UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
Or
For the transition period from to
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Address (including zip code) and telephone number (including area code) of principal executive offices
Securities registered pursuant to Section 12(b) of the Act: None
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
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 | ☐ |
☒ | 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
As
of August 14, 2023,
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
SENTINEL ENERGY SERVICES INC.
CONDENSED BALANCE SHEETS
June
30, (unaudited) | December 31, 2022 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total current assets | ||||||||
Prepaid expenses – long term | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Total liabilities | ||||||||
Stockholders’ Deficit: | ||||||||
Preferred shares, $ | ||||||||
Class A common stock, $ | ||||||||
Class B common stock, $ | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ deficit | ( | ) | ( | ) | ||||
Total liabilities and stockholders’ deficit | $ | $ |
See accompanying notes to unaudited condensed financial statements.
1
SENTINEL ENERGY SERVICES INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the June 30, | For the June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
REVENUE | $ | $ | $ | $ | ||||||||||||
EXPENSES | ||||||||||||||||
General and administrative | ||||||||||||||||
TOTAL EXPENSES | ||||||||||||||||
LOSS BEFORE INCOME TAX PROVISION | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income tax provision | ||||||||||||||||
Net loss attributable to common stock | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
1 |
See accompanying notes to unaudited condensed financial statements.
2
SENTINEL ENERGY SERVICES INC.
UNAUDITED CONDENSED StatementS of Changes in STOCKHOLDERS’ DEFICIT
For the Three and Six Months Ended June 30, 2023
Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance as of January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Issuance of Class A shares to Sponsor | ||||||||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance as of March 31, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance as of June 30, 2023 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) |
For the Three and Six Months Ended June 30, 2022
Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance as of January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
Issuance of Class A shares to Sponsor | ||||||||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance as of March 31, 2022 (unaudited) | $ | ( | ) | ( | ) | |||||||||||||||||||||||
Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
Balance as of June 30, 2022 (unaudited) | $ | $ | $ | $ | ( | ) | $ | ( | ) |
See accompanying notes to unaudited condensed financial statements.
3
SENTINEL ENERGY SERVICES INC.
UNAUDITED CONDENSED StatementS of Cash Flows
For the Six Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ||||||||
Prepaid expenses – long term | ||||||||
Accounts payable and accrued expenses | ||||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from issuance of Class A common stock - Sponsor | ||||||||
Net cash provided financing activities | ||||||||
Net change in cash | ( | ) | ( | ) | ||||
Cash at beginning of period | ||||||||
Cash at end of period | $ | $ |
See accompanying notes to unaudited condensed financial statements.
4
SENTINEL ENERGY SERVICES INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
1. Description of Organization and Business Operations
Organization and General
Sentinel Energy Services Inc. (the “Company”) was incorporated in the Cayman Islands on June 5, 2017. The Company was formed as a blank check company for the purpose of effecting a merger, amalgamation, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company is also a “smaller reporting company” as defined in the Exchange Act of 1934, as amended (the “Exchange Act”).
On December 28, 2018, the Company changed its jurisdiction of incorporation from the Cayman Islands (“Sentinel Cayman”) to the State of Delaware (“Sentinel Delaware”), as described further below (the “Domestication”) and continued to be named Sentinel Energy Services Inc. As a result of the Domestication, the securities of Sentinel Cayman converted into securities of Sentinel Delaware, such that Sentinel Cayman’s issued and outstanding Class A ordinary shares (the “Class A ordinary shares”) and Class B ordinary shares (the “Class B ordinary shares”) automatically converted by operation of law into one share of Class A common stock (“Class A common stock”) and Class B common stock (“Class B common stock”), of Sentinel Delaware, respectively. Similarly, each of Sentinel Cayman’s outstanding units and warrants automatically converted by operation of law, on a one-for-one basis, into Units (as defined below) of Sentinel Delaware and warrants, including the Private Placement Warrants and Public Warrants (each as defined below) to acquire the corresponding number of shares of Class A common stock, respectively. Accordingly, all references to the Company’s capital stock both before and after the Domestication are referred to as shares of “common stock” in this filing.
At June 30, 2023, the Company had not yet commenced operations. All activity through June 30, 2023 relates to (1) the Company’s formation and issuance of the Founder Shares (as defined in Note 4), (2) the Public Offering (as defined below) and sale of warrants in a private placement to the Sponsor (the “Private Placement Warrants”) which closed in November 2017, (3) the subsequent a search for a business combination candidate, including activities in connection with an announced and subsequently terminated proposed business combination and (4) liquidation activities, including liquidation of the Trust Account (as defined below), following the Company’s inability to consummate a business combination prior to the November 7, 2019 deadline under the Company certificate of incorporation (the “Charter”). The Company has not generated any operating revenues since inception. The Company generated non-operating income in the form of interest income from the proceeds derived from the Public Offering and sale of Private Placement Warrants until November 2019.
The Company intended to finance
its initial business combination with proceeds from the Company’s initial public offering (the “Public Offering”) of
the Company units (“Units”) and the sale of the Private Placement Warrants. Each Unit consisted of (A) one share of the Company’s
Class A common stock, par value $
In connection with the redemption
of the Public Shares, each stockholder received approximately $
5
SENTINEL ENERGY SERVICES INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
Following the redemption of the Public Shares, the conversion of the Public Warrants and the forfeiture of the Private Placement Warrants, there were no Units, Public Shares, Public Warrants or Private Placement Warrants outstanding. Additional shares of Class A common stock were subsequently issued and shares of Class B common stock remain outstanding. For more information on additional issuances, see Note 4 and the Company’s previous filings with the Securities and Exchange Commission (the “SEC”).
Initial Business Combination
The Company’s management had broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering were intended to be generally applied toward consummating an initial business combination.
The Charter and the prospectus
that the Company filed in connection with the Public Offering provided that the Company had 24 months after the closing of its Public
Offering, or until November 7, 2019, to complete a business combination. During the period since the Company’s Public Offering,
the Company diligently searched for a business to combine with in a transaction that would generate value for the Company’s stockholders;
however, over the same period, the energy sector experienced significant headwinds, which increased the challenges faced by the Company
in sourcing a compelling target business. Despite the Company’s best efforts, it was not able to consummate a business combination
prior to the November 7, 2019 deadline under its Charter. As a result, the Company commenced the liquidation of the Trust Account and
returned the funds held therein to its public stockholders by redeeming
Underwriting Discount
Upon closing of the Public
Offering, the Company paid an underwriting discount of
Liquidity and Going Concern
In connection with the Company’s
assessment of going concern considerations in accordance with the Financial Accounting Standards Board (“FASB”) Accounting
Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the
Company determined that it does not have sufficient liquidity to meet its future obligations; however, management has determined that,
pursuant to a commitment letter from the Sponsor, it has access to funds from the Sponsor that alleviate going concern. As of June 30,
2023, the Company had a working capital deficit of $
Pursuant a commitment letter from the Sponsor, the Sponsor intends to financially support the Company sufficient for the Company to satisfy its working capital needs until at least August 14, 2024. For additional information, see the information under the captions “Advances from Related Parties,” “Promissory Note Payable – Sponsor,” “Contributions from Related Party” and “Administrative Support Agreement” in Note 4.
The Company demonstrates adverse
conditions that raise substantial doubt about the Company’s ability to continue as a going concern for
The Company has not established any source of revenue to cover its operating costs. Management plans to fund operating expenses with a commitment letter from the Sponsor. The unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.
6
SENTINEL ENERGY SERVICES INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC, and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of June 30, 2023 and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2023.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Concentration of Credit Risk
The Company has significant
cash balances at financial institutions which throughout the year may exceed the federally insured limit of $
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheets.
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 had no cash equivalents as of June 30, 2023 and December 31, 2022.
Net Loss per Share of Common Stock
Net loss per share of common stock is computed by dividing net loss applicable to the shares of common stock by the weighted average number of shares outstanding for the periods. As a result of the redemption of Public Shares in November 2019, for the three and six months ended June 30, 2023 and 2022, the Class A shares have no specific redemption rights. Net loss per common share is calculated by dividing the net loss by the weighted average number of Class A and Class B shares outstanding for the periods.
7
SENTINEL ENERGY SERVICES INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income 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.
FASB Topic ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2023 and December 31, 2022. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at June 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 has been subject to income tax examinations by major taxing authorities since inception.
The Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with federal, state, and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
During the three and six months ended June 30, 2023 and 2022, the Company recorded no income tax expense.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have an effect on the Company’s financial statements.
3. Public Offering and Private Placement Warrants
In November 2017, the Company
closed its Public Offering of
During the liquidation period,
the Company and the holders of its Public Warrants executed an amendment to the Warrant Agreement, dated as of November 2, 2017, between
the Company and Continental Stock Transfer & Trust Company, to automatically convert all of the outstanding Public Warrants into the
right to receive $
Simultaneously with the closing
of the Public Offering on November 7, 2017, the Sponsor purchased an aggregate of
8
SENTINEL ENERGY SERVICES INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
The Company paid an underwriting
discount of
Following the redemption of the Public Shares, the conversion of the Public Warrants and the forfeiture of the Private Placement Warrants, there were no Units, Public Shares, Public Warrants or Private Placement Warrants outstanding. Additional shares of Class A common stock were subsequently issued and shares of Class B common stock remain outstanding. For more information on additional issuances, see Note 4 and the Company’s previous filings with the SEC.
4. Related Party Transactions
Founder Shares
In June 2017 prior to the
Public Offering, the Sponsor entered into an Amended and Restated Securities Purchase Agreement for the purchase of
The Founder Shares are identical to the shares of Class A common stock that were included in the Units sold in the Public Offering except that (1) holders of the Founder Shares have the right to vote on the election of directors prior to an initial business combination, (2) the Founder Shares are subject to certain transfer restrictions, as described in more detail below, (3) holders of the Founder Shares entered into letter agreements with the Company pursuant to which they agreed to waive their redemption rights with respect to any Founder Shares held by them in connection with the completion of an initial business combination, (4) the Founder Shares will automatically convert on a one-for-one basis into shares of Class A common stock at the time of an initial business combination and (5) the Founder Shares are subject to registration rights, as described below.
In August 2017, the Sponsor
surrendered
In October 2017 and April
2018, the Sponsor transferred
Transfer Restrictions
The terms applicable to the
Founder Shares provide that, subject to limited exceptions, the Sponsor may not transfer, assign or sell any of the same until the earlier
to occur of (A) one year after the completion of the initial business combination or (B) subsequent to the initial business combination,
(x) if the last sale price of the Company’s Class A common stock equals or exceeds $
9
SENTINEL ENERGY SERVICES INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
Registration Rights
The holders of Founder Shares that may be issued equity securities of the Company upon conversion of working capital loans may be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement, by and between the Company, the Sponsor and Mr. Zenner. The registration rights include certain demand and “piggyback” rights.
However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), to become effective until termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Advances from Related Parties
During the three and six months ended June 30, 2023 and 2022, the Sponsor or an affiliate of the Sponsor did not incur certain administrative expenses on behalf of the Company. As of June 30, 2023 and December 31, 2022, there was no outstanding balance due to related parties.
Promissory Note Payable – Sponsor
On March 1, 2019, the Company
issued a convertible promissory note (the “Convertible Promissory Note”) in the amount of up to $
All unpaid principal under
the Convertible Promissory Note was due and payable in full on the earlier of November 7, 2019 or the consummation of an initial business
combination by the Company by the deadline specified in its Charter. As a result, the Convertible Promissory Note is no longer available
to the Company as a source of financing and no amount has been outstanding thereunder since March 31, 2020. As of June 30, 2023 and December
31, 2022, the outstanding balance on Convertible Promissory Note was $
Contributions from Related Party
In January 2022, the Company
received a contribution of $
In September 2022, the Company
received a contribution of $
10
SENTINEL ENERGY SERVICES INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
In December 2022, the Company
received a contribution of $
In March 2023, the Company
received a contribution of $
As of June 30, 2023 and December
31, 2022, there were
Administrative Support Agreement
Commencing on the date the
Units were first listed on the Nasdaq Capital Market, the Company agreed to pay an affiliate of the Sponsor up to $
The Company did not incur any expenses under the Administrative Support Agreement for the three and six months ended June 30, 2023 and 2022.
5. Stockholders’ Deficit
Common Stock
The authorized common stock
of the Company includes up to
The Sponsor currently holds
At June 30, 2023 and December
31, 2022, there were
Preferred Stock
The Company is authorized
to issue
6. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of Exchange Act Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “look,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:
● | our inability to complete our initial business combination; |
● | the lack of a market for our securities; or |
● | our financial performance. |
The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in this Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” in this Report may not be exhaustive.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
The Company was formed as a blank check company for the purpose of effecting a merger, amalgamation, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. For more information about the Company, please see Note 1 to our unaudited condensed financial statements included in this Report.
12
Results of Operations
We have not generated any operating revenues to date, and we will likely not generate any operating revenues in the future. Our entire activity up to June 30, 2023 has related (1) the Company’s formation and issuance of the Founder Shares in June 2017, (2) the Public Offering and sale of Private Placement Warrants which closed in November 2017, (3) the subsequent search for a business combination candidate, including activities in connection with an announced and subsequently terminated proposed business combination, and (4) liquidation activities following the Company’s inability to consummate a business combination prior to the November 7, 2019 deadline under the Company’s Charter.
For the three months ended June 30, 2023, we had a net loss of $24,452, which consisted of general and administrative expenses.
For the three months ended June 30, 2022, we had a net loss of $34,285, which consisted of $34,285 of general and administrative expenses.
For the six months ended June 30, 2023, we had a net loss of $60,103, which consisted of general and administrative expenses.
For the six months ended June 30, 2022, we had a net loss of $70,842, which consisted of $70,842 of general and administrative expenses.
Liquidity and Capital Resources
We presently have no revenue; our net loss was $24,452 and $60,103 for the three and six months ended June 30, 2023, respectively, and consisted of general and administrative expenses. Our net loss was $34,285 and $70,842 for the three and six months ended June 30, 2022, respectively, and consisted of general and administrative expenses. For the three and six months ended June 30, 2023 and 2022, our liquidity needs were satisfied through funding from our Sponsor. The Company does not expect to seek loans, advances or contributions from parties other than the Sponsor or an affiliate of the Sponsor.
Contributions from Related Party
In January 2022, the Company received a contribution of $25,000 from the Sponsor to fund ongoing operations and expenses. The amount advanced by the Sponsor was treated as a capital contribution in exchange for which the Company issued to the Sponsor 2,500 shares of the Company’s Class A common stock at $10.00 per share on January 25, 2022.
In September 2022, the Company received a contribution of $30,000 from the Sponsor to fund ongoing operations and expenses. The amount advanced by the Sponsor was treated as a capital contribution in exchange for which the Company issued to the Sponsor 3,000 shares of the Company’s Class A common stock at $10.00 per share on September 20, 2022.
In December 2022, the Company received a contribution of $60,000 from the Sponsor to fund ongoing operations and expenses. The amount advanced by the Sponsor was treated as a capital contribution in exchange for which the Company issued to the Sponsor 6,000 shares of the Company’s Class A common stock at $10.00 per share on December 13, 2022.
In March 2023, the Company received a contribution of $10,000 from the Sponsor to fund ongoing operations and expenses. The amount advanced by the Sponsor was treated as a capital contribution in exchange for which the Company issued to the Sponsor 1,000 shares of the Company’s Class A common stock at $10.00 per share on March 3, 2023.
13
Mandatory Liquidation
We were unable to complete an initial business combination by the November 7, 2019 deadline under our Charter and so we commenced the liquidation of the assets in the Trust Account on November 8, 2019. This raises substantial doubt about our ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Liquidity and Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company determined that it does not have sufficient liquidity to meet its future obligations; however, management has determined that, pursuant to a commitment letter from the Sponsor, it has access to funds from the Sponsor that alleviate going concern. As of June 30, 2023, the Company had a working capital deficit of $338,027, current liabilities of $355,512 and cash of $7,068.
Pursuant a commitment letter from the Sponsor, the Sponsor intends to financially support the Company sufficient for the Company to satisfy its working capital needs until at least August 14, 2024. For more information regarding our liquidity, see “-Liquidity and Capital Resources” above.
Critical Accounting Estimates
Net Loss per Share of Common Stock
Net loss per share of common stock is computed by dividing net loss applicable to the shares of common stock by the weighted average number of shares outstanding for the periods. As a result of the redemption of Public Shares in November 2019, for the three and six months ended June 30, 2023 and 2022, shares of Class A common stock have no specific redemption rights. Net loss per common share is calculated by dividing the net loss by the weighted average number of shares of Class A common stock and Class B common stock outstanding for the periods.
JOBS Act
The Jumpstart Our Business Startups Act (“JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. Companies that qualify as an “emerging growth company” under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies and are eligible for reduced reporting requirements provided by the JOBS Act. We are no longer an emerging growth company after December 31, 2022 due to the passing the fifth anniversary of the completion of the Public Offering. As a result, we must adopt all accounting pronouncements as of public company effective dates and are no longer eligible for reduced reporting requirements provided by the JOBS Act.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2023.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
The underwriters in the Public Offering were entitled to deferred underwriting commissions of $12,075,000. The deferred underwriting commissions would have become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete an initial business combination, subject to the terms of the underwriting agreement. The underwriters were not entitled to any interest accrued on the deferred underwriting commissions. Because we were unable to complete an initial business combination under the November 7, 2019 deadline under our Charter, the underwriters will not receive the deferred underwriting commission.
14
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company,” we are not required to provide disclosure pursuant to this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Financial Officer (the “Certifying Officer”) who is both our principal executive and principal financial officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation, our Certifying Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.
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.
15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the knowledge of our management, there is no material litigation, arbitration, bankruptcy, receivership, governmental proceeding or other proceeding currently pending against us or any members of our management team in their capacity as such.
Item 1A. Risk Factors
As of the date of this Report, 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 31, 2023.
Item 2. Unregistered Sales of Equity Securities
None.
Item 5. Other Information
None.
16
Item 6. Exhibits
EXHIBIT INDEX
Exhibit Number | Description | |
31.1 | Certification of Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
32.1 | Certification of Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema | |
101.CAL | Inline XBRL Taxonomy Calculation Linkbase | |
101.LAB | Inline XBRL Taxonomy Label Linkbase | |
101.PRE | Inline XBRL Definition Linkbase Document | |
101.DEF | Inline XBRL Definition Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
August 14, 2023
SENTINEL ENERGY SERVICES INC. | ||
By: | /s/ Gerald Cimador | |
Gerald Cimador | ||
Chief Financial Officer (Principal Executive, Financial and Accounting Officer) |
18
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND
PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald Cimador, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Sentinel Energy Services Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 14, 2023 | By: | /s/ Gerald Cimador |
Gerald Cimador | ||
Chief Financial Officer | ||
(Principal Executive Officer, Principal Financial and Accounting Officer) |
Exhibit 32.1
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
In connection with the Quarterly Report of Sentinel Energy Services Inc. (the “Registrant”) on Form 10-Q for the quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, in the capacity and on the date indicated below, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: August 14, 2023 | By: | /s/ Gerald Cimador |
Gerald Cimador | ||
Chief Financial Officer | ||
(Principal Executive Officer, Principal Financial and Accounting Officer) |
Condensed Balance Sheets (Parentheticals) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Preferred shares, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred shares, authorized | 1,000,000 | 1,000,000 |
Preferred shares, issued | ||
Preferred shares, outstanding | ||
Class A Common Stock | ||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 566,911 | 565,911 |
Common stock, shares outstanding | 566,911 | 565,911 |
Class B Common Stock | ||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 862,500 | 862,500 |
Common stock, shares outstanding | 862,500 | 862,500 |
Unaudited Condensed Statements of Operations - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|||
Income Statement [Abstract] | ||||||
REVENUE | ||||||
EXPENSES | ||||||
General and administrative | 24,452 | 34,285 | 60,103 | 70,842 | ||
TOTAL EXPENSES | 24,452 | 34,285 | 60,103 | 70,842 | ||
LOSS BEFORE INCOME TAX PROVISION | (24,452) | (34,285) | (60,103) | (70,842) | ||
Income tax provision | ||||||
Net loss attributable to common stock | $ (24,452) | $ (34,285) | $ (60,103) | $ (70,842) | ||
Weighted average number of shares of common stock outstanding, basic and diluted (in Shares) | [1] | 1,429,411 | 1,415,911 | 1,429,074 | 1,415,911 | |
Basic and diluted net loss per share of common stock (in Dollars per share) | $ (0.02) | $ (0.02) | $ (0.04) | $ (0.05) | ||
|
Unaudited Condensed Statements of Operations (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|||
Income Statement [Abstract] | ||||||
Weighted average number of shares of common stock outstanding, Diluted | [1] | 1,429,411 | 1,415,911 | 1,429,074 | 1,415,911 | |
Diluted net loss per share of common stock | $ (0.02) | $ (0.02) | $ (0.04) | $ (0.05) | ||
|
Unaudited Condensed Statements of Changes in Stockholders’ Deficit - USD ($) |
Class A
Common Stock
|
Class B
Common Stock
|
Additional Paid-in Capital |
Accumulated Deficit |
Total |
---|---|---|---|---|---|
Balance at Dec. 31, 2021 | $ 55 | $ 86 | $ 5,644,400 | $ (5,925,876) | $ (281,335) |
Balance (in Shares) at Dec. 31, 2021 | 554,411 | 862,500 | |||
Issuance of Class A shares to Sponsor | 25,000 | 25,000 | |||
Issuance of Class A shares to Sponsor (in Shares) | 2,500 | ||||
Net loss | (36,557) | (36,557) | |||
Balance at Mar. 31, 2022 | $ 55 | $ 86 | 5,669,400 | (5,962,433) | (292,892) |
Balance (in Shares) at Mar. 31, 2022 | 556,911 | 862,500 | |||
Balance at Dec. 31, 2021 | $ 55 | $ 86 | 5,644,400 | (5,925,876) | (281,335) |
Balance (in Shares) at Dec. 31, 2021 | 554,411 | 862,500 | |||
Net loss | (70,842) | ||||
Balance at Jun. 30, 2022 | $ 55 | $ 86 | 5,669,400 | (5,996,718) | (327,177) |
Balance (in Shares) at Jun. 30, 2022 | 556,911 | 862,500 | |||
Balance (in Shares) at Mar. 31, 2022 | 556,911 | 862,500 | |||
Net loss | (34,285) | (34,285) | |||
Balance at Jun. 30, 2022 | $ 55 | $ 86 | 5,669,400 | (5,996,718) | (327,177) |
Balance (in Shares) at Jun. 30, 2022 | 556,911 | 862,500 | |||
Balance at Dec. 31, 2022 | $ 56 | $ 86 | 5,759,399 | (6,027,497) | (267,956) |
Balance (in Shares) at Dec. 31, 2022 | 565,911 | 862,500 | |||
Issuance of Class A shares to Sponsor | 10,000 | 10,000 | |||
Issuance of Class A shares to Sponsor (in Shares) | 1,000 | ||||
Net loss | (35,651) | (35,651) | |||
Balance at Mar. 31, 2023 | $ 56 | $ 86 | 5,769,399 | (6,063,148) | (293,607) |
Balance (in Shares) at Mar. 31, 2023 | 566,911 | 862,500 | |||
Balance at Dec. 31, 2022 | $ 56 | $ 86 | 5,759,399 | (6,027,497) | (267,956) |
Balance (in Shares) at Dec. 31, 2022 | 565,911 | 862,500 | |||
Net loss | (60,103) | ||||
Balance at Jun. 30, 2023 | $ 56 | $ 86 | 5,769,399 | (6,087,600) | (318,059) |
Balance (in Shares) at Jun. 30, 2023 | 566,911 | 862,500 | |||
Balance (in Shares) at Mar. 31, 2023 | 566,911 | 862,500 | |||
Net loss | (24,452) | (24,452) | |||
Balance at Jun. 30, 2023 | $ 56 | $ 86 | $ 5,769,399 | $ (6,087,600) | $ (318,059) |
Balance (in Shares) at Jun. 30, 2023 | 566,911 | 862,500 |
Unaudited Condensed Statements of Cash Flows - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Cash Flows From Operating Activities: | ||
Net loss | $ (60,103) | $ (70,842) |
Changes in operating assets and liabilities: | ||
Prepaid expenses | 1,579 | |
Prepaid expenses – long term | 5,208 | 5,207 |
Accounts payable and accrued expenses | 30,000 | 38,155 |
Net cash used in operating activities | (24,895) | (25,901) |
Cash Flows From Financing Activities: | ||
Proceeds from issuance of Class A common stock - Sponsor | 10,000 | 25,000 |
Net cash provided financing activities | 10,000 | 25,000 |
Net change in cash | (14,895) | (901) |
Cash at beginning of period | 21,963 | 8,314 |
Cash at end of period | $ 7,068 | $ 7,413 |
Description of Organization and Business Operations |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Description of Organization and Business Operations [Abstract] | |
Description of Organization and Business Operations | 1. Description of Organization and Business Operations
Organization and General
Sentinel Energy Services Inc. (the “Company”) was incorporated in the Cayman Islands on June 5, 2017. The Company was formed as a blank check company for the purpose of effecting a merger, amalgamation, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company is also a “smaller reporting company” as defined in the Exchange Act of 1934, as amended (the “Exchange Act”).
On December 28, 2018, the Company changed its jurisdiction of incorporation from the Cayman Islands (“Sentinel Cayman”) to the State of Delaware (“Sentinel Delaware”), as described further below (the “Domestication”) and continued to be named Sentinel Energy Services Inc. As a result of the Domestication, the securities of Sentinel Cayman converted into securities of Sentinel Delaware, such that Sentinel Cayman’s issued and outstanding Class A ordinary shares (the “Class A ordinary shares”) and Class B ordinary shares (the “Class B ordinary shares”) automatically converted by operation of law into one share of Class A common stock (“Class A common stock”) and Class B common stock (“Class B common stock”), of Sentinel Delaware, respectively. Similarly, each of Sentinel Cayman’s outstanding units and warrants automatically converted by operation of law, on a one-for-one basis, into Units (as defined below) of Sentinel Delaware and warrants, including the Private Placement Warrants and Public Warrants (each as defined below) to acquire the corresponding number of shares of Class A common stock, respectively. Accordingly, all references to the Company’s capital stock both before and after the Domestication are referred to as shares of “common stock” in this filing.
At June 30, 2023, the Company had not yet commenced operations. All activity through June 30, 2023 relates to (1) the Company’s formation and issuance of the Founder Shares (as defined in Note 4), (2) the Public Offering (as defined below) and sale of warrants in a private placement to the Sponsor (the “Private Placement Warrants”) which closed in November 2017, (3) the subsequent a search for a business combination candidate, including activities in connection with an announced and subsequently terminated proposed business combination and (4) liquidation activities, including liquidation of the Trust Account (as defined below), following the Company’s inability to consummate a business combination prior to the November 7, 2019 deadline under the Company certificate of incorporation (the “Charter”). The Company has not generated any operating revenues since inception. The Company generated non-operating income in the form of interest income from the proceeds derived from the Public Offering and sale of Private Placement Warrants until November 2019.
The Company intended to finance its initial business combination with proceeds from the Company’s initial public offering (the “Public Offering”) of the Company units (“Units”) and the sale of the Private Placement Warrants. Each Unit consisted of (A) one share of the Company’s Class A common stock, par value $0.0001 per share (the “Public Shares”), and (B) one-third of one warrant exercisable to purchase one share of the Company’s Class A common stock (each whole warrant, a “Public Warrant”), and from the Company’s private placement sale of warrants exercisable to purchase one share of Company’s Class A common stock (each, a “Private Placement Warrant”) to the Sentinel Management Holdings, LLC (the “Sponsor”). Upon the closings of the Public Offering and the sale of the Private Placement Warrants, approximately $345,000,000 was placed in a trust account (the “Trust Account”). The Company was not able to consummate a business combination prior to the November 7, 2019 deadline under the Company’s Charter. As a result, the Company commenced the liquidation of the Trust Account, which then had a balance of approximately $355,500,000, and returned the funds held therein to its public stockholders by redeeming 100% of the Public Shares in accordance with the Charter. During the liquidation period, the Company and the holders of the Public Warrants also executed an amendment to the Warrant Agreement, dated as of November 2, 2017, by and between the Company and Continental Stock Transfer & Trust Company, which automatically converted the Public Warrants into the right to receive $0.02 per whole Public Warrant, payable in cash. The redemption of the Public Shares and the conversion of the Public Warrants completely extinguished the public stockholders’ rights in the Company. In addition, the Sponsor forfeited the Private Placement Warrants as a result of the Company being unable to consummate a business combination prior to the deadline in its Charter.
In connection with the redemption of the Public Shares, each stockholder received approximately $10.30 per share on November 18, 2019. The Company withheld approximately $1,350,000 from the distribution. In April 2020, the Company paid the income tax liability for the year ended December 31, 2019 of $259,284 and, following payment of distribution settlement expenses of $100,351, the Company distributed the remaining $1,152,035 to its public stockholders on May 4, 2020 for a distribution of approximately $0.03 per share. The Trust Account was subsequently closed with no balance remaining. In December 2019, the Company paid $225,990 in connection with the conversion of the Public Warrants.
Following the redemption of the Public Shares, the conversion of the Public Warrants and the forfeiture of the Private Placement Warrants, there were no Units, Public Shares, Public Warrants or Private Placement Warrants outstanding. Additional shares of Class A common stock were subsequently issued and shares of Class B common stock remain outstanding. For more information on additional issuances, see Note 4 and the Company’s previous filings with the Securities and Exchange Commission (the “SEC”).
Initial Business Combination
The Company’s management had broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering were intended to be generally applied toward consummating an initial business combination.
The Charter and the prospectus that the Company filed in connection with the Public Offering provided that the Company had 24 months after the closing of its Public Offering, or until November 7, 2019, to complete a business combination. During the period since the Company’s Public Offering, the Company diligently searched for a business to combine with in a transaction that would generate value for the Company’s stockholders; however, over the same period, the energy sector experienced significant headwinds, which increased the challenges faced by the Company in sourcing a compelling target business. Despite the Company’s best efforts, it was not able to consummate a business combination prior to the November 7, 2019 deadline under its Charter. As a result, the Company commenced the liquidation of the Trust Account and returned the funds held therein to its public stockholders by redeeming 100% of the Company’s Public Shares in accordance with the Charter, which together with the conversion of the Public Warrants extinguished the public stockholders’ rights in the Company.
Underwriting Discount
Upon closing of the Public Offering, the Company paid an underwriting discount of 2.0% of the per Unit offering price to the underwriters with an additional fee (the “Deferred Discount”) of 3.5% ($12,075,000) of the gross offering proceeds payable upon the Company’s completion of an initial business combination. The underwriters were not entitled to any interest accrued on the Deferred Discount. In accordance with the terms of the underwriting agreement entered into in connection with the Public Offering, the underwriters forfeited any rights or claims to the Deferred Discount because the Company was unable to consummate an initial business combination by the November 7, 2019 deadline under its Charter.
Liquidity and Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company determined that it does not have sufficient liquidity to meet its future obligations; however, management has determined that, pursuant to a commitment letter from the Sponsor, it has access to funds from the Sponsor that alleviate going concern. As of June 30, 2023, the Company had a working capital deficit of $338,027, current liabilities of $355,512 and cash of $7,068.
Pursuant a commitment letter from the Sponsor, the Sponsor intends to financially support the Company sufficient for the Company to satisfy its working capital needs until at least August 14, 2024. For additional information, see the information under the captions “Advances from Related Parties,” “Promissory Note Payable – Sponsor,” “Contributions from Related Party” and “Administrative Support Agreement” in Note 4.
The Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern for one year following the issuance of these financial statements. These adverse conditions are negative financial trends, specifically operating loss, working capital deficiency, and other adverse key financial ratios.
The Company has not established any source of revenue to cover its operating costs. Management plans to fund operating expenses with a commitment letter from the Sponsor. The unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern. |
Summary of Significant Accounting Policies |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC, and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of June 30, 2023 and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2023.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Concentration of Credit Risk
The Company has significant cash balances at financial institutions which throughout the year may exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheets.
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 had no cash equivalents as of June 30, 2023 and December 31, 2022.
Net Loss per Share of Common Stock
Net loss per share of common stock is computed by dividing net loss applicable to the shares of common stock by the weighted average number of shares outstanding for the periods. As a result of the redemption of Public Shares in November 2019, for the three and six months ended June 30, 2023 and 2022, the Class A shares have no specific redemption rights. Net loss per common share is calculated by dividing the net loss by the weighted average number of Class A and Class B shares outstanding for the periods.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income 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.
FASB Topic ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2023 and December 31, 2022. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at June 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 has been subject to income tax examinations by major taxing authorities since inception.
The Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with federal, state, and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
During the three and six months ended June 30, 2023 and 2022, the Company recorded no income tax expense.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have an effect on the Company’s financial statements. |
Public Offering and Private Placement Warrants |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Public Offering & Private Placement Warrants [Abstract] | |
Public Offering and Private Placement Warrants | 3. Public Offering and Private Placement Warrants
In November 2017, the Company closed its Public Offering of 34,500,000 units at a price of $10.00 per Unit, with gross proceeds of $345,000,000 from the sale of Units. The closings occurred on November 7, 2017 with respect to 30,000,000 Units and on November 9, 2017 with respect to 4,500,000 Units related to the exercise of the underwriters’ overallotment option.
During the liquidation period, the Company and the holders of its Public Warrants executed an amendment to the Warrant Agreement, dated as of November 2, 2017, between the Company and Continental Stock Transfer & Trust Company, to automatically convert all of the outstanding Public Warrants into the right to receive $0.02 per whole Public Warrant, payable in cash. In December 2019, the Company paid $225,990 to its warrant holders in connection with the conversion of the Public Warrants.
Simultaneously with the closing of the Public Offering on November 7, 2017, the Sponsor purchased an aggregate of 5,333,333 Private Placement Warrants at a price of $1.50 per whole warrant ($8,000,000 in gross proceeds) in a private placement. Simultaneously with the closing of the overallotment, the Company consummated the private placement of an additional 600,000 Private Placement Warrants to the Sponsor, generating additional gross proceeds of $900,000.
The Company paid an underwriting discount of 2.0% of the per Unit offering price to the underwriters at the closing of the Public Offering, with the Deferred Discount payable upon the Company’s completion of an initial business combination. The Deferred Discount was payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completed its initial business combination. In accordance with the terms of the underwriting agreement entered into in connection with the Public Offering, the underwriters forfeited any rights or claims to the Deferred Discount because the Company was unable to consummate an initial business combination by the November 7, 2019 deadline under its Charter.
Following the redemption of the Public Shares, the conversion of the Public Warrants and the forfeiture of the Private Placement Warrants, there were no Units, Public Shares, Public Warrants or Private Placement Warrants outstanding. Additional shares of Class A common stock were subsequently issued and shares of Class B common stock remain outstanding. For more information on additional issuances, see Note 4 and the Company’s previous filings with the SEC. |
Related Party Transactions |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 4. Related Party Transactions
Founder Shares
In June 2017 prior to the Public Offering, the Sponsor entered into an Amended and Restated Securities Purchase Agreement for the purchase of 14,375,000 shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.002 per share. The Sponsor is a portfolio company of CSL Capital Management, L.P., an energy services-focused private equity fund. Following the redemption of the Public Shares, the conversion of the Public Warrants and the forfeiture of the Private Placement Warrants noted above, the only securities of the Company outstanding were the Founder Shares.
The Founder Shares are identical to the shares of Class A common stock that were included in the Units sold in the Public Offering except that (1) holders of the Founder Shares have the right to vote on the election of directors prior to an initial business combination, (2) the Founder Shares are subject to certain transfer restrictions, as described in more detail below, (3) holders of the Founder Shares entered into letter agreements with the Company pursuant to which they agreed to waive their redemption rights with respect to any Founder Shares held by them in connection with the completion of an initial business combination, (4) the Founder Shares will automatically convert on a one-for-one basis into shares of Class A common stock at the time of an initial business combination and (5) the Founder Shares are subject to registration rights, as described below.
In August 2017, the Sponsor surrendered 5,750,000 shares of its Class B common stock for no consideration to adjust its holdings to an expected 20% of the Company’s combined outstanding shares of Class A common stock and Class B common following the Public Offering, resulting in the Sponsor holding an aggregate of 8,625,000 Founder Shares.
In October 2017 and April 2018, the Sponsor transferred 37,500 Founder Shares to Marc Zenner and Jon A. Marshall, respectively, both of whom were independent directors of the Company at the time, at the original purchase price. Each of the Sponsor and Messrs. Zenner and Marshall subsequently agreed to forfeit 90% of their Founder Shares when the Company was unable to consummate a business combination prior to the deadline in its Charter, resulting in the Sponsor currently holding 855,000 Founder Shares and each of Messrs. Zenner and Marshall owning 3,750 Founder Shares. As a result, the total number of Founder Shares outstanding as of June 30, 2023 is 862,500.
Transfer Restrictions
The terms applicable to the Founder Shares provide that, subject to limited exceptions, the Sponsor may not transfer, assign or sell any of the same until the earlier to occur of (A) one year after the completion of the initial business combination or (B) subsequent to the initial business combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial business combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property. The Sponsor transferred the portion of its Founder Shares noted above to Messrs. Zenner and Marshall in accordance with those terms or pursuant to a waiver thereof.
Registration Rights
The holders of Founder Shares that may be issued equity securities of the Company upon conversion of working capital loans may be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement, by and between the Company, the Sponsor and Mr. Zenner. The registration rights include certain demand and “piggyback” rights.
However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), to become effective until termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Advances from Related Parties
During the three and six months ended June 30, 2023 and 2022, the Sponsor or an affiliate of the Sponsor did not incur certain administrative expenses on behalf of the Company. As of June 30, 2023 and December 31, 2022, there was no outstanding balance due to related parties.
Promissory Note Payable – Sponsor
On March 1, 2019, the Company issued a convertible promissory note (the “Convertible Promissory Note”) in the amount of up to $1,500,000 with the Sponsor to fund the Company’s ongoing expenses. The Convertible Promissory Note does not bear interest and all unpaid principal was due and payable in full on the earlier of November 7, 2019 or the consummation of an initial business combination by the Company. The Sponsor had the option to convert any amounts outstanding under the Convertible Promissory Note into warrants of a post-business combination entity to purchase shares, at a conversion price of $1.50 per warrant. On March 31, 2020, the Sponsor converted the $999,640 outstanding into 99,964 shares of Class A common stock of the Company at a conversion price of $10.00 per share.
All unpaid principal under the Convertible Promissory Note was due and payable in full on the earlier of November 7, 2019 or the consummation of an initial business combination by the Company by the deadline specified in its Charter. As a result, the Convertible Promissory Note is no longer available to the Company as a source of financing and no amount has been outstanding thereunder since March 31, 2020. As of June 30, 2023 and December 31, 2022, the outstanding balance on Convertible Promissory Note was $0.
Contributions from Related Party
In January 2022, the Company received a contribution of $25,000 from the Sponsor to fund ongoing operations and expenses. The amount advanced by the Sponsor was treated as a capital contribution in exchange for which the Company issued to the Sponsor 2,500 shares of the Company’s Class A common stock at $10.00 per share on January 25, 2022.
In September 2022, the Company received a contribution of $30,000 from the Sponsor to fund ongoing operations and expenses. The amount advanced by the Sponsor was treated as a capital contribution in exchange for which the Company issued to the Sponsor 3,000 shares of the Company’s Class A common stock at $10.00 per share on September 20, 2022.
In December 2022, the Company received a contribution of $60,000 from the Sponsor to fund ongoing operations and expenses. The amount advanced by the Sponsor was treated as a capital contribution in exchange for which the Company issued to the Sponsor 6,000 shares of the Company’s Class A common stock at $10.00 per share on December 13, 2022.
In March 2023, the Company received a contribution of $10,000 from the Sponsor to fund ongoing operations and expenses. The amount advanced by the Sponsor was treated as a capital contribution in exchange for which the Company issued to the Sponsor 1,000 shares of the Company’s Class A common stock at $10.00 per share on March 3, 2023.
As of June 30, 2023 and December 31, 2022, there were 566,911 and 565,911 shares of the Company’s Class A common stock outstanding, respectively, all of which are held by the Sponsor.
Administrative Support Agreement
Commencing on the date the Units were first listed on the Nasdaq Capital Market, the Company agreed to pay an affiliate of the Sponsor up to $10,000 per month for office space, utilities and secretarial and administrative support. Since the Company was unable to complete its initial business combination prior to the November 7, 2019 deadline in the Charter, pursuant to the Administrative Support Agreement, the Company ceased paying these monthly fees. The Administrative Support Agreement, however, remains in place for the benefit of the Company.
The Company did not incur any expenses under the Administrative Support Agreement for the three and six months ended June 30, 2023 and 2022. |
Stockholders’ Deficit |
6 Months Ended |
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Jun. 30, 2023 | |
Stockholders’ Deficit [Abstract] | |
Stockholders’ Deficit | 5. Stockholders’ Deficit
Common Stock
The authorized common stock of the Company includes up to 200,000,000 shares of Class A common stock, par value of $0.0001 per share, and 20,000,000 shares of Class B common stock, par value of $0.0001 per share, or the Founder Shares. If the Company entered into an initial business combination, it may (depending on the terms of such an initial business combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on an initial business combination to the extent the Company seeks stockholder approval in connection with an initial business combination. Holders of the Company’s common stock are entitled to one vote for each share of common stock held by them.
The Sponsor currently holds 855,000 Founder Shares and each of Messrs. Zenner and Marshall holds 3,750 Founder Shares. For a discussion of transactions resulting in these holdings as well as transactions related to Class A common stock, see Note 4 and the Company’s previous filings with the SEC.
At June 30, 2023 and December 31, 2022, there were 566,911 and 565,911 shares of Class A common stock issued and outstanding, respectively, and 862,500 and 862,500 shares of Class B common stock issued and outstanding, respectively.
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock, 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 June 30, 2023 and December 31, 2022, there were shares of preferred stock issued or outstanding. |
Subsequent Events |
6 Months Ended |
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Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | 6. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements. |
Accounting Policies, by Policy (Policies) |
6 Months Ended |
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Jun. 30, 2023 | |
Summary of Significant Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the SEC, and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of June 30, 2023 and the results of operations and cash flows for the periods presented. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. Interim results are not necessarily indicative of results for a full year. The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2023. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. |
Concentration of Credit Risk | Concentration of Credit Risk The Company has significant cash balances at financial institutions which throughout the year may exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows. |
Financial Instruments | Financial Instruments The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheets. |
Cash and Cash Equivalents | 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 had no cash equivalents as of June 30, 2023 and December 31, 2022. |
Net Loss per Share of Common Stock | Net Loss per Share of Common Stock Net loss per share of common stock is computed by dividing net loss applicable to the shares of common stock by the weighted average number of shares outstanding for the periods. As a result of the redemption of Public Shares in November 2019, for the three and six months ended June 30, 2023 and 2022, the Class A shares have no specific redemption rights. Net loss per common share is calculated by dividing the net loss by the weighted average number of Class A and Class B shares outstanding for the periods.
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Income Taxes | Income Taxes The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income 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. FASB Topic ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2023 and December 31, 2022. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at June 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 has been subject to income tax examinations by major taxing authorities since inception. The Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with federal, state, and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. During the three and six months ended June 30, 2023 and 2022, the Company recorded no income tax expense. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have an effect on the Company’s financial statements. |
Summary of Significant Accounting Policies (Details) |
Jun. 30, 2023
USD ($)
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Summary of Significant Accounting Policies [Abstract] | |
Federally insured limit | $ 250,000 |
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