IPVF InterPrivate III Financial Partners Inc

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 September 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 number: 001-40151

INTERPRIVATE III FINANCIAL PARTNERS INC.

(Exact Name of Registrant as Specified in Its Charter)

1350 Avenue of the Americas, 2nd Floor

New York, NY 10019

(Address of principal executive offices)

(212) 920-0125

(Issuer’s telephone number)

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

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

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

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

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

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

As of November 20, 2023 the Registrant had 1,352,029 shares of its Class A common stock, $0.0001 par value per share, and 6,468,750 shares of its Class B common stock, $0.0001 par value per share, outstanding.

INTERPRIVATE III FINANCIAL PARTNERS INC.

FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements. 

INTERPRIVATE III FINANCIAL PARTNERS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).

INTERPRIVATE III FINANCIAL PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 (UNAUDITED)

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)

INTERPRIVATE III FINANCIAL PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 (UNAUDITED)

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)

INTERPRIVATE III FINANCIAL PARTNERS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)

INTERPRIVATE III FINANCIAL PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” are to InterPrivate III Financial Partners Inc., except where the context requires otherwise. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to InterPrivate Acquisition Management III, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Quarterly Report and the Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Annual Report. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

We are a blank check company formed under the laws of the State of Delaware on September 10, 2020 for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of the Public Offering and the sale of the private placement units, our capital stock, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.

Significant Developments

Termination of Proposed Business Combination With Aspiration

As described in Note 6 under the heading “Termination of Proposed Business Combination With Aspiration”, on August 22, 2023 the Company terminated the Second A&R Merger Agreement with Aspiration, effective on August 29, 2023, pursuant to Section 9.01(n) thereof. Such termination obligates Aspiration to pay the Company a Cash Termination Fee and an Equity Termination Fee. However, as of the date of this Quarterly Report, Aspiration has not paid the Cash Termination Fee to the Company, and the Company cannot provide any assurance that it will receive the termination payments to which it is entitled under the Second A&R Merger Agreement or the timing thereof.

On August 31, 2023 the Company requested that its Registration Statement on Form S-4 (File No. 333-262732) related to the Aspiration Business Combination, together with all exhibits thereto, and as subsequently amended (the “Registration Statement”), initially filed with the SEC on February 15, 2022, be withdrawn.

Termination of Related Agreements

As a result of the termination of the Proposed Aspiration Business Combination, the Second A&R Merger Agreement will be of no further force and effect (other than the Termination Provision and other ancillary provisions thereof, each of which survives the termination), and each of the transaction agreements entered into in connection therewith, including, but not limited to, the following, have either automatically been terminated in accordance with their terms or are of no further force and effect: (i) the Subscription Agreements dated as of August 18, 2021 by and among the Company and certain accredited investors; (ii) the Aspiration Support Agreement; (iii) the Sponsor Support Agreement; (iv) the Amended and Restated Registration Rights Agreement; (v) the Stockholders Agreement; (vi) the Series X Preferred Stock Purchase Agreement with OCM Aspiration Holdings LLC (“Oaktree”); (vii) the Investor Rights Agreement with Oaktree. 

First Special Meeting

On December 21, 2022, the Company held a special meeting of stockholders (the “First Special Meeting”). At the First Special Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “First Charter Amendment”) to extend the date by which the Company must complete a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination involving the Company and one or more businesses (the “Deadline Date”) from March 9, 2023 to April 9, 2023, and to allow the Company to elect to further extend in one-month increments up to two additional times, or a total of up to three months after March 9, 2023, until June 9, 2023, unless the closing of a business combination should have occurred prior thereto.

Pursuant to the First Amendment to the Company’s Amended and Restated Certificate of Incorporation, executed December 23, 2022, at the beginning of each month in which an extension was implemented and an initial business combination has not yet been consummated, the Company made a deposit from its working capital account into the Trust Account in an amount determined by multiplying $0.06 by the number of public shares then outstanding, up to a maximum monthly deposit of $210,000, or an aggregate deposit of up to $630,000 (if all extensions were exercised).

On March 29, 2023, the Board determined to implement the Company’s first monthly Extension under the First Charter Amendment to allow additional time for the Company to complete its initial business combination. In connection with the first monthly Extension, the Company deposited $120,100 into the Trust Account on April 4, 2023. On May 3, 2023 the Board determined to implement the Company’s second monthly Extension under the First Charter Amendment to extend the Deadline Date for an additional month to June 9, 2023. In connection with the second monthly Extension, the Company deposited $120,100 to into the Trust Account on May 3, 2023.

Second Special Meeting

On June 5, 2023, the Company held a special meeting of stockholders (the “Second Special Meeting”) in which the Company’s stockholders voted in favor of a proposal to the Second Amendment of the Company’s Amended and Restated Certificate of Incorporation (the “Second Charter Amendment”) to extend the Deadline Date (the date by which it must consummate an initial business combination) from June 9, 2023 to July 9, 2023 and to allow the Company to elect to further extend in one-month increments up to eight additional times (each monthly election referred to herein as an “Extension”), or a total of up to nine months, until March 9, 2024 (the “Extended Deadline Date”).

Additionally, the Company’s redemption limitation amendment proposal was approved at the Second Special Meeting whereby the Second Charter Amendment amends the Company’s Charter to permit the Company’s Board, in its sole discretion, to eliminate (i) the limitation that the Company may not redeem public shares in an amount that would cause the Company’s net tangible assets to be less than $5,000,001 and (ii) the limitation that the Company shall not consummate a business combination unless the Company has net tangible assets of at least $5,000,001.

Pursuant to the Second Amendment to the Company’s Amended and Restated Certificate of Incorporation, executed June 7, 2023, at the beginning of each month in which an Extension has been implemented and an initial business combination has not yet been consummated, the Company shall make a deposit from its working capital account into the Trust Account of $21,000, or an aggregate deposit of up to $189,000 (if all extensions are exercised). In connection with the Second Special Meeting, the Company deposited $21,000 in the Trust Account on June 7, 2023.

On June 29, 2023, the Company’s board of directors elected to implement the Company’s first monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to August 9, 2023. In connection with the Extension, the Company deposited $21,000 in the Trust Account on June 30, 2023.

On July 26, 2023, the Company’s board of directors elected to implement the Company’s second monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to September 9, 2023. In connection with the second monthly Extension, the Company deposited $21,000 in the Trust Account on July 27, 2023.

On September 6, 2023, the Company’s board of directors elected to implement the Company’s third monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to October 9, 2023. In connection with the third monthly Extension, the Company deposited $21,000 in the Trust Account on September 5, 2023.

On October 4, 2023, the Company’s board of directors elected to implement the Company’s fourth monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to November 9, 2023. In connection with the fourth monthly Extension, the Company deposited $21,000 in the Trust Account on October 5, 2023.

On November 1, 2023, the Company’s board of directors elected to implement the Company’s fifth monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to December 9, 2023. In connection with the fifth monthly Extension, the Company deposited $21,000 in the Trust Account on November 2, 2023.

Public Share Redemptions

In connection with the First Special Meeting held on December 21, 2022, stockholders holding an aggregate of 23,873,324 shares of the Company’s Class A common stock exercised their right to redeem their shares for approximately $10.10 per share of the funds held in the Company’s trust account. After satisfaction of the redemptions exercised on December 21, 2022, approximately $20.6 million in cash remained in the trust account and 2,001,676 shares of Class A common stock subject to redemption were outstanding. Warrants previously issued as Units in the initial IPO were segregated and retained by stockholders that redeemed their public shares.

In connection with the Second Special Meeting held on June 5, 2023, stockholders holding an aggregate of 1,542,147 shares of the Company’s Class A common stock exercised their right to redeem their shares for approximately $10.39 per share of the funds held in the Company’s trust account. After satisfaction of the redemptions exercised on June 5, 2023, approximately $4.8 million in cash remained in the trust account and 459,529 shares of Class A common stock subject to redemption were outstanding. Warrants previously issued as Units in the initial IPO were segregated and retained by stockholders that redeemed their public shares.

NYSE American Listing

On February 2, 2023, the New York Stock Exchange (the “NYSE”) notified the Company that trading in the Company’s common stock, units and warrants had been halted, as the Company no longer satisfied the continued listing standard of the NYSE requiring the Company to maintain an average aggregate global market capitalization attributable to its publicly held shares over a consecutive 30 trading day period of at least $40,000,000. On February 13, 2023, the Company was approved for listing on the NYSE American LLC (the “NYSE American”) and its common stock, units and warrants began trading on the NYSE American on February 16, 2023.

Termination of Proposed Business Combination With Aspiration

On August 18, 2021, the Company entered into an Agreement and Plan of Merger (as amended and restated, the “Merger Agreement”) with Merger Sub, Merger Sub II, and Aspiration Partners Inc. (“Aspiration”). As previously disclosed, on July 21, 2022, the Company entered into a Second Amended and Restated Agreement and Plan of Merger, as amended by Amendment No. 1 thereto dated as of December 29, 2022 (“Amendment No. 1”), as further amended by Amendment No. 2 thereto dated as of March 30, 2023, as further amended by Amendment No. 3 thereto dated as of April 29, 2023 and as further amended by Amendment No. 4 thereto dated as of May 31, 2023 (as amended, the “Second A&R Merger Agreement”), by and among the Company, InterPrivate III Merger Sub Inc., a wholly owned subsidiary of the Company, InterPrivate III Merger Sub II LLC, a wholly owned subsidiary of the Company, and Aspiration Partners, Inc. The transactions contemplated by the second A&R Merger Agreement, amended as described below, are referred to as the “Proposed Aspiration Business Combination.”

As previously disclosed, on August 22, 2023 the Company terminated the Second A&R Merger Agreement, effective on August 29, 2023, pursuant to Section 9.01(n) thereof. Such termination constitutes a “Qualifying Termination” (as defined under Section 9.01(n), as amended by the Amendment No. 1 (the “Termination Provision”)). The Termination Provision provides that upon a Qualifying Termination, Aspiration must pay the Company (i) a cash termination fee of $7.0 million (the “Cash Termination Fee”), and (ii) a termination fee in the form of a number of equity securities of Aspiration (the “Equity Termination Fee”) calculated as $13,000,000 (A) divided by a price per equity interest of Aspiration and on the same terms as (1) those issued to investors in the first issuance or series of related issuance of equity securities by Aspiration (other than issuances of certain derivative rights) occurring on or before the date that is 180 days following the Qualifying Termination from which Aspiration receives immediately available gross proceeds of at least $50,000,000 (a “Qualified Aspiration Financing”) or (2) in the absence of such Qualified Aspiration Financing during such period, the last issuance of Aspiration’s Series C-4 Preferred Stock by Aspiration immediately prior to July 21, 2022, the date of the Second A&R Merger Agreement (the “Second Amendment Effective Time”) or (B) on such other terms as the Company and Parent may mutually agree. The Termination Provision provides that the Cash Termination Fee is payable by Aspiration within two business days of the Qualifying Termination and the Equity Termination Fee shall not be issued by Aspiration prior to the earlier to occur of (i) the completion of the redemption of all outstanding shares of the Company’s Class A Stock, including in accordance with Section 9.2(d) of the certificate of incorporation of the Company, such that no shares of Class A Stock of the Company remain outstanding, and (ii) the closing of an alternative business combination by the Company.

As of the date of this Quarterly Report on Form 10-Q, Aspiration has not paid the Cash Termination Fee to the Company, and the Company cannot provide any assurance that it will receive the termination payments to which it is entitled under the Second A&R Merger Agreement or the timing thereof.

The Company intends to continue its search for an initial Business Combination. If the Company does not complete an initial Business Combination, any funds remaining, after paying expenses including those incurred in the Company’s search for a Business Combination, from payments (if any) under the Termination Provision, are expected to remain outside of the Trust Account and not be part of liquidating distributions with respect to the Public Shares.

On August 31, 2023 the Company requested that its Registration Statement on Form S-4 (File No. 333-262732) related to the Aspiration Business Combination, together with all exhibits thereto (the “Registration Statement”), initially filed with the SEC on February 15, 2022, be withdrawn.

Termination of Related Agreements

As a result of the termination of the Proposed Aspiration Business Combination, the Second A&R Merger Agreement will be of no further force and effect (other than the Termination Provision and other ancillary provisions thereof, each of which survives the termination), and each of the transaction agreements entered into in connection therewith, including, but not limited to, the following, have either automatically been terminated in accordance with their terms or are of no further force and effect: (i) the Subscription Agreements dated as of August 18, 2021 by and among the Company and certain accredited investors; (ii) the Aspiration Support Agreement; (iii) the Sponsor Support Agreement; (iv) the Amended and Restated Registration Rights Agreement; (v) the Stockholders Agreement; (vi) the Series X Preferred Stock Purchase Agreement with OCM Aspiration Holdings LLC (“Oaktree”); (vii) the Investor Rights Agreement with Oaktree.

Results of Operations  

We have neither engaged in any operations nor generated any revenues to date. Our only activities through September 30, 2023 were organizational activities, those necessary to prepare for the Public Offering, described below, and identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our business combination. We generate non-operating income in the form of interest income on marketable securities held in 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.

The three months ended September 30, 2023 compared to the three months ended September 30, 2022

For the three months ended September 30, 2023, we had a net loss of $213,383 which consists of operating costs of $1,018,333, a loss on the change in fair value of the warrant liability of $736, dividend and interest income on marketable securities held in the Trust Account and cash equivalents of $98,376, and a provision for income tax benefit of $707,310.

For the three months ended September 30, 2022, we had net income of $8,171,298 which consists of operating costs of $871,338, extension fee income of $10,000,000, a gain on the change in fair value of the warrant liability of $46,385, interest income on marketable securities held in the Trust Account of $1,318,723, an unrealized gain on marketable securities held in Trust Account $47,946, and a provision for income tax expense of $2,370,418.

The nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

For the nine months ended September 30, 2023, we had a net loss of $1,922,716 which consists of operating costs of $3,054,449, a gain on the change in fair value of the warrant liability of $654, dividend and interest income on marketable securities held in the Trust Account and cash equivalents of $481,423, and a provision for income tax benefit of $649,656.

For the nine months ended September 30, 2022, we had net income of $7,046,193, which consists of operating costs of $2,571,972, extension fee income of $10,000,000, a gain on the change in fair value of the warrant liability of $227,660, and interest income on marketable securities held in the Trust Account of $1,789,598, an unrealized gain on marketable securities held in Trust Account $18,983, and a provision for income tax expense of $2,418,076. 

Liquidity, Capital Resources and Going Concern

On March 9, 2021, we consummated the Public Offering of 25,875,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 3,375,000 Units, at $10.00 per Unit, generating gross proceeds of $258,750,000. Simultaneously with the closing of the Public Offering, we consummated the sale of 692,500 private placement units at a price of $10.00 per private placement unit in a private placement to the Sponsor and EarlyBirdCapital, generating gross proceeds of $6,925,000. Following the Public Offering, the full exercise of the over-allotment option, and the sale of the private placement units, a total of $258,750,000 was placed in the Trust Account.

As of September 30, 2023, we had cash held in the Trust Account of $4,957,032. Interest earned on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2023, we have withdrawn $406,202 in interest earned from the Trust Account for tax purposes. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, net of taxes payable, to complete our business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.  

As of September 30, 2023, we had cash and cash equivalents held outside of the Trust Account of $2,566,902. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.

In order to finance transaction costs in connection with a business combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we will repay such loaned amounts. In the event that a business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant, at the option of the lender. The units would be identical to the private placement units. In addition to the $10,000,000 received during the third quarter of 2022 and the Company became entitled to certain termination fees in connection with the termination of the Proposed Business Combination with Aspiration, as more fully described in Note 6 under the heading “Termination of Proposed Business Combination With Aspiration.” However, as of the date of this Quarterly Report on Form 10-Q, Aspiration has not paid the Cash Termination Fee to the Company, which became due on August 31, 2023. The Company cannot provide any assurance that it will receive the termination payments to which it is entitled under the Second A&R Merger Agreement or the timing thereof.

We monitor the adequacy of our working capital in order to meet the expenditures required for operating our business prior to our initial business combination. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in depth due diligence and negotiating a business combination is less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Our amended and restated certificate of incorporation provides that we must cease all operations except for the purpose of liquidating if we are unable to complete a business combination. The Company currently has less than 12 months from the date these financial statements were issued to complete a business combination, the latest date by which we must consummate a business combination is December 9, 2023, or March 9, 2024, if all extensions are exercised. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this report do not include any adjustments that might result from our inability to continue as a going concern.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of September 30, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, administrative and support services. We began incurring these fees on March 4, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.

We have entered into an agreement, pursuant to which we will pay the Vice President a total of $10,000 per month for assisting us in negotiating and consummating an initial business combination. Upon completion of the Business Combination or the Company’s liquidation, the agreement will terminate and the Company will cease paying these monthly fees. 

In connection with our IPO, the Company engaged Morgan Stanley and EarlyBirdCapital as advisors pursuant to a business combination and marketing agreement (the “BCMA”) to assist the Company in holding meetings with its stockholders to discuss a potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholder approval for a Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. On February 14, 2022, the BCMA was amended, and as a result Morgan Stanley is no longer required to perform any services under the BCMA and is not entitled to receive any compensation thereunder. We will pay EarlyBirdCapital a cash fee for such services upon the consummation of the Business Combination in an amount equal to 1.75% of the gross proceeds of the Initial Public Offering (exclusive of any applicable finders’ fees which might become payable).

We have issued to EarlyBirdCapital, and/or its designees, 200,000 representative shares (the “representative shares”) for nominal consideration. The holders of the representative shares have agreed not to transfer, assign or sell any such shares without our prior consent until the completion of our initial business combination. In addition, the holders of the representative shares have agreed (i) to waive their conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete our initial business combination within 24 months from the closing of the Initial Public Offering.

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 on Form S-1 pursuant to Rule 5110(e)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(e)(1), these securities will not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the Registration Statement on Form S-1 or commencement of sales of the Initial Public Offering, except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, provided that all securities so transferred remain subject to the lockup restriction above for the remainder of the time period.

We have granted the holders of these shares and the private placement units registration rights. EarlyBirdCapital may not exercise its demand and “piggy-back” registration rights more than five and seven years, respectively, after the effective date of our Registration Statement on Form S-1 and may not exercise its demand rights on more than one occasion in accordance with FINRA Rule 5110(g)(8). 

Critical Accounting Policies

The preparation of condensed consolidated financial statements and related disclosures in conformity with 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Warrant Classification

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 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 of common stock and whether the warrant 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, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. As of September 30, 2023 and December 31, 2022, the Private Placement Warrants were accounted for as liabilities, and the Public Warrants were accounted for as temporary equity.

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. Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and 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 the occurrence of uncertain future events. Accordingly, at September 30, 2023, the entire amount of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed consolidated balance sheet.

Net Income (loss) Per Share of Common Stock

The Company’s statement of operations includes a presentation of income (loss) per share of common stock in a manner similar to the two-class method of loss per share.

Net income (loss) per share of common stock, basic and diluted, for our Class A common stock subject to possible redemption is calculated by dividing (i) its allocable share of net income (loss) by (ii) the weighted average number of shares of our Class A common stock subject to possible redemption outstanding during the period.

Net income (loss) per share of common stock, basic and diluted, for our non-redeemable Class A common stock is calculated by dividing (i) its allocable share of net income (loss) by (ii) the weighted average number of shares of our non-redeemable Class A common stock outstanding during the period.

The Company has not considered the effect of the Public Warrants and the Private Placement Warrants to purchase shares of our Class A common stock in the calculation of diluted net income (loss) per share, since the exercise of such warrants into shares of our Class A common stock is contingent upon the occurrence of future events and their inclusion would be anti-dilutive. As a result, diluted net income (loss) per common stock is the same as basic net income (loss) per common stock for the periods presented.

Non-redeemable Class A common stock includes the Founder Shares and other shares of Class A common stock that do not have redemption features.

Measurement of Credit Losses on Financial Instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information. ASU 2016-13 was effective for SEC filers, excluding smaller reporting companies, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As an emerging growth company, the Company was permitted to adopt the new standard for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Effective January 1, 2023, the Company adopted ASU 2016-13 using a modified retrospective transition method. There were no effects on the Company’s financial position, results of operations, or cash flows upon adoption of ASU 2016-13.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure 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 Report, 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 (who serves as our Principal Executive, Financial and Accounting Officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon his evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of September 30, 2023 due to the material weaknesses described below.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management’s Report on Internal Controls Over Financial Reporting

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Our Chief Executive Officer assessed the effectiveness of our internal control over financial reporting as of September 30, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, our Chief Executive Officer determined that our internal controls over financial reporting were not effective as of September 30, 2023 because of material weaknesses in our internal control over financial reporting. Specifically, our management has concluded that our controls related to the classification of redeemable common stock as components of either permanent or temporary equity, remeasurement of Class A common stock subject to redemption, and accounting for accruals of certain expenses including tax liabilities were not effectively designed or maintained.

This Quarterly Report does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.

Changes in Internal Control over Financial Reporting  

In light of the material weaknesses described above, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Management has implemented remediation steps to address the material weaknesses and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals. 

While we took considerable action to remediate the material weaknesses, such remediation has not been fully evidenced. Accordingly, we continue to test our controls implemented in the first quarter to assess whether our controls are operating effectively. While there can be no assurance, we believe our material weaknesses will be remediated during the course of fiscal 2023. 

Other than the changes discussed above, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

As of the date of this Quarterly Report, there have been no material changes from the risk factors previously disclosed in the Annual Report. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

Effective August 18, 2023, the Company entered into a consulting service agreement with Richard McGinn, a director and beneficial owner of the Company, for consulting and advisory services, and effective August 20, 2023, Mr. McGinn resigned from the Company’s Audit Committee prior to entering into the consulting service agreement. The services to be provided under the consulting service agreement include assistance with the Company’s due diligence and analysis of one or more potential business combination targets identified by the Company, and advice and assistance in negotiating the terms, structure and the execution of one or more business combination transactions involving the Company. For the services rendered, the Company is to pay Mr. McGinn a monthly retainer of $50,000 per month (the “Consulting Fee”) until the consulting service agreement is terminated by either party. On October 17, 2023, the Company and Mr. McGinn entered into an amendment to the consulting service agreement. For the three months ended September 30, 2023 the Company incurred and paid Consulting Fees of $150,000. For the nine months ended September 30, 2023 the Company incurred and paid Consulting Fees of $150,000. As of September 30, 2023, no fees were payable by the Company.

Item 6. Exhibits

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

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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