ROSECLIFF
ACQUISITION CORP I
CONDENSED
BALANCE SHEETS
| |
September 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash | |
$ | 517,838 | | |
$ | 769,432 | |
Prepaid expenses | |
| 114,875 | | |
| 313,125 | |
Total Current Assets | |
| 632,713 | | |
| 1,082,557 | |
| |
| | | |
| | |
Investment held in Trust Account | |
| 254,228,158 | | |
| 253,027,240 | |
TOTAL ASSETS | |
$ | 254,860,871 | | |
$ | 254,109,797 | |
| |
| | | |
| | |
LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accrued expenses | |
$ | 3,075,867 | | |
$ | 2,908,800 | |
Accrued offering costs | |
| — | | |
| 12,000 | |
Income taxes payable | |
| 251,755 | | |
| — | |
Due to Sponsor | |
| 16,152 | | |
| 16,152 | |
Total Current Liabilities | |
| 3,343,774 | | |
| 2,936,952 | |
| |
| | | |
| | |
Warrant liabilities | |
| 788,400 | | |
| 10,142,642 | |
Deferred underwriting fee payable | |
| 8,855,000 | | |
| 8,855,000 | |
TOTAL LIABILITIES | |
| 12,987,174 | | |
| 21,934,594 | |
| |
| | | |
| | |
Commitments and contingencies | |
| | | |
| | |
Class A common stock subject to possible redemption: 25,300,000 shares at approximately $10.04 and $10.00 per share redemption value at September 30, 2022 and December 31, 2021, respectively | |
| 253,946,629 | | |
| 253,000,000 | |
| |
| | | |
| | |
STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | |
Class A common stock, $0.0001 par value; 80,000,000 shares authorized, none outstanding (less 25,300,000 shares subject to possible redemption at September 30, 2022 and December 31, 2021) | |
| — | | |
| — | |
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 6,325,000 shares issued and outstanding at September 30, 2022 and December 31, 2021(1) | |
| 633 | | |
| 633 | |
Additional paid-in capital | |
| — | | |
| — | |
Accumulated deficit | |
| (12,073,565 | ) | |
| (20,825,430 | ) |
Total Stockholders’ Deficit | |
| (12,072,932 | ) | |
| (20,824,797 | ) |
TOTAL LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ DEFICIT | |
$ | 254,860,871 | | |
$ | 254,109,797 | |
(1) | On
February 11, 2021, the Company effected a 1:1.1 stock split of its Class B common stock, resulting in an aggregate of 6,325,000 shares
outstanding. All share and per-share amounts have been retroactively restated to reflect the stock split. |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
ROSECLIFF
ACQUISITION CORP I
UNAUDITED
CONDENSED STATEMENTS OF OPERATIONS
| |
For the Three Months Ended September 30, | | |
For the Nine Months Ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
General and administrative expenses | |
$ | 237,071 | | |
$ | 1,192,736 | | |
$ | 950,917 | | |
$ | 1,637,589 | |
Loss from operations | |
| (237,071 | ) | |
| (1,192,736 | ) | |
| (950,917 | ) | |
| (1,637,589 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Change in fair value of warrant liabilities | |
| 525,600 | | |
| 3,416,400 | | |
| 9,354,242 | | |
| 4,599,000 | |
Transaction costs allocated to warrant liabilities | |
| — | | |
| — | | |
| — | | |
| (438,283 | ) |
Interest earned on investment held in Trust Account | |
| 1,122,395 | | |
| 3,506 | | |
| 1,546,924 | | |
| 23,010 | |
Total other income, net | |
| 1,647,995 | | |
| 3,419,906 | | |
| 10,901,166 | | |
| 4,183,727 | |
| |
| | | |
| | | |
| | | |
| | |
Income before provision for income taxes | |
| 1,410,924 | | |
| 2,227,170 | | |
| 9,950,249 | | |
| 2,546,138 | |
Provision for income taxes | |
| (225,250 | ) | |
| — | | |
| (251,755 | ) | |
| — | |
Net income | |
$ | 1,185,674 | | |
$ | 2,227,170 | | |
$ | 9,698,494 | | |
$ | 2,546,138 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding, Class A common stock | |
| 25,300,000 | | |
| 25,300,000 | | |
| 25,300,000 | | |
| 20,851,648 | |
Basic and diluted net income per share, Class A common stock | |
$ | 0.04 | | |
$ | 0.07 | | |
$ | 0.31 | | |
$ | 0.09 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding, Class B common stock | |
| 6,325,000 | | |
| 6,325,000 | | |
| 6,325,000 | | |
| 6,179,945 | |
Basic and diluted net income per share, Class B common stock | |
$ | 0.04 | | |
$ | 0.07 | | |
$ | 0.31 | | |
$ | 0.09 | |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
ROSECLIFF
ACQUISITION CORP I
UNAUDITED
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| |
Class A Common Stock | | |
Class B Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance — December 31, 2021 | |
| — | | |
$ | — | | |
| 6,325,000 | | |
$ | 633 | | |
$ | — | | |
$ | (20,825,430 | ) | |
$ | (20,824,797 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 7,053,847 | | |
| 8,512,820 | |
Balance – March 31, 2022 | |
| — | | |
| — | | |
| 6,325,000 | | |
| 633 | | |
| — | | |
| (13,771,583 | ) | |
| (13,770,950 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accretion for Class A common stock to redemption amount | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (99,034 | ) | |
| (99,034 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,458,973 | | |
| 1,458,973 | |
Balance – June 30, 2022 | |
| — | | |
| — | | |
| 6,325,000 | | |
| 633 | | |
| — | | |
| (12,411,644 | ) | |
| (12,411,011 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accretion for Class A common stock to redemption amount | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (847,595 | ) | |
| (847,595 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,185,674 | | |
| 1,185,674 | |
Balance – September 30, 2022 | |
| — | | |
$ | — | | |
| 6,325,000 | | |
$ | 633 | | |
$ | — | | |
$ | (12,073,565 | ) | |
$ | (12,072,932 | ) |
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
| |
Class A
Common Stock | | |
Class B (1)
Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total
Stockholders’
Equity | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
(Deficit) | |
Balance — December 31, 2020 | |
| — | | |
$ | — | | |
| 6,325,000 | | |
$ | 633 | | |
$ | 24,367 | | |
$ | (675 | ) | |
$ | 24,325 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash paid in excess of fair value of Private placement warrants | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,824,000 | | |
| — | | |
| 2,824,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accretion for Class A common stock to redemption amount | |
| — | | |
| — | | |
| — | | |
| — | | |
| (2,848,367 | ) | |
| (18,676,477 | ) | |
| (21,524,844 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 3,221,641 | | |
| 3,221,641 | |
Balance – March 31, 2021 | |
| — | | |
| — | | |
| 6,325,000 | | |
| 633 | | |
| — | | |
| (15,455,511 | ) | |
| (15,454,878 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (2,902,673 | ) | |
| (2,902,673 | ) |
Balance – June 30, 2021 | |
| — | | |
| — | | |
| 6,325,000 | | |
| 633 | | |
| — | | |
| (18,358,184 | ) | |
| (18,357,551 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,227,170 | | |
| 2,227,170 | |
Balance – September 30, 2021 | |
| — | | |
$ | — | | |
| 6,325,000 | | |
$ | 633 | | |
$ | — | | |
$ | (16,131,014 | ) | |
$ | (16,130,381 | ) |
(1) | On
February 11, 2021, the Company effected a 1:1.1 stock split of its Class B common stock, resulting in an aggregate of 6,325,000 shares
outstanding. All share and per-share amounts have been retroactively restated to reflect the stock split. |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
ROSECLIFF
ACQUISITION CORP I
UNAUDITED
CONDENSED STATEMENTS OF CASH FLOWS
| |
For the Nine Months Ended September 30, | | |
For the Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
Cash Flows from Operating Activities: | |
| | |
| |
Net income | |
$ | 9,698,494 | | |
$ | 2,546,138 | |
Adjustments to reconcile net income to net cash provided by used in operating activities: | |
| | | |
| | |
Change in fair value of warrant liabilities | |
| (9,354,242 | ) | |
| (4,599,000 | ) |
Transaction costs allocated to warrant liabilities | |
| — | | |
| 438,283 | |
Interest earned on investments held in Trust Account | |
| (1,546,924 | ) | |
| (23,010 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 198,250 | | |
| (399,038 | ) |
Accrued expenses | |
| 167,067 | | |
| 1,305,376 | |
Accrued offering costs | |
| (12,000 | ) | |
| — | |
Income taxes payable | |
| 251,755 | | |
| — | |
Net cash used in operating activities | |
| (597,600 | ) | |
| (731,251 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Cash withdrawn from Trust Account to pay franchise and income taxes | |
| 346,006 | | |
| — | |
Investment of cash in Trust Account | |
| — | | |
| (253,000,000 | ) |
Net cash provided by (used in) investing activities | |
| 346,006 | | |
| (253,000,000 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from sale of Units, net of underwriting discounts paid | |
| — | | |
| 247,940,000 | |
Proceeds from sale of Private Placements Warrants | |
| — | | |
| 7,060,000 | |
Proceeds from promissory note – related party | |
| — | | |
| 109,152 | |
Repayments of promissory note – related party | |
| — | | |
| (133,000 | ) |
Payment of offering costs | |
| — | | |
| (381,127 | ) |
Net cash provided by financing activities | |
| — | | |
| 254,595,025 | |
| |
| | | |
| | |
Net change in Cash | |
| (251,594 | ) | |
| 863,774 | |
Cash – Beginning of period | |
| 769,432 | | |
| — | |
Cash – End of period | |
$ | 517,838 | | |
$ | 863,774 | |
| |
| | | |
| | |
Non-cash investing and financing activities: | |
| | | |
| | |
Offering costs included in accrued offering costs | |
$ | — | | |
$ | 12,000 | |
Payment of accrued expenses through promissory note | |
$ | — | | |
$ | 16,152 | |
Deferred underwriting fee payable | |
$ | — | | |
$ | 8,855,000 | |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Rosecliff
Acquisition Corp I (the “Company”) is a blank check company incorporated in Delaware on November 17, 2020. The Company was
formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (the “Business Combination”).
The
Company is not limited to a particular industry or sector 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 September 30, 2022, the Company had not commenced any operations. All activity for the period from November 17, 2020 (inception) through
September 30, 2022 relates to the Company’s formation and the initial public offering (“Initial Public Offering”),
which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The
Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The
Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The Company has selected December 31 as its fiscal year end.
The
registration statement for the Company’s Initial Public Offering was declared effective on February 11, 2021. On February 17, 2021,
the Company consummated the Initial Public Offering of 25,300,000 units (the “Units” and, with respect to the Class A common
stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment
option in the amount of 3,300,000 Units, at $10.00 per Unit, generating gross proceeds of $253,000,000, which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 4,706,667 warrants (the “Private Placement
Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to Rosecliff Acquisition Sponsor I LLC (the
“Sponsor”) generating gross proceeds of $7,060,000, which is described in Note 4.
Transaction
costs amounted to $14,373,127, consisting of $5,060,000 in cash underwriting fees, $8,855,000 in deferred underwriting fees, and $458,127
of other offering costs.
Following
the closing of the Initial Public Offering on February 17, 2021, an amount of $253,000,000 ($10.00 per Unit) from the net proceeds of
the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the
“Trust Account”), located in the United States and was invested only 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 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 of the Investment Company Act, which invest only
in direct U.S. government treasury obligations, as determined by the Company, until the earlier of (i) the completion of a Business Combination
and (ii) the distribution of the funds held in 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 Initial Public Offering
and the sale of 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 with one or more operating businesses or assets that together have
a fair market value equal to at least 80% of the assets held in the Trust Account (as defined below) (excluding any deferred underwriting
commissions and taxes payable on the income earned on the Trust Account). 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 business sufficient for it not to be required to register as an investment company under the Investment Company
Act. There is no assurance that the Company will be able to complete a Business Combination successfully.
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 held in the Trust Account (initially $10.00 per Public Share, plus
any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business
Combination with respect to the Company’s warrants.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
The
Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 following any related
redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination.
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 its Amended and Restated Certificate of Incorporation
(the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and
Exchange Commission (“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 5) and any Public Shares purchased
during or after the Initial Public Offering 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, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the Certificate of Incorporation will provide 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% of the Public Shares, without the prior consent of the Company.
The
Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and Public Shares held by it in connection with
the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance
or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public
Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect
to any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public
Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The
Company will have until February 17, 2023, to complete a Business Combination (the “Combination Period”). If the Company
has not completed a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose
of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a
per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the
funds held in the Trust Account and not previously released to pay 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), 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 the Delaware General Corporation Law to provide
for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions
with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within
the Combination Period.
The
Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares it will
receive if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its
respective affiliates acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account
if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights
to their deferred underwriting commission (see Note 6) 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 assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
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 third party 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 to below the lesser of (i) $10.00 per Public Share
and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less
than $10.00 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will
not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in
the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering
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 for the Company’s independent
registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
Liquidity
and Going Concern
As
of September 30, 2022, the Company had $517,838 in its operating bank account and a working capital deficit of $2,429,532. The Company
intends to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence
on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their
representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate
and complete a Business Combination. In order to finance transaction costs in connection with a Business Combination, the Sponsor or
an affiliated of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company
Working Capital Loans (as defined below) (see Note 5).
In
connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards Update (“ASU”) 205-40, “Disclosure of Uncertainties about an Entity’s
Ability to Continue as a Going Concern,” the Company has until February 17, 2023 to consummate a Business Combination. It is uncertain
that the Company will be able to consummate a Business Combination by this time. Additionally, the Company may not have sufficient liquidity
to fund the working capital needs of the Company through one year from the issuance of these financial statements. If a Business Combination
is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined
that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution,
raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities that might result from the outcome of this uncertainty. The Company intends to complete the proposed
Business Combination before the mandatory liquidation date. However, there can be no assurance that the Company will be able to consummate
any Business Combination by February 17, 2023. In addition, the Company may need to raise additional capital through loans or additional
investments from its Sponsor, stockholders, officers, directors or third parties. The Company’s officers, directors and Sponsor
may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their
sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing.
If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and
reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable
terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through the
liquidation date of February 17, 2023.
The
accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in above to the financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs as
well as complete a Business Combination by the close of business on February 17, 2023, then the Company will cease all operations except
for the purpose of liquidating. This date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s
ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to
Form 10-Q and Article 8 of Regulation S-X of the Securities Act. Certain information or footnote disclosures normally included in financial
statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for
interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation
of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial
statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial
position, operating results and cash flows for the periods presented.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K
for the period ended December 31, 2021, as filed with the SEC on March 30, 2022. The interim results for the three and nine months
ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any
interim future periods.
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period, which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company 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 the unaudited condensed 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 and the reported amounts of revenues and expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates
included in these financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject
to change as more current information becomes available and accordingly, the actual results could differ significantly from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had $517,838 and $769,432 of cash as of September 30, 2022 and December 31, 2021, respectively, and no cash equivalents.
Investment
Held in Trust Account
As of September 30, 2022, substantially all of
assets held in the Trust Account were held in U.S Treasury Bills and were recorded at amortized cost. As of December 31, 2021, all of
the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury Securities. During
the period January 1, 2021 to September 30, 2022, the Company withdrew $346,006 of interest earned on investment held in the Trust Account
to pay its tax obligations. The Company presents its investments in money market funds 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 these securities are included in interest income in
the accompanying condensed statements of operations. The estimated fair value of investments held in the Trust Account is determined using
available market information.
Offering
Costs
Offering
costs consisted of legal, accounting and other expenses incurred through the Initial Public Offering that were directly related to the
Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based
on a relative fair value basis, compared to total proceeds received. Offering costs allocated to warrant liabilities were expensed as
incurred in the statements of operations. Offering costs associated with the Class A common stock issued were initially charged to temporary
equity and then accreted to common stock subject to redemption upon the completion of the Initial Public Offering.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards
Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject
to mandatory redemption are classified as a liability instrument and are measured at fair value. 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 features
certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future
events. Accordingly, at September 30, 2022 and December 31, 2021, 25,300,000 Class A common stock subject to possible redemption is presented
as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to
equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company
recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable Class A common
stock resulted in charges against additional paid-in capital and accumulated deficit.
At
September 30, 2022 and December 31, 2021, the Class A common stock reflected in the condensed balance sheets is reconciled in the following
table:
Gross proceeds | |
$ | 253,000,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (7,590,000 | ) |
Class A common stock issuance costs | |
| (13,934,844 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 21,524,844 | |
Class A common stock subject to possible redemption, December 31, 2021 | |
$ | 253,000,000 | |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 946,629 | |
Class A common stock subject to possible redemption, September 30, 2022 | |
$ | 253,946,629 | |
Warrant
Liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC
815”). The Company accounts for warrants in accordance with the guidance in ASC 480 and ASC 815 and determined that the warrants
do not meet the criteria for equity treatment thereunder. The assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for
equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other
conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant
issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Accordingly,
the Company recognizes the 8,433,333 Public Warrants and 4,706,667 Private Placement Warrants as liabilities at fair value and adjusts
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 the Company’s condensed statements of operations. The Public Warrants
are valued by the closing price of the observable market quote in an active market. The Private Placement Warrants are valued using an
observable market quote for a similar asset in an active market. See Notes 8 and 9.
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 September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance
recorded against it.
ASC
740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate applied to year to date income in
interim periods under ASC 740-270-30-5. Our effective tax rate was 15.96% and 0.00% for the three months ended September 30, 2022 and
2021, respectively, and 2.53% and 0.00% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs
from the statutory tax rate of 21% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant
liability and the valuation allowance on the deferred tax assets.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The
Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation
by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus
of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net
Income Per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. The Company has
two classes of common stock, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of stock. Net income per common share is calculated by dividing the net income by the weighted average shares
of common stock outstanding for the respective period. Accretion associated with the redeemable shares of Class A common stock is excluded
from earnings per share as the redemption value approximates fair value.
The
calculation of diluted income per share does not consider the effect of the warrants issued in connection with the (i) Initial Public
Offering and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants
are exercisable to purchase 13,140,000 shares of Class A common stock in the aggregate. As of September 30, 2022 and 2021, the Company
did not have any dilutive securities or other contracts that could potentially be exercised or converted into shares of common stock
and then share in the earnings of the Company. As a result, diluted net income per share of common stock is the same as basic net income
per share of common stock for the periods presented.
The
following table reflects the calculation of basic and diluted net income per share of common stock (in dollars, except per share amounts):
| |
For the Three Months Ended September 30, | | |
For the Nine Months Ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per share of common stock | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Allocation of net income, as adjusted | |
$ | 948,539 | | |
$ | 237,135 | | |
$ | 1,781,736 | | |
$ | 445,434 | | |
$ | 7,758,795 | | |
$ | 1,939,699 | | |
$ | 1,964,042 | | |
$ | 582,096 | |
Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 25,300,000 | | |
| 6,325,000 | | |
| 25,300,000 | | |
| 6,325,000 | | |
| 25,300,000 | | |
| 6,325,000 | | |
| 20,851,648 | | |
| 6,179,945 | |
Basic and diluted net income per share of common stock | |
$ | 0.04 | | |
$ | 0.04 | | |
$ | 0.07 | | |
$ | 0.07 | | |
$ | 0.31 | | |
$ | 0.31 | | |
$ | 0.09 | | |
$ | 0.09 | |
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
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 Deposit Insurance Corporation coverage limit of $250,000. 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 ASC Topic 820, “Fair Value
Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their
short-term nature, other than the warrant liabilities (see Note 9).
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices
for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In
some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input
that is significant to the fair value measurement.
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each
reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
Recent
Accounting Standards
In
August 2020, the FASB issued 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” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts
to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU
2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early
adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results
of operations or cash flows. The Company has not adopted this guidance as of September 30, 2022.
Management
does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s condensed financial statements.
NOTE
3. INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold 25,300,000 Units, which includes a full exercise by the underwriter of its overallotment
option in the amount of 3,300,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-third
of one redeemable warrant (each, a “Public Warrant”). Each whole 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 9).
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor has purchased an aggregate of 4,706,667 Private Placement Warrants at a
price of $1.50 per Private Placement Warrant ($7,060,000 in the aggregate) from the Company in a private placement. Each whole Private
Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment
(see Note 9). A portion of the proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial
Public Offering 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 held in the Trust Account will be used to fund the redemption of the Public
Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
During
the period ended December 31, 2020, the Sponsor paid $25,000 to cover certain of the Company’s offering costs in exchange for 5,750,000
shares of the Company’s Class B common stock (the “Founder Shares”). On February 11, 2021, the Company effected a 1:1.1
stock split of its Class B common stock, resulting in an aggregate of 6,325,000 shares outstanding. All share and per-share amounts have
been retroactively restated to reflect the stock split. The Founder Shares included an aggregate of up to 825,000 shares subject to forfeiture
to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares
would equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding common stock upon the consummation
of the Initial Public Offering. As a result of the underwriter’s election to fully exercise its over-allotment option, no Founder
Shares are currently subject to forfeiture.
The
Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur
of (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported
sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business
Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar
transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
Amount
Due to Sponsor
At
September 30, 2022 and December 31, 2021, the Company had advances owed to the Sponsor in the amount of $16,152.
Administrative
Services Agreement
Commencing
on February 11, 2021 through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company
agreed to pay the Sponsor a total of $10,000 per month for office space, support and administrative services. For the three and nine
months ended September 30, 2022, the Company accrued $30,000 and $90,000 in fees for these services, respectively, of which such amount
is included in accrued expenses in the accompanying condensed balance sheets.
For the three and nine months ended September
30, 2021, the Company incurred $30,000 and $80,000 in fees for these services, respectively.
Related
Party Loans
In
order to fund working capital deficiencies or 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 will 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 $1,500,000 of such Working Capital Loans may
be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant. The warrants would be identical
to the Private Placement Warrants. As of September 30, 2022 and December 31, 2021, there were no amounts outstanding under the Working
Capital Loans.
NOTE
6. COMMITMENTS AND CONTINGENCIES
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Various
social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, including rising trade
tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the U.S. and foreign,
trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods,
earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties
or deterioration in the U.S. and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility
could adversely affect the Company’s ability to complete a Business Combination. In response to the conflict between Russia and
Ukraine, the U.S. and other counties have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including
sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s
ability to complete a Business Combination and the value of the Company’s securities.
ROSECLIFF ACQUISITION
CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
Inflation
Reduction Act of 2022 (the “IR Act”)
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 stockholders 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.
Registration
Rights
Pursuant
to a registration rights agreement entered into on February 11, 2021, the holders of the Founder Shares, Private Placement Warrants and
warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise
of the Private Placement Warrants or warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the
Founder Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of
the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make
up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have
certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a
Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities
Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or
cause any registration statement to become effective until termination of the applicable lock-up period. The registration rights agreement
does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities.
The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting
Agreement
The
underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,855,000 in the aggregate. The deferred fee will become payable to
the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject
to the terms of the underwriting agreement.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
Termination
of the Previously Announced Business Combination Agreement
On
March 11, 2022, the Company and GT Gettaxi Limited entered into a Termination of the Business Combination Agreement pursuant to which
the parties mutually agreed to terminate the Business Combination Agreement, effective immediately. The Company requested that the Target’s
management undertake a thorough analysis of its financial projections. Following the conclusion of that process, and extensive mutual
efforts to negotiate an appropriate valuation adjustment, both parties agreed to terminate the Business Combination Agreement.
As
a result of the termination of the Business Combination Agreement, the Business Combination Agreement is of no further force and effect,
and certain transaction agreements entered into in connection with the Business Combination Agreement, including, but not limited to,
the Investors’ Rights Agreement, dated as of November 9, 2021, and to be effective as of the closing of the Business Combination,
by and among the Company, a Delaware limited liability company, and certain holders, will either be terminated or no longer be effective,
as applicable, in accordance with their respective terms.
The
Company intends to continue to pursue the consummation of a business combination with an appropriate target.
NOTE
7. STOCKHOLDERS’ DEFICIT
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.
At September 30, 2022 and December 31, 2021, there were no shares of preferred stock issued and outstanding.
Class A
Common Stock — The Company is authorized to issue 80,000,000 shares of Class A common stock with a par value of $0.0001
per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2022 and December 31, 2021, there
were 25,300,000 shares of Class A common stock issued and outstanding, which are presented as temporary equity.
Class B
Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001
per share. Holders of Class B common stock are entitled to one vote for each share. At September 30, 2022 and December 31, 2021, there
were 6,325,000 shares of Class B common stock issued and outstanding.
Holders
of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of
the Company’s stockholders, except as otherwise required by law.
The
shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier
at the option of the holder, on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations
and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked
securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of
a Business Combination, the ratio at which the shares of Class B common stock will convert into shares of Class A common stock will be
adjusted (unless the holders of a majority of the issued and outstanding shares of Class B common stock agree to waive such anti-dilution
adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion
of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of all shares of common
stock issued and outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked
securities issued or deemed issued in connection with the initial Business Combination, excluding any shares or equity-linked securities
issued, or to be issued, to any seller in the initial Business Combination.
NOTE
8. WARRANTS
As
of September 30, 2022 and December 31, 2021, there were 8,433,333 Public Warrants outstanding. Public Warrants may only be exercised
in whole and only for a whole number of shares. The Public Warrants will become exercisable on the later of (a) 30 days after the completion
of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years
after the completion of a Business Combination or earlier upon redemption or liquidation.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
The
Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class
A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying
its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for
cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants,
unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising
holder, or an exemption is available.
The
Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination,
the Company will use its commercially reasonable efforts to file a registration statement covering the issuance, under the Securities
Act, of the Class A common stock issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts
to cause the same to become effective within 60 business days after the closing of a Business Combination and to maintain the effectiveness
of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the
provisions of the warrant agreement.
Notwithstanding
the above, if the shares of Class A common stock are, at the time of any exercise of a warrant, not listed on a national securities exchange
such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may,
at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance
with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain
in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable
blue sky laws to the extent an exemption is not available.
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 warrants (except as described herein with respect to the Private Placement Warrants):
| ● | in
whole and not in part; |
| ● | at
a price of $0.01 per warrant; |
| ● | upon
not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if,
and only if, the last reported sale price of the Class A common stock for any 20 trading days within a 30-trading day period ending on
the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the “Reference
Value”) equals or exceeds $18.00 per share (as adjusted). |
If
and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register
or qualify the underlying securities for sale under all applicable state securities laws.
Redemption
of Warrants When the Price per share of 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 based on the redemption date and the fair market
value of the shares of Class A common stock; |
| ● | if,
and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted); and |
| ● | if
the Reference Value is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for
redemption on the same terms as the outstanding Public Warrants, as described above. |
The
exercise price and number of shares of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain
circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation.
However, except as described below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its
exercise price. Additionally, in no event will the Company be required to net cash settle the Public 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 Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from
the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may
expire worthless.
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
In
addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes
in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per
share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board
of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held
by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross
proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of
the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions),
and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the
trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”)
is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher
of the Market Value and the Newly Issued Price, the $18.00 and $10.00 per share redemption trigger price described above will be adjusted
(to the nearest cent) to be equal to 180% and 100%, respectively, of the higher of the Market Value and the Newly Issued Price.
At
September 30, 2022 and December 31, 2021, there were 4,706,667 Private Placement Warrants outstanding. The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants
and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable
until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement
Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial
purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or
their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the
same basis as the Public Warrants.
NOTE
9. 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 fair value hierarchy (see Note 2)
is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and
liabilities.
At September 30, 2022 and December 31, 2021, assets
held in the Trust Account were comprised of $254,228,158 and $253,027,240 in a U.S. Fixed income securities fund. During the period ended
September 30, 2022 and December 31, 2021, the Company withdrew $346,006 and $0, of interest to pay its tax obligations, respectively.
At
September 30, 2022, assets held in the Trust Account were comprised of $254,056,732 invested marketable securities invested in U.S. Treasury
Bills and $171,426 in money market funds which are invested primarily in U.S. Treasury Securities. Total investments in marketable securities
as of September 30, 2022 is $254,228,158, during the nine months ended September 30, 2022,
At
December 31, 2021, assets held in the Trust Account were comprised of $253,027,240 money market funds that primarily invested in U.S.
Treasury Securities at fair market value. During the year ended December 31, 2021, the Company did not withdraw any interest income from
the Trust Account.
The
following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring
basis at September 30, 2022 and December 31, 2021 and indicate the fair value hierarchy of the valuation inputs the Company utilized
to determine such fair value.
| |
Held-To-Maturity | |
Level | | |
Amortized Cost | | |
Gross Holding Gain (Loss) | | |
Fair Value | |
September 30, 2022 | |
U.S. Treasury Securities (Matures on 10/13/22) | |
| 1 | | |
$ | 254,056,732 | | |
$ | (7,522 | ) | |
$ | 254,049,210 | |
Description | |
Level | |
September 30, 2022 | | |
Level | |
December 31, 2021 | |
Assets: | |
| |
| | |
| |
| |
Investments and Cash held in Trust Account – U.S. Treasury Securities Money Market Fund | |
1 | |
$ | 171,426 | | |
1 | |
$ | 253,027,240 | |
Description | |
Level | |
September 30, 2022 | | |
Level | |
December 31, 2021 | |
Liabilities: | |
| |
| | |
| |
| |
Warrant Liability – Public Warrants | |
2 | |
$ | 506,000 | | |
1 | |
$ | 6,493,666 | |
Warrant Liability – Private Placement Warrants | |
2 | |
$ | 282,400 | | |
2 | |
$ | 3,648,976 | |
ROSECLIFF
ACQUISITION CORP I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
The
Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Company’s
accompanying September 30, 2022 and December 31, 2021 condensed balance sheets. The warrant liabilities are measured at fair value at
inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed
statements of operations.
The
Company initially valued its Private Placement Warrants, on February 17, 2021, as Level 3 utilizing a lattice model, specifically a binomial
lattice model incorporating the Cox-Ross-Rubenstein methodology and subsequently valued the Private Placement Warrants as Level 3 through
December 31, 2021, with changes in fair value recognized in the statements of operations.
The estimated fair value of the Private Placement
Warrant liabilities was determined using Level 2 inputs on September 30, 2022 and December 31, 2021. As of September 30, 2022, the Public
Warrants were classified as Level 2 in the fair value hierarchy due to low trading volume. The estimated fair value of the Public Warrants
transferred from a Level 1 measurement to a Level 2 measurement during the three and nine months ended September 30, 2022 was $506,000.
On December 31, 2021 the Private Placement Warrants transferred to Level 2 due to the use of an observable market quote for a similar
asset in an active market.
Transfers
to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.
The estimated fair value of the Public Warrants previously transferred from a Level 3 measurement to a Level 1 fair value measurement
for the year ended December 31, 2021 was $6,831,000. The estimated fair value of the Private Placement Warrants transferred from a Level
3 measurement to a Level 2 fair value measurement for the year ended December 31, 2021 was $2,588,667. There was no transfer during the
three and nine months ended September 30, 2022.
NOTE
10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the condensed balance sheet date up to the date that the unaudited condensed financial statements were issued. Based
upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited
condensed financial statements.
On November 9, 2022, the Company filed a preliminary
proxy statement in connection with the Special Meeting (as defined below) for the purpose of voting on three proposals, one proposal being
to amend the Certificate of Incorporation (as defined below) to extend the mandatory liquidation date from February 17, 2023 to February
17, 2024.