Related Party Transactions

9 Months Ended

Sep. 30, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Note 4 – Related Party Transactions

Founder Shares and Sponsor Exchange

On July 10, 2020, the Sponsor purchased 3,737,500 shares of the Company’s Class B common stock, par value $0.0001 per share (the “Original Founder Shares”), for an aggregate price of $25,000. On December 17, 2020, pursuant to the Certificate of Incorporation, each Original Founder Share outstanding immediately prior to December 17, 2020 was converted into one and two-thirteenths (1²/₁₃) Original Founder Shares, resulting in an aggregate of 4,312,500 Original Founder Shares outstanding. The initial stockholders agreed to forfeit up to 562,500 Original Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters, so that the Original Founder Shares would represent 20% of the Company’s issued and outstanding shares after the initial public offering. The underwriters exercised their over-allotment option in full on December 22, 2020; thus, these 562,500 Original Founder Shares were no longer subject to forfeiture. The Original Founder Shares were identical to the shares of Class A common stock included in the units sold in the initial public offering except that the Original Founder Shares were subject to certain transfer restrictions, as described in more detail below.

The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Original Founder Shares until the earlier to occur of (A) one year after the completion of the initial business combination or earlier if, subsequent to the initial business combination, the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading-day period commencing at least 150 days after the initial business combination, and (B) the date following the completion of the initial business combination on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the stockholders having the right to exchange their Class A common stock for cash, securities or other property.

On September 20, 2023, the Company and the Sponsor entered into an Exchange Agreement (the “Exchange Agreement”). Pursuant to the Exchange Agreement, on September 20, 2023, the Sponsor exchanged 4,312,500 Original Founder Shares on a one-for-one basis for 4,312,500 shares of the Company’s Class A common stock (the “Founder Shares”) on the terms and conditions set forth in the Exchange Agreement (the “Exchange”). Pursuant to the terms of the Exchange Agreement, the Founder Shares are subject to the same restrictions as applied to the Original Founder Shares before the Exchange, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote such Founder Shares in favor of the Company’s initial business combination. The Sponsor (and any permitted transferees of the Sponsor holding any Founder Shares) will not be entitled to receive any distributions (including, without limitation, any liquidating distributions) from the Company’s trust account in respect of the Founder Shares. Following the completion of the Exchange on September 20, 2023, there were 5,494,554 shares of the Company’s Class A common stock issued and outstanding and no shares of the Company’s Class B common stock issued and outstanding. As a result of the Exchange, the Sponsor holds approximately 78.5% of the outstanding shares of the Company’s Class A common stock. The Exchange Agreement contains customary representations and warranties. The Exchange Agreement also provides that the Company will register for resale under the Securities Act of 1933, as amended, the Founder Shares issued to the Sponsor in the Exchange pursuant to the Company’s registration rights agreement.

The Company modified its balance sheet, statement of operations and statements of shareholders equity to reflect the impact of the Exchange.

Private Placement Warrants

Simultaneously with the closing of the initial public offering, the Company consummated the private placement of 4,850,000 private placement warrants at a price of $1.00 per private placement warrant to the Sponsor, generating proceeds of $4,850,000. Each private placement warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the private placement warrants to the Sponsor was added to the proceeds from the initial public offering held in the trust account such that at closing of the initial public offering, $172,000,000 was placed in the trust account.

The private placement warrants (including the shares of common stock issuable upon exercise of the private placement warrants) are not transferable, assignable or salable until 30 days after the completion of the initial business combination and they are non-redeemable and exercisable on a cashless basis so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees. If the private placement warrants are held by someone other than the initial purchasers of the private placement warrants or their permitted transferees, the private placement warrants will be redeemable for cash by the Company and exercisable by such holders on the same basis as the warrants included in the units sold in the initial public offering. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants sold as part of the units in the initial public offering and have no net cash settlement provisions.

If the Company does not complete a business combination, then the proceeds will be part of the liquidating distribution to the public stockholders and the warrants issued to the Sponsor will expire worthless.

Related Party Loans

On June 18, 2020, the Sponsor agreed to loan the Company an aggregate of up to $200,000 to cover expenses related to the initial public offering pursuant to a promissory note (the “Note”). This loan was non-interest bearing and payable upon the completion of the initial public offering. The Company borrowed approximately $31,000 under the Note and fully repaid the Note in full on December 22, 2020. Subsequent to the repayment, the facility was no longer available to the Company.

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 (the “working capital loans”). If the Company completes a business combination, the Company will 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. The working capital loans would either be repaid upon consummation of a business combination or, at the lenders’ 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. 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. As of September 30, 2023 and December 31, 2022, the Company had no borrowings under working capital loans.

Promissory Note – Related Party

On June 21, 2023, the Company issued an unsecured promissory note (the “Sponsor Note”) to the Sponsor, which provides for borrowings from time to time of up to an aggregate of $300,000 that may be drawn by the Company and used for working capital purposes and to pay expenses related to the Business Combination, previously announced on May 15, 2023. The Sponsor Note does not bear interest and is payable on the earlier of December 31, 2023 and the completion of the Business Combination. The Sponsor Note is subject to customary events of default, the occurrence of any of which automatically triggers the unpaid principal balance of the Sponsor Note and all other sums payable with regard to the Sponsor Note to become immediately due and payable. As of September 30, 2023, the Company has borrowed $20,000 under the Sponsor Note.

Administrative Services Agreement

Commencing on the date that the Company’s securities were first listed on Nasdaq until the earlier of the Company’s consummation of a Business Combination or the Company’s liquidation, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to members of the Company’s management team. For the three and nine months ended September 30, 2023, the Company had incurred $10,000 and $90,000 in administrative services expenses under this agreement, respectively. For the three and nine months ended September 30, 2022, the Company had incurred $30,000 and $90,000 in administrative services expenses under this agreement, respectively. As of September 30, 2023 and December 31, 2022, the Company had $110,000 and $120,000 outstanding, respectively, for services in connection with such agreement due to related parties within Accounts payable on the accompanying condensed consolidated balance sheets.

The Sponsor, officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. The Company’s audit committee will review on a quarterly basis all payments that were made by the Company to the Sponsor, officers or directors of the Company, or any of their affiliates. For the three and nine months ended September 30, 2023, amounts reimbursed to the Sponsor, officers and directors and recorded as travel expenses within general and administrative expenses in the statements of operations were $10,291 and $33,587, respectively. For the three and nine months ended September 30, 2022, amounts reimbursed to the Sponsor, officers and directors and recorded as travel expenses within general and administrative expenses in the statements of operations were $12,699 and $33,753, respectively. As of September 30, 2023, there was $23,357 included in accounts payable and $1,500 included in due to a related party. As of December 31, 2022, there was $103,646 included in accounts payable and $1,500 included in due to a related party.