Item 1. Condensed Financial Statements.
NOTES TO CONDENSED FINANCIAL
STATEMENTS (UNAUDITED)
March 31, 2023
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Avalon Acquisition Inc. (the
“Company”) was incorporated in Delaware on October 12, 2020. The Company was formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses
(the “Business Combination”).
Although the Company is
not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends
to focus on businesses that are in the financial services and financial technologies industries. The Company is an early stage
and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth
companies.
As of March 31, 2023, the Company
had not commenced any operations. All activity for the period from October 12, 2020 (inception) through March 31, 2023 relates to the
Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and identifying
a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial
Business Combination, at the earliest. The Company currently generates non-operating income in the form of income from the proceeds
derived from the Initial Public Offering and subsequent deposits in conjunction with extension of Combination Period (as discussed further
below).
The registration statement
for the Company’s Initial Public Offering was declared effective on October 5, 2021. On October 8, 2021, the Company consummated
the Initial Public Offering of 20,700,000 units (the “Units” and, with respect to the shares of Class A common stock
included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of the over-allotment
option to purchase an additional 2,700,000 Units, at $10.00 per Unit, generating gross proceeds of $207,000,000, which is described
in Note 3.
Simultaneously with the
closing of the Initial Public Offering, the Company consummated the sale of 8,100,000 warrants (each, a “Private Placement
Warrant” and, collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant
in a private placement to Avalon Acquisition Holdings, LLC (the “Sponsor”), generating gross proceeds of $8,100,000,
which is described in Note 3.
Following the closing
of the Initial Public Offering on October 8, 2021, an amount of $210,105,000 ($10.15 per Unit) from the net proceeds of the sale
of the units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust
Account”) located in the United States and invested only in an open-ended investment company that holds itself out as a money
market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended
(the “Investment Company Act”), as determined by the Company, until the earlier of (i) the completion of a Business
Combination or (ii) the distribution of the funds in the Trust Account, as described below.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of
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’s initial Business Combination must be with one or more target businesses that together have a fair market value
equal to at least 80% of the balance in the Trust Account (as defined below) (excluding taxes payable on interest income earned
from the Trust Account and the deferred underwriting commissions) at the time of the agreement to enter into the initial Business
Combination. 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 that the Company
will be able to complete a Business Combination successfully.
The Company will
provide its holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all
or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder
meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company
will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion.
The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account
(initially anticipated to be $10.15 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account
and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to Public Stockholders
who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter
(as discussed in Note 5). There will be no redemption rights upon the completion of a Business Combination with respect to
the Company’s warrants. The Public Shares subject to redemption are recorded at redemption value and classified as temporary
equity in accordance with the Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities
from Equity.”
The Company will proceed
with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business
Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination.
If a stockholder vote is not required by law or stock exchange requirements and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the
“Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of
the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain
stockholder approval for business or legal 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 Company’s Sponsor has agreed to vote their Founder Shares (as defined in Note 4) and
any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally,
each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the above,
if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender
offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate
of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined
under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent
of the Company.
The Company’s Sponsor
has agreed (i) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection
with the completion of a Business Combination and (ii) not to propose an amendment to the Company’s Amended and Restated
Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its
Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with
the opportunity to redeem their shares in conjunction with any such amendment.
In accordance with the
terms of the Company’s Initial Public Offering, the Company had the right to extend the period of time to consummate an initial
Business Combination up to two times from January 8, 2023, each by an additional three months (for a total of up to 21 months)
by depositing into the Trust Account $2,070,000 (equal to $0.10 for each Public Share outstanding), on or prior to the date of
the applicable deadline, for each of the available three month extensions (the “Initial Combination Period”). On each
of January 5, 2023, and April 4, 2023, BCG, as defined below, deposited $2,070,000 into the Trust Account, which enabled the Company
to exercise its right to extend the Initial Combination Period to July 8, 2023 (the “Combination Period”).
If the Company is unable
to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the
Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes (less up to $100,000
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. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire
worthless if the Company fails to complete a Business Combination within the Combination Period.
The Sponsor has agreed to
waive its right to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to
complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial
Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to
complete a Business Combination within the Combination Period. The underwriter has agreed to waive its rights to its deferred underwriting
commission (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 assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the
amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third
party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.15 per Public Share
or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account
due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except
as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as
to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that
an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any
liability for such third-party claims. 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 (other than the Company’s
independent registered public accounting firm), prospective target businesses or other entities with which the Company does business,
execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Proposed Business Combination
On September 21, 2022,
the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with The Beneficient
Company Group, L.P., a Delaware limited partnership (“BCG”), Beneficient Merger Sub I, Inc., a Delaware corporation
and direct, wholly-owned subsidiary of BCG (“Merger Sub I”), and Beneficient Merger Sub II, LLC, a Delaware limited
liability company and direct, wholly-owned subsidiary of BCG (“Merger Sub II” and together with Merger Sub I, the “Merger
Subs”), as fully disclosed in a Current Report on Form 8-K filed with the SEC on September 21, 2022.
On April
18, 2023, the Company, BCG and Merger Subs entered into Amendment No. 1 to the Business Combination Agreement (the “Amendment”)
pursuant to which the parties to the Business Combination Agreement amended the Business Combination Agreement to: (i) provide that holders
of BCG Class B Common Stock are entitled to 10 votes per share of BCG Class B Common Stock with respect to all matters on which common
stockholders of Beneficient generally are entitled to vote, including the election of directors to be elected by the holders of BCG Class
A Common Stock and BCG Class B Common Stock, voting together as a single class, (ii) pursuant to the parties’ exercise of their
rights under the Business Combination Agreement to waive closing conditions, the removal of the parties’ mutual condition to closing
of the transactions that GWG Holdings, Inc. effect a consent to the Conversion and the Amended BCG Organizational Documents and the Amended
BCH Organizational Documents and execute a lock up in favor of BCG in a form reasonably acceptable to each of the Company and BCG, (iii)
remove the Company’s right to designate two directors to BCG’s board of directors upon closing of the Business Combination
and set the number of initial directors of BCG at nine and (iv) revise certain board of directors and board committee composition provisions.
The obligations of the
parties to consummate the transactions contemplated by the Business Combination Agreement, as amended, are subject to the satisfaction
or waiver of certain customary closing conditions as further described in the Business Combination Agreement, as amended.
BCG filed its Form S-4 Registration Statement on December 9, 2022, Amendment
No. 1 to Form S-4 Registration Statement on January 23, 2023, Amendment No. 2 to Form S-4 Registration Statement on March 6, 2023, Amendment
No. 3 to Form S-4 Registration Statement on April 19, 2023, Amendment No. 4 to Form S-4 Registration Statement on May 8, 2023, and Amendment
No. 5 to Form S-4 Registration Statement on May 11, 2023 (collectively, “Form S-4 and Amendments”).
Transaction Consideration
The
aggregate consideration to be paid in the Business Combination to the direct or indirect owners of Avalon consists of 26,030,250
shares of Beneficient Class A common stock (the “Beneficient Class A common stock”), 20,855,250 shares of
Beneficient Series A preferred stock (the “Beneficient Series A preferred stock”) and 23,625,000 warrants (the “Beneficient
Warrants”). At the Avalon Merger Effective Time, as defined in Form S-4 and Amendments, each
share of Avalon Class A common stock and Avalon Class B common stock issued and outstanding immediately prior to the
Avalon Merger Effective Time will be entitled to receive, for each share of Avalon common stock, one share of Beneficent Class A
common stock. As additional merger consideration, each holder of Avalon Class A common stock will also receive, for each share
of Avalon Class A common stock that is not redeemed, one share of Beneficient Series A preferred stock. Each share of Beneficient
Series A preferred stock that is then issued and outstanding is convertible into one-fourth (1/4) of a share of Beneficient
Class A common stock on, and only on, the later of (i) 90 days after the Avalon Merger Effective Time and (ii) 30 days after
a registration statement under the Securities Act has been declared effective with respect to the issuance of Beneficient Class A
common stock and Beneficient Series A preferred stock upon the exercise of the Beneficient Warrants unless the holder thereof elects
to not convert under the optional conversion rights.
Also at the Avalon
Merger Effective Time, each Avalon warrant issued and outstanding, entitling the holder thereof to purchase one share of Avalon
Class A common stock at an exercise price of $11.50 per share (subject to adjustment), will automatically convert into the
right to purchase, at an exercise price of $11.50 per share (subject to adjustment), one share of Beneficient Class A common
stock and one share of Beneficient Series A preferred stock upon consummation of the Business Combination.
There
are a number of conditions to closing, each of which are set forth in the Business Combination Agreement and Amendment No.
1 to the Business Agreement, as fully disclosed in Current Reports on Form 8-K filed with the SEC on September 21, 2022
and April 18, 2023, respectively.
Refer
to BCG’s Form S-4 and Amendments for more information.
Liquidity and Going Concern
As of March 31, 2023,
the Company had $112,161 in its operating bank account, $216,329,414 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 $500,962, which
excludes franchise and income taxes payable, as such amounts can be paid from income earned in the Trust Account.
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.
Prior to the consummation
of its Initial Public Offering, the Company’s liquidity needs were satisfied through the payment of $25,000 from the
Sponsor to cover certain expenses on behalf of the Company in consideration of Founder Shares (as defined in Note 4), and a loan
from the Sponsor of $197,000 under the Note (as defined in Note 4) which was repaid in full on October 15, 2021. Following
the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds of $1.18 million
from the consummation of the Initial Public Offering (including the Over-Allotment) and the Private Placement held outside of the
Trust Account. 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, provide the Company
Working Capital Loans (as defined in Note 4). As of March 31, 2023 and December 31, 2022, there were no amounts outstanding under
any Working Capital Loans.
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards
Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that the liquidity condition and date for mandatory liquidation and subsequent dissolution raise
substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts
of assets or liabilities should the Company be required to liquidate after July 8, 2023. The unaudited condensed financial statements
do not include any adjustment that might be necessary if the Company is unable to continue as a going concern. Management plans to complete
a business combination prior to the mandatory liquidation.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The unaudited condensed
financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States
of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information or footnote disclosures
normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules
and regulations of the SEC for interim financial reporting. Accordingly, they do not include all of the information and footnotes
necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management,
all adjustments (consisting of normal accruals) considered for a fair presentation have been included.
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 February 23, 2023. The interim results for the three months
ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for
any future periods.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth
companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in
its periodic reports and proxy statements, not being required to comply with any requirement that may be adopted by the Public
Company Accounting Oversight Board regarding mandatory audit firm rotation or to provide a supplement to the auditor’s report
providing additional information about the audit and the financial statements and exemptions from the requirements of holding a
nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not
have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt
out of such extended transition period which means that when a standard is issued or revised and it has different application dates
for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with
another public company which is neither an emerging growth company nor an emerging growth company which 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 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 unaudited
condensed financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition,
situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, actual results
could differ significantly from those estimates.
Fair Value of Financial Instruments
The fair value of the
Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,”
approximates the carrying amounts represented in the balance sheets, primarily due to their short-term nature, except for warrant
liabilities (see Note 6).
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed
the Federal Deposit Insurance Corporation coverage of $250,000.
Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition,
results of operations, and cash flows.
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 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.
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. There were
no cash equivalents at March 31, 2023 and December 31, 2022.
Investments Held in Trust Account
Investments held in Trust
Account is comprised of investments in a money market fund that invests in U.S. government securities and generally have a readily
determinable fair value. Such investments are recognized at fair value and presented on the condensed balance sheets at the end
of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in income earned on
investments held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of
investments held in the Trust Account are determined using available market information.
Deferred Offering Costs Associated with
the Initial Public Offering
The Company complies with
the requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering.”
Costs incurred in connection with preparation for the Public Offering ($695,809), together with $10,953,007 of underwriter’s
discount, were allocated to equity instruments ($11,168,880) and derivative warrant liabilities ($479,936), based on their relative
values, and charged to temporary equity or expensed (in the case of the portion allocated to derivative warrant liabilities) upon
completion of the Initial Public Offering.
Income Taxes
The Company follows the
asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred tax
assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statement’s carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized. As of March 31, 2023 and December 31, 2022, the Company had deferred tax assets
of approximately $667,000 and $527,000, respectively, with a full valuation allowance against them.
The Company’s current
taxable income primarily consists of income earned on the Trust Account. The Company’s general and administrative costs are
generally considered start-up costs and are not currently deductible. During the three months ended March 31, 2023 and 2022, the
Company recorded $619,800 and $0, respectively, in income tax expense. The Company’s effective tax rates for the three months
ended March 31, 2023 and 2022 was approximately 54% and 0%, respectively, which differ from the expected income tax rate due to
the start-up costs (discussed above), the change in value of warrant liabilities, and the transaction costs allocated to the warrant
liabilities which are not currently deductible.
FASB ASC Topic 740 prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as
of March 31, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities
since inception.
Net Income per Share of Common Stock
The Company complies with
accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of
shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata
between the two classes of shares. This presentation assumes a business combination as the most likely outcome. Net income per
share of common stock is calculated by dividing the net income by the weighted average shares of common stock outstanding for the
respective period.
The calculation of diluted
net income per share of common stock does not consider the effect of the warrants issued in connection with the IPO (including
exercise of the over-allotment option) and the Private Placement to purchase an aggregate of 23,625,000 shares of Class A
common stock in the calculation of diluted income per share, because their exercise is contingent upon future events and their
inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income per share is the same as basic
net income per share for the three months ended March 31, 2023 and 2022. Accretion associated with the redeemable Class A
common stock is excluded from earnings per share as the redemption value approximates fair value.
The
following tables present a reconciliation of the numerator and denominator used to compute basic and diluted net income per share
for each class of common stock:
Schedule of basic and diluted net loss per share | |
| | | |
| | | |
| | | |
| | |
|
For the Three Months Ended |
|
March 31, 2023 | |
March 31, 2022 |
|
Class A | |
Class B | |
Class A | |
Class B |
Basic and diluted net income per common share: | |
| | | |
| | | |
| | | |
| | |
Numerator | |
| | | |
| | | |
| | | |
| | |
Allocation of net income | |
$ | 430,878 | | |
$ | 106,917 | | |
$ | 2,925,439 | | |
$ | 725,915 | |
Denominator | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average common stock outstanding | |
| 20,855,250 | | |
| 5,175,000 | | |
| 20,855,250 | | |
| 5,175,000 | |
Basic and diluted net income per common share | |
$ | 0.02 | | |
$ | 0.02 | | |
$ | 0.14 | | |
$ | 0.14 | |
Redeemable Common Stock
As discussed in Note 1,
all of the 20,700,000 Public Shares sold as part of Units in the Initial Public Offering contain a redemption feature which allows
for the redemption of the Public Shares if the Company holds a stockholder vote or there is a tender offer for shares in connection
with a Business Combination. In accordance with FASB ASC 480, redemption provisions not solely within the control of the Company
require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and
liquidation of all of the entity’s equity instruments, are excluded from the provisions of FASB ASC 480. Although the Company
did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its Public Shares in an amount
that would cause its net tangible assets (i.e., total assets less intangible assets and liabilities) to be less than $5,000,001
upon the closing of a Business Combination.
While redemptions cannot
cause the Company’s net tangible assets to fall below $5,000,000, all shares of Class A common stock sold in the Initial
Public Offering are redeemable and classified as temporary equity on the Company’s unaudited condensed balance sheets until
such time as a redemption event takes place. The value of Class A common stock that may be redeemed will be equal to $10.41 and
$10.24 per share, respectively, as of March 31, 2023 and December 31, 2022 (which is the assumed redemption price) multiplied by
20,700,000 shares of Class A common stock.
Derivative Warrant Liabilities
The Company accounts for
warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific
terms and in accordance with FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC
815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding
financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet
all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s
own shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment,
is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified
warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification,
the warrants are required to be recorded at their initial fair value of the date of issuance, and each balance sheet date thereafter.
Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed statements
of operations. Costs associated with issuing the warrants classified as derivative liabilities are charged to operations when the
warrants are issued.
Recent Accounting Pronouncements
In August 2020, the FASB
issued ASU 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —
Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity” (“ASU 2020-06”), to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and
simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.
The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and
settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement
to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December
15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating
the impact the pronouncement will have on the unaudited condensed financial statements.
Management does not believe
that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect
on the Company’s unaudited condensed financial statements.
Risks and Uncertainties
COVID-19
Management continues to
evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company,
the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed
financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Russia-Ukraine War
In February 2022, a military
conflict started between Russia and Ukraine. The ongoing military conflict has provoked strong reactions from the United States,
the UK, the European Union and various other countries around the world, including the imposition of broad financial and economic
sanctions against Russia. Further, the precise effects of the ongoing military conflict and these sanctions on the global economies
remain uncertain as of the date of these unaudited condensed financial statements. 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 unaudited condensed 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 the Business Combination,
(iii) the nature and amount of any “PIPE” or other equity issuances in connection with the Business Combination (or
otherwise issued not in connection with the Business Combination but issued within the same taxable year of the 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.
NOTE 3 — INITIAL PUBLIC OFFERING
On October 8, 2021, the
Company consummated the Public Offering of 20,700,000 Units, which includes the full exercise by the underwriter of its option
to purchase an additional 2,700,000 Units, at a price of $10.00 per unit (the “Units”). Each Unit consists of one share
of the Company’s Class A common stock, $0.0001 par value and three-fourths of one redeemable warrant (“Public
Warrant”). Each whole Warrant offered in the Initial Public Offering is exercisable to purchase one share of Class A
common stock at $11.50 per share, subject to adjustment (see Note 6).
Simultaneously with the
closing of the Initial Public Offering, the Sponsor purchased an aggregate of 8,100,000 Private Placement Warrants for an aggregate
purchase price of $. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock
at a price of $ per share (see Note 6).
NOTE 4 — RELATED PARTY TRANSACTIONS
Founder Shares
On October 21, 2020, the
Sponsor paid an aggregate of $25,000, or approximately $0.004 per share, to cover certain of the Company’s offering costs
in consideration of 5,750,000 shares of Class B common stock, par value $0.0001. On August 30, 2021, the Sponsor forfeited
1,437,500 of these shares, for no consideration, such that there were 4,312,500 shares of Class B common stock outstanding. On
October 5, 2021, the Company effected a stock dividend of 0.2 of a founder share for each outstanding founder share, which resulted
in the Sponsor holding an aggregate of 5,175,000 Founder Shares. The Founder Shares included an aggregate of up to 675,000 shares
subject to forfeiture to the extent that the underwriter’s over-allotment option was not exercised in full or in part, so
that the Sponsor would own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial
Public Offering. As a result of the underwriter’s election to exercise fully its over-allotment option, 675,000 Founder Shares
were no longer subject to forfeiture. All share and per-share amounts have been retroactively restated to reflect the stock dividend.
On October 5, 2021, the Sponsor transferred 150,000 Founder Shares to its then independent directors.
The Sponsor has agreed,
subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of (A) one
year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last reported
sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days
after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange
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.
Promissory Note—Related Party
On October 31, 2020, the
Sponsor agreed to loan the Company an aggregate of up to $ to cover expenses related to the Initial Public Offering pursuant
to a promissory note (the “Promissory Note”). The Promissory Note was non-interest bearing and payable, as amended,
on the earlier of December 31, 2021 or the completion of the Initial Public Offering. On October 15, 2021, the Company repaid the
balance in full to the Sponsor. Because the balance of the Promissory Note has been repaid, it is no longer available to the Company.
Administrative Support Agreement
Commencing on the effective
date of the Initial Public Offering, on October 5, 2021, the Company agreed to pay the Sponsor a total of $10,000 per month for
office space, and administrative support services. Upon completion of an initial Business Combination or the Company’s liquidation,
the Company will cease paying these monthly fees. For the three months ended March 31, 2023 and 2022, the Company incurred $30,000,
respectively, of these fees which are included in general and administrative expenses – related party on the unaudited condensed
statements of operations.
Related Party Loans
In order to finance transaction
costs in connection with a Business Combination, the Sponsor, or 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. In the event
that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the
foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect
to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest,
or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants at a price
of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants. As of
March 31, 2023 and December 31, 2022, there were no working capital loans outstanding.
NOTE 5 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder
Shares, Private Placement Warrants, representative shares and warrants that may be issued upon conversion of Working Capital Loans
(and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement
signed on the effective date of Initial Public Offering. The holders of these securities will be entitled to make up to three demands,
excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However,
the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities
Act to become effective until termination of the applicable lockup period. 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 Initial Public Offering to purchase up to 2,700,000 additional Units to cover over-allotments,
if any, at the Initial Public Offering price less the underwriting discounts and commissions. At October 8, 2021, the underwriter
exercised such option in full.
The underwriter was entitled
to an underwriting discount of $0.125 per Unit, or $2,587,500 in the aggregate of the gross proceeds of the Initial Public Offering.
In addition, the underwriter is entitled to a deferred fee of $0.35 per Unit, or $7,245,000 in the aggregate; provided that up
to 0.875% of the gross proceeds or $1,811,250 in the aggregate may be paid to third parties not participating in the offering (but
who are members of the Financial Industry Regulatory Authority (“FINRA”) or regulated broker-dealers) that assist the
underwriter in consummating the initial Business Combination. The deferred fee will be waived by the underwriter in the event that
the Company does not complete a Business Combination, subject to the terms of the underwriting agreement.
In addition, the Company
issued to the underwriter 155,250 non-redeemable shares of Class A common stock upon closing of the Initial Public Offering, at
a price of $0.0001 (the “Representative Shares”). These shares were fair valued at $1,120,507 at the Initial
Public Offering using Black-Scholes option pricing model utilizing Level 3 inputs. The holder of the Representative Shares
has agreed not to transfer, assign or sell any such shares without the Company’s prior consent until the completion of the
Company’s initial Business Combination. In addition, the holder of the Representative Shares has agreed (i) to waive its
conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of
the Company’s initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust account
with respect to such shares if the Company fails to complete its initial Business Combination within the required time period.
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days
immediately following the date of the effectiveness of the registration statement.
NOTE 6 – WARRANTS
Public Warrants may only
be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants
will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business
Combination or (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years
after the completion of a Business Combination or earlier upon redemption or liquidation. As of March 31, 2023 and December 31,
2022, 15,525,000 Public Warrants and 8,100,000 Private Warrants, respectively, were outstanding.
The Company will not be
obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation
to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A
common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying
its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable
and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless the share
of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the
securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed
that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, the Company
will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities
Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use its commercially reasonable
efforts to cause the same to become effective within 60 business days following the closing of the initial business combination
and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration
or redemption of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering
the issuance of the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business
day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a
“cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. In addition, if
the Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that
they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company
may, at its option, require holders of the Public Warrants who exercise their warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects to do so, the Company will not
be required to file or maintain in effect a registration statement, but it will use its best efforts to register or qualify the
shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrants
when the price per share of Class A common stock equals or exceeds $18.00. Once the Public Warrants become exercisable,
the Company may redeem the Public Warrants (except with respect to the Private Placement Warrants):
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in whole and not in part; |
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at a price of $0.01 per warrant; |
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upon not less than 30 days prior written notice of redemption to each warrant holder; and |
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if, and only if, the reported last sale price of the shares of the Company’s Class A common stock for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted). |
If and when the warrants become redeemable
by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities
for sale under all applicable state securities laws.
Redemption of warrants
when the price per share of Class A common stock equals or exceeds $10.00. Once the Public Warrants become exercisable,
the Company may redeem the Public Warrants:
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in whole and not in part; |
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at $0.10 per warrant upon a minimum of 30 days prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the Class A common stock; |
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if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted); and |
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if the Reference Value is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
If and when the Public
Warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify
the underlying securities for sale under all applicable state securities laws.
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 exercise price and number of shares of Class A
common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock
dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not
be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the
Company be required to net cash settle the 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 (x) the
Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection
with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A common
stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors
and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by
the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate
gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the
funding of 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 20 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 Public Warrants will be adjusted (to the nearest cent) to be equal to 115%
of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price described above will
be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00
per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to the higher of the Market
Value and the Newly Issued Price.
The Private Placement
Warrants are identical to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private
Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable,
assignable or salable until the completion of a Business Combination, subject to certain limited exceptions. Additionally, the
Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial
purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers
or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders
on the same basis as the Public Warrants.
NOTE 7 – CLASS A COMMON STOCK SUBJECT
TO POSSIBLE REDEMPTION
The Company’s Class
A common stock sold during the Initial Public Offering features certain redemption rights that are considered to be outside of
the Company’s control and subject to the occurrence of future events. The Company is authorized to issue 100,000,000 shares
of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled
to one vote for each share. As of March 31, 2023 and December 31, 2022, there were 20,855,250 shares of Class A common stock outstanding,
of which 20,700,000 shares are subject to possible redemption and are classified outside of stockholders’ deficit in the
unaudited condensed balance sheets.
The Class A common stock
subject to possible redemption reflected on the unaudited condensed balance sheets is reconciled on the following table:
Schedule of reconcilation of balance sheet | |
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Gross proceeds from Initial Public Offering | |
$ | 207,000,000 | |
Less: | |
| | |
Fair value of Public Warrants at issuance | |
| (9,159,750 | ) |
Offering costs allocated to Class A common stock subject to possible redemption | |
| (11,168,880 | ) |
Plus: | |
| | |
Accretion on Class A common stock subject to possible redemption amount | |
| 23,433,630 | |
Class A common stock subject to possible redemption as of December 31, 2021 | |
| 210,105,000 | |
Increase in redemption value of Class A common stock subject to redemption | |
| 1,766,303 | |
Class A common stock subject to possible redemption as of December 31, 2022 | |
| 211,871,303 | |
Deposit into Trust Account to extend Combination Period | |
| 2,070,000 | |
Increase in redemption value of Class A common stock subject to redemption | |
| 1,597,661 | |
Class A common stock subject to possible redemption as of March 31, 2023 | |
$ | 215,538,964 | |
NOTE 8 — STOCKHOLDERS’ DEFICIT
Preferred Stock
— The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with
such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board
of directors. At March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.
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. Holders of Class A common stock are entitled to one vote for each share. At March 31, 2023 and December 31, 2022,
there were 20,855,250 shares of Class A common stock issued and outstanding, of which 20,700,000 shares are subject to redemption.
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. Holders of Class B common stock are entitled to one vote for each share. At March 31, 2023 and December 31, 2022,
there were 5,175,000 shares of Class B common stock issued and outstanding.
Holders of Class B
common stock will have the right to elect all of the Company’s directors prior to a Business Combination. Holders of Class A
common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders
except as required by law.
The shares of Class B
common stock will automatically convert into shares of Class A common stock on the first business day following the completion
of a Business Combination at a ratio such that the number of shares of Class A common stock issuable upon conversion of all
Founder shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of shares of
the Company’s common stock issued and outstanding upon completion of Initial Public Offering, plus (ii) the sum of (a) all
shares of the Company’s common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked
securities or deemed issued by the Company in connection with or in relation to the completion of a Business Combination, excluding
(1) any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A
common stock issued, or to be issued, to any seller in a Business Combination and any (2) Private Placement Warrants issued
to the Sponsor or any of its affiliates upon conversion of Working Capital Loans minus (b) the number of Public Shares redeemed
by public stockholders in connection with a Business Combination.
NOTE 9 – FAIR VALUE MEASUREMENTS
The following tables present
information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31,
2023 and December 31, 2022, and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine
such fair value.
Schedule of Fair value hierarchy of the valuation inputs the Company | |
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Fair Value Measured as of March 31, 2023 |
Description | |
Quoted Prices in Active Markets (Level 1) | |
Significant Other Observable Inputs (Level 2) | |
Significant Other Unobservable Inputs (Level 3) |
Assets: | |
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Investments held in Trust Account | |
$ | 216,329,414 | | |
$ | — | | |
$ | — | |
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Liabilities: | |
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Private Placement Warrants | |
$ | — | | |
$ | 729,000 | | |
$ | — | |
Public Warrants | |
$ | 1,397,250 | | |
$ | — | | |
$ | — | |
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Fair Value Measured as of December 31, 2022 |
Description | |
Quoted Prices in Active Markets (Level 1) | |
Significant Other Observable Inputs (Level 2) | |
Significant Other Unobservable Inputs (Level 3) |
Assets: | |
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Investments held in Trust Account | |
$ | 212,031,953 | | |
$ | — | | |
$ | — | |
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Liabilities: | |
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Private Placement Warrants | |
$ | — | | |
$ | 526,500 | | |
$ | — | |
Public Warrants | |
$ | 1,009,125 | | |
$ | — | | |
$ | — | |
Transfers to/from Levels
1, 2, and 3 are recognized at the end of each reporting period.
Initial Measurement
The
Company established the initial fair value for the warrants on October 8, 2021, the date of the Company’s Initial Public
Offering, using a market-based approach for the Private Placement Warrants and the Public Warrants. The Company allocated the proceeds
received from (i) the sale of Units (which is inclusive of one share of Class A common stock and three-fourth of
one Public Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance of Class B common stock, first
to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A
common stock subject to possible redemption (temporary equity), Class A common stock (permanent equity) and Class B common
stock (permanent equity) based on their relative fair values at the initial measurement date. The Warrants were classified as Level 3
at the initial measurement date due to the use of unobservable inputs. On October 8, 2021, the Private Placement Warrants and Public
Warrants were determined to have aggregate values of $4.78 million and $9.16 million, respectively.
Subsequent Measurement
The Warrants are measured
at fair value on a recurring basis. The subsequent measurement of the Public Warrants as of March 31, 2023 and December 31,
2022 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker AVACW. As
the transfer of Private Placement Warrants to anyone outside of a small group of individuals who are permitted transferees would
result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that
the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant, with an insignificant adjustment
for short-term marketability restrictions. As such, the Private Placement Warrants are classified as Level 2. As of March
31, 2023, the aggregate values of the Private Placement Warrants and Public Warrants were $729,000 and $1,397,250, respectively.
As of December 31, 2022, the aggregate values of the Private Placement Warrants and Public Warrants were $526,500 and $1,009,125,
respectively.
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated
subsequent events and transactions that occurred after the balance sheet date through the date that the unaudited condensed financial
statements were issued. Other than the extension of the Combination Period from April 4, 2023 to July 8, 2023, as described in Note
1, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed
financial statements.