LF Capital Acquisition Corp. II - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-41071

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

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ☐ No ☒

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 the 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☒

As of August 10, 2023, there were 11,970,144 shares of the Registrant’s Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”) and 200,000 shares of the Registrant’s Class B Common Stock, par value $0.0001 per share (“Class B Common Stock”) issued and outstanding.

LF CAPITAL ACQUISITION CORP. II 

 Quarterly Report on Form 10-Q

 TABLE OF CONTENTS

Item 1. Interim Financial Statements (Unaudited)

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

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

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

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

 LF CAPITAL ACQUISITION CORP. I 

 NOTES TO CONDENSED FINANCIAL STATEMENTS 

 JUNE 30, 2023

 (UNAUDITED)

Note 1 – Description of Organization and Business Operations

LF Capital Acquisition Corp. II (the “Company”) was incorporated in Delaware on February 19, 2021. The Company is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (the “Business Combination”). The Company has selected December 31 as its fiscal year end.

The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of June 30, 2023, the Company had not commenced any operations. All activity from February 19, 2021 (inception) through June 30, 2023, relates to the Company’s formation and Initial Public Offering (“IPO”), which is described below and, since the IPO, the search for a prospective Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income earned on investments from the proceeds derived from the IPO. The registration statement for the Company’s IPO was declared effective on November 16, 2021. On November 19, 2021, the Company consummated the IPO and sold 22,500,000 units (“Units”) with each Unit consisting of one share of Class A Common Stock and one-half of one redeemable warrant to purchase one share of Class A Common Stock at $11.50 per share (each, a “Public Warrant”) at $10.00 per Unit, generating gross proceeds of $225,000,000, which is discussed in Note 3.

Simultaneously with the closing of the IPO, the Company consummated the sale of 11,000,000 warrants at a price of $1.00 per warrant in a private placement (“Private Placement Warrants”) to the Company’s Sponsor, Level Field Capital II, LLC (the “Sponsor”), Jefferies LLC, the underwriter (the “Underwriter”) of the IPO and certain funds and accounts managed by subsidiaries of a strategic investor (the “Anchor Investor”), generating gross proceeds of $11,000,000 which is described in Note 4.

Simultaneously with the closing of the IPO, the Company consummated the closing of the sale of 3,375,000 additional Units upon receiving notice of the Underwriter’s election to fully exercise its overallotment option, generating additional gross proceeds of $33,750,000. Simultaneously with the exercise of the overallotment, the Company consummated the private placement of an additional 1,350,000 Private Placement Warrants to the Sponsor and the Underwriter (the “Private Placement”), generating gross proceeds of $1,350,000.

Offering costs for the IPO and the exercise of the Underwriter’s over-allotment option amounted to $15,030,508, consisting of $14,231,250 of underwriting fees, of which $9,056,250 is deferred and held in the Trust Account (defined below) and $799,258 of other offering costs. As described in Note 5, the $9,056,250 of deferred underwriting fees payable is contingent upon the consummation of a Business Combination within 15 months from the closing of IPO (or, following the extension of the period of time to complete the initial Business Combination up to six times by an additional period of one month each time for a total of up to 21 months), subject to the terms of the underwriting agreement.

Following the closing of the IPO and the exercise of the Underwriter’s over-allotment option, $263,925,000 ($10.20 per Unit) from the net proceeds from the sale of the Units in the IPO and the Private Placement Warrants were placed in a trust account (“Trust Account”) and have been invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting fees and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance the Company will be able to successfully effect a Business Combination.

The Company will provide the holders of the outstanding public shares (the “Public Shares”, and the holders thereof, the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). The warrants will subject to redemption, as further described in Note 6.

All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation (the “Charter”). In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”) 480, “Distinguishing Liabilities from Equity” (“ASC 480”) Subtopic 10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares were issued with other freestanding instruments (i.e., Public Warrants), the initial carrying value of Class A Common Stock classified as temporary equity was the allocated proceeds determined in accordance with ASC 470-20 “Debt with Conversion and other Options”. The Class A Common Stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. Although redemptions cannot cause the Company’s net tangible assets to fall below $5,000,001, the Public Shares are redeemable and are classified as such on the balance sheet until the date on which such a redemption event takes place.

Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s Business Combination. If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to the Charter, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.

Notwithstanding the foregoing, the Charter provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A Common Stock sold in the IPO, without the prior consent of the Company.

The Company’s Sponsor, officers and directors (collectively, the “Initial Stockholders”) have agreed not to propose an amendment to the Charter that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their shares of Class A Common Stock in conjunction with any such amendment.

If the Company is unable to complete a Business Combination within 15 months from the closing of the IPO (unless extended in connection with an Extension (as defined below) election or as a result of an amendment to our Charter, which would require the approval of the holders of at least 65% of all of the Company’s then outstanding common stock) (“Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

On February 14, 2023, pursuant to the terms of the Charter of the Company, our Sponsor, the holder of an aggregate of 6,388,750 shares of the Company’s Class B Common Stock, par value $0.0001 per share (“Class B Common Stock”), elected to convert 6,268,750 shares of the Class B Common Stock held by it on a one-for-one basis into Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”) of the Company, with immediate effect. Following such conversion, as of February 14, 2023, the Company had an aggregate of 32,143,750 shares of Class A Common Stock issued and outstanding and 200,000 shares of Class B Common Stock issued and outstanding.

On February 15, 2023, the Company signed a letter of intent with the target company for a potential Business Combination (the “Target Company” which, if completed, would qualify as its initial Business Combination. The letter of intent is non-binding with respect to all its material terms, except with respect to provisions regarding a limited period of exclusivity. The Target Company is a US-based manufacturer in the packaging industry with industry-leading profitability serving diversified end markets and with an established and highly attractive, blue-chip customer base that are subject to multi-year contracts.

On February 15, 2023, the Company held a special meeting of its stockholders (the “Special Meeting”) to vote on a proposal to amend the Company’s Charter to increase the monthly Extension payment per one-month extension of the deadline to complete the initial Business Combination to $0.04 per share of the Company’s Class A Common Stock (the “Charter Amendment Proposal”). The Company convened and adjourned the Special Meeting, without conducting any business and the Company adjourned the meeting until February 17, 2023. On February 17, 2023, the Company reconvened the Special Meeting at which its stockholders approved the Charter Amendment Proposal. In connection with the vote to approve the Charter Amendment Proposal, holders of 14,574,581 shares of Class A Common Stock properly exercised their right to redeem their shares of Class A Common Stock at a redemption price of approximately $10.35 per share, for an aggregate redemption amount of approximately $150,738,777. As such, approximately 56% of the Class A Common Stock outstanding with redemption rights was redeemed and approximately 11,300,419 shares of the Class A Common Stock remain outstanding.

On February 21, 2023, the Company issued a promissory note (the “2023 Note”) in the aggregate principal amount of up to $2,712,101 (the “Extension Funds”) to our Sponsor, pursuant to which a portion of the Extension Funds may be deposited into the Trust Account for each share of Class A Common Stock sold in the Company’s initial public offering that was not redeemed in connection with increase of the redemption price set forth in the Charter Amendment Proposal. The Company entered into an amendment on June 27, 2023 to increase the aggregate principal amount available under the 2023 Note by $800,000. On February 21, 2023, March 20, 2023, April 17, 2023, May 17, 2023 and June 14, 2023 the Company drew down $452,016.76, respectively, under the 2023 Note to fund the Extension payments. As of June 30, 2023, the amount borrowed against the 2023 Note was $2,260,084 and $1,252,017 is available for withdrawal.

On March 13, 2023, Scott Reed resigned from the board of directors of the Company and from his positions as President and Chief Executive Officer. Mr. Reed did not resign as a result of any dispute or disagreement with the Company or board of directors on any matters relating to the Company’s operations, policies or practices. Mr. Reed will continue to serve as an advisor to the Company. On March 13, 2023, Elias Farhat, who is also a member of the board of directors, was appointed as the new Chief Executive Officer.

On March 13, 2023, the Company announced that Djemi Traboulsi, Senior Vice President and Managing Director of the Company, was appointed to the board of directors, to serve until the 2024 annual meeting of stockholders of the Company and until his successor is elected and qualified.

On March 21, 2023, Djemi Traboulsi resigned from his position as Senior Vice President and Managing Director. Mr. Traboulsi did not resign as a result of any dispute or disagreement with the Company or board of directors on any matters relating to the Company’s operations, policies or practices. Mr. Traboulsi will continue to serve as a member of the board of directors of the Company.

On June 27, 2023, the Company filed an amendment (the “Charter Amendment”) to the Company’s Charter with the Secretary of State of the State of Delaware. The Charter Amendment extended the date by which the Company has to consummate a Business Combination from August 19, 2023 to November 19, 2023 (the “Extended Date”), by increasing the number of one-month extensions of the deadline to complete the initial Business Combination from six to nine (the “Extensions”) by depositing into the Trust Account established in connection with the Company’s IPO for each Extension beginning July 19, 2023 the lesser of (i) $200,000 or (ii) $0.03 per share of the Company’s Class A Common Stock, par value $0.0001 per share, sold in the IPO, per Extension. In connection with the approval and amendment of the Company’s Charter pursuant to the Charter Amendment, the Company was required to permit its public shareholders to redeem their shares of Class A Common Stock. Of the 11,383,419 shares of Class A Common Stock outstanding with redemption rights, the holders of 5,599,025 shares of Class A Common Stock elected to redeem their shares at a per share redemption price of approximately $10.70. As a result, approximately $59,958,158 was due to be removed from the Company’s Trust Account to pay such holders. The redemption payments were subsequently dispersed on July 5, 2023, as such it is reflected as a liability on the Company’s unaudited condensed balance sheet.

The Initial Stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The Underwriter has agreed to waive its rights to its deferred underwriting fees (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.20 per share held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the Underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the world. As of the date the financial statements were issued, there is considerable uncertainty around the expected duration of this pandemic. Management continues to evaluate the impact of the COVID-19 pandemic, and the Company has concluded that, while it is reasonably possible that COVID-19 could have a negative effect on the Company’s ability to identify a target company for a Business Combination, the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.

Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, Extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, Extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, Extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.

Liquidity and Going Concern

As of June 30, 2023, the Company had $176,957 in its operating bank account, $121,095,558 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of $5,441,971.

In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in FASB Accounting Standards Update (“ASU”) Subtopic 205-40, “Presentation of Financial Statements-Going Concern,” management has determined that should the Company be unable to complete a Business Combination, due to the mandatory liquidation and subsequent dissolution described in Note 1 of the financial statements that would follow, it raises substantial doubt about the Company’s ability to continue as a going concern. The Company originally had until February 19, 2023 to consummate a Business Combination. On February 15, 2023, the Company held a Special Meeting to vote on a proposal to amend the Company’s Charter to increase the monthly Extension payment per one-month extension of the deadline to complete the initial Business Combination to $0.04 per share of the Company’s Class A Common Stock (the “Charter Amendment Proposal”). The Company convened and adjourned the Special Meeting, without conducting any business and the Company adjourned the meeting until February 17, 2023. On February 17, 2023, the Company reconvened the Special Meeting at which its stockholders approved the Charter Amendment Proposal which included extending the Business Combination period to August 19, 2023. In connection with the vote to approve the Charter Amendment Proposal, holders of 14,574,581 shares of Class A Common Stock properly exercised their right to redeem their shares of Class A Common Stock at a redemption price of approximately $10.35 per share, for an aggregate redemption amount of approximately $150,738,777. As such, approximately 56% of the Class A Common Stock outstanding with redemption rights was redeemed and approximately 11,300,419 shares of the redeemable Class A Common Stock remained outstanding.

On June 27, 2023, the Company filed the Charter Amendment with the Secretary of State of the State of Delaware. The Charter Amendment extended the date by which the Company has to consummate a Business Combination from August 19, 2023 to November 19, 2023, by increasing the number of one-month Extensions of the deadline to complete the initial Business Combination from six to nine by depositing into the Trust Account established in connection with the Company’s initial public offering for each Extension beginning July 19, 2023 the lesser of (i) $200,000 or (ii) $0.03 per share of the Company’s Class A Common Stock sold in the IPO, per Extension. In connection with the approval and amendment of the Company’s Charter pursuant to the Charter Amendment, the Company was required to permit its public shareholders to redeem their shares of Class A Common Stock. Of the 11,383,419 shares of Class A Common Stock outstanding with redemption rights, the holders of 5,599,025 shares of Class A Common Stock elected to redeem their shares at a per share redemption price of approximately $10.70. As a result, approximately $59,958,158 was removed from the Company’s Trust Account in July of 2023 to pay such holders. It is uncertain that the Company will be able to consummate a Business Combination by the specified period. If a Business Combination is not consummated by November 19, 2023, or the Company does not exercise its optional one-month extensions, there will be a mandatory liquidation and subsequent dissolution.

On February 21, 2023, the Company issued the 2023 Note in the aggregate principal amount of up to $2,712,101 to our Sponsor, the Extension Funds, pursuant to which the Extension Funds will be deposited into the Trust Account for each share of Class A Common Stock of the Company that was not redeemed in connection with increase of the redemption price set forth in the Charter Amendment Proposal. The Company entered into an amendment on June 27, 2023 to increase the aggregate principal amount available under the 2023 Note by $800,000. On February 21, 2023, March 20, 2023, April 17, 2023, May 17, 2023 and June 14, 2023 the Company drew down $452,016.76, respectively, under the 2023 Note to fund the Extension payments.

Also, in connection with the Company’s assessment of going concern considerations in accordance with the ASU Subtopic 205-40 management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs as well as complete a Business Combination by November 19, 2023, the Extended Date, then the Company will cease all operations except for the purpose of liquidating. The liquidity condition as well as the date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern.

These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023.

The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 23, 2023.

Emerging Growth Company

The Company is an emerging growth company as defined in Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, will adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s unaudited condensed financial statement with those of another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Making estimates requires management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates. It is at least reasonably possible that the estimate of the effects of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2023 and December 31, 2022.

Investments Held in Trust Account

At June 30, 2023 and December 31, 2022, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in unrealized gains on marketable securities held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.

Convertible Promissory Note

The Company accounts for its convertible promissory note under ASC 815, “Derivatives and Hedging” (“ASC 815”). Under 815-15-25, the election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825, “Financial Instruments” (“ASC 825”). The Company has made such election for its convertible promissory note. Using the fair value option, the convertible promissory note is required to be recorded at its initial fair value on the date of issuance and each balance sheet date thereafter. Differences between the face value of the note and fair value at issuance are recognized as either an expense in the statements of operations (if issued at a premium) or as a capital contribution (if issued at a discount). Changes in the estimated fair value of the notes are recognized as non-cash gains or losses in the condensed statements of operations.

Offering Costs Associated with the Initial Public Offering

Offering costs amounted to $15,030,508, of which $14,621,728 and $408,779 were charged against the carrying value of Class A Common Stock and Public and Private Warrants, respectively, as of November 19, 2021, based on the relative value of the Class A Common Stock and Public and Private Warrants.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation limit of $250,000. At June 30, 2023 and December 31, 2022, the Company has not experienced losses on these accounts, and management believes the Company is not exposed to significant risks on such account.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” equals or approximates the carrying amounts represented in the accompanying unaudited condensed balance sheets, primarily due to their short-term nature.

Income Taxes

The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of June 30, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it.

The Company’s effective tax rate was 159.43% and (0.24%) for the three months ended June 30, 2023 and 2022, respectively, and 49.03% and (4.78%) for the six months ended June 30, 2023 and 2022, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and six months ended June 30, 2023 and 2022, due to the change in valuation allowance on the deferred tax assets, non-deductible transaction costs and the change in fair value of the convertible promissory note.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.

The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. The Company has not recorded any unrecognized tax benefits since inception. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

Class A Common Stock Subject to Possible Redemption

The Company follows the two-class method to calculate earnings per ordinary share. The Company accounts for its Class A Common Stock subject to possible redemption in accordance with the guidance in ASC 480. Conditionally redeemable Class A Common Stock (including Class A Common Stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A Common Stock is classified as stockholders’ equity. The Company’s Class A Common Stock sold in the IPO and in connection with the exercise of the Underwriter’s over-allotment option feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, on June 30, 2023 and December 31, 2022, 5,701,394 and 25,875,000 shares of Class A Common Stock subject to possible redemption is presented as temporary equity.

In connection with the February 15, 2023 vote to approve the Charter Amendment Proposal, holders of 14,574,581 shares of Class A Common Stock properly exercised their right to redeem their shares of Class A Common Stock at a redemption price of approximately $10.35 per share, for an aggregate redemption amount of approximately $150,738,777. As such, immediately following, approximately 56% of the Class A Common Stock outstanding with redemption rights were redeemed and approximately 11,300,419 shares of the redeemable Class A Common Stock remained outstanding.

In connection with the June 26, 2023 vote to approve the amendment to the Company’s Charter pursuant to the Charter Amendment on June 27, 2023, the Company was required to permit its public shareholders to redeem their shares of Class A Common Stock. Of the 11,383,419 shares of Class A Common Stock outstanding with redemption rights, the holders of 5,599,025 shares of Class A Common Stock elected to redeem their shares at a per share redemption price of approximately $10.70. As a result, approximately $59,958,158 was due to be removed from the Company’s Trust Account to pay such holders. This redemption payment was subsequently dispersed in July 2023, as such it is reflected as a liability on the Company’s unaudited condensed balance sheet as of June 30, 2023.

On February 21, 2023, the Company issued the 2023 Note in the aggregate principal amount of up to $2,712,101, the Extension Funds, to our Sponsor, pursuant to which a portion of the Extension Funds may be deposited into the Trust Account for each share of Class A Common Stock sold in the Company’s initial public offering that was not redeemed in connection with increase of the redemption price set forth in the Charter Amendment Proposal. The Company entered into an amendment on June 27, 2023 to increase the aggregate principal amount available under the 2023 Note by $800,000. On February 21, 2023, March 20, 2023, April 17, 2023, May 17, 2023 and June 14, 2023 the Company drew down $452,016.76, respectively, under the 2023 Note to fund the Extension payments. As of June 30, 2023, the amount borrowed against the 2023 Note was $2,260,084 and contributed to the Trust Account.

Immediately upon the closing of the IPO and the exercise of the Underwriter’s over-allotment option, the Company recognized the accretion from the initial book value to redemption amount value. The change in the carrying value of redeemable shares of Class A Common Stock resulted in charges against additional paid-in capital and accumulated deficit.

As of June 30, 2023 and December 31, 2022 the shares of Class A Common Stock reflected on the unaudited condensed balance sheet are reconciled on the following table:

Net (Loss) Income per Common Share

The Company has two classes of shares, which are referred to as Class A Common Stock and Class B Common Stock (the “Founder Shares”). Earnings and losses are shared pro rata between the two classes of shares. A total of 12,937,500 Public Warrants (see Note 3) and 12,350,000 Private Placement Warrants (see Note 4) to purchase an aggregate of 25,287,500 shares of Class A Common Stock at $11.50 per share were issued on November 19, 2021. At June 30, 2023, no Public Warrants or Private Placement Warrants have been exercised. The 25,287,500 shares of Class A Common Stock for which the outstanding Public Warrants and Private Placement Warrants are exercisable were excluded from diluted earnings per share for the period ended June 30, 2023 and 2022 because they are contingently exercisable, and the contingencies have not yet been met. The calculation does not include warrants that could be issued as a result of the conversion option in the convertible promissory note. As a result, diluted net (loss) income per share of common stock is the same as basic net (loss) income per share of common stock for the period. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income per share for each class of stock.

Warrant Instruments

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.

Stock Compensation Expense

In connection with the Company’s IPO, Founder’s Shares were sold to certain independent directors by the Sponsor at the price of $0.004 per share.

The Company accounts for stock-based compensation expense in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”) under which stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and recognized over the requisite service period. To the extent a stock-based award is subject to a performance condition, the amount of expense recorded in a given period, if any, reflects an assessment of the probability of achieving such performance condition, with compensation recognized once the event is deemed probable to occur. Forfeitures are recognized as incurred.

The fair value of the 80,000 Founder Shares sold to certain independent directors as of November 19, 2021, was $627,119, or $7.84 per share. The Company used a Monte Carlo Model Simulation to arrive at the fair value of the stock compensation. The key assumptions in the option pricing model utilized are assumptions related to expected separation date of Units, anticipated Business Combination date, purchase price, share-price volatility, expected term, exercise date, risk-free interest rate and present value. The expected volatility as of the IPO closing date was derived based upon similar SPAC warrants and technology exchange traded funds which aligns with Company’s stated industry target and present value factor was based on risk-free rate and terms until the exercise date. The Company’s Founder Shares sold to independent directors (see Note 4) were deemed within the scope of ASC 718 and are subject to a performance condition, namely the occurrence of a Business Combination. Compensation expense related to the Founder Shares transferred is recognized only when the performance condition is probable of occurrence, or more specifically when a Business Combination is consummated. Therefore, no stock-based compensation expense has been recognized during the period from February 19, 2021 (inception) through June 30, 2023.

Recent Accounting Pronouncements

The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company, or no material effect is expected on the financial statement as a result of future adoption.

 Note 3 — Initial Public Offering

Pursuant to the IPO, and including the Underwriter’s exercise of its over-allotment option, the Company sold 25,875,000 Units at a price of $10.00 per Unit resulting in gross proceeds of $258,750,000 and net proceeds of $243,738,425 after deduction of offering costs. Each Unit consists of one Public Share and one-half of one Public Warrant. Each Public Warrant entitles the holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment (see Note 6).

Note 4 — Related Party Transactions

Founder Shares

On March 5, 2021, the Sponsor acquired 100 shares of the Company’s common stock. On March 15, 2021, the Company effectuated a recapitalization of the Company, which included a 64,687.50-for-1 stock split, resulting in an aggregate of 6,468,750 Founder Shares outstanding. On June 21, 2021, the Company effectuated a recapitalization of the Company, which included a 1.11-for-1 stock split, resulting in an aggregate of 7,187,500 Founder Shares outstanding. On October 26, 2021, the Company effectuated a recapitalization of the Company, which included a 1-for-1.11 reverse stock split, resulting in an aggregate of 6,468,750 Founder Shares outstanding (up to 843,750 of which were subject to forfeiture if the Underwriter’s over-allotment option was not exercised in full). Since the Underwriter exercised its over-allotment option in full, the Sponsor did not forfeit any Founder Shares. The Sponsor subsequently transferred an aggregate of 80,000 Founder Shares to the members of the Company’s board of directors for the same per-share consideration that it originally paid for such shares, resulting in the Sponsor holding 6,388,750 Founder Shares.

The Founder Shares will automatically convert into shares of Class A Common Stock at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions. Holders of Founder Shares may also elect to convert their shares of Class B Common Stock into an equal number of shares of Class A Common Stock, subject to adjustment, at any time.

On February 14, 2023, pursuant to the terms of the Charter of the Company, our Sponsor, the holder of an aggregate of 6,388,750 shares of the Company’s Class B Common Stock, elected to convert 6,268,750 shares of the Class B Common Stock held by it on a one-for-one basis into Class A Common Stock of the Company. Following such conversion, as of February 14, 2023, the Company had an aggregate of 32,143,750 shares of Class A Common Stock issued and outstanding and 200,000 shares of Class B Common Stock issued and outstanding. All of the Class A Common Stock converted from Class B Common Stock, was still considered non-redeemable with the same restrictions as the Class B Common Stock prior to the conversion. This resulted in 25,875,000 shares of Class A Common Stock being redeemable and 6,268,750 Class A Common Stock being non-redeemable. Following the conversion, in connection with the Extension, 14,574,581 Class A Common Stock were redeemed, resulting in 11,300,419 shares of redeemable Class A Common Stock and 6,268,750 shares of non-redeemable Class A Common Stock remaining. On June 27, 2023, in connection with the Extension, 5,599,025 shares of Class A Common Stock were redeemed, resulting in 5,701,394 shares of redeemable Class A Common Stock and 6,268,750 shares of non-redeemable Class A Common Stock remaining.

The Initial Stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Private Placement

On November 19, 2021, simultaneously with the consummation of the IPO and the Underwriter’s exercise of its over-allotment option, the Company consummated the issuance and sale of 12,350,000 Private Placement Warrants in a Private Placement at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $12,350,000. Each Private Placement Warrant is exercisable to purchase one share of Class A Common Stock at a price of $11.50 per share. A portion of the proceeds from the Private Placement were added to the proceeds from the IPO being held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants and all underlying securities will be worthless.

Convertible Promissory Note – Related Party

On April 13, 2022, the Sponsor agreed to loan the Company an aggregate of up to $1,500,000 pursuant to a promissory note (the “Convertible Note”). The Convertible Note is non-interest bearing and payable in full on February 19, 2023, unless extended. At the Company’s discretion, the Convertible Note may be converted into warrants of the Company at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.

On April 13, 2022, June 30, 2022 and August 31, 2022, the Company drew down $250,000, $200,000 and $175,000, respectively, under the Convertible Note. The fair value of the $250,000 drawn on April 13, 2022 was estimated by the Company to be $229,333 at initial measurement. The $20,668 excess proceeds over fair value was recognized in additional paid-in capital. The fair value of the $200,000 drawn on June 30, 2022 was estimated to be $183,030 at initial measurement. The $16,970 excess proceeds over fair value was recognized in additional paid-in capital. The fair value of the $175,000 drawn on August 31, 2022 was estimated to be $88,784 at initial measurement. The $123,853 excess proceeds over fair value was recognized in additional paid-in capital.

On January 31, 2023, the Company drew down $225,000 under the Convertible Note. The fair value of the $225,000 drawn was estimated by the Company to be $38,999 at initial measurement. The $186,001 excess proceeds over fair value was recognized in additional paid-in capital.

On April 30, 2023 and June 7, 2023, the Company drew down $200,000 and $220,000, respectively, under the Convertible Note. The fair value of the $200,000 drawn on April 30, 2023 was estimated by the Company to be $25,807 at initial measurement. The $174,193 excess proceeds over fair value were recognized in additional paid-in capital. The fair value of the $220,000 drawn on June 7, 2023 was estimated by the Company to be $33,655 at initial measurement. The $186,345 excess proceeds over fair value were recognized in additional paid-in capital. The aggregate fair value of the Convertible Note was estimated to be $222,306 and $75,851 as of June 30, 2023 and December 31, 2022, respectively.

Related Party Loans

On March 5, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the IPO pursuant to a promissory note (the “Note”). On June 18, 2021, the Sponsor amended the Note to increase the principal amount to $600,000. The loan was non-interest bearing and payable on the earlier of March 31, 2022 or the completion of the IPO. A total of $425,000 under the Note was borrowed from the Sponsor and repaid in full from the proceeds of the IPO not being placed in the Trust Account on November 19, 2021.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.

On February 21, 2023, the Company issued the 2023 Note in the aggregate principal amount of up to $2,712,101, the Extension Funds, to our Sponsor, pursuant to which a portion of the Extension Funds may be deposited into the Trust Account for each share of Class A Common Stock sold in the Company’s initial public offering that was not redeemed in connection with increase of the redemption price set forth in the Charter Amendment Proposal. The Company entered into an amendment on June 27, 2023 to increase the aggregate principal amount available under the 2023 Note by $800,000. On February 21, 2023, March 20, 2023, April 17, 2023, May 17, 2023 and June 14, 2023 the Company drew down $452,016.76, respectively, under the 2023 Note to fund the Extension payments. As of June 30, 2023, the amount borrowed against the 2023 Note was $2,260,084 and $1,252,017 is available for withdrawal.

Support Services

Effective November 16, 2021, the Company entered into an Administrative Support Agreement with an entity affiliated with the Sponsor for office space and administrative support services at a monthly fee of $15,000. Since the consummation of the IPO, the Company has paid, and intends to continue paying until the earlier of the consummation of the Business Combination or the Company’s liquidation, a fee of approximately $15,000 per month. The Company recognized $45,000 and $90,000 for the three and six months ending June 30, 2023, respectively, and $45,000 and $90,000 for the three and six months ending June 30, 2022, respectively, of which such amounts has been accrued for these services and is included in “Accounts payable and accrued expenses” in the accompanying unaudited condensed balance sheets.

Note 5 — Commitments and Contingencies

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A Common Stock) pursuant to a registration rights agreement, dated November 16, 2021. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the Underwriter a 45-day option from the date of the final prospectus relating to the IPO to purchase up to 3,375,000 additional Units to cover over-allotments, if any, at the IPO price less underwriting fees. On November 19, 2021, the Underwriter elected to fully exercise its over-allotment option, purchasing 3,375,000 of such additional Units.

The Underwriter was paid a cash underwriting discount of $0.20 per Unit sold in the IPO, including the Units issued in connection with the Underwriter’s exercise of its over-allotment option, or $5,175,000 in the aggregate at the closing of the IPO. In addition, the Underwriter is entitled to a deferred underwriting fee of $0.35 per Unit, or $9,056,250, from the closing of the IPO and the exercise of the Underwriter’s over-allotment option. The deferred underwriting fees will become payable to the Underwriter from the amounts held in the Trust Account solely if the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Excise Tax

In connection with the votes to approve the Charter Amendment Proposal and the Charter Amendment, holders of 14,574,581 and 5,599,025 shares of Class A Common Stock, respectively, properly exercised their right to redeem their shares of Class A Common Stock for an aggregate redemption amount of approximately $150,738,777 and $59,958,158 on February 17, 2023 and June 26, 2023, respectively. As such the Company has recorded a 1% excise tax liability in the total amount of $2,106,969 on the condensed balance sheets as of June 30, 2023. The liability does not impact the condensed statements of operations and is offset against additional paid-in capital or accumulated deficit if additional paid-in capital is not available. This excise tax liability can be offset by future share issuances within the same fiscal year which will be evaluated and adjusted in the period in which the issuances occur. Should the Company liquidate prior to December 31, 2023, the excise tax liability will not be due.

Note 6 — Stockholders’ Deficit

Common stock

Class A Common Stock—The Company is authorized to issue 100,000,000 shares of Class A Common Stock with a par value of $0.0001 per share. As of June 30, 2023 and December 31, 2022, there were 6,268,750 and 0 (excluding 5,701,394 and 25,875,000 shares of Class A Common Stock subject to possible redemption) shares of Class A Common Stock issued and outstanding, respectively.

Class B Common Stock—The Company is authorized to issue 10,000,000 shares of Class B Common Stock with a par value of $0.0001 per share. As of June 30, 2023 and December 31, 2022, there were 200,000 and 6,468,750 shares of Class B Common Stock issued and outstanding, respectively.

Preferred Stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. For the period presented, there were no shares of preferred stock issued or outstanding.

Warrants—As of June 30, 2023 and December 31, 2022, the Company had 12,937,500 Public Warrants and 12,350,000 Private Placement Warrants outstanding. The Company has determined that warrants issued in connection with its IPO in November 2021 are subject to treatment as equity. At IPO, the Company utilized a Monte Carlo simulation model to value the Warrants. Inherent in a Monte Carlo simulation are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero, the fair value of the Public and Private Placement Warrants on IPO was $0.52/warrant.

The Public Warrants will become exercisable 30 days after the completion of a Business Combination. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of Class A Common Stock issuable upon exercise of the warrants and a current prospectus relating to such shares of Class A Common Stock. Notwithstanding the foregoing, if a registration statement covering the shares of Class A Common Stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

Redemption of warrants when the price per share of Class A Common Stock equals or exceeds $18.00

Once the warrants become exercisable, the Company may redeem the outstanding warrants:

The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the Class A Common Stock issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A Common Stock is available throughout the 30-day redemption period. If and when the warrants become redeemable by us, we may exercise our redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

Redemption of warrants when the price per Class A Common Stock equals or exceeds $10.00

Once the warrants become exercisable, the Company may redeem the outstanding warrants:

The “fair market value” of the Company’s Class A Common Stock for the above purpose means the volume weighted average price of our Class A Common Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. The Company will provide its warrant holders with the final fair market value no later than one business day after the 10-trading day period described above ends. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 Class A Common Stock per warrant (subject to adjustment). Any redemption of the warrants for Class A Common Stock will apply to both the Public Warrants and the Private Placement Warrants.

No fractional Class A Common Stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, the Company will round down to the nearest whole number of the number of Class A Common Stock to be issued to the holder. Please see the section entitled “Description of Securities—Warrants—Public Stockholders’ Warrants” for additional information.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the IPO, except that the Private Placement Warrants and the shares of Class A Common Stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until after the completion of a Business Combination, subject to certain limited exceptions.

The exercise price and number of shares of Class A Common Stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of shares of Class A Common Stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

In addition, if the Company issues additional shares of Class A Common Stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A Common Stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Initial Stockholders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A Common Stock during the 10 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at which the Company issues the additional shares of Class A Common Stock or equity-linked securities.

Note 7 — Fair Value Measurements

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3: Unobservable inputs based on the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability.

At June 30, 2023 and December 31, 2022, the assets held in the Trust Account were held in U.S. Treasury funds. All of the Company’s investments held in the Trust Account are classified as trading securities.

The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2023 and December 31, 2022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

The following table presents the valuation inputs of the convertible promissory note as of June 30, 2023 and December 31, 2022:

The following table presents the changes in the fair value of the Level 3 convertible promissory note as of June 30, 2023:

Note 8 — Subsequent Events

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

On July 5, 2023, $59,958,158 was withdrawn from the Trust Account and and paid to redeeming shareholders in connection with the with the June 26, 2023 charter amendment.

On July 17, 2023, the Company in connection with the extension, deposited approximately $171,000 into the Trust Account. 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to “we,” “us,” “Company” or “our Company” refer to LF Capital Acquisition Corp. II. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our other filings with the SEC. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Part II—Other Information. Item 1a. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are an early-stage blank check company incorporated in February 2021 as a Delaware corporation and 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. We completed our initial public offering (the “IPO”) on November 19, 2021. We intend to effectuate our initial business combination using cash from the proceeds of the IPO and the sale of the private placement warrants, our capital stock, debt or a combination of cash, stock and debt.

On February 15, 2023, the Company signed a letter of intent with the target company for a potential business combination (the “Target Company”) which, if completed, would qualify as its initial business combination. The letter of intent is non-binding with respect to all its material terms, except with respect to provisions regarding a limited period of exclusivity. The Target Company is a US-based manufacturer in the packaging industry with industry-leading profitability serving diversified end markets and with an established and highly attractive, blue-chip customer base that are subject to multi-year contracts.

We presently have no revenue, have had losses since inception from incurring formation costs and have had no operations other than the active solicitation of a target business with which to complete an initial business combination. We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities through June 30, 2023 were organizational activities, those necessary to prepare for the IPO, described below, and, after our IPO, identifying a target company for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We generate non-operating income in the form of interest income on marketable securities held in the trust account (the “Trust Account”). We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended June 30, 2023, we had a net loss of $107,293, which consisted of operating costs of $1,229,349, a change in fair value of the promissory note dated April 13, 2022 by and between the Company and the Sponsor (the “Convertible Note”) of $11,371 and income tax expense of $287,831, offset by dividend income of $1,421,258.

For the three months ended June 30, 2022, we had a net loss of $154,809, which consisted of operating costs of $370,565, offset by an unrealized gain on marketable securities held in the Trust Account of $214,745, a change in fair value of Convertible Note of $544, dividend income of $92 and income tax benefit of $375.

For the six months ended June 30, 2023, we had a net income of $748,805, which consisted of an unrealized gain on marketable securities held in the Trust Account of $1,331,526 and dividend income of $2,198,244, offset by operating costs of $2,012,809, a change in fair value of Convertible Note of $47,994 and income tax expense of $720,162.

For the six months ended June 30, 2022, we had a net loss of $472,363, which consisted of operating costs of $807,672 and income tax expense of $21,532, offset by an unrealized gain on marketable securities held in the Trust Account of $356,205 and a change in fair value of Convertible Note of $544 and dividend income of $92.

Liquidity and Going Concern

As of June 30, 2023, the Company had $176,957 in its operating bank account, $121,095,558 in securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and working capital deficit of $5,441,971.

In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in FASB Accounting Standards Update (“ASU”) Subtopic 205-40, “Presentation of Financial Statements-Going Concern,” management has determined that should the Company be unable to complete a Business Combination, due to the mandatory liquidation and subsequent dissolution described in Note 1 of the financial statements that would follow, it raises substantial doubt about the Company’s ability to continue as a going concern. The Company originally had until February 19, 2023 to consummate a Business Combination. On February 15, 2023, the Company held a special meeting of its stockholder (the “Special Meeting”) to vote on a proposal to amend the Company’s Amended and Restated Certificate of Incorporation (the “Charter”) to increase the monthly Extension payment per one-month extension of the deadline to complete the initial Business Combination to $0.04 per share of the Company’s Class A Common Stock (the “Charter Amendment Proposal”). The Company convened and adjourned the Special Meeting, without conducting any business and the Company adjourned the meeting until February 17, 2023. On February 17, 2023, the Company reconvened the Special Meeting at which its stockholders approved the Charter Amendment Proposal which included extending the Business Combination period to August 19, 2023. In connection with the vote to approve the Charter Amendment Proposal, holders of 14,574,581 shares of Class A Common Stock properly exercised their right to redeem their shares of Class A Common Stock at a redemption price of approximately $10.35 per share, for an aggregate redemption amount of approximately $150,738,777. As such, approximately 56% of the Class A Common Stock outstanding with redemption rights was redeemed and approximately 11,300,419 shares of the redeemable Class A Common Stock remained outstanding

On June 27, 2023, the Company filed an amendment (the “Charter Amendment”) to the Company’s Charter with the Secretary of State of the State of Delaware. The Charter Amendment extended the date by which the Company has to consummate a Business Combination from August 19, 2023 to November 19, 2023, by increasing the number of one-month extensions of the deadline to complete the initial Business Combination from six to nine (the “Extensions”) by depositing into the trust account (the “Trust Account”) established in connection with the Company’s initial public offering (the “IPO”) for each Extension beginning July 19, 2023 the lesser of (i) $200,000 or (ii) $0.03 per share of the Company’s Class A Common Stock sold in the IPO, per Extension. In connection with the approval and amendment of the Company’s Charter pursuant to the Charter Amendment, the Company was required to permit its public shareholders to redeem their shares of Class A Common Stock. Of the 11,383,419 shares of Class A Common Stock outstanding with redemption rights, the holders of 5,599,025 shares of Class A Common Stock elected to redeem their shares at a per share redemption price of approximately $10.70. As a result, approximately $59,958,158 was removed from the Company’s Trust Account in July of 2023 to pay such holders. It is uncertain that the Company will be able to consummate a Business Combination by the specified period. If a Business Combination is not consummated by November 19, 2023, or the Company does not exercise its optional one-month extensions, there will be a mandatory liquidation and subsequent dissolution.

Also, in connection with the Company’s assessment of going concern considerations in accordance with the ASU Subtopic 205-40 management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs as well as complete a Business Combination by November 19, 2023 (or such earlier date if the Company does not exercise its option(s) to extend the deadline) then the Company will cease all operations except for the purpose of liquidating. The liquidity condition as well as the date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern.

These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company’s liquidity needs prior to the consummation of the IPO were satisfied through the payment of $25,000 from the Sponsor to cover certain offering costs on the Company’s behalf in exchange for issuance of Founder Shares (Note 4) and a promissory note, as amended, from the Sponsor (see Note 4). Subsequent to the IPO, the Company’s liquidity needs have been satisfied through a portion of the net proceeds from the Private Placement. Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. In order to finance transaction costs in connection with a Business Combination, the Company will need to raise additional capital through loans or additional investments from its Sponsor, shareholders, 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.

On April 13, 2022, the Sponsor issued the 2022 Convertible Note, pursuant to which the Company may borrow up to an aggregate principal amount of $1,500,000. The 2022 Convertible Note is non-interest bearing and payable on the later of (a) February 19, 2023 (or such later date as the Company may extend the deadline to complete the business combination and (b) the effective date of the business combination. At the option of the Sponsor, at any time on or prior to the maturity date, any amounts outstanding under the 2022 Convertible Note (or any portion thereof) up to $1,500,000 in the aggregate, may be converted into warrants to purchase Class A Common Stock of the Company at a conversion price equal to $1.00 per whole warrant.

On April 13, 2022, June 30, 2022 and August 31, 2022, the Company drew down $250,000, $200,000 and $175,000, respectively, under the Convertible Note. The fair value of the $250,000 drawn on April 13, 2022 was estimated by the Company to be $229,333 at initial measurement. The $20,668 excess proceeds over fair value was recognized in additional paid-in capital. The fair value of the $200,000 drawn on June 30, 2022 was estimated to be $183,030 at initial measurement. The $16,970 excess proceeds over fair value was recognized in additional paid-in capital. The fair value of the $175,000 drawn on August 31, 2022 was estimated to be $88,784 at initial measurement. The $123,853 excess proceeds over fair value was recognized in additional paid-in capital.

On January 31, 2023, the Company drew down $225,000 under the Convertible Note. The fair value of the $225,000 drawn was estimated by the Company to be $38,999 at initial measurement. The $186,001 excess proceeds over fair value was recognized in additional paid-in capital.

On April 30, 2023 and June 7, 2023, the Company drew down $200,000 and $220,000, respectively, under the Convertible Note. The fair value of the $200,000 drawn on April 30, 2023 was estimated by the Company to be $25,807 at initial measurement. The $174,193 excess proceeds over fair value was recognized in additional paid-in capital. The fair value of the $220,000 drawn on June 7, 2023 was estimated by the Company to be $33,655 at initial measurement. The $186,345 excess proceeds over fair value was recognized in additional paid-in capital. The aggregate fair value of the Convertible Note was estimated to be $222,306 and $75,851 at June 30, 2023 and December 31, 2022, respectively.

On February 21, 2023, the Company issued a promissory note (the “2023 Note”) in the aggregate principal amount of up to $2,712,101 (the “Extension Funds”) to our Sponsor, pursuant to which a portion of the Extension Funds may be deposited into the Trust Account for each share of Class A Common Stock sold in the Company’s initial public offering that was not redeemed in connection with increase of the redemption price set forth in the Charter Amendment Proposal. The Company entered into an amendment on June 27, 2023 to increase the aggregate principal amount available under the 2023 Note by $800,000. On February 21, 2023, March 20, 2023, April 17, 2023, May 17, 2023 and June 14, 2023 the Company drew down $452,016.76, respectively, under the 2023 Note to fund the Extension payments. As of June 30, 2023, the amount borrowed against the 2023 Note was $2,260,084 and $1,252,017 is available for withdrawal.

Off-Balance Sheet Arrangements

As of June 30, 2023, we had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements.

Contractual Obligations

As of June 30, 2023, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay affiliate of our Sponsor a monthly fee of $15,000 for office space, utilities and secretarial and administrative and support. We began incurring these fees on consummation of the IPO and will continue to incur these fees monthly until the earlier of the completion of our initial business combination and our liquidation.

Jefferies LLC (the “Underwriter”) is entitled to a deferred fee of $0.35 per unit sold in the IPO, or $9,056,250 in the aggregate. This deferred fee will be waived by the Underwriter in the event that the Company does not complete an initial business combination, subject to the terms of the underwriting agreement with respect to the Company’s IPO.

Critical Accounting Policies and Estimates

The preparation of the unaudited condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:

Class A Common Stock Subject to Possible Redemption

We account for our Class A Common Stock subject to possible redemption in accordance with the guidance in ASC 480. Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A Common Stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, our Class A Common Stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our balance sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A Common Stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable Class A Common Stock are affected by charges against additional paid in capital and accumulated deficit.

Convertible Promissory Note

The Company accounts for the 2022 Convertible Note under ASC 815, “Derivatives and Hedging” (“ASC 815”). Under 815-15-25, the election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825, “Financial Instruments” (“ASC 825”). The Company has made such election for its convertible promissory note. Using the fair value option, the convertible promissory note is required to be recorded at its initial fair value on the date of issuance and each balance sheet date thereafter. Differences between the face value of the note and fair value at issuance are recognized as either an expense in the statements of operations (if issued at a premium) or as a capital contribution (if issued at a discount). Changes in the estimated fair value of the notes are recognized as non-cash gains or losses in the condensed statements of operations.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” equals or approximates the carrying amounts represented in the accompanying unaudited condensed balance sheets, primarily due to their short-term nature.

Warrant Instruments

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.

Net (Loss) Income Per Ordinary Share

The Company follows the two-class method to calculate earnings per ordinary share. Net (loss) income per share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the period, excluding shares of common stock subject to forfeiture by the Sponsor. The calculation of diluted (loss) income per share does not consider the effect of the warrants issued in connection with the IPO and warrants issued in the Private Placement since the exercise of these warrants are contingent upon the occurrence of future events. The calculation also does not include the warrants that could be issued as a result of the conversion option in the convertible promissory note. For the three and six months ended June 30, 2023 and 2022, the Company did not have any dilutive securities and/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 (loss) income per share is the same as basic (loss) income per share for the period presented.

Recent Accounting Standards

The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company or no material effect is expected on the unaudited condensed financial statements as a result of future adoption.

 Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter of the fiscal year covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1a. Risk Factors.

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K filed with the SEC on March 23, 2023 or Quarterly Report on Form 10-Q filed with the SEC on May 15, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

 We have received a deficiency letter from Nasdaq relating to our non-compliance with Nasdaq’s continued listing requirements and our warrants could become subject to delisting from Nasdaq if we fail to regain compliance.

On June 14, 2023, we received a notice from Nasdaq that our warrants are not in compliance with Nasdaq’s continued listing criteria set forth in Listing Rule 5452(b)(C) (the “Minimum Bid Price Requirement”), which requires the Company to maintain an aggregate market value of its outstanding warrants of at least $1.0 million (the “Notice”). We have submitted a plan to regain compliance and, if Nasdaq accepts such plan, we expect to have 180 days, or until December 11, 2023, to regain compliance with the Minimum Bid Price Requirement. If we do not regain compliance with the Minimum Bid Price Requirement by the end of the compliance period, or are not granted a compliance period, our warrants will become subject to delisting. In the event that we receive notice that our warrants are being delisted, the Nasdaq listing rules permit us to appeal a delisting determination by Nasdaq to a hearings panel.

The Notice serves only as a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s warrants on the Nasdaq. Additionally, the Notice relates only to the Company’s warrants and will have no effect on the listing or trading of the Company’s Class A common stock.

We have submitted our plan to regain compliance to the Nasdaq and intend to continue to monitor the aggregate market value of our outstanding warrants and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement. However, there can be no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with other Nasdaq Listing Rules. Failure to meet applicable Nasdaq Listing Rules could result in a delisting of our warrants and materially reducing their liquidity.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

Unregistered Sales of Equity Securities

None.

Use of Proceeds

On November 19, 2021, the Company consummated its IPO of 25,875,000 Units, including 3,375,000 Units issued pursuant to the full exercise of the Underwriter’s over-allotment option. Each Unit consists of one share of Class A Common Stock and one-half of one redeemable warrant of the Company, with each whole warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $258,750,000.

A total of $263,925,000 of the proceeds from the IPO (which amount includes $9,056,250 of the Underwriter’s deferred fee) and the sale of the Private Placement Warrants, was placed in a U.S.-based Trust Account at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust Company, acting as trustee. The proceeds held in the Trust Account may be invested by the trustee only in U.S. government securities with a maturity of 185 days or less or in money market funds investing solely in U.S. government Treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.

*       Filed herewith.

⁽¹⁾       Incorporated by reference to the Company’s Form 8-K, filed with the SEC on November 22, 2021.

⁽²⁾       Incorporated by reference to the Company’s Form 8-K, filed with the SEC on February 22, 2023.

⁽³⁾       Incorporated by reference to the Company’s Form 8-K, filed with the SEC on June 28, 2023.

⁽⁴⁾       Incorporated by reference to the Company’s Form S-1, filed with the SEC on October 28, 2021.

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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