Home Plate Acquisition Corp - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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(Mark One)

For the quarterly period ended June 30, 2023

OR

 

For the transition period from                     to                    

Commission file number: 001-40844

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HOME PLATE ACQUISITION CORP.

(Exact Name of Registrant as Specified in Its Charter)

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(917) 703-2312

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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Securities registered pursuant to Section 12(b) of the Exchange Act:

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒     No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☒    No  ☐

 

The registrant had 5,922,935 shares of Class A common stock, par value $0.0001 per share, and 1,350,000 shares of Class B common stock, par value $0.0001 per share, issued and outstanding as of August 8, 2023.

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PART I. FINANCIAL INFORMATION

 

 

HOME PLATE ACQUISITION CORP.

CONDENSED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

		For the Three Months Ended								For the Six Months Ended
		June 30, 2023				June 30, 2022				June 30, 2023				June 30, 2022
Formation, general and administrative expenses		$	1,157,055			$	510,373			$	2,984,497			$	1,065,137
Loss from Operations			(1,157,055	)			(510,373	)			(2,984,497	)			(1,065,137	)
Other Income
Realized and unrealized gain on Investment held in Trust Account			634,085				314,499				2,693,647				381,473
Gain (loss) on change in fair value of Warrant Liabilities			5,204,000				2,478,000				(282,000	)			6,474,000
Total Other Income			5,838,085				2,792,499				2,411,647				6,855,473
Income (Loss) before Income Tax Provision			4,681,030				2,282,126				(572,850	)			5,790,336
Income Tax Provision			(103,066	)			(26,525	)			(525,054	)			(26,525	)
Net Income (Loss)		$	4,577,964			$	2,255,601			$	(1,097,904	)		$	5,763,811
Basic and diluted weighted average shares outstanding, Class A Common Stock			5,922,935				20,000,000				12,767,033				20,000,000
Basic and diluted net income (loss) per share, Class A Common Stock		$	0.63			$	0.09			$	(0.07	)		$	0.23
Basic and diluted weighted average shares outstanding, Class B Common Stock			1,350,000			$	5,000,000				3,124,586				5,000,000
Basic and diluted net income (loss) per share, Class B Common Stock		$	0.63			$	0.09			$	(0.07	)		$	0.23

		Class A Common Stock								Class B Common Stock								Accumulated				Total Stockholders’
		Shares				Amount				Shares				Amount				Deficit				Deficit
Balance – December 31, 2022 (audited)			—			$	—				5,000,000			$	500			$	(6,197,361	)		$	(6,196,861	)
Remeasurement of Class A common stock subject to possible redemption			—				—				—				—				(1,587,479	)			(1,587,479	)
Conversion of Class B Common Stock to Class A Common Stock by Sponsor			3,650,000				365				(3,650,000	)			(365	)			—				—
Net loss			—				—				—				—				(5,675,868	)			(5,675,868	)
Balance – March 31, 2023 (unaudited)			3,650,000			$	365				1,350,000			$	135			$	(13,460,708	)		$	(13,460,208	)
Remeasurement of Class A common stock subject to possible redemption			—				—				—				—				(481,019	)			(481,019	)
Excise tax			—				—				—				—				(1,772,707	)			(1,772,707	)
Net income			—				—				—				—				4,577,964				4,577,964
Balance – June 30, 2023 (unaudited)			3,650,000			$	365				1,350,000			$	135			$	(11,136,470	)		$	(11,135,970	)

		Class B Common Stock
		Shares				Amount				Additional Paid-in Capital				Accumulated Deficit				Total Stockholders’ (Deficit)
Balance – December 31, 2021 (audited)			5,000,000				500				—				(14,095,323	)			(14,094,823	)
Net income			—				—				—				3,508,210				3,508,210
Balance – March 31, 2022 (unaudited)			5,000,000				500				—				(10,587,113	)			(10,586,613	)
Remeasurement of Class A common stock subject to possible redemption			—				—				—				(118,705	)			(118,705	)
Net income			—				—				—				2,255,601				2,255,601
Balance – June 30, 2022 (unaudited)			5,000,000			$	500			$	—			$	(8,450,217	)		$	(8,449,717	)

HOME PLATE ACQUISITION CORP.

CONDENSED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

HOME PLATE ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 – ORGANIZATION AND BUSINESS BACKGROUND

 

Home Plate Acquisition Corporation (the “Company”) was incorporated in the State of Delaware on March 24, 2021. The Company was incorporated for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company has not yet selected any specific Business Combination target. 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.

 

The Company’s sponsor is Home Plate Sponsor LLC, a Delaware limited liability company (the “Sponsor”). As of June 30, 2023, the Company had not commenced any operations. All activity for the period from March 24, 2021 (inception) through June 30, 2023 relates to the Company’s formation and its initial public offering (the “IPO”) described below, and, since the IPO, the search for a target for its initial Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.

 

In accordance with the rules of Nasdaq, the Company’s initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the net assets held in the Trust Account (as defined in the following paragraph) (excluding the amount of deferred underwriting discounts and commissions held in trust and taxes payable on the income earned on the Trust Account) at the time of the signing of a definitive agreement in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination 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 1940, as amended (the “Investment Company Act”).

 

If the Company were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which the Company has not allotted funds and may hinder the ability to complete a Business Combination. If the Company has not consummated the initial Business Combination within the required time period, the public stockholders may receive only approximately $10.00 per Public Share, or less in certain circumstances, on the liquidation of the Trust Account and the warrants will expire worthless.

 

The Company will provide the holders of the 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 general meeting called to approve the Business Combination or (ii) without a stockholder vote 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, solely in its discretion. 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 $10.00 per Public Share).

These Public Shares were classified as temporary equity upon the completion of the IPO in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination.

 

 

The Company’s Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their Founder Shares (defined in Note 4) and any Public Shares held by them in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to their Founder Shares and Public Shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated memorandum and articles of association, (iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to complete the initial Business Combination within the Combination Period, and (iv) vote any Founder Shares held by them and any Public Shares purchased during or after the Initial Public Offering (including in open market and privately-negotiated transactions) in favor of the initial Business Combination.

 

The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third-party (other than the Company’s independent auditors) for services rendered or products sold to the Company, or a prospective target business with which the Company have discussed entering into a transaction agreement, reduce the amounts 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, in each case net of the interest that may be withdrawn to pay the Company’s tax obligations, provided that such liability will not apply to any claims by a third-party or prospective target business that executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under the indemnity of the underwriter 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.

Extension Special Meeting

 

On March 30, 2023, the Company held a special meeting of stockholders (the “Special Meeting”) at which it submitted multiple proposals to vote as described below.

 

 

In connection with the Special Meeting, stockholders were given the opportunity to redeem their shares at their discretion. As a result, 17,727,065 shares were redeemed leaving 2,272,935 shares outstanding, prior to the conversion of Class B Founder shares to Class A shares issued to the Sponsor, discussed in more detail below. In connection with these redemptions, $180,577,599 is to be paid out of the Trust Account with a redemption value of approximately $10.19 per share of Class A common stock.  This was comprised of the initial investment of $10.00 in addition to the stockholders’ proportionate share of interest income earned on the Investments held in the Trust Account.

 

Unregistered Sales of Equity Securities

Following the Conversion, there are 5,922,935 shares of Class A Common Stock issued and outstanding, and 1,350,000 shares of Class B Common Stock issued and outstanding. As a result of the Conversion, the Initial Stockholders hold approximately 61.6% of the outstanding shares of the Company’s Class A Common Stock.

Business Combination Agreement

 

On March 19, 2023, Home Plate Acquisition Corporation, a Delaware corporation (“Home Plate”), Home Plate Sponsor LLC, a Delaware limited liability company (“Sponsor”), Heidmar Marine Inc., a company organized and existing under the laws of Marshall Islands (“Holdings”), HP Merger Subsidiary Corp., a Delaware corporation (“Merger Sub”), Heidmar Inc., a company organized and existing under the laws of Marshall Islands ( “Heidmar”), and those shareholders of the Company party thereto (collectively, the “Heidmar Shareholders”), entered into a Business Combination Agreement (the “Business Combination Agreement”), pursuant to which, subject to the satisfaction or waiver of certain conditions precedent in the Business Combination Agreement, the following transactions will occur: (a) the merger of Merger Sub with and into Home Plate (the “Merger”), with Home Plate surviving the Merger and the security holders of Home Plate (other than the security holders of Home Plate electing to redeem their shares of Home Plate common stock or shares of Home Plate common stock held in treasury) becoming security holders of Holdings, (b)  the automatic modification of each Home Plate warrant to no longer entitle the holder to purchase Home Plate shares of common stock and instead acquire an equal number of Holdings common shares per Home Plate warrant, (c) the acquisition by Holdings of all of the issued and outstanding share capital of Heidmar from the Heidmar Shareholders in exchange for the issuance of Holdings common shares and, if applicable, the issuance of Earnout Shares (as defined in the Business Combination Agreement), pursuant to which Heidmar will become a direct wholly owned subsidiary of Holdings (the “Share Acquisition”), and (d) the other transactions contemplated by the Business Combination Agreement and the Ancillary Documents referred to therein (together with the Merger and Share Acquisition, the “Transactions”).

 

 

Sponsor Support Agreement

 

In connection with the execution of the Business Combination Agreement, the Sponsor has entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”) with Home Plate, Holdings and the Company, pursuant to which the Sponsor has agreed to, among other things, (a) waive its anti-dilution rights in the SPAC Charter with respect to the SPAC Class B common stock (collectively, the “Sponsor Securities”), (b) vote at any meeting of Home Plate shareholders to be called for approval of the Transactions (as defined in the Business Combination Agreement) all Sponsor Securities held of record or thereafter acquired in favor of the Shareholder Approval Matters, (c) be bound by certain other covenants and agreements related to the Transactions and (d) be bound by certain transfer restrictions with respect to the Sponsor Securities and warrants exercisable for Sponsor Securities, in each case, on the terms and subject to the conditions set forth in the Sponsor Support Agreement. The Sponsor Support Agreement also provides that the Sponsor has agreed irrevocably to waive its redemption rights in connection with the consummation of the Transactions with respect to any Sponsor Securities they may hold.

 

Sponsor has agreed to forfeit for issuance to the Heidmar Shareholders, for no consideration, the right to receive 1,212,500 Holdings common shares that would otherwise be issued to Sponsor in connection with the Closing.  In the event that the SPAC Transaction Expenses are greater than $15 million, Sponsor shall forfeit for issuance to the Heidmar Shareholders, for no consideration, as of the Closing Date (as defined in the Business Combination Agreement), the right to receive Holdings Private Warrants that would otherwise be issued to Sponsor in connection with the Closing equal to (i) the amount SPAC Transaction Expenses are greater than $15 million divided by (ii) $5.00.

 

Lock-Up Agreements

 

In connection with the Closing, the Heidmar Shareholders will enter into agreements (the “Heidmar Shareholder Lock-Up Agreements”) providing that the Heidmar Shareholders will not, subject to certain exceptions (including the payment of taxes arising from the Transactions), transfer any Restricted Securities (as defined in the Heidmar Shareholder Lock-Up Agreements) during the period commencing from the Closing Date until 150 days after the Closing Date.

 

In connection with the Closing, the Sponsor will enter into an agreement (the “Sponsor Lock-Up Agreement”) providing that it will not, subject to certain exceptions, transfer any Restricted Securities during the period commencing from the Closing Date until the date that is 150 days after the Closing Date.

 

The foregoing summary of the Heidmar Shareholder Lock-Up Agreements and Sponsor Lock-Up Agreement are qualified in its entirety by reference to the full text of the form of Sponsor Lock-Up Agreement and form of Heidmar Shareholder Lock-Up Agreement, the terms of which are incorporated herein by reference.

 

New Registration Rights Agreement

 

Warrant Assumption Agreement

Non-Redemption Agreement

Liquidity and Going Concern

 

As of June 30, 2023, the Company had $726,505 in its operating bank account, and a working capital deficit of $3,903,478. The Company’s liquidity needs up to and through June 30, 2023 have been satisfied through a payment from the Sponsor for the Founder Shares and the loan under an unsecured promissory note from the Sponsor of up to $300,000. The Promissory Note was fully repaid as of October 4, 2021 and there were no amounts outstanding under it as of June 30, 2023.

 

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements—Going Concern, if the Company is not able to consummate a Business Combination before October 4, 2023, the Company will commence an automatic winding up, dissolution and liquidation. Management has determined that the automatic 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. While management intends to complete a Business Combination on or before October 4, 2023, it is uncertain whether the Company will be able to do so. 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.  No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after October 4, 2023.

 

Risks and Uncertainties

 

Results of operations and the Company’s ability to complete a Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond its control. The business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. Management continues to evaluate the impact of the foregoing events and has concluded that while it is reasonably possible that such events could have a negative effect on the Company’s business, financial position, and our ability to complete an initial Business Combination, management cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or their specific impact. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into law. The IR Act provides for, among other measures, a new 1% U.S. federal excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations. Because Home Plate is a Delaware corporation with securities trading on Nasdaq, Home Plate is a “covered corporation” for this purpose. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from whom the shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased. For purposes of calculating the excise tax, however, 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. However, the statutory language and guidance provided to date generally does not permit the repurchasing corporation to net the fair market value of new issuances of stock of a different issuer. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury Department”) has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of, the excise tax.

On December 27, 2022, the Treasury issued Notice 2023-2 (the “Notice”) as interim guidance until publication of forthcoming proposed regulations on the excise tax on stock buybacks. The guidance in the Notice does not constitute proposed or final Treasury regulations. However, because the Notice provides notice of proposed regulations Treasury intends to issue in the future, taxpayers may rely upon the guidance provided in the Notice until the issuance of the forthcoming proposed regulations and certain of the forthcoming proposed regulations would (if issued) apply retroactively. The Notice generally provides that, in certain circumstances, if a covered corporation completely liquidates and dissolves, distributions in such complete liquidation and other distributions by such covered corporation in the same taxable year in which the final distribution in complete liquidation and dissolution is made are not subject to the excise tax.

 

Any redemption or other repurchase effected by the Company that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to this excise tax. Whether and to what extent the Company is ultimately subject to the excise tax in connection with these redemptions will depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, together with any other redemptions or repurchases consummated by Home Plate in the same taxable year (including redemptions consummated in connection with the Extension Meeting), (ii)  the nature and amount of any equity issuances the Company makes in the taxable year of the Business Combination, (iii) whether the Company completely liquidates and dissolves within the taxable year of such redemptions, and (iv) legal uncertainties regarding how the excise tax applies to transactions like the proposed Business Combination (and, if applicable, a complete liquidation and dissolution of Home Plate) and the content of final and proposed regulations and further guidance from the Treasury Department.. Any excise tax would be payable by Home Plate, not by the redeeming holder, and the mechanics of any required payment of the excise tax are not clear. Home Plate will not reduce the amounts payable out of the Trust Account to holders of our Class A common stock that exercise redemption rights in connection with the Business Combination in respect of potential liabilities or the excise tax described above, and any such excise tax will not be paid by or from the trust account (provided that the proceeds released from the trust account in connection with the consummation of the Business Combination may be used to pay liabilities in respect of such excise tax, if any).

 

If the Company has not consummated the proposed Heidmar Business Combination by October 4, 2023 (as approved at the Special Meeting), the Company is expected to redeem the public shares in a liquidating distribution. The Company does not expect such redemption in connection with the liquidating distribution to be subject to the excise tax under the Notice, but such expectation is subject to a number of factual and legal uncertainties, including further guidance from the Treasury Department.

		June 30, 2023				December 31, 2022
As of beginning of the period		$	202,187,705			$	200,000,000
Gross Proceeds			—				—
Less:
Redemptions in connection with Special Meeting			(180,577,599	)			—
Plus:
Remeasurement of Class A common stock subject to possible redemption carrying value to redemption value			2,068,498				2,187,705
Class A common stock subject to possible redemption		$	23,678,604			$	202,187,705

		For the three months ended June 30, 2023								For the three months ended June 30, 2022
		Redeemable Class A Common Stock				Non-Redeemable Class B Common Stock				Redeemable Class A Common Stock				Non-Redeemable Class B Common Stock
Basic and diluted net income  per share
Numerator:
Allocation of net income		$	3,728,204			$	849,760			$	1,804,481			$	451,120
Denominator:
Weighted-average shares outstanding			5,922,935				1,350,000				20,000,000				5,000,000
Basic and diluted net income per share		$	0.63			$	0.63			$	0.09			$	0.09

NOTE 3 – INITIAL PUBLIC OFFERING

 

On October 4, 2021 the Company completed its IPO of 20,000,000 Units at a price of $10.00 per Unit, generating gross proceeds of $200,000,000. Each Unit consisted of one share of Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).

 

The Company granted the underwriter a 45-day option from the date of the IPO to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. This option expired unused in November 2021.

 

An aggregate of $10.00 per Unit sold in the IPO was held in the Trust Account and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

Founder Shares

 

On May 5, 2021, the Sponsor and certain directors of the Company paid $25,000 (approximately $0.004 per share) in consideration for 5,750,000 shares of Class B common stock with par value of $0.0001 (the “Founder Shares”). Up to 750,000 of these shares of Class B common stock were subject to forfeiture by the Sponsor if the underwriter’s over-allotment option is not exercised. The underwriter’s over-allotment option expired unused in November 2021 which resulted in aggregate outstanding Class B common stock of 5,000,000 shares.

 

Subject to each Anchor Investor purchasing 100% of the Units allocated to it, in connection with the closing of the Initial Public Offering, the Sponsor sold up to 150,000 Founder Shares to each Anchor Investor (other than those funds managed by UBS O’Connor, LLC) (an aggregate of 1,350,000 Founder Shares to all of the Anchor Investors) at their original purchase price. The Company estimated the aggregate fair value of these shares of Class B common stock attributable to such Anchor Investors to be $10,676,610 or $7.9086 per share.

 

The excess of the fair value over consideration of the Founder Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A and 5T. Accordingly, the offering cost have been 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 derivative warrant liabilities were expensed as incurred in the statement of operations. Offering costs allocated to the Public Shares were charged to stockholders’ deficit upon the completion of the Initial Public Offering.

On March 30, 2023, the Company issued an aggregate of 3,650,000 shares of its Class A common stock, Class A Common Stock to the Sponsor, Michael A. DeSimone, Michele Docharty, Ross Fubini and Rhonda Ramparas, holders of the Company’s Class B common stock (“Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”) (such holders of shares of Class B Common Stock collectively, the “Initial Stockholders”), upon the conversion of an equal number of shares of Class B Common Stock (the “Conversion”). The 3,650,000 shares of Class A Common Stock issued in connection with the Conversion are subject to the same restrictions as applied to the shares of Class B Common Stock before the Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial business combination, as described in the prospectus for the Company’s initial public offering.

Following the Conversion, there are 5,922,935 shares of Class A Common Stock issued and outstanding, and 1,350,000 shares of Class B Common Stock issued and outstanding. As a result of the Conversion, the Initial Stockholders hold approximately 61.6% of the outstanding shares of the Company’s Class A Common Stock.

Private Placement Warrants

 

Simultaneously with the consummation of the IPO on October 4, 2021, the Sponsor and Jefferies purchased an aggregate of 7,600,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant ($7,600,000 in the aggregate) in a private placement. Each whole Private Placement Warrant is exercisable for one share of Class A common stock at a price of $11.50 per share.

 

A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor were added to the proceeds from the Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless.

 

The Private Placement Warrants are non-redeemable for cash and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. Subject to limited exceptions, the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of the Business Combination (See Note 7).

 

Related Party Loans

 

On May 5, 2021, the Sponsor agreed to loan up to $300,000 to the Company to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and was due on the earlier of the completion of the Initial Public Offering or December 31, 2021. As of October 4, 2021, the date of the IPO, $266,912 had been drawn by the Company and was paid off as part of the closing of the transaction. As of June 30, 2023 and December 31, 2022, no amount is outstanding under the Note.

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 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 $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.

 

The Sponsor, officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made to the Sponsor, officers or directors, or their affiliates. As of June 30, 2023 and December 31, 2022, the Company had no outstanding borrowings under the Working Capital Loans.

 

Administrative Services

 

The Company has committed to pay up to $15,000 per month to the Sponsor for administrative, financial and support services provided to members of the Company’s sponsor team. This administrative service arrangement will terminate upon completion of the initial Business Combination or liquidation of the Company. For the three months and six months ended June 30, 2023, $0 and $30,000, respectively, and the three months and six months ended June 30, 2022, $45,000 and $90,000, respectively, in costs were incurred related to this agreement which are included in formation, general and administrative expenses in the accompanying condensed statements of operations.

NOTE 5 —STOCKHOLDERS’ DEFICIT

 

 

 

 

Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders, except as required by law or the applicable rules of Nasdaq. Holders of the Class A and Class B common stock will have one vote for every share of common stock with the exception that holders of the Class B common stock have the exclusive right to vote for the election of directors and all other matters properly submitted to a vote of stockholders.

The Class B common stock will automatically convert into shares of Class A common stock concurrently with or immediately following the consummation of the initial Business Combination on a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, 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 connection with the initial Business Combination, 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, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by Public Stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans; provided that such conversion of shares of Class B common stock will never occur on a less than one-for-one basis.

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

Underwriting Agreement

 

The Company granted the underwriter a 45-day option from the date of the Offering to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the Offering price less the underwriting discounts and commissions. This option expired unused in November 2021.

 

The underwriter has earned an underwriting discount of $0.20 per Unit, or $4,000,000 in the aggregate which was paid upon the closing of the Offering.

 

In addition, the underwriter will be entitled to a deferred fee of $0.35 per Unit, or $7,000,000 in the aggregate. The deferred fee will become payable to the underwriter 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.

 

Registration Rights

 

The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of working capital loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans) are entitled to registration rights pursuant to a registration rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form 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 the initial Business Combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period, which occurs (i) in the case of the Founder Shares, the period ending on the earlier of (a) one year after the completion of the Company’s initial Business Combination and (b) subsequent to the completion of the Company’s initial Business Combination, (x) if the last reported sale price of the 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 the Company’s initial Business Combination or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction after the Company’s initial Business Combination 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., and (ii) in the case of the Private Placement Warrants and the respective Class A common stock underlying such warrants, 30 days after the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Consulting Agreements

 

In April 2022, the Company entered into an agreement with a third-party consultant pursuant to which the consultant will provide to the Company, among other services, introductions to, and due diligence of, potential Business Combination target entities. Pursuant to the terms of the agreement, the Company has paid the consultant an initial fee of $100,000 and has agreed to pay a contingent fee, payable upon the satisfaction of certain transaction milestones, of up to $3,900,000 if the Company consummates a Business Combination with a target introduced by the consultant and fewer than 25% of the Public Shares are redeemed by stockholders in connection with such Business Combination. Nothing is recorded in relation to this agreement in the financial statements.

 

In June 2022, the Company entered into an agreement with a third-party consultant pursuant to which the consultant will provide to the Company, among other services, introductions to, and negotiation assistance with, potential Business Combination target entities. Pursuant to the terms of the agreement, the Company has agreed to pay a contingent fee, payable upon the satisfaction of certain transaction milestones, of up to $3,900,000 if the Company consummates a Business Combination with a target introduced by the consultant and fewer than 25% of the Public Shares are redeemed by stockholders in connection with such Business Combination. Nothing is recorded in relation to this agreement in the financial statements.

In September 2022, the Company entered into an agreement with a third-party consultant pursuant to which the consultant will provide to the Company, among other services, introductions to potential Business Combination target entities. Pursuant to the terms of the agreement, the Company has agreed to pay a contingent fee, payable upon the satisfaction of certain transaction milestones, of up to $1,500,000, in addition to the issuance of newly-issued shares, if the Company consummates a Business Combination with a target introduced by the consultant. Nothing is recorded in relation to this agreement in the financial statements.

NOTE 7 – WARRANT LIABILITY

 

The Company accounted for the 17,600,000 warrants issued in connection with the Initial Public Offering (the 10,000,000 Public Warrants and the 7,600,000 Private Placement Warrants) in accordance with the guidance contained in ASC 815-40. Such guidance provides that, because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. Accordingly, the Company has classified each warrant as a liability at its fair value. This liability is subject to re-measurement at each balance sheet date. With each such remeasurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The warrants are also subject to re-evaluation of the proper classification and accounting treatment at each reporting period. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.

 

The Company has 17,600,000 (10,000,000 Public Warrants and 7,600,000 Private Placement Warrants) warrants outstanding.  No changes in classification were made as of and for the three months ended June 30, 2023.

 

Public Warrants

 

The Company offered warrants in connection with its sale of Units. Each whole warrant that is part of the Units sold in the Offering is exercisable to purchase one share of the Company’s Class A common stock, subject to adjustment as provided in the Company’s Offering prospectus, and only whole warrants are exercisable. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. If, upon separation of the Units, a holder of warrants would be entitled to receive a fractional warrant, the Company will round down to the nearest whole number of warrants to be issued to such holder.

 

The exercise price of the warrant will be $11.50 per whole share, subject to adjustments as described in the Company’s Offering prospectus. In addition, if (x) the Company issues additional shares of its Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the Business Combination at an issue price or effective issue price of less than $9.20 per share of its 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 Company’s initial stockholders 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 Business Combination on the date of the completion of the Business Combination (net of redemptions), and (z) the volume-weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company completes the Business Combination (such price, the “Market Value”) is below $9.20 per share, then 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, and the $10.00 and $18.00 per share redemption trigger prices described below will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.

 

The warrants will become exercisable on the later of: (a) 30 days after the completion of the Business Combination; and (b) 12 months from the closing of the Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the sale of the shares of its Class A common stock issuable upon exercise of the warrants, and a current Offering prospectus relating thereto is available, and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement as a result of (i) the Company’s failure to have an effective registration statement by the 60th business day after the closing of the Business Combination as described in the immediately following paragraph or (ii) a notice of redemption described below). 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.

The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of the Business Combination, the Company will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the sale of the shares of Class A common stock issuable upon exercise of the warrants, and to maintain the effectiveness of such registration statement, and a current Offering prospectus relating thereto, until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the sale of the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Company’s 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, it will not be required to file or maintain in effect a registration statement, but the Company 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.

The warrants will expire at 5:00 p.m., New York City time, five years after the completion of the Business Combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to the Company and not placed in the Trust Account.

 

Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described in the Company’s Offering prospectus with respect to the private placement warrants):

 

 

 

 

The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the sale of the shares of its Class A common stock issuable upon exercise of the warrants is effective, and a current Offering prospectus relating thereto is available, throughout the 30-day redemption period. Any such exercise would not be on a “cashless basis” and would require the exercising warrant holder to pay the exercise price for each warrant being exercised.

 

The “fair market value” of the Company’s Class A common stock shall mean the volume-weighted average price of the Class A common stock for the ten trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. This redemption feature differs from the typical warrant redemption features used in other blank check offerings. The Company will provide the warrant holders with the final fair market value no later than one business day after the 10-day trading period described above ends. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of the Company’s Class A common stock per warrant (subject to adjustment).

No fractional shares of the Company’s Class A common stock will be issued upon exercise of a warrant in connection with a redemption. If, upon such exercise, 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 shares of its Class A common stock to be issued to the holder.

 

Pursuant to the warrant agreement, references above to Class A common stock shall include a security other than Class A common stock into which the Class A common stock has been converted or exchanged for in the event the Company is not the surviving company in the initial Business Combination.

 

Private Placement Warrants

 

The holders of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (“Working Capital Warrants”), and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants or Working Capital Warrants, are subject to a lock-up period of 30 days after the completion of the Business Combination pursuant to a registration rights agreement.

 

The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants included in the Units sold in the IPO.

 

NOTE 8 – RECURRING FAIR VALUE MEASUREMENTS

 

The following table presents fair value information as of June 30, 2023 and December 31, 2022 of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

 

The following table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value on a recurring basis:

 

Investment Held in Trust Account

 

 

The composition of the Company’s fair value of held to maturity securities is as follows:

Warrant Liabilities

 

Under the guidance in ASC 815-40, the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment. As such, the Public Warrants and the Private Warrants must be recorded on the balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, the valuations will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.

 

The Company’s warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value.

 

The fair value of the Private Placement Warrant liability is classified within Level 3 of the fair value hierarchy. On November 22, 2021, the 52nd day following the date of the offering prospectus, the Public Shares and Public Warrants underlying the Units sold in the IPO became separately tradeable. Accordingly, an observable market was available for the Public Warrants and they were reclassified to a Level 1 classification.

Measurement

 

The Company established the initial fair value for the warrants on October 4, 2021, the date of the consummation of the Company’s IPO. The Company used a Black-Scholes-Merton formula model to value the warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A common stock and one-half of one Public Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance of Class B common stock, first to the warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A common stock subject to possible redemption (temporary equity), Class A common stock (permanent equity) and Class B common stock (permanent equity) based on their relative fair values at the initial measurement date.

 

As of June 30, 2023, the Public Warrants were publicly traded and their fair value was based on the market trade price on that date. The fair value for the Private Warrants was estimated using a Monte Carlo simulation model.

 

Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. During the three months ended June 30, 2023 and for the three months ended June 30, 2022, there were no transfers between levels.

 

The Company’s warrant liabilities are based on a valuation model utilizing management judgement and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the Private Warrant liability is classified within Level 3 of the fair value hierarchy.

 

The key inputs into the Private Placement Warrants model were as follows for June 30, 2023 and December 31, 2022:

 

The following contains additional information regarding the inputs used in the pricing models:

 

 

 

 

NOTE 9 – SUBSEQUENT EVENTS

 

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based on this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statement.

There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that has  materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.