10-Q 1 f10q0923_revelstone.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

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

 

For the transition period from  _____________ to ________________

 

Commission File Number 001-41178

 

REVELSTONE CAPITAL ACQUISITION CORP.

(Exact name of registrant as specified in its charter)

 

Delaware   87-1511157
(State or other jurisdiction of   (IRS Employer
incorporation or organization)   Identification No.)

 

14350 Myford Road
Irvine, CA 92606
(Address of principal executive offices and zip code)

 

(949) 751-7518

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class   Trading Symbol(s)   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, each whole Redeemable Warrant to purchase one share of Class A common stock for $11.50 per share   RCACU   The Nasdaq Stock Market LLC
Class A Common Stock, par value $0.0001 per share   RCAC   The Nasdaq Stock Market LLC
Redeemable Warrants, each whole Redeemable Warrant exercisable to purchase one share of Class A Common Stock for $11.50 per share   RCACW   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 (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

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

 

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 17, 2023, there were 7,644,814 shares of Class A common stock, par value $0.0001 per share, and five shares of Class B common stock, par value $0.0001 per share, issued and outstanding.

 

 

 

 

 

REVELSTONE CAPITAL ACQUISITION CORP.

 

TABLE OF CONTENTS

 

    Page
numbers
PART 1 – FINANCIAL INFORMATION 1
     
Item 1. FINANCIAL STATEMENTS   1
     
  Condensed Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 1
     
  Unaudited Condensed Statements of Operations for the three and nine months ended September 30, 2023 and 2022 2
     
  Unaudited Condensed Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2023 and 2022 3
     
  Unaudited Condensed Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 4
     
  Notes to Condensed Financial Statements 5
     
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21
     
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24
     
Item 4. CONTROLS AND PROCEDURES 24
     
PART II – OTHER INFORMATION 26
     
Item 1. LEGAL PROCEEDINGS 26
     
Item 1A. RISK FACTORS 26
     
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 27
     
Item 3. DEFAULTS UPON SENIOR SECURITIES 27
     
Item 4. MINE SAFETY DISCLOSURES 27
     
Item 5. OTHER INFORMATION 27
     
Item 6. EXHIBITS 27
     
SIGNATURES 28

 

i

 

 

PART 1 – FINANCIAL INFORMATION

 

REVELSTONE CAPITAL ACQUISITION CORP.

CONDENSED BALANCE SHEETS

 

   September 30,   December 31, 
   2023   2022 
   (unaudited)     
Assets:        
Current Assets        
Cash  $152,956   $776,607 
Prepaid Assets   
    89,113 
Total Current Assets   152,956    865,720 
Other Assets          
Investments held in Trust Account   37,549,655    168,759,775 
Total Other Assets   37,549,655    168,759,775 
Total Assets  $37,702,611   $169,625,495 
           
Liabilities and Stockholders’ Deficit          
Current Liabilities          
Accounts payable  $210,399   $65,325 
Franchise tax liability   27,378    159,262 
Accrued Expenses   1,469,530    274,019 
Income Tax Payable   78,501    230,681 
Note and Other Payable – Related Party   485,014    
 
Excise tax payable   1,342,951    
 
Total Current Liabilities   3,613,773    729,287 
Long-Term Liabilities          
Deferred underwriting commission payable   1,732,500    5,775,000 
Total Long-Term Liabilities   1,732,500    5,775,000 
Total Liabilities   5,346,273    6,504,287 
Commitments and Contingencies (Note 6)   
 
    
 
 
Class A Common stock subject to possible redemption, 3,519,819 and 16,500,000 shares at redemption value of $10.66 and $10.20 as of September 30, 2023 and December 31, 2022, respectively   37,525,062    168,367,986 
Stockholders’ Deficit          
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding as of September 30, 2023 and December 31, 2022   
    
 
Class A Common stock, $0.0001 par value; 180,000,000 shares authorized; 4,124,995 and 0 issued and outstanding (excluding 3,519,819 and 16,500,000 shares subject to possible redemption) as of September 30, 2023 and December 31, 2022, respectively   412    
 
Class B Common stock, $0.0001 par value; 20,000,000 shares authorized; 5 and 4,125,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022   
    412 
Additional paid-in capital   
    
 
Accumulated Deficit   (5,169,136)   (5,247,190)
Total Stockholders’ Deficit   (5,168,724)   (5,246,778)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $37,702,611   $169,625,495 

 

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

 

1

 

 

REVELSTONE CAPITAL ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

 

   Three Months Ended
September 30,
2023
   Three Months Ended
September 30,
2022
   Nine Months Ended
September 30,
2023
   Nine Months Ended
September 30,
2022
 
Operating Expenses                
Formation and Operating Costs  $804,083   $201,493   $2,484,680   $545,791 
Total Operating Expenses   804,083    201,493    2,484,680    545,791 
Net Operating Loss   804,083    201,493    2,484,680    545,791 
Gain from investments held in Trust Account   478,474    758,134    4,137,173    1,003,415 
Change in fair value of overallotment units   
-
    
-
    
-
    15,119 
Fair value of forfeited overallotment option   
-
    
-
    
-
    79,071 
Total Other Income   478,474    758,134    4,137,173    1,097,605 
Income (loss) before provision for income tax  $(325,609)  $556,641   $1,652,493   $551,814 
Provision for income taxes- loss   89,811    143,177    821,820    165,340 
Net income (loss)  $(415,420)  $413,464   $830,673   $386,474 
                     
Basic and diluted weighted average shares subject to possible redemption
   3,519,819    16,500,000    11,745,355    16,439,560 
Basic and diluted net income (loss) per share subject to possible redemption
  $(0.05)  $0.02   $0.05   $0.02 
Basic and diluted weighted average nonredeemable shares of common stock
   4,125,000    4,125,000    4,125,000    4,125,000 
Basic and diluted net income (loss) per nonredeemable share of common stock
  $(0.05)  $0.02   $0.05   $0.02 

 

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

 

2

 

 

REVELSTONE CAPITAL ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

 

  

Common Stock

Class A

   Common Stock
Class B
   Additional
Paid-In
   Accumulated   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
Balance— January 1, 2023   
   $
    4,125,000   $412   $
   $(5,247,190)  $(5,246,778)
Re-measurement of redeemable shares of Class A common stock to redemption value       
        
    
    (1,327,101)   (1,327,101)
Net Income       
        
    
    492,016    492,016 
Balance—March 31, 2023   
   $
    4,125,000   $412   $
   $(6,082,275)  $(6,081,863)
Re-measurement of redeemable shares of Class A common stock to redemption value       
            
    (1,516,404)   (1,516,404)
Re-measurement of redeemable shares to redemption value– waiver of deferred underwriting commission       
            
    4,042,500    4,042,500 
Recognition of excise tax liability on trust redemptions       
            
    (1,342,951)   (1,342,951)
Net Income                          754,077    754,077 
Balance – June 30, 2023   
   $
    4,125,000   $412   $
   $(4,145,053)  $(4,144,641)
Re-measurement of redeemable shares to redemption value       
        
    
    (608,663)   (608,663)
Net Income       
                   (415,420)   (415,420)
Conversion of Class B shares to Class A    4,124,995    412    (4,124,995)   (412)   
    
    
 
Balance—September 30, 2023   4,124,995   $412    5   $
   $
   $(5,169,136)  $(5,168,724)

 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

 

   Common Stock
Class A
   Common Stock
Class B
   Additional
Paid-In
   Accumulated   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
Balance— January 1, 2022   
 
   $
    4,125,000   $412    
   $(4,300,101)  $(4,299,689)
Proceeds allocated to Public Warrants       
        
    225,000    
    225,000 
Proceeds allocated to Private Placement Warrants       
        
    450,000    
    450,000 
Offering costs allocated to warrants       
        
    (36,044)   
    (36,044)
Derecognition of overallotment unit liability       
        
    158,141    
    158,141 
Re-measurement of redeemable shares to redemption value       
        
    (797,097)   (379,763)   (1,176,860)
Net Loss       
        
    
    (94,699)   (94,699)
Balance— March 31, 2022   
    
    4,125,000   $412    
   $(4,774,563)  $(4,774,151)
Re-measurement of redeemable shares to redemption value       
        
    
    (44,130)   (44,130)
Net Income       
        
    
    67,709    67,709 
Balance— June 30, 2022   
    
    4,125,000   $412    
   $(4,750,984)  $(4,750,572)
Re-measurement of redeemable shares to redemption value       
        
    
    (564,957)   (564,957)
Net Income       
        
    
    413,464    413,464 
Balance—September 30, 2022   
    
    4,125,000   $412    
    (4,902,477)   (4,902,065)

 

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

 

3

 

 

REVELSTONE CAPITAL ACQUISITION CORP.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

 

   Nine Months Ended
September 30,
2023
   Nine Months Ended
September 30,
2022
 
Cash Flows from Operating Activities:        
Net income (loss)  $830,673   $386,474 
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Change in fair value of overallotment units   
    (15,119)
Fair value of forfeited overallotment units   
    (79,071)
Gain from investments held in Trust Account   (4,137,173)   (1,003,415)
Changes in operating assets and liabilities:          
Prepaid Assets   89,113    166,653 
Accounts Payable   145,074    (671,220)
Accrued Expenses   1,195,511    71,888 
Franchise Tax Liability   (131,884)   43,980 
Income tax receivable/payable   (152,180)   133,340 
Net cash used in operating activities   (2,160,866)   (966,490)
Cash Flows from Investing Activities:          
Principal deposited in Trust Account   
    (15,150,000)
Cash withdrawn from Trust Account in connection with redemption   134,295,092    
 
Payment of extension fee into Trust Account   (360,000)   
 
Withdrawals from Trust Account for income and franchise taxes   1,412,201    137,204 
Net cash provided by (used in) investing activities   135,347,293    (15,012,796)
Cash Flows from Financing Activities:          
Redemption of common stock   (134,295,092)   
 
Proceeds from partial exercise of overallotment option, net of costs   
    14,700,000 
Proceeds from private placement related to partial exercise of overallotment option   
    450,000 
Proceeds from note and other payable—related party   485,014    (189,789)
Net cash provided by/(used in) financing activities   (133,810,078)   14,960,211 
Net Change in Cash   (623,651)   (1,019,075)
Cash–Beginning   776,607    1,844,672 
Cash–Ending  $152,956   $825,597 
Non-Cash investing and financing activities:          
Waiver of deferred underwriting commissions payable  $4,042,500   $525,000 
Re-measurement of carrying value of redeemable shares of Class A common stock to redemption value  $3,452,168   $1,785,947 
Exercised portion of overallotment unit liability  $
   $158,141 
Excise tax related to stock redemptions  $1,342,951   $
 
Conversion of Class B shares to Class A shares  $412   $
 

 

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

 

4

 

 

REVELSTONE CAPITAL ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

 

Note 1—Description of Organization and Business Operations

 

Revelstone Capital Acquisition Corp. (the “Company”) was incorporated in Delaware on April 5, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies. The Company’s sponsor is Revelstone Capital LLC, a Delaware limited liability company (the “Sponsor”).

 

As of September 30, 2023, the Company has neither engaged in any operations nor generated any revenues. All activity for the period from April 5, 2021 (inception) through September 30, 2023, relates to the Company’s formation and the initial public offering (“Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Public Offering.

 

The Company has selected December 31 as its fiscal year end.

 

The registration statement for the Company’s IPO was declared effective on December 16, 2021 (the “Effective Date”). On December 21, 2021, the Company’s consummated the IPO of 15,000,000 units at $10.00 per unit (the “Units”), which is discussed in Note 3 (the “IPO”), generating gross proceeds to the Company of $150,000,000. Each Unit consists of one share of Class A common stock (the “Public Shares”) and one-half of one warrant (the “Public Warrants”). Each whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share.

 

Simultaneously with the consummation of the IPO, the Company consummated the private placement of 5,800,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement, generating gross proceeds to the Company of $5,800,000, which is described in Note 4.

 

On January 11, 2022, the underwriters partially exercised the over-allotment option to purchase 1,500,000 additional Units (the “Additional Units”) at $10.00 per Additional Unit. In connection with the underwriter’s partial exercise of the over-allotment option, the Company generated additional gross proceeds of $15,000,000 and incurred $300,000 in cash underwriting fees.

 

Simultaneously with the sale of the Additional Units, the Company consummated the sale of an additional 450,000 Private Placement Warrants to the Sponsor at $1.00 per additional Private Placement Warrants, generating additional gross proceeds of $450,000. Since the over-allotment was not exercised in full, 187,500 shares of the 4,312,500 shares of Class B common stock, par value $0.0001 per share, were forfeited by the holders thereof for no consideration.

 

On February 3, 2022, the Company announced that the holders of the Units may elect to separately trade the shares of Class A common stock, par value $0.0001 per share and warrants included in the Units commencing on or about February 7, 2022. Each Unit consists of one share of common stock and one-half of one redeemable warrant. Each whole warrant entitles the holder thereof to purchase one share of common stock at a price of $11.50 per share (subject to adjustment). Any Units not separated will continue to trade on the Nasdaq Global Market under the symbol “RCACU”, and the common stock and warrants will separately trade on Nasdaq under the symbols “RCAC” and “RCACW”, respectively. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade.

 

Transaction costs amounted to $17,398,949 consisting of $2,800,000 of net underwriting commissions, $5,775,000 of deferred underwriting commissions, $8,104,500 of incentives to Anchor Investors (see Note 3), and $719,449 of other offering costs, and was all charged to additional paid-in capital and accumulated deficit where no additional paid-in capital was available. Net underwriting commissions consist of a $3,300,000 gross commission and $500,000 of the underwriter’s reimbursement of transaction costs incurred by the Company. Included in the transaction costs are $300,000 of net underwriting commissions and $525,000 of deferred underwriting commissions related to partial exercise of the overallotment option.

 

5

 

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.

 

The Company must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the agreement to enter into a Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to complete a Business Combination successfully.

 

Following the closing of the Public Offering on December 21, 2021 and partial exercise of the overallotment option on January 11, 2022, $166,650,000 ($10.10 per Unit) from the net proceeds of the sale of the Units and Private Placement Warrants, was deposited in a trust account (“Trust Account”), located in the United States and invested only in 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 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 completion of a Business Combination and (ii) the distribution of the Trust Account, as described below.

 

The Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.10 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

 

If the Company seeks stockholder approval to a proceed with a Business Combination, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor, officers and directors will agree to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.

 

If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.

 

6

 

 

The Sponsor and each Anchor Investor (see Note 3) holding Founder Shares have agreed (a) to waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.

 

The Company has until December 21, 2023 to complete a Business Combination (the “Combination Period”), or during any extended time that the Company has to consummate a business combination beyond such date as a result of a stockholder vote to amend the Amended and Restated Certificate of Incorporation (an “Extension Period”). If the Company is unable to complete a Business Combination within the Combination Period or during any Extension Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period or during any Extension Period.

 

The Sponsor and each Anchor Investor holding Founder Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period or during any Extension Period. However, if the Sponsor or any of its affiliates acquire Public Shares after the Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period or during any Extension Period. The underwriters have agreed to waive their right to their deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period or during any Extension Period, and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Public Offering price per Unit ($10.10).

 

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.10 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. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

 

Going Concern, Liquidity and Capital Resources

 

As of September 30, 2023 the Company had approximately $152,956 in its operating bank account and negative working capital of approximately $3,460,817.

 

Prior to the completion of the Public Offering, the Company’s liquidity needs had been satisfied through a payment from the Sponsor of $25,000 for the Founder Shares to cover certain offering costs, and the loan under an unsecured promissory note from the Sponsor of $189,789. The promissory note was paid in full in January 2022.

 

7

 

 

Subsequent to the consummation of the Public Offering and private placement, the Company’s liquidity needs have been satisfied through the 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, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). As of September 30, 2023 and December 31, 2022, there were no amounts outstanding under any Working Capital Loans.

 

On August 24, 2023, a company affiliated with the Sponsor agreed to loan the Company an aggregate of up to $100,000 under a promissory note. The promissory note is non-interest bearing and payable, according to contractual terms, on the earlier of December 21, 2023 or the completion of the Business Combination. As of September 30, 2023, the Company had borrowed $100,000 under the promissory note. At September 30, 2023, the Company owed to related parties an overall amount of $485,014 (see Note 5).

 

The Company held a meeting on June 14, 2023 to vote on the proposal to amend its charter and the investment management trust agreement dated as of December 16, 2021 with Continental Stock Transfer & Trust Company. Pursuant to the charter amendment and the trust amendment, the Company has the right to extend the time to complete a business combination from June 21, 2023 until December 21, 2023, on a month-to-month basis by depositing into the Company’s trust account a $90,000 fee for each one month of extension. As approved by its stockholders at the meeting held on June 14, 2023, the Company filed an amendment to its second amended and restated certificate of incorporation with the Delaware Secretary of State on June 15, 2023, (a) giving the Company the right to extend the date by which it has to complete a business combination to December 21, 2023, and (b) to remove the net tangible asset requirement so that the Company need not have net tangible assets of at least $5,000,001 to consummate a business combination.

 

In connection with the stockholders’ vote at the special meeting of stockholders held by the Company on June 14, 2023, 12,980,181 shares of the Company’s Class A common stock were redeemed with a total redemption payment of $134,295,092.

 

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 205-40, “Presentation of Financial Statements – Going Concern,” the Company has, according to the amended charter and the investment management trust agreement, until December 21, 2023, to consummate an initial business combination. It is uncertain that the Company will be able to consummate an initial business combination by this time. If an initial business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and the mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities that might result from the outcome of this uncertainty for the next twelve months form the issuance of these financial statements.

 

Inflation Reduction Act of 2022

 

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

 

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

 

On June 23, 2023, 12,980,181 shares of the Company’s common stock were redeemed with a total redemption payment of $134,295,092. The Company determined that an excise tax liability should be recorded due to the redeemed shares. As of September 30, 2023, the Company recorded a charge to stockholders’ deficit of $1,342,951 of excise tax liability calculated as 1% of the value of the shares redeemed.

 

8

 

 

Note 2—Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. 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. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Form 10-K annual report filed by the Company with the SEC on March 27, 2023.

 

Emerging Growth Company

 

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”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

Use of estimates

 

The preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.

 

Making estimates requires management to exercise significant judgment. 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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

 

9

 

 

Cash and Cash Equivalents

 

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

 

Investments Held in Trust Account

 

At September 30, 2023 and December 31, 2022, the assets held in the Trust Account were held in treasury funds. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in the Trust Account are included in interest income in the accompanying statements of operations. The estimated fair value of investments held in the Trust Account are determined using available market information.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which frequently exceeds the Federal Depository Insurance Coverage of $250,000. At September 30, 2023 and December 31, 2022, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

 

Income Taxes

 

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes”. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statements recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of 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.

 

Fair Value Measurements

 

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. 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). These tiers include:

 

  Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;

 

  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

 

10

 

 

Derivative Financial Instruments

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the Public Warrants and Private Placement Warrants issued in the Public Offering meet the requirements for equity classification. The Company categorized the over-allotment option granted to underwriters in connection with the Public Offering as a freestanding financial instrument to be accounted for separately from the Units.

 

Class A Common Stock Subject to Possible Redemption

 

The 3,519,819 remaining shares of Class A common stock issued as part of the Units in the Public Offering and outstanding at September 30, 2023 contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder 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 ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all Class A common stock has been classified outside of permanent equity.

 

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital and accumulated deficit.

 

Offering Costs associated with the Initial Public Offering

 

The Company complies with the requirements of ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Public Offering that were directly related to the Public Offering. The Company incurred offering costs amounting to $17,398,949 as a result of the Public Offering consisting of $2,800,000 of net underwriting commissions, $5,775,000 of deferred underwriting commissions, $8,104,500 of incentives to Anchor Investors (see Note 3) and $719,449 of other offering costs. The offering costs were charged to additional paid-in capital upon the completion of the Public Offering, and accumulated deficit when no additional paid-in capital was available.

 

In June 2023, deferred underwriting fee payable was reduced by $4,042,500 to $1,732,500. The reduction was due to BofA Securities, Inc., one of the underwriters, waiving their portion of the deferred underwriting fee.

 

Net Loss Per Share of Common Stock

 

The Company has two categories of shares, which are referred to as redeemable shares of common stock and non-redeemable shares of common stock. Earnings and losses are shared pro rata between the two categories of shares.

 

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The calculation of diluted net income (loss) per share of common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering and the partial exercise of the over-allotment option because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and nine months ended September 30, 2023 and 2022.

 

The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each category:

 

   Three Months Ended   Nine Months Ended   Three Months Ended   Nine Months Ended 
   September 30,
2023
   September 30,
2023
   September 30,
2022
   September 30,
2022
 
   Redeemable   Non-redeemable   Redeemable   Non-redeemable   Redeemable   Non-redeemable   Redeemable   Non-redeemable 
Numerator                                
Allocation of net income (loss)  $(191,267)  $(224,153)  $614,766   $215,907   $330,771   $82,693   $308,952   $77,522 
Denominator                                        
Weighted average shares outstanding   3,519,819    

4,125,000

    11,745,355    4,125,000    16,500,000    4,125,000    16,439,560    4,125,000 
Basic and diluted net income (loss) per share  $(0.05)  $(0.05)  $0.05   $0.05   $0.02   $0.02   $0.02   $0.02 

 

Note 3—Initial Public Offering

 

On December 21, 2021 the Company sold 15,000,000 Units at a price of $10.00 per Unit. As part of the Public Offering, the Company granted the underwriters a 45-day option from the date of the Public Offering to purchase up to an additional 2,250,000 Public Units to cover over-allotments. On January 11, 2022, the underwriters partially exercised the over-allotment option and the Company sold 1,500,000 additional Units at $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant will entitle the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).

 

Following the closing of the Public Offering on December 21, 2021 and partial exercise of the overallotment option on January 11, 2022, $166,650,000 ($10.10 per Unit) from the net proceeds of the sale of the Units and Private Placement Warrants, was deposited in a Trust Account, located in the United States and invested only in 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 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.

 

Prior to the Public Offering certain qualified institutional buyers or institutional accredited investors which are not affiliated with any member of the Company’s management (the “Anchor Investors”) each expressed to the Company an interest in purchasing Units in the Public Offering at the offering price of $10.00 per Unit. As incentives for the Anchor Investors, upon consummation of the Public Offering, the Sponsor transferred 1,125,000 Founder Shares, with an aggregate fair value of $8,111,250, to the Anchor Investors taken together as a whole, in exchange for their original purchase price of approximately $0.006 per share. The excess of the fair value of the Founder Shares transferred over the original issuance price, or $8,104,500, was accounted for as offering costs with an offset to additional paid-in capital. The Company utilized Level 3 inputs to determine the fair value of shares of Class B common stock.

 

12

 

 

As of September 30, 2023, the value of the shares of Class A common stock subject to redemption reflected on the balance sheet are reconciled in the following table:

 

Gross proceeds from IPO  $150,000,000 
Less:     
Proceeds allocated to Public Warrants   (2,475,000)
Class A common stock issuance costs   (16,506,549)
Plus:     
Re-measurement of carrying value to redemption value   22,349,535 
Gross proceeds from partial exercise of overallotment option   15,000,000 
Class A common stock subject to redemption as of December 31, 2022  $168,367,986 
Plus:     
Re-measurement of carrying value to redemption value   1,327,101 
Class A common stock subject to redemption as of March 31, 2023  $169,695,087 
Plus:     
Re-measurement of carrying value to redemption value   1,516,404 
Less:     
Partial redemptions   (134,295,092)
Class A common stock subject to redemption as of June 30, 2023  $36,916,399 
Plus:     
Re-measurement of carrying value to redemption value   608,663 
Class A common stock subject to redemption as of September 30, 2023  $37,525,062 

 

Note 4—Private Placement

 

Simultaneously with the closing of the Public Offering, the Sponsor, Roth and certain Roth affiliates purchased an aggregate of 5,800,000 Private Placement Warrants, of which 5,050,000 Private Placement Warrants were purchased by the Sponsor and 750,000 Private Placement Warrants were purchased by Roth and certain Roth affiliates. The Sponsor purchase an additional 450,000 Private Placement Warrants when the over-allotment option was partially exercised.

 

Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share. If the Company does not complete a Business Combination within the Combination Period or during any Extension 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 (see Note 7).

 

Note 5—Related Party Transactions

 

Founder Shares

 

On May 11, 2021, the Sponsor paid $25,000 to purchase 4,312,500 shares of the Company’s Class B common stock (the “Founder Shares”). The Founder Shares will automatically convert into Class A common stock upon consummation of a Business Combination on a one-for-one basis, subject to certain adjustments, as described in Note 7. As of December 31, 2022, the Founder Shares include an aggregate of up 562,500 shares subject to forfeiture to the extent that the underwriter’s option to purchase additional units is not exercised in full or in part. On January 11, 2022, the underwriters partially exercised the over-allotment option, resulting in forfeiture of 187,500 shares of Class B common stock. As of September, 30, 2023 and December 31, 2022 outstanding Class B common stock excludes 187,500 of shares forfeited due to partial exercise of the overallotment option on January 11, 2022.

 

On November 18, 2021, the Sponsor transferred 25,000 Founder Shares to each of Jeff Rosenthal, Margaret McDonald and Jason White, the Company’s independent director nominees and 15,000 Founder Shares to each of Assia Grazioli-Venier, Jonathan Goodwin and Nate Bosshard, the Company’s outside advisors. The Company determined the estimated fair value of the transferred shares to be immaterial and did not recognize the impact of the transfer in these financial statements.

 

13

 

 

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

 

On July 27, 2023, the Company issued an aggregate of 4,124,995 shares of Class A common stock, par value $0.0001 per share to the holders of the Company’s shares of Class B common stock, par value $0.0001 per share upon the conversion of an equal number of Class B Shares. The 4,124,995 Class A Shares issued in connection with the conversion are subject to the same restrictions as applied to the Class B Shares before the conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial business combination as described in the prospectus for our initial public offering. Following the conversion, there were 7,644,814 Class A Shares issued and outstanding (of which 3,519,819 shares were redeemable and 4,124,995 were non-redeemable) and five Class B Shares issued and outstanding. The issuance of Class A Shares upon the conversion has not been registered under the Securities Act of 1933, as amended, in reliance on the exemption from registration provided by Section 3(a)(9) thereof.

 

Related Party Loans

 

On May 11, 2021, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Public Offering (“First Promissory Note”). The First Promissory Note is non-interest bearing and payable, according to contractual terms, on the earlier of December 31, 2022 or the completion of the Public Offering. As of December 31, 2021, the Company had borrowed $189,789 under First Promissory Note. The Company settled the liability on January 11, 2022.

 

On June 22, 2023, the Sponsor and Set Jet, Inc., a Nevada corporation each contributed $45,000 to the Trust Account. During the three months ended September 30, 2023, Set Jet, Inc., contributed $270,000 to the Trust Account. The Company will reimburse the Sponsor and Set Jet, Inc. for the contribution in the event that the Company completes a Business Combination. The Company recorded the contribution as part of Note and Other Payable- Related Party at September 30, 2023.

 

On August 24, 2023, a company affiliated with the Sponsor agreed to loan the Company an aggregate of up to $100,000 to cover expenses related to the Business Combination (“Second Promissory Note”). The Second Promissory Note is non-interest bearing and payable, according to contractual terms, on the earlier of December 21, 2023 or the completion of the Business Combination. As of September 30, 2023, the Company had borrowed $100,000 under Second Promissory Note.

 

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of September 30, 2023 and December 31, 2022, the Company had no borrowings under the Working Capital Loans.

 

Administrative Service Agreement

 

The Company entered into an administrative services agreement with an affiliate of the Sponsor for office space, administrative and support services. The affiliate agreed to provide the above services for no consideration.

 

Note 6—Commitments and Contingencies

 

Registration Rights

 

The holders of the majority of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans up to $1,500,000 (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement signed on December 21, 2021 and requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). In addition, our initial stockholders, any anchor investors holding Founder Shares and their respective permitted transferees are entitled to make up to three demands, excluding short form demands, that the Company register such securities. Notwithstanding the foregoing, the Company shall use its best efforts to file a registration statement within 30 days of our business combination to register such securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

14

 

 

Underwriting Agreement

 

On December 21, 2021 the Company paid a cash underwriting commission of $0.20 per Unit, or $3,000,000 in the aggregate. On December 21, 2021, the underwriters also reimbursed the Company for $500,000 of transaction costs incurred by the Company. Following the reimbursement, the underwriters’ net commission was $2,500,000 or $0.17 per Unit.

 

The Company granted the underwriters a 45-day option from the date of the Public Offering to purchase up to 2,250,000 additional Units at the Public Offering price less the underwriting discounts and commissions, which was partially exercised on January 11, 2022.

 

On January 11, 2022, the Company paid a cash underwriting commission of $0.20 per Unit or $300,000 in the aggregate in connection with the underwriters’ partial exercise of the over-allotment option.

 

The underwriters were entitled to deferred underwriting commissions of $0.35 per Unit, or $5,775,000 in the aggregate. The deferred underwriting commissions 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 June 2023 BofA Securities, Inc., one of the underwriters, waived their portion of the deferred underwriting fee which is reflected in the condensed balance sheet and the condensed statements of changes in stockholders’ deficit. Therefore, the deferred underwriting fee was reduced by $4,042,500. As a result of the reductions, the outstanding deferred underwriting fee payable was reduced to $1,732,500.

 

Legal Advisory Agreement

 

On July 7, 2022, the Company signed an agreement with a legal advisor that will represent the Company on corporate and securities compliance matters related to its pursuit of a Business Combination. According to the terms of the agreement, the Company was obligated to pay a retainer fee of $50,000 upon the signing of this agreement, and is further obligated to pay up to an additional $200,000 when certain milestones are met prior to the closing of the Business Combination. Legal fees incurred in connection with the business combination above $250,000 will be due and payable upon completion of the Business Combination. The initial retainer fee of $150,000 was paid as of September 30, 2023. The amount of legal fees recorded as part of the Company’s accrued expenses and accounts payable was $1,469,530 and $50,000, respectively, as of September 30, 2023.

 

M&A Advisory Agreement

 

On October 13, 2022, the Company signed an agreement with an advisor to assist the Company on merger and acquisition matters as they relate to a Business Combination. According to the terms of the agreement, as amended on July 7, 2023, the Company is obligated to pay the advisor a fee determined as a percentage of the enterprise value of a target. The percentage ranges from 0.5%, which would apply to an enterprise value of $600,000,000 or more, and 1.5%, which would apply to an enterprise value of $200,000,000 or less. The advisory fee is payable by the Company to the advisor in shares of the Company’s Class A common stock at $10.00 per share. The Company has not recorded any advisory fees through September 30, 2023 as stock compensation recognition criteria per ASC 718-10-25 have not been met.

 

Private Placement Agreements

 

On October 13, 2022, the Company signed a private placement agreement with an agent to assist the Company with the private placement of the Company’s stock or other securities. According to the terms of the agreement, as amended on July 7, 2023, the Company is obligated to pay the agent, concurrently with the consummation of the placement, a fee determined as 2% of gross receipts from the placement. The advisory fee is payable in shares of the Company’s Class A common stock at $10.00 per share. No fee has been recorded by the Company through September 30, 2023 as this private placement has not yet taken place.

 

15

 

 

Merger Agreement

 

On July 17, 2023, the Company entered into a merger agreement, by and among the Company, Revelstone Capital Merger Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“Merger Sub”), Set Jet, Inc., a Nevada corporation “Set Jet” and Thomas P. Smith.

 

The merger agreement provides that, among other things, at the closing of the transactions, Merger Sub will merge with and into Set Jet, with Set Jet surviving as a wholly-owned subsidiary of the Company. In connection with the merger, the Company will change its name to Set Jet, Inc.

 

The Business Combination is subject to customary closing conditions, including the satisfaction of the minimum net tangible assets condition, the receipt of certain governmental approvals and the required approval by the stockholders of the Company and Set Jet. There is no assurance that the Business Combination will be completed.

 

The total consideration to be received by the Set Jet stockholders from the Company at closing and via earnout is up to $145 million subject to adjustment. Consideration paid at closing is in an amount equal to $80 million, subject to adjustment, based on the Company’s debt net of the Company’s cash and cash equivalents at closing, as defined in the merger agreement. Merger consideration at closing is paid in shares of Class A common stock of the Company. Earnout consideration of up to $65 million consists of (i) up to $45 million to shareholders of Set Jet pursuant to the earnout escrow agreement and (ii) up to $20 million to certain executive officers and directors of the combined company under the retention bonus agreement. 

 

On August 16, 2023, the Company, Merger Sub and Set Jet entered into an amended and restated merger agreement amending certain covenants and closing conditions, none of which were material to the Business Combination

 

Note 7—Stockholders’ Deficit

 

Preferred Stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2023 and December 31, 2022 there were no shares of preferred stock issued and outstanding.

 

Shares of Class A Common Stock—The Company is authorized to issue 180,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. There were 4,124,995 and 0 shares of Class A common stock issued and outstanding, excluding 3,519,819 and 16,500,000 shares of Class A common stock subject to redemption at September 30, 2023 and December 31, 2022, respectively.

 

Shares of Class B Common Stock—The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. There were 5 and 4,125,000 shares of Class B common stock issued and outstanding at September 30, 2023 and December 31, 2022, respectively. The number excludes 187,500 of Class B common stock forfeited due to partial exercise of the overallotment option on January 11, 2022.

 

On July 27, 2023, the Company issued an aggregate of 4,124,995 shares of Class A common stock, par value $0.0001 per share to the holders of the Company’s shares of Class B common stock, par value $0.0001 per share upon the conversion of an equal number of Class B Shares.

 

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Holders of shares of Class A common stock and shares of Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders, except as required by law.

 

The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to increase in respect of the issuance of certain securities, as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities (as described herein), are issued or deemed issued in excess of the amount issued in the Public Offering and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the aggregate number of all shares of common stock outstanding upon the completion of the Public Offering, plus the aggregate number of shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial business Combination (net of the number of shares of Class A common stock redeemed in connection with the initial Business Combination), excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination and any private placement warrants issued to the Sponsor, an affiliate of the Sponsor or any of the officers or director.

 

Public Warrants —Public Warrants may only be exercised for a whole number of shares. No fractional warrants are issued upon separation of the Units and only whole warrants trade. The Public Warrants will become exercisable on the date that is the later of twelve months from the date of this offering or 30 days after the completion of the initial Business Combination, provided that the Company has an effective registration statement under the Securities Act covering the issuance of the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them 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).

 

The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common 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 shares of 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.

 

17

 

 

The Company has agreed that as soon as practicable, after the closing of a Business Combination, the Company will use its best efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is 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 best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. The warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor, Anchor Investor, or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume-weighted average trading price of Class A common stock during the 20 trading day period starting on the trading day after to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described under “Description of Securities—Redeemable Warrants—” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.

 

Redemptions of Warrants When the Price Per Share of Class A Common Stock Equals or Exceeds $18.00Once the warrants become exercisable, the Company may redeem the Public Warrants:

 

  in whole and not in part;

 

  at a price of $0.01 per warrant;

 

  upon not less than 30 days’ prior written notice of redemption to each warrant holder;

 

  if, and only if, the last reported sale price of Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities as described above) 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 holders, and

 

  if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants.

 

If the Company calls the Public Warrants for redemption for cash, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”, as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period or during any Extension 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.

 

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Public Offering, except that the Private Placement Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.

 

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The Company accounted for the 14,500,000 warrants issued in connection with the Public Offering and partial exercise of the over-allotment option, including 8,250,000 Public Warrants and 6,250,000 Private Placement Warrants, in accordance with the guidance contained in ASC 815-40. The Company concluded that the Public and Private Placement Warrants are considered indexed to the entity’s own stock and meet other equity classification requirements. Therefore, Public and Private Placement Warrants are considered equity instruments and are classified as such.

 

On June 23, 2023, 12,980,181 shares of the Company’s common stock were redeemed. At September 30, 2023, the amount of issued and outstanding Public Warrants and Private Placement warrants did not change.

 

Underwriters’ Over-allotment Option- The Company granted the underwriters a 45-day option from the date of the Public Offering to purchase up to 2,250,000 additional Units at the Public Offering price less the underwriting discounts and commissions. The Company categorized the over-allotment option as a freestanding financial instrument to be accounted for separately from the Units. On January 11, 2022 the underwriters partially exercised the over-allotment option and acquired 1,500,000 additional Units.

 

Note 8—Income Taxes

 

Our effective tax rate was 6.78% and 24.26% for the three months ended September 30, 2023 and 2022, respectively. Our effective tax rate was 49.76% and 29.96% for the nine months ended September 30, 2023 and 2022, respectively. The effective tax rate differs from the statutory tax rate of 21% mainly due to non-deductible transaction costs and a valuation allowance for the three and nine months ended September 30, 2023 and September 30, 2022. Cash paid for income taxes during the nine months ended September 30, 2023 and 2022 was $974,000 and $32,000, respectively.

 

 Note 9—Fair Value Measurements

 

Investments held in Trust Account

 

The following table presents information about the Company’s assets that are measured at fair value on September 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

       Quoted Prices In   Significant Other
Observable
   Significant Other
Unobservable
 
   September 30,   Active Markets   Inputs   Inputs 
   2023   (Level 1)   (Level 2)   (Level 3) 
Assets:                    
Investments held in Trust Account  $37,549,655   $37,549,655    
    
 
   $37,549,655   $37,549,655    
    
 

 

       Quoted Prices In   Significant Other
Observable
   Significant Other
Unobservable
 
   December 31,   Active Markets   Inputs   Inputs 
   2022   (Level 1)   (Level 2)   (Level 3) 
Assets:                    
Investments held in Trust Account  $168,759,775   $168,759,775    
    
 
   $168,759,775   $168,759,775    
    
 

 

Underwriters’ over-allotment option

 

The Company accounted for the over-allotment option as a liability in accordance with ASC 815-40 and presented it within liabilities on the balance sheet before the option was partially settled on January 11, 2022. The over-allotment liability was measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of over-allotment units in the statement of operations.

 

The Company used a Black Scholes model to value the over-allotment option. The over-allotment option was classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs. Inherent in pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its shares of Class A common stock based on historical volatility that matches the expected remaining life of the option. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the option. The expected life of the option is assumed to be equivalent to its remaining contractual term.

 

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The key inputs into the Black Scholes model for the over-allotment liability were as follows at January 11, 2022, the date of the partial exercise of the overallotment option:

 

   January 11, 
Input  2022 
Risk-free interest rate   0.04%
Expected term (years)   0.07 
Expected volatility   11.26%
Exercise price  $10.00 
Unit Price  $9.98 

 

The following table sets forth a summary of the changes in the fair value of the Level 3 over-allotment liability for the year ended December 31, 2022:

 

   Over-allotment 
   Liability 
Fair value as of December 31, 2021  $252,331 
Change in fair value at January 11, 2022  $(15,119)
Fair value of forfeited overallotment units at January 11, 2022  $(79,071)
Elimination of overallotment liability at January 11, 2022  $(158,141)
Fair value as of December 31, 2022  $
 

 

Note 10—Subsequent Events

 

The Company has evaluated subsequent events that occurred after the balance sheet date up to the date the financial statements were issued. Based on the Company’s review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements, except as indicated below.

 

On October 19, 2023, a company affiliated with the Sponsor agreed to loan the Company, under the terms of a promissory note, an aggregate of up to $100,000 to cover expenses related to the Business Combination. The promissory note is non-interest bearing and payable, according to contractual terms, on the earlier of December 21, 2023 or the completion of the Business Combination.

  

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

 

References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to Revelstone Capital Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Revelstone Capital, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Special Note Regarding Forward-Looking Statements

 

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

 

Overview

 

We are a blank check company incorporated in Delaware on April 5, 2021. We were formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” Our efforts to identify a prospective target business will not be limited to a particular industry or geographic location, although we intend to focus our search for target businesses in the consumer, media and/or technology sectors. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.

 

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.

 

Results of Operations

 

As of September 30, 2023, we have neither engaged in any operations nor generated any revenues. All activity for the period from April 5, 2021 (inception) through September 30, 2023 relates to our formation and the initial public offering. We will not generate any operating revenues until after the completion of our initial business combination, at the earliest. We have generated and will continue to generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the initial public offering.

 

For the three months ended September 30, 2023, we had a net loss of $415,420, which resulted from formation and operating costs of $804,083 offset by gain from investments held in the trust account of $478,474, and income tax expense of $89,811.

 

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For the nine months ended September 30, 2023, we had net income of $830,673, which resulted from gain from investments held in the trust account of $4,137,173 offset by formation and operating costs of $2,484,680 and income tax expense of $821,820.

  

For the three months ended September 30, 2022, we had a net income of $413,464, which resulted from interest income from investments held in the trust account of $758,134 offset by formation and operating costs of $201,493 and income tax expense of $143,177.

 

For the nine months ended September 30, 2022, we had net income of $386,474, which resulted from the fair value of forfeited overallotment option of $79,071, the change in fair market value of the over-allotment option of $15,119 and interest income from investments held in the trust account of $1,003,415, offset by formation and operating costs of $545,791 and income tax provision of $165,340.

 

Liquidity and Capital Resources

 

As of September 30, 2023, we had $152,956 in cash and a working capital deficit of $3,460,817.

 

Prior to the completion of the Initial Public Offering, our liquidity needs had been satisfied through a payment from the sponsor of $25,000 for the founder shares to cover certain offering costs, and the loan under an unsecured promissory note from the sponsor of $189,789. The promissory note was paid in full on January 11, 2022.

 

In addition, in order to finance transaction costs in connection with a business combination, the sponsor, initial shareholders, officers, directors or their affiliates may, but are not obligated to, provide us working capital loans. As of September 30, 2023, there were no amounts outstanding under any working capital loans.

 

On August 24, 2023, a company affiliated with the sponsor agreed to loan the Company, under an unsecured promissory note, an aggregate of up to $100,000. Second promissory note  is non-interest bearing and payable, according to contractual terms, on the earlier of December 21, 2023 or the completion of the business combination. As of September 30, 2023, the Company had borrowed $100,000 under second promissory note. On October 19, 2023, a company affiliated with the Sponsor agreed to loan the Company, under the terms of a promissory note, an aggregate of up to $100,000. Third promissory note is non-interest bearing and payable, according to contractual terms, on the earlier of December 21, 2023 or the completion of the business combination. Subsequent to the consummation of the initial public offering and private placement, our liquidity needs have been satisfied through the proceeds from the consummation of the private placement not held in the trust account.

 

The Company held a meeting on June 14, 2023 to vote on the proposal to amend its charter and the investment management trust agreement dated as of December 16, 2021 with Continental Stock Transfer & Trust Company. Pursuant to the charter amendment and the trust amendment, the Company has the right to extend the time to complete a business combination from June 21, 2023 until December 21, 2023, on a month-to-month basis by depositing into the Company’s trust account $90,000 fee for each one month of extension.

 

In connection with the stockholders’ vote at the special meeting of stockholders held by the Company on June 14, 2023, 12,980,181 shares of the Company’s common stock were redeemed with a total redemption payment of $134,295,092.

 

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 205-40, “Presentation of Financial Statements – Going Concern,” the Company has, according to the amended charter and the investment management trust agreement, until December 21, 2023, to consummate an initial business combination. It is uncertain that the Company will be able to consummate an initial business combination by this time. If an initial business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and the mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities that might result from the outcome of this uncertainty for the next twelve months from the issuance of these financial statements.

 

Off-Balance Sheet Arrangements

 

We did not have any off-balance sheet arrangements as of September 30, 2023.

 

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Contractual Obligations

 

Legal Advisory Agreement

 

On July 7, 2022 the Company signed an agreement with a legal advisor that will represent the Company on corporate and securities compliance matters related to its pursuit of a Business Combination. According to the terms of the agreement, the Company was obligated to pay a retainer fee of $50,000 upon the signing of this agreement, and is further obligated to pay up to an additional $200,000 when certain milestones are met prior to the closing of the Business Combination. Legal fees incurred in connection with the business combination above $250,000 will be due and payable upon completion of the Business Combination. The initial retainer fee of $150,000 was paid as of September 30, 2023. The amount of legal fees recorded as part of the Company’s accrued expenses and accounts payable was $1,469,530 and $50,000, respectively, as of September 30, 2023.

  

Deferred Underwriting Commission

 

As of September, 30, 2023 the Company has a long-term liability represented by deferred underwriting commissions of $1,732,500.

 

M&A Advisory Agreement

 

On October 13, 2022, the Company signed an agreement with an advisor to assist the Company on merger and acquisition matters as they relate to a Business Combination. According to the terms of the agreement, as amended on July 7, 2023, the Company is obligated to pay the advisor a fee determined as a percentage of the enterprise value of a target. The percentage ranges from 0.5%, which would apply to an enterprise value of $600,000,000 or more, and 1.5%, which would apply to an enterprise value of $200,000,000 or less. The advisory fee is payable by the Company to the advisor in shares of the Company’s Class A common stock at $10.00 per share. The Company has not recorded any advisory fees through September 30, 2023 as stock compensation recognition criteria per ASC 718-10-25 have not been met.

 

Private Placement Agreements

 

On October 13, 2022, the Company signed a private placement agreement with an agent to assist the Company with the private placement of the Company’s stock or other securities. According to the terms of the agreement, as amended on July 7, 2023, the Company is obligated to pay the agent, concurrently with the consummation of the placement, a fee determined as 2% of gross receipts from the placement. The advisory fee is payable in shares of the Company’s Class A common stock at $10.00 per share. No fee has been recorded by the Company through September 30, 2023 as this private placement has not yet taken place.

 

Merger Agreement

 

On July 17, 2023, the Company entered into a merger agreement, by and among the Company, Revelstone Capital Merger Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“Merger Sub”), Set Jet, Inc., a Nevada corporation “Set Jet” and Thomas P. Smith.

 

The merger agreement provides that, among other things, at the closing of the transactions, Merger Sub will merge with and into Set Jet, with Set Jet surviving as a wholly-owned subsidiary of the Company. In connection with the merger, the Company will change its name to Set Jet, Inc.

 

The Business Combination is subject to customary closing conditions, including the satisfaction of the minimum net tangible assets condition, the receipt of certain governmental approvals and the required approval by the stockholders of the Company and Set Jet. There is no assurance that the Business Combination will be completed.

 

The total consideration to be received by the Set Jet stockholders from the Company at closing and via earnout is up to $145 million subject to adjustment. Consideration paid at closing is in an amount equal to $80 million, subject to adjustment, based on the Company’s debt net of the Company’s cash and cash equivalents at closing, as defined in the merger agreement. Merger consideration at closing is paid in shares of Class A common stock of the Company. Earnout consideration of up to $65 million consists of (i) up to $45 million to shareholders of Set Jet pursuant to the earnout escrow agreement and (ii) up to $20 million to certain executive officers and directors of the combined company under the retention bonus agreement. 

 

On August 16, 2023, the Company, Merger Sub and Set Jet entered into an amended and restated merger agreement amending certain covenants and closing conditions, none of which were material to the Business Combination

 

Critical Accounting Policies

 

Public and Private Warrants

 

The Company accounted for the 14,500,000 warrants issued and outstanding at September 30, 2023, including 8,250,000 Public Warrants and 6,250,000 Private Placement Warrants in accordance with the guidance contained in ASC 815-40. The Company concluded that the Public and Private Placement Warrants are considered indexed to the entity’s own stock and meet other equity classification requirements. Therefore, Public and Private Placement Warrants are considered equity instruments and are classified as such.

 

23

 

 

 

Net Income/(Loss) Per Share of Class A Common Stock

 

We have two categories of shares, which are referred to as redeemable shares of Class A common stock and non-redeemable shares of Class B and Class A common stock. Earnings and losses are shared pro rata between the two categories of shares of common stock.

 

Shares of Class A Common Stock Subject to Possible Redemption

 

The 3,519,819 remaining shares of Class A common stock issued as part of the Units in the Public Offering and outstanding at September 30, 2023 contain a redemption feature which allows for the redemption of such public shares in connection with our liquidation, if there is a shareholder vote or tender offer in connection with the business combination and in connection with certain amendments to our second amended and restated certificate of incorporation. In accordance with ASC 480-10-S99, redemption provisions not solely within the control of us require shares of Class A common stock subject to redemption to be classified outside of permanent equity. Therefore, all redeemable shares of Class A common stock were classified outside of permanent equity as of September 30, 2023.

 

We recognized changes in redemption value immediately as they occur upon the IPO and will adjust the carrying value of redeemable shares of Class A common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares of Class A common stock are affected by charges against additional paid in capital and accumulated deficit.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company we are not required to make disclosures under this Item.

 

Item 4. Control and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2023, pursuant to Rule 15d-15(e) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, our disclosure controls and procedures were not effective as of September 30, 2023 due to the material weakness in our internal control over financial reporting related to a) timely recognition of accounts payable, accrued liabilities as well as related expenses, b) calculation of the provision for income taxes and c) calculation of shares subject to redemption and non-redeemable shares, including calculations of net income (loss) per share associated with both classes of shares.

 

Management’s Report on Internal Controls Over Financial Reporting

 

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:

 

  1. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,

 

  2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

 

  3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

24

 

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at September 30, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of September 30, 2023.

 

Management has implemented steps to improve our internal control over financial reporting. To respond to the material weakness related to timely recognition of accounts payable, accrued liabilities as well as related expenses, we have devoted, and plan to continue to devote, additional effort and resources to the remediation and improvement of our internal control over financial reporting. Our plans at this time include performing, as part of financial close, additional analysis and procedures, as deemed necessary to ensure complete recognition of all vendor invoices and expenses incurred but not yet invoiced in addition to proper review controls over the provision for income taxes and calculations of non-redeemable and redeemable shares, including related net income (loss) per share. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

 

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

 

Changes in Internal Control Over Financial Reporting

 

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, except for the changes noted above to address the aforementioned material weakness. 

 

25

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

Except as disclosed herein, as of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 27, 2023. Any of those risk factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

 

Revelstone is currently not in compliance with the Nasdaq continued listing requirements. If Revelstone is unable to regain compliance with Nasdaq’s listing requirements, its warrants could be delisted, which could affect its securities’ market price and liquidity.

 

On June 14, 2023, the Company received a notification letter (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that that it was not in compliance with Nasdaq Listing Rule 5452(b)(C) with respect to its warrants for failing to maintain a minimum of $1,000,000 in aggregate market value of its outstanding warrants which is required by the Nasdaq Global Market.

 

On July 31, 2023, the Company submitted a plan to regain compliance and Nasdaq granted an extension of time until December 11, 2023, to regain compliance. The Company cannot assure you that it will be able to regain compliance. The Company’s failure to meet this, or any other requirement would result in its warrants being delisted from Nasdaq. The Company and holders of its securities could be materially adversely impacted if its securities are delisted from Nasdaq. In particular:

 

  the price of the Company’s securities will likely decrease as a result of the loss of market efficiencies associated with Nasdaq;

 

  holders may be unable to sell or purchase the Company’s securities when they wish to do so;

 

  The Company may become subject to stockholder litigation;

 

  The Company may lose the interest of institutional investors in its securities;

 

  The Company may lose media and analyst coverage; and

 

  The Company would likely lose any active trading market for its securities, as it may only be traded on one of the over-the-counter markets, if at all.

 

26

 

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

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

 

Exhibit No.   Description
31.1*   Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32**   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document
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 Labels Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

*Filed herewith.

 

**Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

27

 

 

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.

 

  Revelstone Capital Acquisition Corp.
     
Date: November 17, 2023 By: /s/ Daniel Neukomm
    Daniel Neukomm
    Co-Chief Executive Officer
    (Principal Executive Officer)

 

Date: November 17, 2023 By: /s/ Morgan Callagy
    Morgan Callagy
    Co-Chief Executive Officer and Secretary
    (Principal Financial and Accounting Officer)

 

 

28

 

 

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