UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
For the quarterly period ended
September 30, 2022
OR
For the transition period from
to
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification Number)
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (
212
)
213-0243
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Smaller reporting company
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Emerging growth company
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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
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No ☐
As of November 10, 2022, there were
23,000,000
shares Class A common stock, par value $0.0001 per share, and
5,750,000
shares of Class B common stock, par value $0.0001 per share, were issued and outstanding, respectively.
FOCUS IMPACT ACQUISITION CORP.
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September 30,
2022
(Unaudited)
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December 31,
2021
(Audited)
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Assets:
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Current assets:
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Cash
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$
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$
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Prepaid expenses
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Total current asset
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Prepaid expenses, non-current
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Investment held in Trust Account
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Total assets
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$
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$
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Liabilities and Stockholders’ Deficit
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Current liabilities:
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Accrued offering costs and expenses
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$
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$
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| Franchise taxes payable |
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| Income taxes payable |
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Total current liabilities
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Warrant liability
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Marketing agreement
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Deferred underwriting commissions
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Total liabilities
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Commitments and Contingencies (Note 6)
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Class A common stock subject to possible redemption,
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Stockholders’ Deficit:
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Preferred stock, $
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Class A common stock, $
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Class B common stock, $
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Additional paid-in capital
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Accumulated deficit
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(
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(
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)
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Total stockholders’ deficit
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(
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)
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(
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)
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Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit
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$
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$
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The accompanying notes are an integral part of these unaudited condensed financial statements.
FOCUS IMPACT ACQUISITION CORP.
(UNAUDITED)
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For the Three Months Ended
September 30,
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For the Nine Months Ended
September 30,
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For the Period from February
23, 2021 (Inception) Through September 30,
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||||||||||||||
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2022
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2021
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2022
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2021
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Formation and operating costs
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$
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$
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$
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$
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Marketing service fee
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Loss from operations
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(
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)
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(
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(
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Other Income
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Change in fair value of warrant liabilities
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Operating account interest income
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Income from trust account
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Total other income
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Income (Loss) before provision for income taxes
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(
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Provision for income taxes
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(
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)
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(
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)
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Net income (loss)
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$
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$
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$
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$
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(
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)
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Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption
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Basic and diluted net income per share, Class A common stock subject to possible redemption
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$ |
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$ |
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$ |
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$ |
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Basic and diluted weighted average shares outstanding, common stock
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Basic and diluted net income (loss) per share, common stock
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$
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$
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(
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)
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$ |
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$ |
(
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)
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The accompanying notes are an integral part of these unaudited condensed financial statements.
FOCUS IMPACT ACQUISITION CORP.
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
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Class B Common Stock
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Shares
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Amount
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Additional
Paid-in Capital
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Accumulated
Deficit
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Stockholders’
Deficit
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Balance as of January 1, 2022
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$
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$
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$
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(
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$
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(
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Net income
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-
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Balance as of March 31,
2022
(unaudited)
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$
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$
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$
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(
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$
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(
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Accretion for Class A common stock to redemption amount
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- |
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(
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(
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Net income
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- |
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Balance as of June 30, 2022 (unaudited)
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$ |
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$ |
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$ |
(
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(
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| Accretion for Class A common stock to redemption amount | - |
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(
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(
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| Net income | - |
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| Balance as of September 30, 2022 (unaudited) |
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$ |
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$ |
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$ |
(
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(
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FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND FOR THE PERIOD FROM FEBRUARY 23, 2021 (INCEPTION) THROUGH SEPTEMBER 30,
2021
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Class B Common Stock
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Shares
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Amount
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Additional
Paid-in Capital
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Accumulated
Deficit
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Stockholder’s
Equity
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Balance as of February 23, 2021 (inception)
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$
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$
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$
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$
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Issuance of Class B common stock to Sponsor
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Net loss
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-
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(
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(
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Balance as of March 31,
2021
(unaudited)
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(
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Net income
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- |
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| Balance as of June 30, 2021 (unaudited) |
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$ |
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$ |
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$ |
(
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) | $ |
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| Net income | - |
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| Balance as of September 30, 2021 (unaudited) |
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$
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$
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$
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(
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) |
$
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The accompanying notes are an integral part of these unaudited condensed financial statements.
FOCUS IMPACT ACQUISITION CORP.
(UNAUDITED)
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For the Nine
Months Ended
September 30,
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For the
Period From
February 23,
2021
(Inception)
Through September
30,
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| 2022 | 2021 | |||||||
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Cash flows from operating activities:
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Net income (loss)
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$
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$
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(
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)
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
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Change in fair value of warrant liability
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(
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Income from investments held in Trust Account
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(
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Changes in assets and liabilities:
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Prepaid expenses
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Accrued offering costs and expenses
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Franchise tax payable
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Marketing service fee
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Income taxes payable
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(
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)
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Net cash used in operating activities
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(
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)
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Cash flows from investing activities:
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Proceeds from Trust Account
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Net cash provided by investing activities
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Net change in cash
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(
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Cash, beginning of the period
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Cash, end of the period
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$
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$
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Supplemental disclosure of cash flow information:
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||||||||
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Accretion for Class A common stock to redemption amount
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$ |
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$ |
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Deferred offering costs paid by Sponsor in exchange for issuance of Class B common stock
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$
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$
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| Deferred offering costs paid by Sponsor under the promissory note |
$
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$
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||||
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Deferred offering costs included in accrued offerings costs and expenses
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$
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$
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The accompanying notes are an integral part of these unaudited condensed financial statements.
FOCUS IMPACT ACQUISITION CORP.
SEPTEMBER 30, 2022
Note 1 - Organization and Business Operations
Organization and General
Focus Impact Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on February 23, 2021. The Company was formed for the purpose of
effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
one
or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2022, the Company had not commenced any operations. All activity for the period from February 23, 2021 (inception) through September 30, 2022
relates to the Company’s formation and the Initial Public Offering (“IPO”) (as defined below), and since the closing of the IPO, the search for a prospective initial business Combination. The Company will not generate any operating revenues until
after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
Sponsor and Financing
The Company’s sponsor is Focus Impact Sponsor, LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s IPO was declared effective on October 27, 2021 (the “Effective Date”). On November 1, 2021, the Company consummated its
IPO of
23,000,000
units (the “Units”) which included the exercise of the underwriters’ option to purchase an additional
3,000,000
Units at the IPO price to cover over-allotments. Each Unit consists of
one
share of Class A common stock, $
0.0001
par value per share (the “Class A
common stock”), and
of one redeemable warrant (the “Public Warrants”), each whole Public Warrant entitling the holder thereof
to purchase
one
share of Class A Common Stock at an exercise price of $
11.50
per share, subject to adjustment. The Units were sold at an offering price of $
10.00
per Unit, generating gross proceeds of $
230,000,000
, which is discussed in Note 3.
Simultaneously with the closing of IPO the Company completed the private sale of
11,200,000
warrants (the “Private Placement Warrants”) at a purchase price of $
1.00
per Private Placement Warrant to the Sponsor, generating gross proceeds to the Company of $
11,200,000
.
Offering costs amounted to $
13,457,525
consisting of $
4,000,000
of underwriting commissions, $
8,650,000
of deferred underwriting commissions, and $
807,525
of other offering costs. Of the offering costs, $
509,712
is included within accumulated deficit and $
12,947,813
is included in additional paid in capital.
Upon the closing of the IPO (including the full exercise of the underwriters’ over-allotment option) and the private placement, $
234,600,000
has been placed in a trust account (the “Trust Account”), representing the redemption value of the Class A common stock sold in the IPO, at
their redemption value of $
10.20
per share.
Nasdaq rules provide that the Business Combination must be with
one
or more target businesses that together have a fair market value equal to at least
80
% of the value of the assets held in the Trust
Account (as defined below) (excluding the deferred underwriting commissions and taxes payable) at the time of the Company signing a definitive agreement in connection with the Business Combination. The Company will only complete a Business
Combination if the post-Business Combination company owns or acquires
50
% or more of the outstanding voting securities of the target or
otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). There is no assurance that the
Company will be able to successfully effect a Business Combination.
Upon the closing of the IPO, $
10.20
per Unit sold in the
IPO (including the full exercise of the underwriters’ over-allotment option) and the proceeds of the sale of the Private Placement Warrants, are held in a trust account (“Trust Account”) and will be invested only in U.S. government securities with
a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. The trust account is intended as a holding place
for funds pending the earliest to occur of: (a) the completion of the initial Business Combination, (b) the redemption of any public shares properly tendered in connection with a stockholder vote to amend the Company’s amended and restated
certificate of incorporation (i) to modify the substance or timing of the Company’s obligation to provide holders of the Company’s Class A common stock the right to have their shares redeemed in connection with the initial Business Combination or
to redeem
100
% of the Company’s public shares if the Company does do not complete the initial Business Combination within
18
months from the closing of this offering or (ii) with respect to any other provisions relating to the rights of holders of the Company’s Class A
common stock, and (c) the redemption of the Company’s public shares if the Company has not consummated the initial Business Combination within
18
months from the closing of this offering, subject to applicable law.
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of the
initial 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 proposed
Business Combination or conduct a tender offer will be made by the Company, solely in the Company’s discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require
the Company to seek stockholder approval under the law or stock exchange listing requirement. The public stockholders will be entitled to redeem their shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in
the Trust Account as of
business days prior to the consummation of the initial Business Combination including interest earned on the
funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations. The amount in the Trust Account is initially
anticipated to be approximately $
10.20
per public share. All of the Public Shares contain a redemption feature which allows for the
redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with an initial Business Combination and in connection with certain amendments to the amended and restated
certificate of incorporation. In accordance with SEC and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require common stock subject to
redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A common stock classified as temporary equity will
be the allocated proceeds determined in accordance with ASC 470-20. The Class A common stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes
in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the
redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The accretion or
remeasurement will be treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). While redemptions cannot cause the Company’s net tangible assets to fall below $
5,000,001
, the Public Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place. In
such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $
5,000,001
upon such
consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
The Company’s amended and restated certificate of incorporation provides that the Company will have only
18 months
from the closing of the Proposed Public Offering (the “Combination Period”) to complete the initial Business Combination. If the Company is unable to complete the
initial Business Combination within such
18-month
period, the Company may seek an amendment to the Company’s amended and restated
certificate of incorporation to extend the period of time the Company has to complete an initial Business Combination beyond
18 months
.
Our amended and restated certificate of incorporation requires that such an amendment be approved by holders of
65
% of the Company’s
outstanding common stock. If the Company does not complete the initial Business Combination within
18 months
from the closing of this
offering (or such extended period to complete an initial Business Combination), the Company will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than
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 us to pay the Company’s franchise and income taxes (less up to $
100,000
of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as
stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining
stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Sponsor, officers and directors entered into a letter agreement with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to
any founder shares and public shares held by them in connection with the completion of the initial Business Combination and a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) that would
modify the substance or timing of the Company’s obligation to provide holders of shares of Class A common stock the right to have their shares redeemed in connection with the initial Business Combination or to redeem
100
% of the Company’s public shares if the Company does not complete the initial Business Combination within
18 months
from the closing of this offering or (B) with respect to any other provision relating to the rights of holders of the Company’s Class A commons stock and (ii) to
waive their rights to liquidating distributions from the trust account with respect to any founder shares they hold if the Company fails to consummate an initial Business Combination within
18 months
from the closing of this offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if
the Company fails to complete the initial Business Combination within the prescribed time frame). Further, the Company has agreed not to enter into a definitive agreement regarding an initial Business Combination without the prior consent of the
Sponsor. If the Company submits the initial Business Combination to the Company’s public stockholders for a vote, the Company will complete the initial Business Combination only if a majority of the outstanding shares of common stock voted are
voted in favor of the initial Business Combination.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or by 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) $
10.20
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 the Company’s franchise and income taxes. This liability will not apply with respect 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 underwriters of this offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver
is deemed to be unenforceable against a third party, then the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company has not independently verified whether the Sponsor has sufficient funds to satisfy
its indemnity obligations and believes that the Sponsor’s only assets are securities of the Company. The Company has not asked the Sponsor to reserve for such indemnification obligations. None of the Company’s officers will indemnify the Company
for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Risks and Uncertainties
Management is continuing 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 these financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The Company’s results of operations and ability to complete an initial business combination may be
adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond the Company’s control. The Company’s business could be impacted by, among other things, downturns in the
financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including
resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the Ukraine. The Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or
magnitude or the extent to which they may negatively impact our business and the Company’s ability to complete an initial business combination.
Consideration of Inflation Reduction Act Excise Tax
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things,
a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for
purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain
exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise,
may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market
value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a
Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition,
because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to
complete a Business Combination and in the Company’s ability to complete a Business Combination.
Liquidity, Capital Resources and Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management believes that the funds which the Company has available following the completion of the IPO will enable it to sustain operations for a period of at least one-year from the issuance date of this financial statement. Based on
the foregoing, management believes that the Company will have sufficient working capital to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be
using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s 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 mandatory liquidation and subsequent dissolution, should the Company be unable to complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going
concern. The Company has until May 1, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there
will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 1, 2023.
Note 2 - Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X 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 the information and footnotes necessary for a complete presentation of
financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair
presentation of the financial position, operating results and cash flows for the periods presented.
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, 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 the financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through
the IPO that were directly related to the IPO. Offering costs will be allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs associated with
warrant liabilities were expensed and presented as non-operating expenses in the statement of operations and offering costs associated with the Class A common stock were charged to temporary equity.
Offering costs amounted to $
13,457,525
consisting of
$
4,000,000
of underwriting commissions, $
8,650,000
of deferred underwriting commissions, and $
807,525
of other offering costs. Of the offering costs, $
509,712
is included within the statement of operations and $
12,947,813
is included in temporary equity.
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. As of September 30, 2022
and December 31, 2021, the Company had cash of $
949,402
and $
1,393,939
, respectively, and
no
cash equivalents.
Investment Held in Trust Account
Investments held in the Trust Account are held in a money market fund characterized as Level 1 investments within the fair value hierarchy
under ASC 820 (as defined below).
Concentration of credit risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000. As of September 30, 2022 and December 31, 2021, the Company had not experienced losses on this account and management believes the Company was not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet, primarily due to its short-term nature.
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each
reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
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—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation
adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2—Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical
or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Net Income (Loss) Per Common Stock
The Company has two classes of common stock, which are referred to as Class A common stock and Class B common stock. Earnings and losses are
shared pro rata between the two classes of stockholders. Private and public warrants to purchase
22,700,000
Class A common stock at
$
11.50
per share were issued on November 1, 2021.
No
warrants were exercised during the three and nine months ended September 30, 2022, three months ended September 30, 2021 and the period from February 23, 2021 (inception) through
September 30, 2021. The calculation of diluted income (loss) per common stock does not consider the effect of the warrants issued in connection with (i) the Initial Public Offering, (ii) the exercise of the over-allotment and (iii) the Private
Placement since the exercise of the warrants is contingent upon the occurrence of future events.
As a result, diluted net income (loss) per common stock is the same as basic net income (loss) per common stock for the periods.
Accretion associated with the redeemable Class A common stock is excluded from earnings per common stock as the redemption value approximates fair value.
|
For the Three Months Ended September 30,
|
||||||||||||||||
|
2022
|
2021
|
|||||||||||||||
|
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||
|
Basic and diluted net income (loss) per share
|
||||||||||||||||
|
Numerator:
|
||||||||||||||||
|
Allocation of net income
|
$
|
|
$
|
|
$ |
|
$
|
|
|
|||||||
|
Denominator:
|
||||||||||||||||
|
Weighted average shares outstanding
|
|
|
|
|
||||||||||||
|
Basic and diluted net income per share, redeemable common stock
|
$
|
|
$
|
|
$ |
|
$
|
|
|
|||||||
|
For the Nine Months Ended
September
30,
|
For the Period from February
23, 2021 (Inception) Through
September
30,
|
|||||||||||||||
|
2022
|
2021
|
|||||||||||||||
|
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||
|
Basic and diluted net income (loss) per share
|
||||||||||||||||
|
Numerator:
|
||||||||||||||||
|
Allocation of net income (loss)
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
|||||||
|
Denominator:
|
||||||||||||||||
|
Weighted average shares outstanding
|
|
|
|
|
||||||||||||
|
Basic and diluted net income (loss) per share, redeemable common stock
|
$
|
|
$
|
|
$
|
|
$ |
(
|
)
|
|||||||
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the
statement of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the
balance sheet date.
Warrant Liability
The Company accounted for the
22,700,000
warrants issued in connection with the IPO and Private Placement in accordance with the guidance contained in FASB ASC 815 “Derivatives and Hedging” whereby
under that provision the warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classified the warrant instrument as a liability at fair value and will adjust the instrument to
fair value at each reporting period. This liability will be re-measured at each balance sheet date until the warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statement of operations. The fair
value of warrants was estimated using an internal valuation model. Our valuation model utilized inputs such as assumed share prices, volatility, discount factors and other assumptions and may not be reflective of the price at which they can
be settled. Such warrant classification is also subject to re-evaluation at each reporting period.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between
the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to
be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded
against it. Our effective tax rate was
10.04
% and
0.00
% for the three months ended September 30, 2022 and 2021, respectively, and
2.31
%
and
0.00
% for the nine months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the
statutory tax rate of
21
% for the three and nine months ended September 30, 2022 and 2021, due to changes in fair value in
warrant liability and the valuation allowance on the deferred tax assets.
While ASC 740 identifies usage of an effective annual tax rate for purposes of an interim provision, it does allow for estimating individual elements in the current period if they are significant, unusual or
infrequent. Computing the effective tax rate for the Company is complicated due to the potential impact of the Company’s change in fair value of warrants (or any other change in fair value of a complex financial instrument), the timing of
any potential business combination expenses and the actual interest income that will be recognized during the year. The Company has taken a position as to the calculation of income tax expense in a current period based on ASC
740-270-25-3 which states, “If an entity is unable to estimate a part of its ordinary income (or loss) or the related tax (benefit) but is otherwise able to make a reasonable estimate, the tax (or benefit) applicable to the item that
cannot be estimated shall be reported in the interim period in which the item is reported.” The Company believes its calculation to be a reliable estimate and allows it to properly take into account the usual elements that can impact its
annualized book income and its impact on the effective tax rate. As such, the Company is computing its taxable income (loss) and associated income tax provision based on actual results through September 30, 2022.
The Company is taking the position that the deferred tax asset related to the unutilized net
operating loss (“NOL”) should still be fully reserved. While interest rates have increased, the actual amount of interest income for tax purposes may differ significantly due to the timing of treasuries purchased, whether the Company
invests in treasuries or potential unrealized interest income based on maturity. Additionally, the NOL utilization is limited to 80% so the approach and estimate used in the interim period is conservative in nature while reviewing the
pertinent facts unique to the Company’s income tax situation.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and
prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
no
unrecognized tax benefits and
no
amounts
accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction.
The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning
the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will
materially change over the next twelve months.
Common Stock Subject to Possible Redemption
All of the
23,000,000
common stock sold as part of
the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and
in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption
provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all shares of Class A common stock have been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value
at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
As of September 30, 2022 and December 31, 2021, the Class A common stock subject to possible redemption reflected on the balance sheet are reconciled in the
following table:
|
September 30,
2022
|
December 31,
2021
|
|||||||
|
As of beginning of the period
|
$
|
|
$
|
|
||||
|
Gross proceeds from IPO
|
|
|
||||||
|
Less:
|
||||||||
|
Proceeds allocated to Public Warrants
|
|
|
(
|
)
|
||||
|
Class A common stock issuance costs
|
|
|
(
|
)
|
||||
|
Plus:
|
||||||||
|
Remeasurement adjustment of carrying value to redemption value
|
|
|
||||||
|
Class A common stock subject to possible redemption
|
$
|
|
$
|
|
||||
Recent Accounting Pronouncements
In August 2020, FASB issued Accounting Standards Update (“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) (“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. The Company adopted ASU 2020-06 on January 1, 2022 and the standard was applied on a full retrospective basis. There was no material impact on the Company’s financial position, results of operations or cash flows.
The Company’s 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 financial statements.
Note 3 - Initial Public Offering
On November 1, 2021, the Company sold
23,000,000
Units at a purchase price of $
10.00
per Unit which included the exercise of the underwriters’ option to purchase an additional
3,000,000
Units at the initial public offering price to cover over-allotments. Each Unit had an offering price of $
10.00
and consists of
one
share of
Class A common stock of the Company, par value $
0.0001
per share, and
of one warrant of the Company. Each full Warrant entitles the holder thereof to purchase
one
share of Class A Common Stock at a price of $
11.50
per share.
Following the closing of the IPO on November 1, 2021, $
234,600,000
($
10.20
per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was
deposited into the Trust Account. The net proceeds deposited into the Trust Account will be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act with a maturity of 180 days or less
or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.
Public Warrants
Each whole warrant entitles the registered holder to purchase
one
whole share of the Class A common stock at a price of $
11.50
per share, subject to adjustment, at any time commencing on the later of
twelve months
from the closing of the IPO and
30
days after the completion of the initial Business Combination. The warrants will expire
five years
after the completion of the initial
Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company has agreed that as soon as practicable, but in no event later than
business days after the closing of the initial Business Combination, the Company will use 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, and the Company will use commercially reasonable efforts to cause the same to become effective within
60
business days after the closing of the initial Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to
those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if the Company’s Class A common stock is 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 the Company’s option, require holders of public warrants who exercise their warrants to do so on a
“cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, will not be required to file or maintain in effect a registration statement, but will use commercially reasonably efforts to
register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the
60
th day after the closing of the initial 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, but will use
commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering the warrants for that number of
shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the “fair market value” (defined
below) less the exercise price of the warrants by (y) the fair market value and (B) the product of
0.361
and the number of whole
warrants being exercised by such holder. The “fair market value” as used in this paragraph shall mean the volume weighted average price of the Class A common stock for the
10
trading days ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $
18.00
.
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the private placement warrants):
|
|
• |
in whole and not in part;
|
|
|
• |
at a price of $
|
|
|
• |
upon a minimum of
|
|
|
• |
if, and only if, the closing price of the Class A common stock equals or exceeds $
|
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A
common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period. If and when the warrants become redeemable by
the Company, the Company may exercise the Company’s redemption right even if the Company are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $
10.00
.
Once the warrants become exercisable, we may redeem the outstanding warrants:
|
|
• |
in whole and not in part;
|
|
|
• |
at $
|
|
|
• |
if, and only if, the closing price of the Company’s Class A common stock equals or exceeds $
|
|
|
• |
if the closing price of the Class A common stock for any
|
Note 4 - Private Placement
On November 1, 2021, simultaneously with the closing of the IPO, the Company completed the private sale of
11,200,000
warrants (the “Private Placement Warrants”) at a purchase price of $
1.00
per Private Placement Warrant to the Sponsor, generating gross proceeds to the Company of $
11,200,000
.
A portion of the proceeds from the Private Placement Warrants has been added to the proceeds from the IPO to be held in the Trust Account. If the Company does not
complete a Business Combination within the Combination Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of the public shares (subject to the requirements of applicable law), and the Private
Placement Warrants will expire worthless.
The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or
salable until
30 days
after the completion of the initial Business Combination and they will not be redeemable by the Company so long as
they are held by the Sponsor or its permitted transferees. The Sponsor, or its permitted transferees, has the option to exercise the Private Placement Warrants on a cashless basis.
The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed (i) to waive their redemption rights with
respect to any founder shares and public shares held by them in connection with the completion of the initial Business Combination and a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A)
that would modify the substance or timing of the Company’s obligation to provide holders of shares of Class A common stock the right to have their shares redeemed in connection with the initial Business Combination or to redeem
100
% of the Company’s public shares if the Company does not complete the initial Business Combination within
18 months
from the closing of the IPO or (B) with respect to any other provision relating to the rights of holders of the Company’s Class A commons stock and (ii) to waive
their rights to liquidating distributions from the trust account with respect to any founder shares they hold if the Company fails to consummate an initial Business Combination within
18 months
from the closing of this offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if
the Company fails to complete the initial Business Combination within the prescribed time frame). Further, the Company has agreed not to enter into a definitive agreement regarding an initial Business Combination without the prior consent of the
Sponsor.
Note 5 - Related Party Transactions
Founder Shares
On March 15, 2021, the Sponsor paid $
25,000
to the
Company in consideration for
7,187,500
shares of Class B common stock. The number of founder shares issued was determined based on the
expectation that the founder shares would represent
20
% of the outstanding shares of common stock upon completion of the IPO. On October
6, 2021, the Sponsor surrendered
1,437,500
shares of Class B common stock for
no
consideration resulting in the Sponsor holding
5,750,000
shares of Class B
common stock.
The
5,750,000
founder shares include an aggregate of up
to
750,000
shares subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised in full or in part,
so that the Sponsor will own, on an as-converted basis,
20
% of the Company’s issued and outstanding shares after the IPO (assuming the
Sponsor does not purchase any public shares in the IPO). With the exercise of the over-allotment option by the underwriters,
no
founder
shares are subject to forfeiture.
The founder shares will automatically convert into shares of Class A common stock upon consummation of a Business Combination on a
one
-for-one basis, subject to certain adjustments, as described in Note 8.
The initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A)
one year
after the completion of the initial Business Combination; or (B) subsequent to the initial Business Combination, (x) if the closing price of
the Company’s Class A common stock equals or exceeds $
12.00
per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any
20
trading days within any
30
-trading day period commencing at least
150
days after the initial Business
Combination, or (y) the date on which the Company completes a liquidation, merger, 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. The Company refers to such transfer restrictions as the lock-up.
Promissory Note — Related Party
The Sponsor agreed to loan the Company an aggregate of up to $
300,000
to be used for a portion of the expenses of the IPO. The loan was non-interest bearing, unsecured and due at the earlier of (i) December 31, 2021, (ii) the date on which the Company consummates the IPO, or (iii) the date on the Company determines
to not proceed with such IPO. The Company had borrowed $
79,991
under the promissory note and fully repaid it on November 4, 2021.
Borrowings under the promissory note are no longer available to the Company.
Related Party Loans
In order to finance transaction costs in connection with an intended initial Business Combination, the Sponsor or an
affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes an initial Business Combination, the
Company would repay such loaned amounts out of the proceeds of the Trust Account released to the Company. Otherwise, such loans would be repaid only out of funds held outside the Trust Account. In the event that the initial Business Combination
does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used to repay such loaned amounts. Up to $
1,500,000
of such 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, including as to exercise price, exercisability and exercise period. At
September 30, 2022 and December 31, 2021,
no
such Working Capital Loans were outstanding.
Administrative Fees
Commencing on the date that the Company’s securities are first listed on the Nasdaq, the Company agreed to pay the Sponsor a total of $
10,000
per month for office space, utilities and secretarial and administrative support provided to the Company. Upon completion of the initial
Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees.
Note 6 - Commitments and Contingencies
Registration and Stockholder Rights
The holders of the founder shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A
common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a
registration rights and stockholder agreement to be signed prior to the consummation of the IPO, requiring the Company to register such securities for resale (in the case of the founder shares, only after conversion to the Class A common stock).
The holders of the majority of these securities are entitled to make up to
three
demands, excluding short form demands, that the Company
registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination and rights to require the Company to
register for resale such securities pursuant to Rule 415 under the Securities Act.
Underwriter Agreement
On
November 1, 2021, the Company paid a cash underwriting commission of $
4,000,000
or approximately $
0.17
per Unit, including the over-allotment option.
The underwriters are entitled to deferred underwriting commissions of approximately $
0.376
per unit, or $
8,650,000
in the aggregate (including the commission related to the underwriters’
exercise of the over-allotment option). The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms of the
underwriting agreement for the offering.
Marketing Fee Agreement
The Company engaged advisors to assist the
Company in validating existing acquisition strategies and providing recommendations or potential amendments and refinements to said strategy. The fee structure is set as a minimum of $
150,000
due upon a Business Combination for advisory services. If the advisors provide lead information of a potential target company in a Business Combination, the Company will pay the
advisors between $
2,000,000
and $
6,000,000
upon successful close of the Business Combination.
Note 7 - Recurring Fair Value Measurements
Under the guidance in ASC 815-40 the warrants do not meet the criteria for equity classification. As such, these financial instruments must be recorded on the
balance sheet at fair value. This valuation is subject to re-measurement at each balance sheet date. With each re-measurement, these financial instruments valuations will be adjusted to fair value, with the change in fair value recognized in the
Company’s statement of operations.
The Company’s warrant liability for the Private Placement Warrants is based on valuation models utilizing inputs from observable and unobservable markets with less
volume and transaction frequency than active markets. The inputs used to determine the fair value of the Private Warrant liability, is classified within Level 3 of the fair value hierarchy.
On December 20, 2021, the Company’s Public Warrants began trading on the Nasdaq Stock Market LLC (“NASDAQ”). The Company’s warrant liability at December 31, 2021 for
the Public Warrants was based on unadjusted quoted prices in an active market (NASDAQ) for identical assets or liabilities that the Company has the ability to access. The fair value of the Public Warrant liability is classified within Level 1 of
the fair value hierarchy. The Company’s warrant liability as of September 30, 2022 for the public warrants is based on quoted prices in markets that are not active for identical or similar assets (NASDAQ) or liabilities that the Company has the
ability to access. The fair value of the public warrant liability is classified within Level 2 of the fair value hierarchy. On September 30, 2022 there was no activity for the Company’s public warrants on NASDAQ. As such, valuation for the public
warrants was based on the NASDAQ closing price as of September 29, 2022.
Substantially all of the Company’s trust assets on the balance sheet consist of U. S. Money Market funds which are classified as cash equivalents. Fair values of
these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2022
and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
|
September 30, 2022
|
||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
||||||||||
|
Assets
|
||||||||||||
|
Investments held in Trust Account
|
$
|
|
$
|
|
$
|
|
||||||
|
Liabilities
|
||||||||||||
|
Public Warrants
|
$
|
|
$
|
|
$
|
|
||||||
|
Private Warrants
|
$
|
|
$
|
|
$
|
|
||||||
|
December 31, 2021
|
||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
||||||||||
|
Assets
|
||||||||||||
|
Investments held in Trust Account
|
$
|
|
$
|
|
$
|
|
||||||
|
Liabilities
|
||||||||||||
|
Public Warrants
|
$
|
|
$
|
|
$
|
|
||||||
|
Private Warrants
|
$
|
|
$
|
|
$
|
|
||||||
Measurement
The Private Warrants were valued using a binomial lattice model, which is considered to be a Level 3 fair value measurement.
The key inputs into the binomial lattice model were as follows at September 30, 2022 and December 31, 2021:
|
Input
|
September 30, 2022
|
December 31, 2021
|
||||||
|
Risk-free interest rate
|
|
%
|
|
%
|
||||
|
Expected term to initial Business Combination (years)
|
|
|
||||||
|
Expected volatility
|
de minimis
|
%
|
|
%
|
||||
|
Common stock price
|
$
|
|
$
|
|
||||
|
Dividend yield
|
|
%
|
|
%
|
||||
The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the Company’s warrants classified as Level 3:
|
Fair value at December 31,
2021
– private warrants
|
$
|
|
||
|
Change in fair value
|
(
|
)
|
||
| Fair Value at March 31, 2022 – private warrants |
|
|||
|
Change in fair value
|
(
|
) | ||
|
Fair Value at June 30,
2022
– private warrants
|
|
|||
|
Change in fair value
|
(
|
) | ||
| Fair Value at September 30, 2022 – private warrants | $ |
|
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 September 30, 2022 and December 31, 2021, there were
no
shares of preferred stock issued or outstanding.
Class A Common Stock
The
Company is authorized to issue
500,000,000
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. As of September
30, 2022
and December 31, 2021, there were
no
shares of Class A common stock issued or outstanding,
excluding
23,000,000
shares subject to possible redemption
Class B Common Stock
The Company is authorized to issue
50,000,000
shares of Class B common stock with a par value of $
0.0001
per share. Holders of the
Company’s Class B common stock are entitled to
one
vote for each common stock. At
September
30, 2022
and December 31, 2021, there were
5,750,000
shares of Class B common stock issued and outstanding.
On March 15, 2021, the Sponsor paid $
25,000
to the
Company in consideration for
7,187,500
shares of Class B common stock. The number of founder shares issued was determined based on the
expectation that the founder shares would represent
20
% of the outstanding shares of common stock upon completion of the IPO. On October
6, 2021, the Sponsor surrendered
1,437,500
shares of Class B common stock for
no
consideration resulting in the Sponsor holding
5,750,000
shares of Class B
common stock.
Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders, except as required by
law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-
one
basis (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like), and subject to further adjustment.
In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the IPO and related to the closing of a Business Combination, the ratio at which shares of
Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed
issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
20
% of the sum of the total number of all shares of common stock outstanding upon completion of the IPO plus all shares of Class A common stock and equity-linked securities
issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination and any private placement-equivalent warrants issued to the Sponsor
or its affiliates upon conversion of loans made to the Company).
Note 9 - Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring through the date the financial statements were issued, require potential adjustment to or disclosure in the financial
statements and did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
References to the “Company,” “Focus Impact Acquisition Corp.,” “our,” “us” or “we” refer to Focus Impact Acquisition Corp. The following discussion and analysis of the Company’s financial
condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis
set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We
have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a newly organized blank check company incorporated on February 23, 2021 as a Delaware corporation and formed for the purpose of effect a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
Our sponsor is Focus Impact Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our initial public offering was declared effective on October
27, 2021. On November 1, 2021, we consummated our initial public offering (the “Initial Public Offering”) of 23,000,000 Units, including the full exercise of the underwriters’ over-allotment option to purchase 3,000,000 units, at a purchase
price of $10.00 per Unit. Offering costs amounted to $13,457,525 consisting of $4,000,000 of underwriting commissions, $8,650,000 of deferred underwriting commissions, and $807,525 of other offering costs. Of the offering costs, $509,712 is
included within the statement of operations and $12,947,813 is included in temporary equity.
Simultaneously with the closing of IPO, we completed the private sale of 11,200,000 warrants (the “Private Placement Warrants”) at a purchase price of $1.00 per Private Placement Warrant to
the Sponsor, generating gross proceeds to us of $11,200,000.
Upon the closing of the IPO, $10.20 per Unit sold in the IPO (including the full exercise of the underwriters’ over-allotment option) and the proceeds of the sale of the Private Placement
Warrants, are held in a trust account (“Trust Account”) and will be invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act which invest only in direct U.S. government treasury obligations. The trust account is intended as a holding place for funds pending the earliest to occur of: (a) the completion of the initial Business Combination, (b) the redemption of any
public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to provide holders of our Class A common stock the
right to have their shares redeemed in connection with the initial Business Combination or to redeem 100% of our public shares if we do not complete the initial Business Combination within 18 months from the closing of this offering or (ii)
with respect to any other provisions relating to the rights of holders of our Class A common stock, and (c) the redemption of our public shares if we have not consummated the initial Business Combination within 18 months from the closing of
this offering, subject to applicable law.
We amended and restated certificate of incorporation provides that we will have only 18 months from the closing of the Proposed Public Offering (the “Combination Period”) to complete the
initial Business Combination. If we are unable to complete the initial Business Combination within such 18-month period, we may seek an amendment to our amended and restated certificate of incorporation to extend the period of time we have to
complete an initial Business Combination beyond 18 months. Our amended and restated certificate of incorporation requires that such an amendment be approved by holders of 65% of our outstanding common stock. If we do not complete the initial
Business Combination within 18 months from the closing of this offering (or such extended period to complete an initial Business Combination), we 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 us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will
completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable
law.
Liquidity, Capital Resources and Going Concern
In connection with our assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to
Continue as a Going Concern,” management believes that the funds which we have available following the completion of the IPO will enable it to sustain operations for a period of at least one-year from the issuance date of this financial
statement. Based on the foregoing, management believes that we will have sufficient working capital to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the
Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures,
selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s 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 mandatory liquidation and subsequent dissolution, should we be unable to complete a Business Combination, raises substantial doubt about our ability to continue as a going
concern. We have until May 1, 2023 to consummate a Business Combination. It is uncertain that we will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 1, 2023.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial
position, results of our operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Our results of operations and ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the
financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates,
supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in the
Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business
combination.
Inflation Reduction Act of 2022 (the “IR Act”)
On August 16, 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 Treasury has been given authority to
provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and
to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in
connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued
not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by
the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the
Company’s ability to complete a Business Combination.
Results of Operations
As of September 30, 2022, we have not commenced any operations. All activity for the period from February 23, 2021 (inception) through September 30, 2022 relates to our formation and the
Initial Public Offering, and since the closing of the IPO, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues
until after the completion of our initial Business Combination, at the earliest. We will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering. We
expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had net income of $1,905,598 resulting from $1,362,000 in change in fair value of warrants, interest income from operating account of $2,481
and $1,059,933 in trust earnings partially offset by $212,593 in provision for income taxes and $306,223 in operating costs.
For the nine months ended September 30, 2022, we had net income of $9,732,124 resulting from $9,761,000 in change in fair value of warrants, interest income from operating account of $2,906
and $1,412,159 in trust earnings partially offset by $230,387 in provision for income taxes and $1,213,554 in operating costs.
For the three months ended September 30, 2021, we had net income of $0.
For the period from February 23, 2021 (inception) to September 30, 2021, we had net loss of approximately $962 which consisted of formation and operating costs.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
Administrative Services Agreement
Commencing on the date that our securities are first listed on the Nasdaq, we agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and
administrative support provided to us. Upon completion of the initial Business Combination or our liquidation, we will cease paying these monthly fees.
Registration and Stockholder Rights
The holders of the founder shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon
the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights and
stockholder agreement to be signed prior to the consummation of the IPO, requiring us to register such securities for resale (in the case of the founder shares, only after conversion to the Class A common stock). The holders of the majority of
these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed
subsequent to the completion of the initial Business Combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act.
Underwriter Agreement
On November 1, 2021, we paid a cash underwriting commission of $4,000,000 or approximately $0.17 per Unit, including the over-allotment option.
The underwriters are entitled to deferred underwriting commissions of approximately $0.376 per unit, or $8,650,000 in the aggregate (including the commission related to the underwriters’
exercise of the over-allotment option). The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete an Initial Business Combination, subject to the terms of the
underwriting agreement for the offering.
Critical Accounting Policies
Offering Costs associated with the Initial Public Offering
We comply with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the IPO that were directly related
to the IPO. Offering costs will be allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed
and presented as non-operating expenses in the statement of operations and offering costs associated with the Class A common stock were charged to temporary equity. Offering costs amounted to $13,457,525 consisting of $4,000,000 of underwriting
commissions, $8,650,000 of deferred underwriting commissions, and $807,525 of other offering costs. Of the offering costs, $509,712 was included within the statement of operations and $12,947,813 was included in temporary equity.
Common Stock Subject to Possible Redemption
All of the 23,000,000 common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation,
if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on
redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within our control require common stock subject to redemption to be classified outside of permanent equity. Therefore, all shares of
Class A common stock have been classified outside of permanent equity.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting
period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
Net Income (Loss) Per Common Stock
We comply with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per common stock is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the period, excluding common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 750,000 shares of common stock that are
subject to forfeiture if the over-allotment option is not exercised by the underwriter. At September 30, 2022 and September 30, 2021, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted
into common stock and then share in the earnings of us. As a result, diluted income (loss) per common stock is the same as basic income (loss) per common stock for the period presented.
Warrants
We account for the warrants issued in connection with the IPO and Private Placement in accordance with the guidance contained in FASB ASC 815 “Derivatives and Hedging” whereby under that
provision the warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, we classified the warrant instrument as a liability at fair value and will adjust the instrument to fair value at each
reporting period. This liability will be re-measured at each balance sheet date until the warrants are exercised or expire, and any change in fair value will be recognized in our statement of operations. The fair value of warrants was estimated
using an internal valuation model. Our valuation model utilized inputs such as assumed share prices, volatility, discount factors and other assumptions and may not be reflective of the price at which they can be settled. Such warrant
classification is also subject to re-evaluation at each reporting period.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Inflation
We do not believe that inflation had a material impact on our business, revenues or operating results during the period presented.
Emerging Growth Company Status
We are 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, 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. We have 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, we, 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 our 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.
| 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 and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within
the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure
controls and procedures as of the end of the fiscal quarter ended September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal
financial officer concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
| Item 1. |
Legal Proceedings
|
None.
| Item 1A. |
Risk Factors
|
Except as described below, there have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the period ended December 31, 2021 as filed with the SEC
on April 1, 2022.
Our search for a Business Combination, and any target business with which we may ultimately consummate a Business Combination, may be materially adversely affected by the geopolitical
conditions resulting from the recent invasion of Ukraine by Russia and subsequent sanctions against Russia, Belarus and related individuals and entities and the status of debt and equity markets, as well as protectionist legislation in our
target markets.
United States and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the recent invasion of Ukraine by Russia in February 2022. In response to such
invasion, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe, and the United States, the United Kingdom, the European Union and other countries have announced various sanctions and restrictive
actions against Russia, Belarus and related individuals and entities, including the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. Certain countries,
including the United States, have also provided and may continue to provide military aid or other assistance to Ukraine during the ongoing military conflict, increasing geopolitical tensions with Russia. The invasion of Ukraine by Russia and
the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union and other countries have created global security concerns that could have a lasting impact on
regional and global economies. Although the length and impact of the ongoing military conflict in Ukraine is highly unpredictable, the conflict could lead to market disruptions, including significant volatility in commodity prices, credit and
capital markets, as well as supply chain interruptions. Additionally, Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital
markets. In addition, the recent invasion of Ukraine by Russia, and the impact of sanctions against Russia and the potential for retaliatory acts from Russia, could result in increased cyber-attacks against U.S. companies.
Any of the abovementioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine and subsequent sanctions,
could adversely affect our search for a Business Combination and any target business with which we may ultimately consummate a Business Combination. The extent and duration of the Russian invasion of Ukraine, resulting sanctions and any related
market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a global scale. Any
such disruptions may also have the effect of heightening many of the other risks described in the “Risk Factors” section of our Annual Report on Form 10-K. If these disruptions or other matters of global concern continue for an extensive period
of time, our ability to consummate a Business Combination, or the operations of a target business with which we may ultimately consummate a Business Combination, may be materially adversely affected.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business
combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring
of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our
business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and
complete our initial business combination, and results of operations.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving SPACs and private operating companies and increasing the
potential liability of certain participants in proposed business combination transactions. These rules, if adopted, whether in the form proposed or in revised form, may materially increase the costs and time required to negotiate and complete
an initial business combination and could potentially impair our ability to complete an initial business combination.
A new 1% U.S. federal excise tax could be imposed on us in connection with redemptions by us of our common stock.
On August 16, 2022, the IR Act was signed into federal law. The IR Act provides for, among other measures, a new U.S. federal 1% excise tax on certain
repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations. The excise tax is imposed on the repurchasing corporation and the amount of the excise tax is generally 1% of the fair market value of the
stock repurchased. 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 Treasury has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of, the excise tax. The IR Act applies
only to repurchases that occur after December 31, 2022.
Any such redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination or otherwise may be subject to the excise
tax. Whether and to what extent we would be subject to the excise tax in connection with a Business Combination would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the
Business Combination, (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. The foregoing could cause a reduction in the cash available to complete a Business
Combination and may adversely affect our ability to complete a Business Combination. Furthermore, whether and to what extent we would be subject to the excise tax and the mechanics for payment of any excise tax in connection with a
liquidating distribution in the event we fail to complete a Business Combination within 18 months of the closing of the Company’s IPO is unclear. Such liquidating distribution would be paid to the holders of Company’s public shares in
accordance with the terms of the amended and restated certificate of incorporation from funds lawfully available, which may impact the amount of cash received with respect to the Company’s public shares if funds are not lawfully available or
if third parties bring claims against us not otherwise covered by the Sponsor’s indemnification obligations.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds.
|
On November 1, 2021, we consummated our Initial Public Offering of 23,000,000 Units which included the exercise of the underwriters’ option to purchase an additional 3,000,000 Units. The Units sold in the Initial
Public Offering and the full exercise of over-allotment option sold at an offering price of $10.00 per Unit, generating total gross proceeds of $230,000,000. The securities sold in the offering were registered under the Securities Act on a
registration statement on Form S-1 (No. 333-255448). The registration statements became effective on October 27, 2021.
Simultaneously with the closing of IPO, the Company completed the private sale of 11,200,000 warrants (the “Private Placement Warrants”) at a purchase price of $1.00 per Private Placement Warrant to the Sponsor,
generating gross proceeds to the Company of $11,200,000. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable
until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering including the over-allotment option, and the sale of the Private Placement Warrants, $234,600,000 was placed in the Trust Account.
We paid a total of $4,000,000 of underwriting commissions and $807,525 for other offering costs related to the IPO. In addition, the underwriters are entitled to deferred underwriting commissions of $8,650,000,
which will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms of the underwriting agreement for the offering.
| Item 3. |
Defaults Upon Senior Securities
|
None.
| Item 4. |
Mine Safety Disclosures
.
|
Not applicable.
| Item 5. |
Other Information.
|
None.
| Item 6. |
Exhibits
|
The following exhibits are filed as part of, or incorporated by reference into, this Report on Form 10-Q.
|
Exhibit Number
|
Description of Exhibit
|
|
|
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
||
|
101.INS*
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
|
|
|
101.SCH*
|
Inline XBRL Taxonomy Extension Schema Document
|
|
|
101.DEF*
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB*
|
Inline XBRL Taxonomy Extension Labels Linkbase Document
|
|
|
101.PRE*
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
104*
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
| * |
Filed herewith.
|
| ** |
These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed
incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 10th day of
November, 2022.
|
FOCUS IMPACT ACQUISITION CORP.
|
||
|
/s/ Carl Stanton
|
||
|
Name:
|
Carl Stanton
|
|
|
Title:
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
||
|
/s/ Ernest Lyles
|
||
|
Name:
|
Ernest Lyles
|
|
|
Title:
|
Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
||
27
TABLE OF CONTENTS
Part I Financial InformationItem 1. Financial StatementsNote 1 - Organization and Business OperationsNote 2 - Significant Accounting PoliciesNote 3 - Initial Public OfferingNote 4 - Private PlacementNote 5 - Related Party TransactionsNote 6 - Commitments and ContingenciesNote 7 - Recurring Fair Value MeasurementsNote 8 - Stockholders DeficitNote 9 - Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits