10-Q 1 d456205d10q.htm 10-Q 10-Q
Table of Contents
false0001851612Q3--12-31NYThe Warrants are accounted for as liabilities in accordance with Subtopic 815-40 and are presented within warrant liabilities on the unaudited condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the unaudited condensed statements of operations. Shares of Class A common stock and warrants comprising the units began separate trading on the Nasdaq under the symbols “BHAC” and “BHACW,” respectively on November 26, 2021. Consequently, Public Warrants have been re-classified from Level 3 to Level 1 to reflect those observable inputs for identical instruments in active markets now exists. 0001851612 2022-12-31 0001851612 2023-09-30 0001851612 2023-07-01 2023-09-30 0001851612 2022-07-01 2022-09-30 0001851612 2023-01-01 2023-09-30 0001851612 2022-01-01 2022-09-30 0001851612 2023-01-01 2023-03-31 0001851612 2023-04-01 2023-06-30 0001851612 2022-04-01 2022-06-30 0001851612 2022-01-01 2022-03-31 0001851612 2021-10-07 2021-12-31 0001851612 2023-07-31 0001851612 2023-08-01 2023-08-31 0001851612 2021-12-31 0001851612 2022-09-30 0001851612 2023-06-30 0001851612 2023-03-31 0001851612 2022-06-30 0001851612 2022-03-31 0001851612 us-gaap:RetainedEarningsMember 2023-07-01 2023-09-30 0001851612 bhacu:PrivatePlacementWarrantsMember 2023-07-01 2023-09-30 0001851612 bhacu:PublicWarrantsMember 2023-07-01 2023-09-30 0001851612 bhacu:WarrantLiabilitiesMember 2023-07-01 2023-09-30 0001851612 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
Focus Impact BH3 Acquisition Company
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
001-40868
 
86-2249068
(State or other jurisdiction of
incorporation or organization)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification Number)
 
1345 Avenue of the Americas, 33rd Floor
New York, NY
 
10105
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (954)
416-3140
CRIXUS BH3 ACQUISITION COMPANY
819 NE 2nd Avenue, Suite 500
Fort Lauderdale, FL
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
Title of Each Class:
 
Trading
Symbol:
 
Name of Each Exchange
on Which Registered:
Units, each consisting of one share of Class A common stock and
one-half
of one Redeemable Warrant
 
BHACU
 
The Nasdaq Stock Market LLC
Class A common stock, par value $0.0001 per share
 
BHAC
 
The Nasdaq Stock Market LLC
Redeemable Warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50
 
BHACW
 
The Nasdaq Stock Market LLC
 
 
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.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes      No  ☐
As of November 
20
, 2023, there were 5,312,029 shares of Class A common stock, par value $0.0001 per share, and 2,750,000 shares of Class B common stock, par value $0.0001 per share, issued and outstanding.
 
 
 


Table of Contents

FOCUS IMPACT BH3 ACQUISITION COMPANY

Quarterly Report on Form

10-Q

Table of Contents

 

       Page No.  

PART I. FINANCIAL INFORMATION

     1  

Item 1.

  Financial Statements      1  
  Condensed Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022      1  
  Condensed Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (Unaudited)      2  
  Condensed Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2023 and 2022 (Unaudited)      3  
  Condensed Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (Unaudited)      4  
  Notes to Condensed Financial Statements (Unaudited)      5  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      23  

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      31  

Item 4

  Controls and Procedures      31  

PART II. OTHER INFORMATION

     32  

Item 1.

  Legal Proceedings      32  

Item 1A.

  Risk Factors      32  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      32  

Item 3.

  Defaults Upon Senior Securities      32  

Item 4.

  Mine Safety Disclosures      32  

Item 5.

  Other Information      32  

Item 6.

  Exhibits      33  

SIGNATURES

     34  

 


Table of Contents
http://fasb.org/us-gaap/2023#FairValueAdjustmentOfWarrantshttp://fasb.org/us-gaap/2023#RelatedPartyMemberhttp://fasb.org/us-gaap/2023#RelatedPartyMemberhttp://fasb.org/us-gaap/2023#RelatedPartyMemberhttp://fasb.org/us-gaap/2023#RelatedPartyMember
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
FOCUS IMPACT BH3 ACQUISITION COMPANY
CONDENSED BALANCE SHEETS
 
    
September 30, 2023
(unaudited)
   
December 31, 2022
 
ASSETS
                
Current assets
                
Cash
   $ 56,600     $ 13,715  
    
 
 
   
 
 
 
Total current assets
     56,600       13,715  
Cash, cash equivalents, and marketable securities held-to-maturity in Trust Account, at amortized cost
     53,335,870      
51,340,014
 
    
 
 
   
 
 
 
Total assets
   $ 53,392,470     $ 51,353,729  
    
 
 
   
 
 
 
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' DEFICIT
                
Current liabilities
                
Accounts payable
   $ 132     $ —    
Income taxes payable
     889,614       86,230  
Derivative warrant liability
     896,790       2,122,940  
Convertible promissory note – related party, at fair value
     197,680       300,000  
Note payable – related party
     350,880       —    
 
  
 
 
 
 
 
 
 
Total current liabilities
     2,335,096       2,509,170  
Deferred underwriting fee payable
     8,050,000       8,050,000  
    
 
 
   
 
 
 
Total liabilities
     10,385,096       10,559,170  
 
  
 
 
 
 
 
 
 
Commitments and contingencies (Note 7)
            
Temporary equity
                
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 5,012,592 shares issued and outstanding at approximately $10.44 and $10.00 redemption value at September 30, 2023 and December 31, 2022
     52,346,256       50,125,920  
Stockholders’ deficit
                
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none outstanding
     —         —    
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 5,750,000 shares issued and outstanding at September 30, 2023 and December 31, 2022
     575       575  
Accumulated deficit
     (9,339,457 )     (9,331,936
    
 
 
   
 
 
 
Total stockholders’ deficit
     (9,338,882     (9,331,361
    
 
 
   
 
 
 
Total liabilities, temporary equity and stockholders’ deficit
   $ 53,392,470     $ 51,353,729  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
1

FOCUS IMPACT BH3 ACQUISITION COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 
    
September 30,
   
September 30,
 
    
2023
   
2022
   
2023
   
2022
 
Formation and operating costs
   $ (185,297   $ (445,631   $ (788,932   $ (1,446,914
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
     (185,297     (445,631     (788,932     (1,446,914
    
 
 
   
 
 
   
 
 
   
 
 
 
Other income (expense):
                                
Interest income
     709,811       1,411,236       1,874,489       1,722,936  
Change in fair value of derivative warrant liabilities
     (524,470     352,629       1,226,150       6,274,173  
Change in fair value of convertible promissory note
     (56,185     —         360,789       —    
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other income
     129,156       1,763,865       3,461,428       7,997,109  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income before provision for income taxes
     (56,141 )     1,318,234       2,672,496       6,550,195  
Provision for income taxes
     (645,032     —         (889,614     —    
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss)
   $ (701,173   $ 1,318,234     $ 1,782,882     $ 6,550,195  
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average shares outstanding, Class A Common Stock subject to possible redemption
     5,012,592       23,000,000       5,012,592       23,000,000  
    
 
 
   
 
 
   
 
 
   
 
 
 
Basic and diluted net income (loss) per share, Class A Common Stock
subject to possible redemption
   $ (0.02 )   $ 0.06     $ 0.40     $ 0.24  
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average shares outstanding, Class B Common Stock
     5,750,000       5,750,000       5,750,000       5,750,000  
    
 
 
   
 
 
   
 
 
   
 
 
 
Basic and diluted net income (loss) per share, Class B Common Stock
   $ (0.10   $ (0.00   $ (0.04   $ 0.17  
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
2

FOCUS IMPACT BH3 ACQUISITION COMPANY
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)

 
 
Preferred Stock
 
 
Class A Common Stock
 
 
Class B Common Stock
 
 
Additional

Paid-In Capital
 
 
Accumulated

Deficit
 
 
Total
Stockholders'

Deficit
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
Balance as of December 31, 2021
             $                   $           5,750,000      $ 575      $         $ (13,027,822   $ (13,027,247
Net income
     —          —          —          —          —          —          —          355,796       355,796  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance as of March 31, 2022
             $                   $           5,750,000      $ 575      $         $ (12,672,026   $ (12,671,451
Net income
     —          —          —          —          —          —          —          4,876,165       4,876,165  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance as of June 30, 2022
             $                   $           5,750,000      $ 575      $         $ (7,795,861   $ (7,795,286
Accretion of Class A common stock to redemption value
           
      
      
      
      
      
       (1,722,936     (1,722,936
Net income
     —          —          —          —          —          —          —          1,318,234       1,318,234  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance as of September 30, 2022
             $                   $           5,750,000      $ 575      $         $ (8,200,563   $ (8,199,988
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
 
 
 
 
 
 
 
    
Preferred Stock
    
Class A Common Stock
    
Class B Common Stock
    
Additional

Paid-In Capital
    
Accumulated
Deficit
   
Total
Stockholders'

Deficit
 
    
Shares
    
Amount
    
Shares
    
Amount
    
Shares
    
Amount
 
Balance as of December 31, 2022
             $                   $           5,750,000      $ 575      $         $ (9,331,936   $ (9,331,361
Accretion of Class A ordinary shares to redemption value
     —          —          —          —          —          —          —          (1,622,652     (1,622,652
Deemed contribution by sponsor
     —          —          —          —          —          —          —          227,424       227,424  
Net income
     —          —          —          —          —          —          —          78,752       78,752  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance as of March 31, 2023
             $                   $           5,750,000      $ 575      $         $ (10,648,412   $ (10,647,837
Accretion of Class A ordinary shares to redemption value
     —          —          —          —          —          —          —          (182,025     (182,025
Deemed contribution by sponsor
     —          —          —          —          —          —          —          202,509       202,509  
Net income
     —          —          —          —          —          —          —          2,405,303       2,405,303  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance as of June 30, 2023
             $                   $           5,750,000      $ 575      $         $ (8,222,625   $ (8,222,050
Accretion of Class A ordinary shares to redemption value
     —          —          —          —          —          —          —          (415,659     (415,659
Net loss
     —          —          —          —          —          —          —          (701,173     (701,173
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance as of September 30, 2023
             $                   $           5,750,000      $ 575      $         $ (9,339,457   $ (9,338,882
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
3
FOCUS IMPACT BH3 ACQUISITION COMPANY
CONDENSED STATEMENTS OF CHANGES IN CASH FLOWS
(Unaudited)


 
  
For the nine months ended
September 30,
 
 
  
2023
 
 
2022
 
Cash flows from operating activities
                
Net income
   $ 1,782,882     $ 6,550,195  
Adjustments to reconcile net income to net cash used in operating activities:
                
Interest income
     (1,874,489     (1,438,115
Change in fair value of derivative warrant liability
     (1,226,150 )    
(6,274,173
)
Change in fair value of convertible promissory note
     (360,789     —    
Changes in operating assets and liabilities:
                
Prepaid expenses
     —         555,385  
Accounts payable and accrued expenses
     132       56,700  
Income tax payable
     803,384       —    
    
 
 
   
 
 
 
Net cash used in operating activities
     (875,030     (550,008
    
 
 
   
 
 
 
Cash flows from investing activities
                
Proceeds from Trust Account
    
229,512
      69,409  
Purchases of marketable securities in Trust Account
     (104,153,634     (697,613,882
Sales and maturities of marketable securities in Trust Account
     156,663,634       697,329,061  
Purchases of mutual funds in Trust Account
     (52,860,879     —    
    
 
 
   
 
 
 
Net cash used in investing activities
     (121,367     (215,412
    
 
 
   
 
 
 
Cash flows from financing activities
                
Proceeds from convertible promissory note
     988,402       —    
Payment of convertible promissory note
     (300,000     —    
Proceeds from related party note payable
     350,880       —    
    
 
 
   
 
 
 
Net cash provided by financing activities
     1,039,282       —    
    
 
 
   
 
 
 
Net change in cash
     42,885       (765,420
Cash at beginning of period
     13,715       1,131,162  
    
 
 
   
 
 
 
Cash at end of period
   $ 56,600     $ 365,742  
    
 
 
   
 
 
 
Supplemental disclosure of non-cash investing and financing activities:
                
Accretion of Class A common stock to redemption value
   $ 2,220,336     $ 1,722,936  
    
 
 
   
 
 
 
Deemed contribution from Sponsor
   $ 429,933     $ —    
    
 
 
   
 
 
 
Supplemental disclosure of cash flow information:
                
Income taxes paid
   $ 86,230     $ —    
    
 
 
   
 
 
 
See accompanying notes to the unaudited condensed financial statements.
 
4

FOCUS IMPACT BH3 ACQUISITION COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note 1—Organization and Plan of Business Operations
Focus Impact BH3 Acquisition Company (f/k/a/ Crixus BH3 Acquisition Company) (the “Company”) is a blank check company incorporated as a Delaware company on February 23, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on targets within the real estate, construction and infrastructure industries. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
The Company has not yet begun operations and therefore, all activity for the period from February 23, 2021 (date of inception) through September 30, 2023, relates to the Company’s Initial Public Offering and identifying a target for the Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate
non-operating
income or losses in the form of interest income from the proceeds derived from the Initial Public Offering and from changes in the fair value of the warrant derivative liability and convertible promissory note.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants (as defined in Note 3), although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (excluding any deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the signing an agreement to enter into a Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide the holders of Class A common stock, par value, $0.0001 per shares (“Class A common stock”, “Class A Shares” or “public shares”, and such holders, the “Public Stockholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the Business Combination, either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer, in either case at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares. Notwithstanding the foregoing, if the Company seeks stockholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)), will
 
be restricted from redeeming its shares with respect to more than an aggregate of 15% of the public shares. The Company will proceed with a Business Combination only if it has net tangible assets of at least $5,000,001 upon consummation of the Business Combination and, in the case of a stockholder vote, a majority of the outstanding Common Stock voted are voted in favor of the Business Combination.
The Nasdaq rules require that the Business Combination must be with one or more target businesses that together have an aggregate fair market value equal to at least 80% of the balance in the Trust Account (less any Deferred Commissions (as defined below) and taxes payable on interest earned) at the time of the Company signing a definitive agreement in connection with the Business Combination.
The Company will have until the New Termination Date (as defined below) to consummate a Business Combination (the “Combination Period”). If the Company has not completed a Business Combination by the New Termination Date, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and 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 the rights of the Public Stockholders as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable
 
5

law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and its 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. In the event of a liquidation, the Public Stockholders will be entitled to receive a full pro rata interest in the Trust Account (initially anticipated to be approximately $10.10 per share, plus any pro rata interest earned on the Trust Fund not previously released to the Company to pay its tax obligations and less up to $100,000 of interest to pay dissolution expenses). There will be no redemption rights or liquidating distributions with respect to the Founder Shares (as defined below) or the Private Placement Warrants, which will expire worthless if the Company fails to complete a Business Combination on or before the New Termination Date.
Charter Amendments and Early Redemptions; Purchase Agreement; Anchor Transfer Agreements
On December 7, 2022 (following approval by the Company’s stockholders at a special meeting (the “December 2022 Special Meeting”)), the Company effected a charter amendment and an amendment to its Investment Management Trust Agreement with Continental Stock Transfer & Trust Company, the effect of which was to change the Company’s prior termination date from April 7, 2023 to August 7, 2023, subject to extension by the Company’s board of directors for up to six additional
thirty-day
periods. In connection therewith, 17,987,408 public shares were tendered for redemption (the “First Redemption”). Immediately after giving effect to the First Redemption, the Company had approximately $51.2 million remaining in the Trust Account.
On October 6, 2023 (following approval by the Company’s stockholders at a special meeting (the “October 2023 Special Meeting”)), the Company effected an amendment to its amended and restated certificate of incorporation, the effect of which was to (i) further extend the period of time by which the Company has to consummate an initial business combination to July 31, 2024 (the “New Termination Date”) (the “Extension”) and (ii) provide for the right of a holder of shares of Class B common stock to convert its shares of Class B common stock into shares of Class A common stock
on a one-to-one basis at
any time and from time to time at the election of the holder. In connection therewith, 2,700,563 public shares were tendered for redemption at a price per share of $10.51 (the “Second Redemption”) and the Sponsor converted 3,000,000 of
its
 shares of Class B common stock into shares of Class A common stock (the “Conversion”). Immediately after giving effect to the Second Redemption, on October 24, 2023, the Company had approximately $24.6 million remaining in the Trust Account. See “Note 8 – Subsequent Events.”
On September 27, 2023, the Company, the Sponsor and Focus Impact BHAC Sponsor, LLC (the “New Sponsor”) entered into a Purchase Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, subject to satisfaction of certain conditions, the New Sponsor (i) has agreed to purchase an aggregate of 3,746,303 shares of Class B common stock from the Sponsor and each of the anchor investors and 4,160,000 private placement warrants from the Sponsor for an aggregate purchase price of $16,288.27 and (ii) will become the sponsor of the Company (together, the “Purchase”). In connection therewith, the Sponsor also entered into anchor transfer agreements with each of its anchor investors, whereby each anchor agreed, subject to the conditions contained therein, when and as directed by the Sponsor, to transfer 2/3 of their shares of Class B common stock for no consideration; provided, however, upon the request of an anchor investor, the Sponsor shall pay to them $0.0043
per share. The Purchase Agreement closed effective as of November 2, 2023. On November 3, 2023, the Company changed its corporate name to “Focus Impact BH3 Acquisition Company”, pursuant to an amendment to its amended and restated certificate of incorporation filed with the Delaware Secretary of State on November 3, 2023.
Class A and Class B Common Stock
As of September 30, 2023 (prior to giving effect to the Second Redemption and Conversion), the Company had 10,762,592 shares of common stock issued and outstanding, consisting of 5,012,592 shares of Class A common stock and 5,750,000 shares of Class B common stock, par value $0.0001 per share and the balance in the Company’s Trust Account was $53.3 million. See “Note 8 – Subsequent Events.
Going Concern
The Company has incurred and expects to continue to incur additional costs in pursuit of its initial Business Combination. The Company has determined that it will not be able to sustain operations for the next twelve months without additional financing. As of September 30, 2023, the Company had approximately $56,600 in its operating bank account available for working capital needs, $53.3 million of cash and investment in liquid securities held in trust, which is not available for working capital needs, and working capital deficit of approximately $2,278,000. To date, the Company’s liquidity needs have been satisfied through a payment of $25,000 from the Sponsor to cover certain expenses on behalf of the Company in exchange for the issuance of the Founder Shares (as defined in Note 4), a Note Payable to Sponsor (Note 4) in the amount of $300,000 and net borrowings of approximately $988,000 pursuant to the Convertible Promissory Note issued to the Sponsor (Note 4). The Company fully repaid the Note Payable to Sponsor on October 7, 2021. As of September 30, 2023, the Convertible Promissory Note had an outstanding principal amount of approximately $988,000.
 
6

On July 31, 2023, the Company issued a
non-interest-bearing
promissory
no
te in the aggregate principal amount of up to $
1,052,644
to the Sponsor. In connection with the promissory note the Company has extended the Termination Date from August 7, 2023 to September 6, 2023, and then from September 6, 2023 to October 6, 2023. Following approval by the Company’s stockholders at the October 2023 Special Meeting, the Company’s amended and restated certificate of incorporation was amended to further extend the period of time by which the Company has to consummate an initial business combination to the New Termination Date. See “Note 8 – Subsequent Events.
Based on the foregoing, our management believes that we will have sufficient working capital to sustain operations for the next twelve months. Subsequent to September 30, 2023, at closing of the Purchase Agreement with New Sponsor on November 2, 2023, the working capital promissory note between the Company and the Sponsor dated November 1, 2022 (in aggregate principal amount of approximately $910,000) and extension promissory note between the Company and the Sponsor dated July 31, 2023 (in aggregate principal amount of $350,881) were
terminated and of no further force and effect, resulting in loan forgiveness by the note holder. On November 3, 2023, the Company entered into a subscription agreement (the “Subscription Agreement”) with the New Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an unaffiliated third party, pursuant to which Polar agreed to make certain capital contributions to the Company of up to
$1,200,000
(the “Capital Contribution”) from time to time, at the request of the Company, subject to the terms and conditions of the Subscription Agreement, to the Company. Based on the cash available from the Subscription Agreement, we believe that we have alleviated the substantial doubt about our ability to continue as a going concern, and we will have sufficient working capital to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we 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, and structuring, negotiating and consummating the Business Combination.
Note 2—Significant Accounting Policies
Basis of Presentation
The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (“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. The condensed balance sheet at December 31, 2022 has been derived from the audited financial statements at that date, but does not include all disclosures, including notes, required by U.S. GAAP for complete financial statements.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K
for the period ended December 31, 2022, as filed with the SEC on March 31, 2023, which contains the audited financial statements and notes thereto. The interim results for the nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, 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 Securities and Exchange Act of 1934, as
 
7

amended) 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 an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, 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 that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of these financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these unaudited condensed financial statements is the determination of the fair value of the derivative warrant liabilities. Such estimates may be subject to change as more current information becomes available. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
As of September 30, 2023 and December 31, 2022, the Company had $56,600 and $13,715, respectively, in cash outside of the Trust Account available for working capital needs. The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
Cash, Marketable Securities and Equity Securities Held in Trust Account
The Company had $51.3 
million held within a trust account in cash, cash equivalents, and marketable securities as of December 31, 2022, none of which was available for working capital needs. Substantially all of the assets held in the Trust Account are held in U.S. Treasury securities. The Company’s investments held in the Trust Account are classified as held-to-maturity securities. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method, at the end of each subsequent reporting period. Interest earned on the investments during each reporting period is recorded at the end of each reporting period and is reported as interest income in the accompanying unaudited condensed statements of operations. The Company estimated the expected credit loss for each security in its portfolio using the probability-of-default method. The Company concluded there were no expected losses as of December 31, 2022. During August 2023, the Company moved all the trust investments to a mutual fund that invests in cash, U.S. Treasury bills, notes, and other obligations with a dollar-weighted average maturity of 60 days or less. The mutual fund is considered a cash equivalent as the weighted average maturity is less than 90 days, the Company has the ability to redeem the fund’s shares on a daily basis, and the fund’s investment attributes are consistent with the investment attributes of an SEC registered money market fund. The estimated fair values of the mutual fund held in the Trust Account are determined using available market information. As of September 30, 2023, the equity securities in mutual funds held totaled
$53.3 million.
September 30, 2023
 
Investment in securities held in Trust Account, at fair value
  
Cost basis
    
Gross
unrecognized
holding gains
    
Gross
unrecognized
holding
losses
    
Fair value
(level 1)
 
Mutual funds
   $ 53,335,870      $         $         $ 53,335,870  
December 31, 2022
 
Held-to-maturity
securities, at amortized cost:
  
Amortized
cost basis
    
Gross
unrecognized
holding gains
    
Gross
unrecognized
holding
losses
    
Fair value
(level 2)
 
U.S. Treasury securities
   $ 51,340,014      $         $ (3,293    $ 51,336,721  
 
8

Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts or investment accounts in a financial institution, which at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “
Fair Value Measurement” (“Topic 820”)
, approximates the carrying amounts represented in the accompanying unaudited condensed financial statements. Topic 820 establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure investments at fair value. The observability of inputs is impacted by a number of factors, including the type of characteristics specific to the financial instruments, market conditions and other factors. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Financial instruments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets will typically have a higher degree of input observability and a lesser degree of judgment applied in determining fair value. The three levels of the fair value hierarchy under Topic 820 are as follows:
Level 1—Unadjusted quoted prices in active markets for identical financial instruments at the measurement date are used.
Level 2—Pricing inputs are other than quoted prices included within Level 1 that are observable for the investment, either directly or indirectly. Level 2 pricing inputs include quoted prices for similar financial instruments in active markets, quoted prices for identical or similar financial instruments in markets that are not active, inputs other than quoted prices that are observable for the financial instruments and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3—Pricing inputs are unobservable and include situations where there is little, if any, market activity for the financial instruments. The inputs used in determination of fair value require significant judgment and estimation.
In some cases, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the financial instrument is categorized in its entirety is determined based on the lowest level input that is significant to the financial instrument.
The carrying amounts of working capital balances approximate their fair values due to the short maturity of these items.
Convertible Promissory Note
The Company accounts for its convertible promissory note under ASC 815,
Derivatives and Hedging
(“ASC 815”). Under
815-15-25,
the election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company has made such election for its convertible promissory note. Using fair value option, the convertible promissory note is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the note are recognized as
non-cash
within change in the fair value of the convertible promissory note in the unaudited condensed statements of operations.
Derivative Warrant Liabilities
The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrant Securities”) in accordance with ASC
815-40,
“Derivatives and Hedging—Contracts in Entity’s Own Equity,” and concluded that the Warrant Securities could not be accounted for as components of equity. As the Warrant Securities meet the definition of a derivative in accordance with ASC
815-40,
the Warrant Securities are recorded as derivative liabilities on the unaudited condensed balance sheets and measured at fair value at issuance and remeasured at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the unaudited condensed statements of operations in the period of change.
Offering Costs
The Company complies with the requirements of the ASC paragraph
340-10-S99-1
and SEC Staff Accounting Bulletin (“SAB”) Topic
5A-Expenses
of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Initial Public Offering (the “IPO”). Offering costs are charged against the carrying value of Class A common stock or the unaudited condensed statements of operations based on the relative value of the Class A common stock and the Public Warrants to the proceeds received from the Units sold upon the completion of the IPO.
 
9

Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “
Distinguishing Liabilities from Equity
” (“
Topic 480
”). Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Shares of conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. The Company’s Class A common stock features include certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2023 and December 31, 2022, 5,012,592 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the accompanying unaudited condensed balance sheets.
All of the 23,000,000 
shares of Class A common stock sold as part of the Units in the Initial Public Offering
(5,012,592
of which remained outstanding after giving effect to the First Redemption and 2,312,029 of which remained outstanding (excluding the 3,000,000 converted shares of Class B common stock) after the Second Redemption) 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 second 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 paragraph 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. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of Topic 480. 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. For the nine months ended September 30, 2023 and September 30, 2022, approximately
$2,220,000 and $1,723,000
of accretion was recorded on Class A common stock, respectively.
Income Taxes
The Company accounts for income taxes under ASC Topic 740,
Income Taxes
(“
Topic740
”). Topic 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the 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. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized.
Topic 740 prescribes a recognition threshold and a measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not
to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
As of September 30, 2023 and December 31, 2022, the Company had income tax liabilities of approximately
$890,000 and
$
86,000,
respectively. The provision for income taxes resulted in an expense of approximately
$890,000 and nil
for the nine months ended September 30, 2023 and 2022, respectively. The provision for income taxes resulted in an expense of approximately
$
645,000
 
and nil for the three months ended September 30, 2023 and 2022, respectively.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
 
10

Risks and Uncertainties
The Company continues to evaluate the impact of the
COVID-19
pandemic and has concluded that
COVID-19
may contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide, which could have a material adverse effect on the Company’s ability to complete an initial Business Combination and the value of the Company’s securities. As the World Health Organization (WHO) declared an end to the
COVID-19
global emergency in May 2023, restrictions are expected to be lifted.
In February 2022, the Russian Federation and Belarus commenced a military action against the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of the unaudited condensed financial statements, and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of the unaudited condensed financial statements.
The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a 1% excise tax on the fair market value of stock repurchased by a publicly listed U.S. corporation beginning in 2023, subject to certain exceptions. The excise tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased. The U.S. Department of the Treasury (the “Treasury”) has been given authority to issue regulations and other guidance to carry out, and prevent the abuse or avoidance of, the excise tax. It is unclear at this time how and to what extent the excise tax will apply to certain redemptions, but since the Company is a publicly listed Delaware corporation, it is a “covered corporation” within the meaning of the IR Act. Consequently, this excise tax may apply to certain redemptions of the Company’s public shares after December 31, 2022.
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 potentially reduce the
per-share
amount that the Company’s public stockholders would otherwise be entitled to receive upon redemption of their public shares, cause a reduction in the cash available on hand to complete a Business Combination and hinder the Company’s ability to complete a Business Combination.
Net Income (Loss) Per Common Stock
The Company has two classes of shares outstanding, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of common stock. Basic net income (loss) per share of common stock is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For the purposes of the diluted net income (loss) per share calculation the warrants to purchase common stock are considered to be potentially dilutive securities pursuant to the treasury stock method. In order to determine the net income (loss) attributable to both the Class A common stock and Class B common stock, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any change to the redemption value of the Class A common stock is treated as a deemed dividend for the purposes of the numerator in the earnings per share calculation, as the redemption value approximates fair value. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company calculates the amount to be allocated pro rata between Class A common stock and Class B common stock for each of the periods presented.
 
11

The following table reflects the calculation of basic and diluted net income per share of common stock (in dollars, except per share amounts):
 
    
For the three months ended September 30,
 
    
2023
    
2022
 
Net income (loss), as reported
   $ (701,173    $ 1,318,234  
Reconciliation items:
                 
Deemed dividend to Class A stockholders
     (415,659      (1,411,236
    
 
 
    
 
 
 
Allocation of net loss, as adjusted
   $ (1,116,832    $ (93,002
    
 
 
    
 
 
 
   
    
For the nine months ended September 30,
 
    
2023
    
2022
 
Net income, as reported
   $ 1,782,882      $ 6,550,195  
Reconciliation items:
                 
Deemed dividend to Class A stockholders
     (2,220,336      (1,722,936
    
 
 
    
 
 
 
Allocation of net income (loss), as adjusted
   $ (437,454    $ 4,827,259  
    
 
 
    
 
 
 
 

 
  
For the three months ended September 30,
 
 
  
2023
 
  
2022
 
 
  
Class A
 
  
Class B
 
  
Class A
 
  
Class B
 
Basic and diluted net income (loss) per share:
                                   
Numerator:
                                   
Allocation of net loss attributable to common stockholders, as adjusted
   $ (520,156)      $ (596,676    $ (74,402    $ (18,600
Allocation of accretion of temporary equity to Class A shares
     415,659                  1,411,236            
    
 
 
    
 
 
    
 
 
    
 
 
 
Allocation of net income (loss)
   $ (104,497 )    $ (596,676    $ 1,336,834      $ (18,600
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator:
                                   
Weighted average common stock outstanding, basic and diluted
     5,012,592        5,750,000        23,000,000        5,750,000  
    
 
 
    
 
 
    
 
 
    
 
 
 
Basic and diluted net income (loss) per common share
   $ (0.02
)
   $ (0.10    $ 0.06      $ (0.00
    
 
 
    
 
 
    
 
 
    
 
 
 
   
    
For the nine months ended September 30,
 
    
2023
    
2022
 
    
Class A
    
Class B
    
Class A
    
Class B
 
Basic and diluted net income (loss) per share:
                                   
Numerator:
                                   
Allocation of net income (loss) attributable to common stockholders,
as adjusted
   $ (203,741    $ (233,713    $ 3,861,807      $ 965,452  
Allocation of accretion of temporary equity to Class A shares
     2,220,336                  1,722,936            
    
 
 
    
 
 
    
 
 
    
 
 
 
Allocation of net income (loss)
   $ 2,016,595      $ (233,713    $ 5,584,743      $ 965,452  
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator:
                                   
Weighted average common stock outstanding, basic and diluted
     5,012,592        5,750,000        23,000,000        5,750,000  
    
 
 
    
 
 
    
 
 
    
 
 
 
Basic and diluted net income (loss) per common share
   $ 0.40      $ (0.04    $ 0.24      $ 0.17  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
12
As of September 30, 2023 and 2022, the promissory notes convertible into warrants at a price of $1.50 per warrant and outstanding warrants to purchase 17,896,782 shares of Class A common stock were excluded from the computation of diluted net income per share of common stock for the periods presented as the exercise price is greater than the average market price (out of the money) and their inclusion would be anti-dilutive under the treasury stock method. As a result, basic and diluted income per share is the same for the periods presented.
Note 3—Initial Public Offering
The registration statement for the Initial Public Offering was declared effective on October 4, 2021. On October 4, 2021, the Company consummated the Initial Public Offering by selling 23,000,000 units at a purchase price of $10.00 (“Units” and, with respect to the shares of Class A common stock included in the Units offered, the “Public Shares”), generating gross proceeds of $230.0 million. Each Unit consists of one Class A Share and
one-half
Public Warrant. Each whole warrant (“Public Warrant”) entitles the holder to purchase one Class A Share at a price of $11.50 per share.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 6,400,000 warrants (the “Private Placement Warrants”) at a price of $1.50 per warrant in a private placement to Crixus BH3 Sponsor LLC (the “Sponsor”), generating gross proceeds of $9.6 million, which is described in Note 4.
Following the closing of the Initial Public Offering, an amount of $232.3 million ($10.10 per Unit) from the net proceeds of the sale of the units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”) which may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule
2a-7
of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account, as described below.
Transaction costs from the Initial Public Offering amounted to approximately $22.4 million, consisting of $12.7 million of underwriters’ fees and discounts, $9.3 million for the excess fair value of founder shares attributable to the anchor investors (see Note 4), and $0.5 million of other offering costs, net of third-party vendor credits. Such transaction costs have been allocated to Class A common stock and warrants issued in the Initial Public Offering based on their relative fair values. Accordingly, $1.4 million of the $22.4 million in total transaction costs (which includes $0.6 million of the excess fair value of the Founder Shares sold to anchor investors - see Note 4), has been allocated to the public warrants.
Note 4—Related Party Transactions
Founder Shares
Prior to the Initial Public Offering, our Sponsor and directors (the “Initial Stockholders”) purchased an aggregate of 5,750,000 shares of Class B common stock, par value $0.0001 per
share (“Class B common stock,” “Class B Shares” or “founder shares”) for
an aggregate purchase price of $25,000, or approximately $0.004 per share. Prior to the initial investment in the Company of $25,000 by our initial stockholders, the Company had no assets, tangible or intangible. The per share purchase price of the founder shares was determined by dividing the amount of cash contributed to the Company by the aggregate number of founder shares issued. Our initial stockholders (including our anchor investors) collectively owned 20% of the outstanding shares of common stock following the Initial Public Offering. Up to 750,000 founder shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option was exercised. The underwriters exercised their over-allotment option in full on October 6, 2021; thus, the 750,000 founder shares are no longer subject to forfeiture. Certified qualified institutional buyers or institutional accredited investors, as defined in Rule 144A and Regulation D, respectively, under the Securities Act, which are not affiliated with us, our sponsor, our directors or any member of our management and that purchased an aggregate of approximately 22,980,000 units in our initial public offering at the public offering price (“herein referred to as “anchor investor”) purchased the number of units for which it had provided an indication of interest (not to exceed 9.9% of the units sold in the Initial Public Offering). In consideration of these purchases, the Sponsor entered into an investment agreement with each of the anchor investors pursuant to which the Sponsor sold 1,450,758 founder shares in the aggregate, at their original purchase price of approximately $0.004 per share.
 
13

The founder shares are identical to the shares of our Class A common stock included in the units sold in the offering, except that:
 
   
prior to the Company’s initial Business Combination, only holders of the founder shares have the right to vote on the election of directors and holders of a majority of the founder shares may remove a member of the board of directors for any reason;
 
   
the founder shares are subject to certain transfer restrictions, as described in more detail below;
 
   
each of the Company’s Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to waive (i) their redemption rights with respect to their founder shares and any public shares held by them in connection with the completion of the initial Business Combination; (ii) their redemption rights with respect to their founder shares and any public shares held by them in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of its obligation to allow redemption in connection with the initial Business Combination or to redeem 100% of the public shares if the Company has not completed an initial Business Combination on or before the New Termination Date or (B) with respect to any other provisions relating to stockholders’ rights or
pre-initial
business combination activity; and (iii) their rights to liquidating distributions from the Trust Account with respect to any founder shares held by them if the Company does not complete the initial Business Combination on or before the New Termination Date, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company does not complete the initial Business Combination within the prescribed time frame. If the Company submits the initial Business Combination to its public stockholders for a vote, the Sponsor, officers and directors have agreed to vote their founder shares and any public shares they may acquire during or after the Initial Public Offering, in favor of the initial Business Combination, and each of the anchor investors has agreed to vote its founder shares (subject to the right to abstain from voting) in favor of the initial Business Combination.
 
   
the founder shares are shares of Class B common stock that will automatically convert into shares of the Company’s Class A common stock on the first business day following the completion of the initial Business Combination;
 
   
the anchor investors will not be entitled to (i) redemption rights with respect to any founder shares held by them in connection with the completion of the initial Business Combination; (ii) redemption rights with respect to any founder shares held by them in connection with a stockholder vote to amend the Company’s amended and restated certification of incorporation in a manner that would affect the substance or timing of its obligation to redeem 100% of our public shares if the Company has not consummated an initial business combination by the New Termination Date or; (iii) rights to liquidating distributions from the Trust Account with respect to any founder shares held by them if the Company fails to complete its initial Business Combination by the New Termination Date (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); and
 
   
the founder shares are entitled to registration rights.
Transfer restrictions on founder shares
Holders of the Company’s founder shares (including the anchor investors) have agreed not to transfer, assign or sell any of their founder shares and any shares of our Class A common stock issuable upon conversion thereof until the earlier to occur of: (i) one year after the completion of our initial business combination; and (ii) subsequent to our initial business combination, (x) if the last reported sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property (except to certain permitted transferees and under certain limited circumstances). Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any founder shares (except that the anchor investors will be permitted to abstain from voting founder shares).
In conjunction with each anchor investor purchasing 100% of the Units allocated to it, in connection with the closing of the Initial Public Offering, the Sponsor sold an aggregate of 1,450,758 Founder Shares at their original purchase price. The Company estimated the fair value of the Founder Shares attributable to the anchor investors to be $9.3 million or $6.40 per share as of October 7, 2021 (date of the Initial Public Offering).
 
14

The excess of the fair value of the Founder Shares sold over the purchase price of $5,803 (or $0.004 per 1,450,758 share) was determined to be an issuance cost of the Initial Public Offering incurred on the Company’s behalf. Accordingly, this issuance cost as well as Offering Costs were accounted for as an equity contribution from the Sponsor. As a portion of the Initial Public Offering consisted of Warrant Securities that are accounted for as liabilities, as such the fair value of the 1,450,758 Founder Shares sold to the anchor investors by the Sponsor ($0.6 million) was allocated to the warrant liabilities as of October 7, 2021 (date of Public Offering).
Private Placement Warrants
Simultaneously with the Initial Public Offering, the Sponsor purchased an aggregate of 6,400,000 Private Placement Warrants at $1.50 per Private Placement Warrant, for an aggregate purchase price of $9.6 million. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at an exercise price of $11.50 (subject to adjustment in certain circumstances). The proceeds from the Private Placement Warrants, net of $4.6 million in underwriting discounts, $0.8 million in Offering Costs, and $2.0 million designated for operational use were added to the proceeds from the Initial Public Offering 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. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Private Placement Warrants.
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: (i) will not be redeemable by the Company so long as they are held by the Sponsor or any of its permitted transferees; (ii) may be exercised for cash or on a cashless basis, so long as they are held by the Sponsor or any of its permitted transferees and (iii) are (including the common stock issuable upon exercise of the Private Placement Warrants) entitled to registration rights. Additionally, the Sponsor has agreed not to transfer, assign or sell any of the Private Placement Warrants, including the Class A Shares issuable upon exercise of the Private Placement Warrants (except to certain permitted transferees), until 30 days after the completion of the Business Combination.
Indemnity
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 a prospective target business with which the Company discussed entering into a transaction agreement, reduces the amount of funds in the Trust Account to below (i) $10.10 per public share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public 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, 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 and, therefore, the Sponsor may not be able to satisfy those obligations. The Company has not asked the Sponsor to reserve for such eventuality as the Company believes the likelihood of the Sponsor having to indemnify the Trust Account is limited because the Company will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Convertible Promissory Note
In order to finance transaction costs in connection with the Business Combination, on November 1, 2022 the Sponsor executed an unsecured convertible promissory note and agreed to loan the Company up to $1.5 million as may be required, the terms of which consist of no interest accrual and a maturity date commensurate with the date the Business Combination has been consummated (“Working Capital Loans”). In the event that the 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 for such repayment. Up to $1.5 million of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants issued to the Sponsor. During the nine months ended September 30, 2023, a total of $1.0 million was drawn by the Company and $0.3 million was repaid. During the nine months ended September 30, 2023, $0.7 million of net draws occurred on the convertible promissory note with a fair value of $0.3 million, with the difference of $0.4 million recorded as a deemed contribution from the Sponsor. For the nine months ended September 30, 2023, the Company recorded a $0.4 
million gain on change in fair value of the convertible promissory note. Effective as of November 2, 2023, in connection with the closing of the transactions contemplated by the Purchase Agreement, the convertible promissory note was forgiven by the note holder.
 
15

Notes Payable to Sponsor
On March 12, 2021, the Sponsor and the Company executed an unsecured promissory note pursuant to which the Company had the ability to borrow up to $300,000 in the aggregate to cover expenses in connection with the Initial Public Offering (the “Promissory Note”). The Promissory Note was
non-interest
bearing and payable on the earlier of December 31, 2021 or the completion of the Initial Public Offering. The Company borrowed $0.1 million under the Promissory Note and the full amount was repaid on October 7, 2021. Subsequent to the repayment, the facility was no longer available to the Company.
On July 31, 2023, the Company issued a
non-interest
bearing promissory note in the aggregate principal amount of up to $1,052,644
to the Sponsor. In connection therewith, the Company initially extended the Termination Date from August 7, 2023 to September 6, 2023, and subsequently further extended the Termination Date from September 6, 2023 to October 6, 2023. Following approval by the Company’s stockholders at the October 2023 Special Meeting, the Company’s amended and restated certificate of incorporation was amended to further extend the period of time by which the Company has to consummate an initial business combination to the New Termination Date. As of September 30, 2023,
 
the
principal balance outstanding was $350,881.44. Effective as of November 2, 2023, in connection with the closing of the transactions contemplated by the Purchase Agreement, the Promissory Note was terminated.
Administrative Services Agreement
The Company entered into an agreement whereby, commencing on October 7, 2021, through the earlier of the consummation of a Business Combination or the Company’s liquidation, the Company has agreed to pay an affiliate of the Sponsor a monthly fee of $15,000 for office space, utilities and administrative support. The Company records the administrative services agreement costs within formation and operating costs on the unaudited condensed statements of operations. For the nine months ended September 30, 2023 and 2022, the Company incurred and paid $45,000 and $135,000, respectively. For the three months ended September 30, 2023 and 2022, the Company incurred and paid nil and $45,000, respectively. On August 8, 2023, (i) the Company and the Sponsor agreed to terminate the Administrative Services Agreement dated October 4, 2021, with effect from and as of March 31, 2023 and (ii) the Sponsor agreed to waive any and all amounts due and owing by the Company after March 31, 2023.
Note 5—Stockholders’ Deficit
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001. The Company’s board of directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The board of directors may, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the Common Stock and could have anti-takeover effects. At September 30, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.
Common Stock
The Company is authorized to issue 200,000,000 Class A Shares, with a par value of $0.0001 each, and 20,000,000 Class B common stock, with a par value of $0.0001 each (the “Class B Shares” and, together with the Class A Shares, the “Common Stock”). Holders of the Common Stock are entitled to one vote for each share of Common Stock; provided that only holders of the Class B Shares have the right to vote on the election of directors prior to the Business Combination. The Class B Shares will automatically convert into Class A Shares at the time of the Business Combination, on a
one-for-one
basis, subject to adjustment for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein.
In the case that additional Class A Shares, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of the Business Combination, the ratio at which the Class B Shares shall convert into Class A Shares will be adjusted (unless the holders of a majority of the outstanding Class B common stock agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A Shares issuable upon conversion of all Class B Shares will equal, in the aggregate, 20% of the sum of all Common Stock outstanding upon completion of the Initial Public Offering plus all Class A Shares and equity-linked securities issued or deemed issued in connection with the Business Combination, excluding any Common Stock or equity-linked securities issued, or to be issued, to any seller in the Business Combination, or any Private Placement-equivalent Warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company.
 
16

At September 30, 2023 and December 31, 2022, there were 5,012,592 Class A Shares issued and outstanding, respectively, of which 6,419 Units and 3,482,975 Units, respectively, remain intact (each consisting of 1 share of Class A common stock and 1/2 of a public warrant). At September 30, 2023 and December 31, 2022, there were 5,750,000 Class B Shares issued and outstanding.
 
17

The redemption value for Class A Shares reflected on the unaudited condensed balance sheets is reconciled on the following table:
 
Gross proceeds received from Initial Public Offering
   $ 230,000,000  
Less:
  
Offering costs allocated to Public Shares
     25,455,164  
Plus:
  
Accretion on common stock to redemption value
     (25,455,164
  
 
 
 
Class A Shares subject to possible redemption as of December 31, 2021
     230,000,000  
Redemption of Class A Shares
     (183,844,056
Increase in redemption value
     3,969,976  
  
 
 
 
Class A Shares subject to possible redemption as of December 31, 2022
     50,125,920  
Increase in redemption value
     1,622,652  
  
 
 
 
Class A Shares subject to possible redemption as of March 31, 2023
     51,748,572  
Increase in redemption value
     182,025  
  
 
 
 
Class A Shares subject to possible redemption as of June 30, 2023
     51,930,597  
Increase in redemption value
     415,659  
  
 
 
 
Class A Shares subject to possible redemption as of September 30, 2023
   $ 52,346,256  
  
 
 
 
Warrants
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering,
provided
in each case that the Company has an effective registration statement under the Securities Act covering the sale of the shares of its Class A common stock issuable upon exercise of the warrants, and a current Offering prospectus relating thereto is available, and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement as a result of (i) the Company’s failure to have an effective registration statement by the 60th business day after the closing of the Business Combination as described in the immediately following paragraph or (ii) a notice of redemption described below). The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. At September 30, 2023 and December 31, 2022, there were 11,496,782 whole Public Warrants and 6,400,000 Private Placement Warrants outstanding.
The Company is not obligated to deliver any Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue any Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the sale of the shares of Class A common stock issuable upon exercise of the Warrants, and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the Warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the sale of the shares of Class A common stock issuable upon exercise of the Warrants is not effective by the 60th business day after the closing of the Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the shares of Class A common stock at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will be required to use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
 
18

Redemption of Warrant Securities when the price per share of Class A common stock equals or exceeds $18.00
Once the Warrant Securities become exercisable, the Company may redeem the outstanding Warrant Securities (except as described herein with respect to the Private Placement Warrants):
 
   
in whole and not in part;
 
   
at a price of $0.01 per Warrant Security;
 
   
upon a minimum of 30 days’ prior written notice of redemption (the
“30-day
redemption period”); and
 
   
if, and only if, the last reported sale price of our Class A common stock for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant Securities’ holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like and certain issuances of Class A common stock and equity-linked securities).
The Company will not redeem the Warrant Securities as described above unless an effective registration statement under the Securities Act covering the sale of the shares of Class A common stock issuable upon exercise of the Warrant Securities is effective, and a current prospectus relating thereto is available, throughout the
30-day
redemption period. Any such exercise would not be on a “cashless basis” and would require the exercising Warrant Security holder to pay the exercise price for each Warrant Security being exercised.
Except as set forth below, none of the Private Placement Warrants will be redeemable by the Company so long as they are held by the Sponsor or its permitted transferees.
Redemption of Warrant Securities when the price per share of Class A common stock equals or exceeds $10.00
Once the Warrant Securities become exercisable, the Company may also redeem the outstanding Warrant Securities (except as described herein with respect to the Private Placement Warrants):
 
   
in whole and not in part;
 
   
at $0.10 per Warrant Security upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of the Class A common stock;
 
   
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like and certain issuances of Class A common stock and equity-linked securities); and
 
   
if the Reference Value is less than $18.00 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like and certain issuances of Class A common stock and equity- linked securities), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
The “fair market value” of the Class A common stock means the volume-weighted average price of the Class A common stock for the ten trading days immediately following the date on which the notice of redemption is sent to the holders of Warrant Securities. The Company will provide its Warrant Security holders with the final fair market value no later than one business day after the
10-day
trading period described above ends. In no event will the Warrant Securities be exercisable in connection with this redemption feature for more than 0.361 shares of our Class A common stock per Warrant Security (subject to adjustment).
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
 
19

In addition, if (i) we issue additional common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per common stock, (ii) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the completion of our initial business combination (net of redemptions), and (iii) the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
Note 6—Fair Value Measurements
The Company follows the guidance in Topic 820 for its financial assets and liabilities that are remeasured and reported at fair value at each reporting period. The following table presents information about the Company’s assets and derivative liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
 
    
Level
    
September 30,
2023
    
December 31,
2022
 
Assets:
        
Cash
     1      $ 56,600      $ 13,715  
Mutual funds
     1      $ 53,335,870      $     
Liabilities:
        
Public Warrants (1,2)
     1      $ 576,150      $ 1,363,900  
Private Placement Warrants (1)
     3      $ 320,640      $ 759,040  
Convertible Promissory Notes
     3      $ 197,680      $ 300,000  
 
(1)
The Warrants are accounted for as liabilities in accordance with Subtopic
815-40
and are presented within warrant liabilities on the unaudited condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the unaudited condensed statements of operations.
(2)
Shares of Class A common stock and warrants comprising the units began separate trading on the Nasdaq under the symbols “BHAC” and “BHACW,” respectively on November 26, 2021. Consequently, Public Warrants have been
re-classified
from Level 3 to Level 1 to reflect those observable inputs for identical instruments in active markets now exists.
Warrant Liability
The Company established the initial fair value for the Warrants on October 7, 2021, the date of the Company’s Initial Public Offering, using a Black- Scholes Option Pricing Method (“BSM”) for the Private Placement Warrants and the Public Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A common stock and
one-half
of one Public Warrant), and (ii) the sale of Private Placement Units, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to shares of Class A common stock subject to possible redemption based on their relative fair values at the initial measurement date. Both the Private Placement Warrants and Public Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs. As of September 30, 2023 and December 31, 2022, the Public Warrants are classified as Level 1 in the fair value hierarchy and are valued at the publicly traded price. The Private Placement Warrants have substantially the same terms as the Public Warrants and the Company determined that the fair value of each Private Placement Warrant is consistent with that of a Public Warrant. With the decline in volatilities, there is de minimis benefit to private warrants with exemption from make whole redemptions. The implication is that private warrants should be priced the same as public warrants. Accordingly, the Private Placement Warrants are valued at the Public Warrant price, however the Private Placement Warrants are classified as Level 3 financial instruments.
 
20

At September 30, 2023, the fair value was determined to be $0.05 per warrant for each of the Private Placement Warrants and Public Warrants, which corresponded with aggregate values of $0.3 million and $0.6 million, respectively. At December 31, 2022, the fair value was determined to be $0.12 per warrant for each of the Private Placement Warrants and Public Warrants, which corresponded with aggregate values of $0.8 million and $1.4 million, respectively. The following table presents the changes in the fair value of warrant liabilities:
 
    
Private
Placement
    
Public
Warrants
    
Warrant
Liabilities
 
Initial measurement on October 7, 2021
   $ 8,640,000      $ 14,720,000      $ 23,360,000  
Change in fair value
     (5,425,077      (8,975,750      (14,400,827
    
 
 
    
 
 
    
 
 
 
Fair value as of December 31, 2021
     3,214,923        5,744,250        8,959,173  
Change in fair value
     (2,455,883      (4,380,350      (6,836,233
    
 
 
    
 
 
    
 
 
 
Fair value as of December 31, 2022
     759,040        1,363,900        2,122,940  
Change in fair value
     72,960        131,100        204,060  
    
 
 
    
 
 
    
 
 
 
Fair value as of March 31, 2023
     832,000        1,495,000        2,327,000  
Change in fair value
     (698,880      (1,255,800      (1,954,680
    
 
 
    
 
 
    
 
 
 
Fair value as of June 30, 2023
     133,120        239,200        372,320  
Change in fair value
     187,520        336,950        524,470  
    
 
 
    
 
 
    
 
 
 
Fair value as of September 30, 2023
   $ 320,640      $ 576,150      $ 896,790  
    
 
 
    
 
 
    
 
 
 
Convertible Promissory Notes
The convertible promissory notes were valued based on the fair value of the private placement warrants in which the convertible promissory notes can be converted, adjusted for the probability of a successful business combination. The inputs are considered to be a Level 3 fair value measurement. The estimated fair value of the Convertible Promissory Notes was based on the following significant inputs:
 
Input
  
Input Values as of
September 30, 2023
 
Private Warrant Value per Share
   $ 0.05  
Probability of successful business combination
     20.0
Value per conversion warrant in business combination scenario
   $ 0.25  
Conversion price per warrant
   $ 1.50  
The following table presents the changes in the fair value of the Level 3 Convertible Promissory Note:
 
Fair value as of December 31, 2022
   $ 300,000  
Proceeds received through Convertible Promissory Note
     707,491  
Payments on Convertible Promissory Note
     (300,000
Deemed Contribution by Sponsor
     (227,424
Change in fair value
     (173,700
    
 
 
 
Fair value as of March 31, 2023
     306,367  
Proceeds received through Convertible Promissory Note
     202,509  
Deemed Contribution by Sponsor
     (202,509
Change in fair value
     (243,274
    
 
 
 
Fair value as of June 30, 2023
     63,093  
Proceeds received through Convertible Promissory Note
     78,402  
Change in fair value
     56,185  
    
 
 
 
Fair value as of September 30, 2023
   $ 197,680  
    
 
 
 
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during period ended September 30, 2023 for the Convertible Promissory Note.
 
21

Note 7—Commitments
Registration Rights
Pursuant to a registration and stockholder rights agreement dated October 4, 2021, the holders of the Founder Shares, Private Placement Warrants (and their underlying securities) and the warrants that may be issued upon conversion of the Working Capital Loans (and their underlying securities) are entitled to registration rights. The holders of a majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable
lock-up
period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
The underwriters were paid a cash underwriting discount of 2.0% of the gross proceeds of the Initial Public Offering, or $4.6 million. In addition, the underwriters are entitled to a deferred underwriting discount of 3.5% of the gross proceeds of the Initial Public Offering, or $8.1 million. The deferred commission was placed in the Trust Account and will be paid in cash upon the closing of a Business Combination, subject to the terms of the underwriting
agreement. Effective as of November 2, 2023, the underwriters agreed to waive the deferred underwriting fee.
Note 8—Subsequent Events
As of October 6, 2023, the Sponsor and the New Sponsor entered into
Non-Redemption
Agreements on substantially the same terms with certain stockholders of the Company, pursuant to which such stockholders agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of 1,946,794
Non-Redeemed
Shares in connection with the October 2023 Special Meeting. In exchange for the foregoing commitments not to redeem such shares of Class A common stock, the New Sponsor agreed to transfer an aggregate of 389,359 shares of Common Stock held by the New Sponsor to such stockholders immediately following consummation of an initial business combination if they continued to hold such
Non-Redeemed
Shares through the October 2023 Special Meeting. On October 6, 2023, following approval by the Company’s stockholders at the October 2023 Special Meeting, the Company effected an amendment to its amended and restated certificate of incorporation, the effect of which was to (i) further extend the period of time by which the Company has to consummate an initial business combination to the New Termination Date and (ii) provide for the right of a holder of shares of Class B common stock to convert its shares of Class B common stock into shares of Class A common stock
on a one-to-one basis at
any time and from time to time at the election of the holder. In connection therewith, 2,700,563 public shares were tendered for redemption and the Sponsor converted 3,000,000 of
its
 shares of Class B common stock into shares of Class A common stock. Upon conversion of Class B common stock to Class A common stock, such Class A common stock will not be entitled to receive funds from the trust account through redemptions or otherwise and will remain subject to the existing transfer restrictions. Immediately after giving effect to the Second Redemption and the Conversion, on October 24, 2023, the Company had approximately $24.6 million remaining in the Trust Account, and 5,312,029 shares of Class A common stock
(including the 3,000,000 converted shares of Class B common stock) 
and 2,750,000 shares of Class B Common Stock outstanding.
In connection with the closing of the transactions contemplated by the Purchase Agreement, the New Sponsor (i) purchased an aggregate of 3,746,303 shares of Class A common stock, par value $0.0001 per share and Class B common stock, par value $0.0001 per share, from the Sponsor and certain other shareholders of the Company and 4,160,000 private placement warrants from the Sponsor for an aggregate purchase price of $16,288.27 and (ii) became the sponsor of the Company (together, the “Purchase”). The Purchase closed as of November 2, 2023. In connection with the closing of the Purchase, the New Sponsor, among other things, joined as a party to (i) the Letter Agreement, dated October 4, 2021, by and between the Company and the Sponsor (the “Letter Agreement,”) and (ii) the Registration and Stockholder Rights Agreement, dated October 4, 2021, among the Company, the Sponsor and certain security holders party thereto.
On November 3, 2023, the Company entered into a subscription agreement (the “Subscription Agreement”) with the New Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an unaffiliated third party, pursuant to which Polar agreed to make certain capital contributions to the Company of up to $1,200,000 (the “Capital Contribution”) from time to time, at the request of the Company, subject to the terms and conditions of the Subscription Agreement, to the Company. Pursuant to the Subscription Agreement, the Capital Contribution shall be repaid to Polar by the Company within five (5) business days of the Company closing an initial business combination (the “Closing”). Polar may elect to receive such repayment (i) in cash or (ii) in shares of common stock of the surviving entity in such initial business combination (the “Surviving Entity”) at a rate of one share of common stock for each ten dollars ($10.00) of the Capital Contribution that is funded. Additionally, in consideration of the Capital Contribution, at the Closing, the Surviving Entity will issue to Polar one share of common stock for each dollar of Capital Contribution that is funded prior to the Closing.
 
22

On November 3, 2023, the Company changed its corporate name to “Focus Impact BH3 Acquisition Company”, pursuant to an amendment to its amended and restated certificate of incorporation (the “Amendment”) filed with the Delaware Secretary of State onNovember 3, 2023 (the “Name Change”). Pursuant to Delaware law, a stockholder vote was not necessary to effectuate the Name Change and it does not affect the rights of the Company’s stockholders.
The Company evaluated subsequent events and transactions that occurred after the balance sheet date of September 30, 2023 through the date that these unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
 
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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Company,” “us,” “our” or “we” refer to Focus Impact BH3 Acquisition Company. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included herein.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.

Overview

We are a blank check company incorporated on February 23, 2021 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We were initially incorporated under the name BH3 Acquisition Corp. and subsequently changed our name to Crixus BH3 Acquisition Company on July 21, 2021. We intend to effectuate our initial business combination using cash from the proceeds of the initial public offering and the private placement warrants, our capital stock, debt or a combination of cash, stock and debt.

Our units began trading on October 5, 2021 on the Nasdaq Global Market (the “Nasdaq”) under the symbol “BHACU.” Commencing on November 26, 2021, the shares of Class A common stock and warrants comprising the units began separate trading on the Nasdaq under the symbols “BHAC” and “BHACW,” respectively. Those units not separated continue to trade on the Nasdaq under the symbol “BHACU.”

Transaction costs of the initial public offering amounted to approximately $22,407,000, consisting of $12,650,000 of underwriters’ fees and discounts, $9,276,000 for the excess fair value of founder shares attributable to the anchor investors, and $481,000 of other offering costs. In addition, the underwriters agreed to defer $8,050,000 in underwriting discounts and commissions.

Our management has broad discretion with respect to the specific application of the net proceeds of the initial public offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a business combination.

On December 7, 2022 (following approval by our stockholders at the December 2022 Special Meeting), we effected the charter amendment and the trust amendment, the effect of which was to change our termination date from April 7, 2023 to August 7, 2023, unless further extended in accordance with our amended and restated certificate of incorporation by our sponsor (or its affiliates or designees) providing to us the requisite notice and the deposit amount. In connection with the charter amendment, 17,987,408 public shares were tendered for redemption. After giving effect to the early redemptions, we had approximately $51.2 million remaining in the trust account.

Pursuant to the amended and restated certificate of incorporation (as in effect prior to the amendment effected following the October 2023 Special Meeting), the Sponsor twice extended the date by which we must consummate an initial business combination to October 6, 2023, by depositing into the Trust Account two additional deposit amounts of $175,440 ($0.035 per outstanding share of the Company’s 5,012,592 Offering Shares) (thereby increasing the aggregate principal amount of the Extension Promissory Note (as defined below) to $350,881).

On September 10, 2023, the Company received a notice (the “Notice”) from the Listing Qualifications Department of the Nasdaq indicating that the Company was no longer in compliance with Nasdaq Listing Rule 5450(a)(2), which requires a minimum of 400 total holders for continued listing on the Nasdaq Global Market (the “Minimum Public Holders Rule”). The Notice stated that the Company had 45 calendar days from the date of the Notice to submit a plan to regain compliance with the Minimum Public Holders Rule. On November 12, 2023, Nasdaq notified the Company that it had determined to grant the Company an extension of time to regain compliance with the Minimum Public Holders Rule.

 

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On September 27, 2023, the Company, the Sponsor and Focus Impact BHAC Sponsor, LLC (the “New Sponsor”) entered into a Purchase Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, subject to satisfaction of certain conditions, the New Sponsor (i) has agreed to purchase an aggregate of 3,746,303 shares of Class B common stock from the Sponsor and each of the anchor investors and 4,160,000 private placement warrants from the Sponsor for an aggregate purchase price of $16,288.27 and (ii) will become the sponsor of the Company (together, the “Purchase”). In connection therewith, the Sponsor also entered into anchor transfer agreements with each of its anchor investors, whereby each anchor agreed, subject to the conditions contained therein, when and as directed by the Sponsor, to transfer 2/3 of their shares of Class B common stock for no consideration; provided, however, upon the request of an anchor investor, the Sponsor shall pay to them $0.0043 per share. The Purchase Agreement closed effective as of November 2, 2023. On November 3, 2023, the Company changed its corporate name to “Focus Impact BH3 Acquisition Company”, pursuant to an amendment to its amended and restated certificate of incorporation filed with the Delaware Secretary of State on November 3, 2023. See “Note 8 – Subsequent Events.”

As of October 6, 2023, the Sponsor and the New Sponsor entered into Non-Redemption Agreements on substantially the same terms with certain stockholders of the Company, pursuant to which such stockholders agreed not to redeem (or to validly rescind any redemption requests on) an aggregate of 1,946,794 Non-Redeemed Shares in connection with the October 2023 Special Meeting. In exchange for the foregoing commitments not to redeem such shares of Class A common stock, the New Sponsor agreed to transfer an aggregate of 389,359 shares of Common Stock held by the New Sponsor to such stockholders immediately following consummation of an initial business combination if they continued to hold such Non-Redeemed Shares through the October 2023 Special Meeting. On October 6, 2023 (following approval by the Company’s stockholders at a special meeting (the “October 2023 Special Meeting”)), the Company effected an amendment to its amended and restated certificate of incorporation, the effect of which was to (i) further extend the period of time by which the Company has to consummate an initial business combination to July 31, 2024 (the “New Termination Date”) (the “Extension”) and (ii) provide for the right of a holder of shares of Class B common stock to convert its shares of Class B common stock into shares of Class A common stock on a one-to-one basis at any time and from time to time at the election of the holder. In connection therewith, 2,700,563 public shares were tendered for redemption (the “Second Redemption”) and the Sponsor converted 3,000,000 of its shares of Class B common stock into shares of Class A common stock (the “Conversion”). Immediately after giving effect to the Second Redemption, the Company had approximately $24.6 million remaining in the Trust Account. See “Note 8 – Subsequent Events.”

If we are unable to consummate an initial business combination on or before the New Termination Date, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest earned on the funds held in the trust account and not previously released to us to pay our 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 liquidation distributions, if any), subject to applicable law and as further described herein, and then seek to dissolve and liquidate. We expect the pro rata redemption price to be approximately $10.24 per share of common stock if we don’t extend the period of time to consummate a business combination, and an additional $0.035 per share of common stock for each month thereafter if we extend the period of time to consummate a business combination (in each case, regardless of whether or not the underwriters exercise their over-allotment option), without taking into account any interest earned on such funds. However, we cannot assure you that we will in fact be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders.

Results of Operations

Our entire activity from inception up to October 7, 2021 was in preparation for our initial public offering and, since the consummation of our initial public offering, the search for a prospective target business. We will not generate any operating revenues until the closing and completion of our initial Business Combination, at the earliest.

For the three months ended September 30, 2023, we had net loss of approximately $0.7 million, which consisted of loss of $56,185 from change in fair valuation of convertible promissory note, loss of $0.5 million from change in fair valuation of derivative warrant liabilities, and $0.2 million in general and administrative expenses and an additional $0.6 million in provision for income taxes, and offset by interest income of $0.7 million.

For the nine months ended September 30, 2023, we had net income of approximately $1.8 million, which consisted of interest income of $1.9 million, gain of $0.4 million from change in fair valuation of convertible promissory note, and gain of $1.2 million from change in fair valuation of derivative warrant liabilities, offset by $0.8 million in general and administrative expenses and an additional $0.9 million in provision for income taxes.

 

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For the three months ended September 30, 2022, we had net income of approximately $1.3 million, which consisted of interest income of $1.4 million and gain of $0.4 million from change in fair valuation of derivative warrant liabilities, offset by $0.4 million in general and administrative expenses.

For the nine months ended September 30, 2022, we had net income of approximately $6.6 million, which consisted of interest income of $1.7 million and gain of $6.3 million from change in fair valuation of derivative warrant liabilities, offset by $1.4 million in general and administrative expenses.

Liquidity and Capital Resources

Sources of Liquidity

Our liquidity needs from the period of February 23, 2021 (date of inception) through October 7, 2021 (date of the initial public offering) had been satisfied through the cash receipt of $25,000 from our initial stockholders to purchase the Founder Shares, and a loan of $300,000 pursuant to a note issued to our Sponsor (the “Note”). The Note balance was paid in full as of the date of the initial public offering. Subsequent to the consummation of the initial public offering, our liquidity needs have been satisfied with the net proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a business combination, our Sponsor or its affiliates may, but are not obligated to, continue providing us with working capital loans (“Working Capital Loans”). As of September 30, 2023, Working Capital Loans outstanding principal amounted to $0.9 million.

As of September 30, 2023, the Company had approximately $56,600 in cash outside of the trust account available for working capital needs and $53.3 million of cash and investment in liquid securities held in trust, which is not available for working capital needs.

Based on the foregoing, our management believes that we will have sufficient working capital to sustain operations for the next twelve months. Subsequent to September 30, 2023, at closing of the Purchase Agreement with New Sponsor on November 2, 2023, the working capital promissory note between the Company and the Sponsor dated November 1, 2022 (in aggregate principal amount of approximately $910,000) and extension promissory note between the Company and the Sponsor dated July 31, 2023 (in aggregate principal amount of $350,881) were terminated and of no further force and effect. On November 3, 2023, the Company entered into a subscription agreement (the “Subscription Agreement”) with the New Sponsor and Polar Multi-Strategy Master Fund (“Polar”), an unaffiliated third party, pursuant to which Polar agreed to make certain capital contributions to the Company of up to $1,200,000 (the “Capital Contribution”) from time to time, at the request of the Company, subject to the terms and conditions of the Subscription Agreement, to the Company. Based on the cash available from the Subscription Agreement, we believe that we have alleviated the substantial doubt about our ability to continue as a going concern, and we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we 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, and structuring, negotiating and consummating the Business Combination.

Our management continues to evaluate the impact of the COVID-19 pandemic and Russia-Ukraine geopolitical conflict and has concluded that the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Founder Shares

In March 2021, our initial stockholders purchased 5,750,000 shares of our Class B common stock, par value $0.0001 per share (the “Founder Shares”), for an aggregate price of $25,000 (1,450,758 of which were subsequently sold to our anchor investors at cost). Our Sponsor agreed to forfeit up to 750,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The underwriters exercised their over-allotment option in full on October 7, 2021. As a result, these shares were no longer subject to forfeiture.

Holders of our Founder Shares (including the anchor investors) have agreed not to transfer, assign or sell any of their founder shares and any shares of our Class A common stock issuable upon conversion thereof until the earlier to occur of: (i) one year after the completion of our initial business combination; and (ii) subsequent to our initial business combination, (x) if the last reported sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property (except to certain permitted transferees). Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any founder shares (except that our anchor investors will be permitted to abstain from voting founder shares).

 

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Private Placement Warrants

Simultaneously with the closing of the initial public offering, on October 7, 2021, we consummated the Private Placement of 6,400,000 Private Placement Warrants in the aggregate at a price of $1.50 per Private Placement Warrant to our Sponsor, generating proceeds of $9,600,000.

Each whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to our Sponsor was added to the proceeds from the initial public offering held in the Trust Account. If we do not complete a Business Combination by the New Termination Date, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by our Sponsor or permitted transferees.

The Sponsor and our officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

Related Party Loans

On March 12, 2021, the Sponsor and the Company executed an unsecured promissory note pursuant to which the Company had the ability to borrow up to $300,000 in the aggregate to cover expenses in connection with the Initial Public Offering (the “Promissory Note”). The Promissory Note was non-interest bearing and payable on the earlier of December 31, 2021 or the completion of the Initial Public Offering. The Company borrowed $145,000 under the Promissory Note and the full amount was repaid on October 7, 2021. No subsequent draws were made against the Promissory Note following repayment on October 7, 2021 and the outstanding balance remained at $0 as of December 31, 2021.

In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. During the nine months ended September 30, 2023, a total of $1.0 million was drawn by the Company and $0.3 million was paid. For the nine months ended September 30, 2023, the Company recorded $0.4 million gain on change in fair value of convertible promissory note. The unsecured convertible promissory note has an outstanding balance of $0.9 million and $0.3 million as of September 30, 2023 and December 31, 2022, respectively.

The Sponsor, officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made to the Sponsor, officers or directors, or their affiliates.

On July 31, 2023, pursuant to and in accordance with the Company’s amended and restated certificate of incorporation, as amended and then in effect, the Sponsor provided the Company with a 30-day extension notice relating to the date by which the Company must complete an initial business combination. In connection therewith, (i) the Sponsor deposited into the Trust Account an amount of $175,440 (such amount, a “Deposit Amount”), which will be used to fund the redemption of shares of Class A common stock, (ii) the Company extended the new termination date from August 7, 2023 to September 6, 2023 and (iii) the Company executed and delivered to the Sponsor a non-interest bearing, unsecured promissory note (the “Extension Promissory Note”) initially equal to the Deposit Amount (which amount will be increased by additional Deposit Amounts in connection with any subsequent 30 day extensions, up to a maximum of $1,052,644). The Sponsor further extended the termination date to October 6, 2023 by providing a further extension notice to the Company and depositing an additional Deposit Amount into the Trust Account, thereby increasing the aggregate principal amount of the Extension Promissory Note to $350,881. The Extension Promissory Note provides that it shall not be repaid by the Company in the event that the Company is unable to complete an initial business combination unless there are funds of the Company available outside of the Trust Account to do so. In connection with the closing of the Purchase, the Extension Promissory Note was cancelled.

 

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Contractual Obligations

Registration Rights

The holders of the founder shares, private placement warrants and warrants that may be issued upon conversion of working capital loans (and any Class A common stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of the initial public offering. The holders 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 our completion of our initial business combination.

However, the registration rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period, which occurs (i) in the case of the founder shares, as described in the following paragraph, and (ii) in the case of the private placement warrants and the respective shares of our Class A common stock underlying such warrants, 30 days after the completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.

Except as described in this Quarterly Report, the holders of the founder shares (including the anchor investors) 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 our initial business combination, or (b) subsequent to our initial business combination, (x) if the last reported sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and other agreements of our sponsor with respect to any founder shares. We refer to such transfer restrictions throughout this Quarterly Report as the lock-up.

In addition, pursuant to the registration rights agreement, our sponsor, upon completion of an initial business combination, will be entitled to nominate up to three individuals for election to our board of directors, as long as the sponsor holds any securities covered by the registration rights agreement.

Underwriting Agreement

The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $4,600,000 in the aggregate, paid upon the closing of the initial public offering and Over-Allotment. In addition, the underwriters will be entitled to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. 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 a Business Combination, subject to the terms of the underwriting agreement. In connection with the closing of the Purchase, the underwriters waived their entitlement to the deferred fee.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Derivative Warrant Liabilities

The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrant Securities”) in accordance with ASC 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity,” and concluded that the Warrant Securities could not be accounted for as components of equity. As the Warrant Securities meet the definition of a derivative in accordance with ASC 815-40, the Warrant Securities are recorded as derivative liabilities on the unaudited condensed balance sheets and measured at fair value at issuance and remeasured at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the unaudited condensed statements of operations in the period of change.

 

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Investments Held in the Trust Account

Our portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in market fair value of these securities is included in gain on marketable securities, dividends and interest held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information. 

Class A Common Stock Subject to Possible Redemption

We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Shares of conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2023 and December 31, 2022, 5,012,592 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the accompanying unaudited condensed balance sheets, respectively. See “Note 8 – Subsequent Events.

Net Income (Loss) Per Common Share

We had two classes of shares outstanding, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of common stock. Basic net income (loss) per share of common stock is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For the purposes of the diluted net income (loss) per share calculation the warrants to purchase common stock are considered to be potentially dilutive securities pursuant to the treasury stock method. In order to determine the net income (loss) attributable to both the Class A common stock and Class B common stock, we first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any changes to the redemption value of the Class A common stock is treated as a deemed dividend for the purposes of the numerator in the earnings per share calculation, as the redemption value approximates fair value. Subsequent to calculating the total income (loss) allocable to both sets of shares, we calculate the amount to be allocated pro rata between Class A common stock and Class B common stock for each of the periods presented.

The following table reflects the calculation of basic and diluted net income per common share (in dollars, except per share amounts):

 

     For the three months ended September 30,  
     2023      2022  

Net income (loss), as reported

   $ (701,173    $ 1,318,234  

Reconciliation items:

     

Deemed dividend to Class A stockholders

     (415,659      (1,411,236
  

 

 

    

 

 

 

Allocation of net loss, as adjusted

   $ (1,116,832    $ (93,002
  

 

 

    

 

 

 

 

     For the nine months ended September 30,  
     2023      2022  

Net income, as reported

   $ 1,782,882      $ 6,550,195  

Reconciliation items:

     

Deemed dividend to Class A stockholders

     (2,220,336      (1,722,936
  

 

 

    

 

 

 

Allocation of net income (loss), as adjusted

   $ (437,454    $ 4,827,259  
  

 

 

    

 

 

 

 

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     For the three months ended September 30,  
     2023      2022  
     Class A      Class B      Class A      Class B  

Basic and diluted net income (loss) per share:

           

Numerator:

           

Allocation of net loss attributable to common stockholders, as adjusted

   $ (356,736)      $ (409,216)      $ (74,402)      $ (18,600)  

Allocation of accretion of temporary equity to Class A shares

     415,659        —          1,411,236        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Allocation of net income (loss)

   $ (104,497)      $ (596,676)      $ 1,336,834      $ (18,600)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Denominator:

           

Weighted average common stock outstanding, basic and diluted

     5,012,592        5,750,000        23,000,000        5,750,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic and diluted net income (loss) per common share

   $ (0.02)      $ (0.10)      $ 0.06      $ (0.00)  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     For the nine months ended September 30,  
     2023      2022  
     Class A      Class B      Class A      Class B  

Basic and diluted net income (loss) per share:

           

Numerator:

           

Allocation of net income (loss) attributable to common stockholders, as adjusted

   $ (203,741)      $ (233,713)      $ 3,861,807      $ 965,452  

Allocation of accretion of temporary equity to Class A shares

     2,220,336        —          1,722,936        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Allocation of net income (loss)

   $  2,016,595      $ (233,713)      $ 5,584,743      $ 965,452  
  

 

 

    

 

 

    

 

 

    

 

 

 

Denominator:

           

Weighted average common stock outstanding, basic and diluted

     5,012,592        5,750,000        23,000,000        5,750,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic and diluted net income (loss) per common share

   $ 0.43      $ (0.01)      $ 0.24      $ 0.17  
  

 

 

    

 

 

    

 

 

    

 

 

 

As of September 30, 2023 and 2022, the promissory notes convertible into warrants at a price of $1.50 per warrant and outstanding warrants to purchase 17,896,782 shares of Class A common stock were excluded from the computation of diluted net income (loss) per share of common stock for the periods presented as the exercise price is greater than the average market price (out of the money) and their inclusion would be anti-dilutive under the treasury stock method. As a result, basic and diluted income (loss) per share is the same for the periods presented.

Recent Accounting Pronouncements

Our management does not believe that there are any recently issued, but not yet effective, accounting pronouncements, if currently adopted, that would have a material effect on our unaudited condensed financial statements.

 

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Off-Balance Sheet Arrangements

As of September 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

JOBS Act

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.

 

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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

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our then Co-Chief Executive Officers, to allow timely decisions regarding required disclosure. As required by Rules 13a-15 and 15d-15 under the Exchange Act, our then Co-Chief Executive Officers and then Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon their evaluation, our then Co-Chief Executive Officers and then Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

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

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II—OTHER

INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023 (the “Annual Report”). Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report.

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

Not Applicable.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

 

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Item 6. Exhibits.

 

Exhibit
Number
 

Description

    3.1(1)   Amendment to the Amended and Restated Certificate of Incorporation of Focus Impact BH3 Acquisition Company dated November 8, 2023.
    3.2(2)   Amendment to the Amended and Restated Certificate of Incorporation of Focus Impact BH3 Acquisition Company dated October 6, 2023.
  10.1(3)   Termination of Administrative Services Agreement, dated August 8, 2023, between the Company and the Sponsor
  10.2(3)   Promissory Note, dated July 31, 2023, issued to Focus Impact BH3 Acquisition Company
  10.3(4)***   Purchase Agreement, dated September 27, 2023, by and among Focus Impact BH3 Acquisition Company, Crixus BH3 Sponsor LLC and Focus Impact BHAC Sponsor, LLC.
  10.4(4)   Form of Anchor Transfer Agreement
  10.5(4)   Form of Non-Redemption Agreement.
  10.6(1)   Subscription Agreement, dated November 2, 2023, by and among Crixus BH3 Acquisition Company, Focus Impact BHAC Sponsor, LLC and Polar Multi-Strategy Master Fund.
  31.1*   Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
  31.2*   Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
  32.1**   Certification of Chief Executive Officer (Principal Executive Officers) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
  32.2**   Certification of Chief Financial Officer (Principal Financial and Accounting 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
101.SCH*   Inline XBRL Taxonomy Extension Schema Document
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*   Inline XBRL Taxonomy Extension Label 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.

***

Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K, Item 601(a)(5). The Company agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.

(1)

Previously filed as an exhibit to our Current Report on Form 8-K filed on November 8, 2023 and incorporated by reference herein.

(2)

Previously filed as an exhibit to our Current Report on Form 8-K filed on October 6, 2023 and incorporated by reference herein.

(3)

Previously filed as an exhibit to our Current Report on Form 8-K filed on August 2, 2023 and incorporated by reference herein.

(4)

Previously filed as an exhibit to our Current Report on Form 8-K filed on September 28, 2023 and incorporated by reference herein.

(5)

Previously filed as an exhibit to our Current Report on Form 8-K filed on October 3, 2023 and incorporated by reference herein.

 

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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 20th day of November, 2023.

 

FOCUS IMPACT BH3 ACQUISITION COMPANY
By:  

/s/ Carl Stanton

Name:  

Carl Stanton

Title:  

Chief Executive Officer

(Principal Executive Officer)

 

By:  

/s/ Ernest Lyles

Name:  

Ernest Lyles

Title:   Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

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