Our sponsor and EBC have agreed not to transfer, assign or sell any of the private shares and the private warrants (except to certain permitted transferees) until after the completion of our initial business combination. In the event of a liquidation prior to our initial business combination, the private shares and the private warrants will likely be worthless. If the Company does not complete a business combination by March 25, 2023, the proceeds from the sale of the private units will be used to fund the redemption of the public shares (subject to the requirements of applicable law).
In order to meet our working capital needs following the consummation of our initial public offering, our sponsor, initial stockholders, officers and directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into units at a price of $10.00 per unit. The units would be identical to the private units. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used for such repayment.
The holders of our founder shares issued and outstanding on the date of this Report, as well as the holders of the private shares, private warrants and any units our sponsor, initial stockholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us (and all underlying securities), are entitled to registration rights pursuant to a signed agreement. The holders of a majority of these securities are entitled to make up to two demands that we register such securities. The holders of the majority of the founder shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the private shares, private warrants and units issued in payment of working capital loans made to us (or underlying securities) can elect to exercise these registration rights at any time after we consummate a business combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination. Notwithstanding anything to the contrary, EBC may only make a demand on one occasion and only during the five-year period beginning on the effective date of the registration statement filed on February 1, 2021. In addition, EBC may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the Registration Statement.
On November 23, 2020, the sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $0.30 million. The Promissory Note is non-interest bearing and was payable on the earlier of June 30, 2021, or the consummation of the initial public offering. The outstanding balance of $0.19 million was paid in full on July 30, 2021.