Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(MARK ONE)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2023
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission file number:
001-40002
 
 
Sustainable Development Acquisition I Corp.
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
Delaware
  
85-4353398
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
5701 Truxtun Avenue, Suite 201
Bakersfield, California
  
93309
(Address of principal executive offices)
  
(Zip Code)
(323)
329-8221
(Issuer’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading
Symbol(s)
  
Name of each exchange
on which registered
Units, each consisting of one share of Class A common stock, $0.0001 par value, and
one-half
of one redeemable warrant
  
SDACU
  
The Nasdaq Capital Market
Shares of Class A common stock included as part of the units
  
SDAC
  
The Nasdaq Capital Market
Redeemable warrants included as part of the units, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50
  
SDACW
  
The Nasdaq Capital Market
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer   ☐    Accelerated filer   ☐
Non-accelerated
filer		   ☒    Smaller reporting company   ☒
     Emerging growth company   ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☒    No  ☐
As of May 
24
, 2023, there were 2,178,988 Class A common stock, $0.0001 par value and 7,906,250 Class B, $0.0001 par value, issued and outstanding.
 
 
 
 

Table of Contents

SUSTAINABLE DEVELOPMENT ACQUISITION I CORP.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023

TABLE OF CONTENTS

 

     Page  

Part I. Financial Information

      1  

Item 1. Interim Financial Statements (Unaudited)

      1  

Condensed Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022

      1  

Unaudited Condensed Statements of Operations for the three months ended March 31, 2023 and 2022

      2  

Unaudited Condensed Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2023 and 2022

      3  

Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2023 and 2022

      4  

Notes to Unaudited Condensed Financial Statements

      5  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

      15  

Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk

      18  

Item 4. Controls and Procedures

      18  

Part II. Other Information

      20  

Item 1. Legal Proceedings

      20  

Item 1A. Risk Factors

      20  

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

      21  

Item 3. Defaults Upon Senior Securities

      21  

Item 4. Mine Safely Disclosures

      21  

Item 5. Other Information

      21  

Item 6. Exhibits

      21  

Part III. Signatures

      22  

Table of Contents
0.500.500.1P10DP3Dhttp://fasb.org/us-gaap/2022#DeferredIncomeTaxLiabilitieshttp://fasb.org/us-gaap/2022#DeferredIncomeTaxLiabilities
PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
SUSTAINABLE DEVELOPMENT ACQUISITION I CORP.
CONDENSED BALANCE SHEETS
 
    
March 31,
    
December 31,
  
    
2023
    
2022
  
Assets
                 
Cash
    $ 1,109,593     $ 318,932  
Prepaid Expenses
      266,516       54,418  
Due from related party
      8,247       8,247  
    
 
 
    
 
 
  
Total current assets
      1,384,356       381,597  
Cash and marketable securities held in Trust Account
      22,512,356       320,678,313  
    
 
 
    
 
 
  
Total Assets
   
$
23,896,712
 
  
$
321,059,910
 
    
 
 
    
 
 
  
Liabilities, Common Stock Subject to Redemption, and Stockholders’ Deficit
                 
Accrued offering costs and expenses
    $ 1,914,319     $ 775,038  
Promissory note – related party
      1,050,000       1,050,000  
Income Tax Payable
      1,159,137       629,701  
Excise tax liability
      2,981,479       —    
    
 
 
    
 
 
  
Total current liabilities
      7,104,935       2,454,739  
    
 
 
    
 
 
  
Deferred Tax Liability
      —         215,870  
Deferred underwriting fee
      10,631,250       10,631,250  
Warrant liability
      2,529,540       1,046,814  
    
 
 
    
 
 
  
Total Liabilities
   
 
20,265,725
 
  
 
14,348,673
 
    
 
 
    
 
 
  
Commitments and Contingencies
                 
Common stock subject to
possible redemption,
 
$0.0001 par
value, 2,178,988 and 31,625,000 stock at redemption value of approximately $10.30 and $10.00 per share at March 31, 2023 and December 31, 2022, respectively
      22,447,083       319,415,389  
Stockholders’ Deficit
                 
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
      —         —    
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; none issued and outstanding at March 31, 2023 and December 31, 2022
      —         —    
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 7,906,250 shares issued and outstanding at March 31, 2023 and December 31, 2022
      791       791  
Additional
paid-in
capital
      —         —    
Accumulated deficit
      (18,816,887 )      (12,704,943 ) 
    
 
 
    
 
 
  
Total Stockholders’ Deficit
   
 
(18,816,096
 )
 
  
 
(12,704,152
) 
    
 
 
    
 
 
  
Total Liabilities, Common Stock Subject to Redemption, and Stockholders’ Deficit
   
$
23,896,712
 
  
$
321,059,910
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
1
Table of Contents
SUSTAINABLE DEVELOPMENT ACQUISITION I CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
    
For the Three Months Ended
March 31,
  
    
2023
    
2022
  
Operating costs
    $ 1,677,292     $ 331,421  
    
 
 
    
 
 
  
Loss from Operations
   
 
(1,677,292
) 
  
 
(331,421
) 
    
 
 
    
 
 
  
Other income (expense):
                 
Interest earned on cash and marketable securities held in Trust Account
      1,522,724       7,799  
Offering costs allocated to warrants
      —         —    
Excess of fair value over cash received for private placement warrants
      —         —    
Change in fair value of warrant liability
      (1,482,727 )      7,314,909  
    
 
 
    
 
 
  
Total other income, net
   
 
39,997
 
  
 
7,322,708
 
    
 
 
    
 
 
  
(Loss) Income before provision for income taxes
      (1,637,295 )      6,991,287  
Provision for income taxes
      (313,566 )      —    
    
 
 
    
 
 
  
Net (loss) income
   
$
(1,950,861
) 
  
$
6,991,287
 
    
 
 
    
 
 
  
Weighted average shares outstanding, Class A common stock
      12,321,503       31,625,000  
    
 
 
    
 
 
  
Basic and diluted net (loss) income per share, Class A common stock
   
$
(0.10
) 
  
$
0.18
 
    
 
 
    
 
 
  
Weighted average shares outstanding, Class B common stock
      7,906,250       7,906,250  
    
 
 
    
 
 
  
Basic and diluted net (loss) income per share, Class B common stock
   
$
(0.10
) 
  
$
0.18
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
2
Table of Contents
SUSTAINABLE DEVELOPMENT ACQUISITION I CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2023
 
    
Class A

Common Stock
     
Class B

Common Stock
     
Additional

Paid-in

Capital
     
Accumulated

Deficit
    
Total

Stockholder’s

Deficit
  
    
Stock
     
Amount
     
Stock
     
Amount
  
Balance as of December 31, 2022
   
 
—  
 
   
$
—  
 
   
 
7,906,250
 
   
$
791
 
   
$
—  
 
   
$
(12,704,943
) 
  
$
(12,704,152
) 
Remeasurement of common stock subject to possible redemption
      —          —          —          —          —          (1,179,604 )      (1,179,604 ) 
Excise tax imposed on common stock redemptions
      —          —          —          —          —          (2,981,479 )      (2,981,479 ) 
Net loss
      —          —          —          —          —          (1,950,861 )      (1,950,861 ) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of March 31, 2023
   
 
—  
 
   
$
—  
 
   
 
7,906,250
 
   
$
791
 
   
$
—  
 
   
$
(18,816,887
 )
 
  
$
(18,816,096
 )
 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
FOR THE THREE MONTHS ENDED MARCH 31, 2022
 
    
Class A

Common Stock
     
Class B

Common Stock
     
Additional

Paid-in

Capital
     
Accumulated

Deficit
    
Total

Stockholder’s

Deficit
  
    
Stock
     
Amount
     
Stock
     
Amount
  
Balance as of December 31, 2021
   
 
—  
 
   
$
—  
 
   
 
7,906,250
 
   
$
791
 
   
$
—  
 
   
$
(24,622,061
) 
  
$
(24,621,270
) 
Net income
      —          —          —          —          —          6,991,287       6,991,287  
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of March 31, 2022
   
 
—  
 
   
$
—  
 
   
 
7,906,250
 
   
$
791
 
   
$
—  
 
   
$
(17,630,774
) 
  
$
(17,629,983
) 
    
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
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Table of Contents
SUSTAINABLE DEVELOPMENT ACQUISITION I CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
    
For the Three Months Ended
March 31,
  
    
2023
    
2022
  
Cash flows from operating activities:
                 
Net (loss) income
    $ (1,950,861 )    $ 6,991,287  
Adjustments to reconcile net (loss) income to net cash used in operating activities:
                 
Interest earned on marketable securities held in Trust Account
      (1,522,724 )      (7,799 ) 
Offering costs allocated to warrants
      —         —    
Deferred tax liability
      (215,870 )      —    
Change in fair value of warrant liability
      1,482,727       (7,314,909 ) 
Changes in operating assets and liabilities:
                 
Prepaid expenses
      (212,098 )      68,736  
Due from related party
      —         —    
Accrued expenses
      1,139,281       (441,860 ) 
Income Tax Payable
      529,436       —    
    
 
 
    
 
 
  
Net cash used in operating activities
   
 
(750,109
) 
  
 
(704,545
) 
    
 
 
    
 
 
  
Cash Flows from Investing Activities:
                 
Cash withdrawn from Trust Account for tax obligations
      1,540,770       —    
Cash withdrawn from Trust Account in connection with redemption
      298,147,910       —    
    
 
 
    
 
 
  
Net cash provided by investing activities
   
 
299,688,680
 
  
 
—  
 
    
 
 
    
 
 
  
Cash Flows from Financing Activities:
                 
Redemption of common stock
      (298,147,910 )      —    
    
 
 
    
 
 
  
Net cash used in financing activities
   
 
(298,147,910
) 
  
 
—  
 
    
 
 
    
 
 
  
Net change in cash
   
 
790,661
 
  
 
(704,545
) 
Cash, beginning of period
      318,932       1,013,843  
    
 
 
    
 
 
  
Cash, end of the period
   
$
1,109,593
 
  
$
309,298
 
    
 
 
    
 
 
  
Supplemental disclosure of cash flow information:
                 
Accretion of Class A stock subject to redemption
    $ 1,179,604     $ —    
 
 
 
 
 
 
 
 
 
Excise tax accrued for common stock redemptions
    $ 2,981,479     $ —    
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
4
Table of Contents
SUSTAINABLE DEVELOPMENT ACQUISITION I CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
Note 1 - Organization and Business Operations
Sustainable Development Acquisition I Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on December 16, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
As of March 31, 2023, the Company had not commenced any operations. All activity through March 31, 2023 relates to the Company’s formation and the Initial Public Offering (“IPO”) which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates
non-operating
income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on February 4, 2021 (the “Effective Date”). On February 9, 2021, the Company consummated the IPO of 31,625,000 units (the “Units”) and, with respect to the shares of common stock included in the Units sold (the “Public Shares”), which included the full exercise by the underwriters of the over-allotment option to purchase an additional 4,125,000 Units, at $10.00 per Unit, generating gross proceeds of $316,250,000, which is discussed in Note 3. Each Unit consists of one share of Class A common stock and
one-half
of one redeemable warrant to purchase one share of Class A common stock at a price of $11.50 per whole share.
Simultaneously with the closing of the IPO, the Company consummated the sale of 9,325,000 warrants (the “Private Placement Warrants”), at a price of $1.00 per Private Placement Warrant, in a private placement to Sustainable Development Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $9,325,000, which is discussed in Note 4.
Transaction costs of the IPO amounted to $17,404,019 consisting of $6,075,000 of underwriting discount, $10,631,250 of deferred underwriting discount, and $697,769 of other offering costs.
Following the closing of the IPO on February 9, 2021, $316,250,000 ($10.00 per Unit) from the net offering proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions of Rule
2a-7
promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations, the net proceeds from the IPO and the sale of the Private Placement Warrants held in the Trust Account will not be released from the Trust Account until the earliest of (a) the completion of the Company’s initial Business Combination, (b) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination by August 12, 2023, subject to applicable law, and (c) the redemption of the Company’s public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a stockholder meeting called to approve the initial Business Combination or (ii) without a stockholder vote by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their shares for a pro rata share of the aggregate amount then on deposit in the Trust Account (initially approximately $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The Company had only 24 months from February 9, 2021, the closing of the IPO, to complete an initial Business Combination (the “Combination Period”). On February 1, 2023 the Company voted and approved an amendment to the articles of incorporation to extend the Combination Period to August 12, 2023. However, if the Company does not complete a Business Combination within the Combination Period, the Company will redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law and as further described in the registration statement, and then seek to dissolve and liquidate.
On February 1, 2023, stockholders of the Company held a special meeting of stockholders (the “Special Meeting”), where the stockholders of the Company approved an amendment (the “Extension Amendment”) to the Amended and Restated Certificate of Incorporation of the Company (the “Charter”) to extend the date by which the Company must (i) consummate a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company and one or more businesses, which we refer to as a “business combination,” (ii) cease its operations if it fails to complete such business combination, and (iii) redeem or repurchase 100% of the Company’s Class A common stock included as part of the units sold in the Company’s initial public offering that was consummated on February 9, 2021 from February 4, 2023 to August 12, 2023. The Company filed the Extension Amendment with the Secretary of State of the State of Delaware on February 2, 2023.
In connection with the votes to approve the Extension Amendment, 29,446,012 shares of common stock of the Company were tendered for redemption at a
per-share
price of $10.125. As such, approximately 93.11% of the public shares were redeemed and approximately 6.89% of the public shares remain outstanding. The Class A common stock was redeemed at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the Trust Account deposits (net of franchise and income taxes payable), divided by the number of then outstanding Class A common stock.
The Company’s initial stockholders have agreed to (i) waive their redemption rights with respect to any founder shares and public shares they hold in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to any founder shares and public shares they hold in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation, (iii) waive their rights to liquidating distributions from the Trust Account with respect to any founder shares they hold if the Company fails to complete the initial Business Combination within the Combination Period, and (iv) vote any founder shares and any public shares held by them in favor of the Company’s initial Business Combination.
 
5
Table of Contents
The Company’s Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services tendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable), nor will it apply to any claims under the Company’s indemnity of the underwriters of the Proposed Public Offering against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Company’s Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.
Liquidity, Capital Resources and Going Concern
As of March 31, 2023, the Company had $1,109,593 in its operating bank account and working capital deficit of $5,655,306 (adjusted for amounts available for withdraw from the trust for franchise and income tax obligations).
The Company’s liquidity needs up to February 9, 2021 had been satisfied through a capital contribution from the Sponsor of $25,000 (see Note 5) for the founder shares and the loan under an unsecured promissory note from the Sponsor of $136,678 (see Note 5). The promissory note from the Sponsor was outstanding at February 9, 2021, and paid in full as of February 11, 2021 (see Note 5). Subsequent to the consummation of the IPO, the Company’s liquidity needs have been satisfied through the net proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide us working capital loans. On August 23, 2022 and December 21, 2022, the Company entered into a $500,000 and $550,000 promissory note agreement (the “Convertible Notes”), respectively, with the Sponsor. The Convertible Note is payable upon the consummation of initial business combination or convertible into warrants at a price of $1.00 at the Sponsor’s discretion. The Convertible Note provides up to $500,000 and $550,000 in funds to be drawn against it, respectively. The Convertible Note does not accrue interest. As of December 31, 2022, the Convertible Notes had the full amounts of $500,000 and $550,000 withdrawn, respectively. No further borrowing is available against the Convertible Notes as of March 31, 2023.
If the Company does not consummate an initial business combination by August 12, 2023, there will be a mandatory liquidation and subsequent dissolution of the Company. In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic
205-40,
“Presentation of Financial Statements—Going Concern,” management has determined that the liquidity condition due to insufficient working capital and mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date that these unaudited condensed financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after August 12, 2023. The unaudited condensed financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
Risks and Uncertainties
Management is continuing to evaluate the impact of the
COVID-19
pandemic and has concluded that while it is reasonably possible that it could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these unaudited condensed financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed financial statements.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
 
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Table of Contents
Note 2 – Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the financial position, and the results of its operations and its cash flows.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed 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 unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these unaudited condensed financial statements is the determination of fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2023 and December 31, 2022.
Cash and Marketable Securities Held in Trust Account
As of March 31, 2023 and December 31, 2022, substantially all of the assets held in the Trust Account were held in cash and money market funds which invest in U.S. Treasury securities, respectively. The Company accounts for its investments within the Trust Account under ASC 320 “Investments – Debt Securities.” Under ASC 320, all of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information (see Note 8). During the period ended March 31, 2023, the Company withdrew an amount of $
299,688,680 in the interest income from the Trust Account to pay its tax obligations and redeem public shares tendered for redemption in connection with the Extension Amendment. During the period ended December 31, 2022, the Company did not withdraw any amount of the interest income from the Trust Account.
Warrant Liabilities
The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 3, Note 4 and Note 8) in accordance with Accounting Standards Codification (“ASC”)
815-40,
“Derivatives and Hedging—Contracts in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the Balance Sheets and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the Statements of Operations in the period of the change.
 
7
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of
ASC340-10-S99-1.
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred and presented as
non-operating
expenses in the statement of operations. Offering costs associated with the Class A common stock were charged to temporary equity upon the completion of the Initial Public Offering.
Common Stock Subject to Possible Redemption
All of the 31,625,000 Class A Common Stock sold as part of the Units in the Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s second amended and restated certificate of incorporation. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, which has been codified in
ASC480-10-S99,
redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly, at March 31, 2023 and December 31, 2022, all shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
In connection with the votes to approve the Extension Amendment, 29,446,012 shares of common stock of the Company were tendered for redemption at a
per-share
price of $10.125. As such, approximately 93.11% of the public shares were redeemed and approximately 6.89% of the public shares remain outstanding. This resulted in a redemption from trust in the amount of $298,147,910.
The Class A common stock subject to possible redemption reflected on the balance sheet as of March 31, 2023 and December 31, 2022 is reconciled in the following table:
 
Gross Proceeds
    $ 316,250,000  
Less:
         
Proceeds allocated to Public Warrants
      (18,753,625 ) 
Class A common stock issuance costs
      (16,371,960 ) 
Plus:
         
Remeasurement of carrying value to redemption value
      35,125,585  
Class A common stock subject to possible redemption as of December 31, 2021
   
$
316,250,000
 
Plus:
         
Remeasurement of carrying value to redemption value
      3,165,389  
Class A common stock subject to possible redemption as of December 31, 2022
   
$
319,415,389
 
Less:
         
Redemption of Class A common stock
      (298,147,910 ) 
Plus:
         
Remeasurement of carrying value to redemption value
      1,179,604  
Class A common stock subject to possible redemption as of March 31, 2023
   
$
22,447,083
 
Share Based Compensation
The Company complies with ASC Topic 718 “Compensation - Stock Compensation” regarding interests in founder shares transferred by the Sponsor to directors of the Company as compensation, which are described in Note 5.
The interests in the Founder Shares effectively vest upon the Company completing the initial Business Combination and compensation expense will be recorded accordingly at that date based upon the initial grant date fair value, the determination of which represents a significant estimate. The grant date fair value is based upon an option pricing model.
The Founders Shares were granted subject to a performance condition (i.e., consummation of the Business Combination). Compensation expense related to the Founders Shares will be recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance.
As of March 31, 2023 and December 31, 2022, the Company determined that a Business Combination is not considered probable, and therefore no stock-based compensation expense has been recognized. Stock-based compensation will be recognized at the date a Business Combination is considered probable (i.e., upon completion of a Business Combination) in an amount equal to the number of Founders Shares that ultimately vest multiplied times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founders Shares.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of March 31, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it.
Our effective tax rate was (19)% and 0.00% for the three months ended March 31, 2023 and 2022, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three months ended March 31, 2023 and December 31, 2022, due to changes in fair value in warrant liability and the valuation allowance on the deferred tax assets.
 
8
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not
to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 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.
Net (loss) Income Per Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net (loss) income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. The Company has two classes of shares, Class A Common Stock and Class B Common Stock. Earnings and losses are shared pro rata between the two classes of shares. The Company has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase 25,137,500 shares of Class A common stock in the calculation of diluted income per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted net income per common share is the same as basic net (loss) income per common share for the years presented.
Basic and diluted net (loss) income per common share for Class A common stock and Class B common stock is calculated by dividing net (loss) income attributable to the Company by the weighted average number of shares of Class A common stock and Class B common stock outstanding, allocated proportionally to each class of common stock.
Reconciliation of Net (loss) Income per Share
The Company’s net income is adjusted for the portion of net income that is allocable to each class of common stock. The allocable net (loss) income is calculated by multiplying net income by the ratio of weighted average number of shares outstanding attributable to Class A and Class B common stock to the total weighted average number of shares outstanding for the period. Accordingly, basic and diluted (loss) income per common share is calculated as follows:
 
    
For the Three Months Ended
March 31,
  
    
2023
     
2022
  
Class A Common Stock
                  
Net (loss) income allocable to Class A common stock
    $ (1,188,345 )     $ 5,593,030  
    
 
 
     
 
 
  
Basic and diluted weighted average shares outstanding
      12,321,503        31,625,000  
    
 
 
     
 
 
  
Basic and diluted net (loss) income per common share
    $ (0.10 )     $ 0.18  
    
 
 
     
 
 
  
Class B Common Stock
                  
Net (loss) income allocable to Class B common stock
    $ (762,516 )     $ 1,398,257  
    
 
 
     
 
 
  
Basic and diluted weighted average shares outstanding
      7,906,250        7,906,250  
    
 
 
     
 
 
  
Basic and diluted net (loss) income per common share
    $ (0.10 )     $ 0.18  
    
 
 
     
 
 
  
Fair Value of Financial Instruments
The Company follows the guidance in ASC 820, “Fair Value Measurement,” for its financial assets and liabilities that are
re-measured
and reported at fair value at each reporting period, and
non-financial
assets and liabilities that are
re-measured
and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
 
Level 1 -    Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
   
Level 2 -    Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means.
   
Level 3 -    Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
 
9
See Note 8 for additional information on assets and liabilities measured at fair value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times,
may
exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
NOTE 3 - INITIAL PUBLIC OFFERING
Public Units
On February 9, 2021, the Company sold 31,625,000 Units, at a purchase price of $10.00 per Unit, which includes the full exercise by the underwriters of the over-allotment option to purchase an additional 4,125,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one common stock, and
one-half
of one redeemable warrant to purchase one common stock (the “Public Warrants”).
Public Warrants
Each whole warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The warrants will become exercisable on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of the IPO, February 9, 2021, and will expire five years after the completion of the initial Business Combination, or earlier upon redemption or liquidation.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s Sponsor or its affiliates, without taking into account any founder shares held by the Sponsor or its affiliates, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price described adjacent to “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described adjacent to the caption “Redemption of warrants when the price per share of Class A common Stock equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a current prospectus relating thereto is current. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
Redemption of Warrants When the Price per Class A Common Stock Equals or Exceeds $18.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
 
  •  
in whole and not in part;
 
  •  
at a price of $0.01 per warrant;
 
  •  
upon not less than 30 days’ prior written notice of redemption (the
“30-day
redemption period”) to each warrant holder; and
 
  •  
if, and only if, the last reported sale price of the Class A common stock for any 20 trading days within a
30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock
sub-divisions,
stock capitalizations, reorganizations, recapitalizations and the like).
Redemption of Warrants When the Price per Class A Common Stock Equals or Exceeds $10.00
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
 
10
  •  
in whole and not in part;
 
  •  
At $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the “fair market value” of the Class A common stock (as defined below in the immediately following paragraph) except as otherwise described below;
 
  •  
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for stock
sub-divisions,
stock capitalizations, reorganizations, recapitalizations and the like); and
 
  •  
if the Reference Value is less than $18.00 per share (as adjusted for stock
sub-divisions,
stock capitalizations, reorganizations, recapitalizations and the like), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9)of the Securities Act or another exemption. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the “fair market value” of the Class A common stock over the exercise price of the warrants by (y) the fair market value and (B) 0.361 per whole warrant. The “fair market value” as used in this paragraph shall mean the average last reported sale price of the Class A common stock for the ten trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
NOTE 4 - PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 9,325,000 Private Warrants at a price of $1.00 per Private Warrant, for an aggregate purchase price of $9,325,000, in a private placement. Each Private Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share. A portion of the proceeds from the private placement was added to the proceeds from the IPO held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Warrants will expire worthless.
The Private Warrants are identical to the Public Warrants sold in the IPO except that the Private Warrants, so long as they are held by the initial stockholders or its permitted transferees, (i) they will not be redeemable by the Company for cash, (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the completion of the Company’s initial Business Combination, and (iii) they may be exercised by the holders on a cashless basis. If the Private Warrants are held by holders other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the Units being sold in the IPO.
NOTE 5 - RELATED PARTY TRANSACTIONS
Founder Shares
On December 18, 2020, the Company’s initial stockholders purchased an aggregate of 7,187,500 shares of Class B common stock (the “Founder Shares”) for a capital contribution of $25,000. On February 4, 2021, the Company effected a stock dividend of
one-tenth
of a share of Class B common stock for each outstanding share of Class B common stock, resulting in 7,906,250 shares of Class B common stock being issued and outstanding, including an aggregate of up to 1,031,250 shares subject to forfeiture if the over-allotment option was not exercised by the underwriters in full. As a result of the underwriters’ election to fully exercise their over-allotment option, on February 9, 2021, the 1,031,250 shares are no longer subject to forfeiture. Prior to the stock dividend on February 4, 2021, shares outstanding included up to 937,500 of Founder Shares subject to forfeiture by the Sponsor if the over-allotment option was not exercised in full or in part by the underwriters.
In January 2021, the Sponsor transferred 25,000 Founder Shares to each of the Company’s three independent directors, as an inducement to serve as directors of the Company, for a sales price of $0.003 per share, or an aggregate of $261 (the “purchase price”). The estimated fair value of the Founder Shares granted to the Company’s director nominees, was approximately $518,062, or $6.91 per share, which was calculated using a valuation model that takes into account various assumptions such as the probability of successfully completing a business combination and various other factors. The Company will record the fair value of the transferred shares as director compensation expense upon consummation of an initial business combination, in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 718 “Compensation-Stock Compensation”, which requires deferral of the expense recognition until after the performance condition is achieved, if the performance condition is a business combination or similar liquidity event. The transferred shares have the same terms and restrictions as the Founder Shares held by the Sponsor.
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares (subject to certain limited exceptions) until the earlier to occur of (i) one year after the completion of the Company’s initial Business Combination or (ii) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities or other property (the
“Lock-up”).Notwithstanding
the foregoing, if (A) the last reported sales price of the Company’s 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 or (B) the Company consummates a transaction after the initial Business Combination which results in its stockholders having the right to exchange their shares for cash, securities or other property, the Founder Shares will be released from the
Lock-up.
Promissory Note—Related Party
On December 18, 2020, the Company issued an unsecured promissory note to the Sponsor for an aggregate of up to $300,000 to cover expenses related to the IPO. This loan was
non-interest
bearing and payable on the earlier of July 15, 2021 or the completion of the IPO. As of February 9, 2021, the Company has drawn down $136,678 under the promissory note. On February 11, 2021, the Company paid the $136,678 balance on the note.
 
11
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $2,000,000 of such Working Capital Loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period.
On August 23, 2022, the Company entered into a $500,000 promissory note (the “Convertible Note”) agreement with the Sponsor. The Convertible Note is payable upon the consummation of initial business combination or convertible into warrants at a price of $1.00 at the Sponsor’s discretion. The Convertible Note provides up to $500,000 in funds to be drawn against it. The Convertible Note does not accrue interest. At December 31, 2022, $500,000 was outstanding from this Convertible Note. Management has determined the fair value of the note is more accurately recorded at par since the conversion price is significantly higher than the value of the warrants. No
arm’s-length
transaction by a note holder would result in a conversion with this fact pattern, thus it is a more accurate depiction with recording at par. As such, no fair value change was booked to the statements of operations.
On December 21, 2022, the Company entered into a $550,000 promissory note (the “Convertible Note”) agreement with the Sponsor. The Convertible Note is payable upon the consummation of initial business combination or convertible into warrants at a price of $1.00 at the Sponsor’s discretion. The Convertible Note provides up to $550,000 in funds to be drawn against it. The Convertible Note does not accrue interest. At December 31, 2022, $550,000 was outstanding from this Convertible Note. Management has determined the fair value of the note is more accurately recorded at par since the conversion price is significantly higher than the value of the warrants. No
arm’s-length
transaction by a note holder would result in a conversion with this fact pattern, thus it is a more accurate depiction with recording at par. As such, no fair value change was booked to the statements of operations.
At March 31, 2023 and December 31, 2022, other than the Convertible Notes described above, there was no outstanding balance on the Working Capital Loans.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Underwriting Agreement
The underwriter had a
45-day
option from the date of the IPO to purchase up to an aggregate of 4,125,000 additional Units at the public offering price less the underwriting commissions to cover over-allotments, if any. On February 9, 2021, the underwriter fully exercised its over-allotment option.
Upon consummation of the IPO on February 9, 2021, the underwriters were paid a cash underwriting fee of 2.0% of the gross proceeds of the IPO, or $6,075,000 in the aggregate.
The underwriters are entitled to a deferred underwriting fee of $0.35 per unit, or $10,631,250 in the aggregate, excluding 1,250,000 units purchased by an affiliate of the Sponsor upon which the underwriters are not entitled to a fee. The deferred fee will be payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination, subject to the terms of the underwriting agreement.
Registration Rights
The holders of the Founder Shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement to be signed prior to or on the effective date of the Proposed Public Offering. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company.
Excise Tax
In connection with the vote to approve the Charter Amendment Proposal, holders of 29,446,012 shares of Class A Common Stock properly exercised their right to redeem their shares of Class A Common Stock for an aggregate redemption amount of approximately $298,147,910. As such the Company has recorded a 1% excise tax liability in the amount of $2,981,479 on the condensed balance sheets as of March 31, 2023. The liability does not impact the condensed statements of operations and is offset against additional paid-in capital or accumulated deficit if additional paid-in capital is not available. This excise tax liability can be offset by future share issuances within the same fiscal year which will be evaluated and adjusted in the period in which the issuances occur. Should the Company liquidate prior to December 31, 2023, the excise tax liability will not be due.
NOTE 7 - STOCKHOLDERS’ DEFICIT
Preferred Stock
- The Company is authorized to issue a total of 1,000,000 preferred shares at par value of $0.0001 each. At March 31, 2023 and December 31, 2022, there were no preference shares issued or outstanding.
Class
 A Common Stock
- The Company is authorized to issue a total of 100,000,000 shares of Class A common stock at par value of $0.0001 each. At March 31, 2023 and December 31, 2022, there were no shares issued and outstanding, excluding 2,178,988 and 31,625,000 shares subject to possible redemption, respectively.
In connection with the votes to approve the Extension Amendment, 29,446,012 shares of common stock of the Company were tendered for redemption at a
per-share
price of $10.125. As such, approximately 93.11% of the public shares were redeemed and approximately 6.89% of the public shares remain outstanding. This resulted in a redemption from trust in the amount of $298,147,910.
Class
 B Common stock
- The Company is authorized to issue a total of 10,000,000 shares of Class B common stock at par value of $0.0001 each. At March 31, 2023 and December 31, 2022, there were 7,906,250 shares issued and outstanding.
The Company’s Sponsor, directors and officers have agreed not to transfer, assign or sell their Founder Shares until the earlier to occur of (A) one year after the completion of the Company’s initial Business Combination or (B) subsequent to the Company’s initial Business Combination, (x) if the reported closing price of the Company’s 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 Company’s initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, or other similar transaction that results in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other property.
 
12
Table of Contents
The shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time of its initial Business Combination on a
one-for-one
basis, subject to adjustment pursuant to certain anti-dilution rights, as described herein. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with the Company’s initial Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an
as-converted
basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Proposed Public Offering, plus the total number of shares of Class A common stock issued, or dee
m
ed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial Business Combination and any private placement-equivalent warrants issued to the Company’s Sponsor, officers or directors upon conversion of working capital loans; provided that such conversion of Founder Shares will never occur on a less than one for one basis.
Holders of record of the Class A common stock and holders of record of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stock
ho
lders, with each share of common stock entitling the holder to one vote except as required by law.
NOTE 8 - FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
 
 
  
March 31, 2023
 
  
Quoted

Prices In

Active

Markets

(Level 1)
 
  
Significant

Other

Observable

Inputs (Level 2)
 
  
Significant

Other

Unobservable

Inputs (Level 3)
 
Liabilities:
  
  
  
  
Public Warrants Liability
    $ 1,552,787      $ 1,552,787      $ —        $ —    
Private Placement Warrants Liability
      976,753        —          —          976,753  
     $ 2,529,540      $ 1,552,787      $ —        $ 976,753  
 
    
December 31,

2022
     
Quoted

Prices In

Active

Markets

(Level 1)
     
Significant

Other

Observable

Inputs (Level 2)
     
Significant

Other

Unobservable

Inputs (Level 3)
  
Assets:
                                    
U.S. Money Market Funds held in Trust Account
    $ 320,678,313      $ 320,678,313      $ —        $ —    
Liabilities:
                                    
Public Warrants Liability
    $ 632,500      $ 632,500      $ —        $ —    
Private Placement Warrants Liability
      414,314        —          —          414,314  
     $ 1,046,814      $ 632,500      $ —        $ 414,314  
The Warrants are accounted for as liabilities in accordance with
ASC815-40
and are presented within warrant liabilities on the balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statements of operations.
The Company established the initial fair value of the Public Warrants and Private Warrants on February 9, 2021, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model. As of December 31, 2021, the fair value for the Private Warrants was estimated using a Monte Carlo simulation model, and the fair value of the Public Warrants by reference to the quoted market price. The Public and Private Warrants were classified as Level 3 at the initial measurement date, and the Private Warrants were classified as Level 3 as of March 31, 2023 and December 31, 2022, due to the use of unobservable inputs. The transfer from Level 3 to Level 1 for the Public Warrants occurred on March 31, 2021 due to the use of the observed trading price of the separated Public Warrants.
The following table presents the changes in Level 3 liabilities for the period ended March 31, 2023 and December 31, 2022:
 
Fair Value at January 1, 2022
    $ 5,550,399  
Change in fair value of private warrants
      (5,136,085 ) 
Fair Value of private warrants at December 31, 2022
    $ 414,314  
Change in fair value of private warrants
      562,439  
Fair Value of private warrants at March 31, 2023
    $ 976,753  
 
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The key inputs into the Monte Carlo simulation as of March 31, 2023 and December 31, 2022 were as follows:
 
Inputs
   
December 31,

2022
    
March 31,
2023
  
Risk-free interest rate
      4.74 %      4.52 % 
Expected term remaining (years)
      0.89       1.21  
Expected volatility
      7.8 %      8.0 % 
Stock price
    $ 10.06     $ 10.09  
NOTE 9 - 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, other than the below, subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On April 10, 2023, BofA Securities Inc. (“BofA”) notified the Company that BoFa waives its entitlement to the payment of its portion of any deferred compensation in connection with its role as underwriter in the Initial Public Offering.
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Table of Contents

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

References to the “Company,” “our,” “us” or “we” refer to Sustainable Development Acquisition I Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are a blank check company incorporated as a Delaware public benefit corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of our Initial Public Offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of our Initial Public Offering or otherwise), shares issued to the owners of the target, debt issued to banks or other lenders or the owners of the target, or a combination of the foregoing.

The registration statement for our IPO was declared effective on February 4, 2021. On February 9, 2021, we consummated the IPO of 31,625,000 units (including 4,125,000 units issued to the Underwriters pursuant to the exercise in full of the over-allotment option granted to the Underwriters) (“Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $316.3 million, and incurring offering costs of approximately $17.4 million, inclusive of $10.6 million in deferred underwriting commissions.

Simultaneously with the closing of the IPO, we consummated the private placement (“Private Placement”) of 9,325,000 warrants at a price of $1.00 per warrant (“Private Placement Warrants” and, together with the warrants included in the Units, the “Warrants”) to the Sponsor, generating gross proceeds of approximately $9.3 million.

Upon the closing of the IPO and the Private Placement on February 9, 2021, $316.3 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the IPO and the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and invested only in U.S. “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

If we have not completed a Business Combination by August 12, 2023, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

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

Recent Developments

The Company’s board of directors believed that there was not going to be sufficient time before the February 9, 2023 deadline to complete a business combination, and that it is in the best interest of the Company’s stockholders to extend the date by which the Company has to consummate a business combination in order that the Company’s stockholders have the opportunity to participate in any future investment. Therefore, on November 4, 2022, the Company filed a preliminary proxy statement and on January 6, 2023, a definitive proxy statement, both in connection with a special stockholders meeting (the “Extension Meeting”) to approve an amendment (the “Extension Amendment”) to the Amended and Restated Certificate of Incorporation of the Company to extend the date by which the Company must (i) consummate a Business Combination (ii) cease its operations if it fails to complete such Business Combination, and (iii) redeem or repurchase 100% of the Company’s Class A common stock included as part of the units sold in the Initial Public Offering from February 4, 2023 to August 12, 2023. On February 1, 2023, the Company held the Extension Meeting where the requisite stockholders of the Company approved the Extension Amendment. The Company filed the Extension Amendment with the Secretary of State of the State of Delaware on February 2, 2023.

 

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In connection with the votes to approve the Extension Amendment, 29,446,012 shares of common stock of the Company were tendered for redemption at a per-share price of $10.125. The Class A common stock was redeemed at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the Trust Account deposits (net of franchise and income taxes payable), divided by the number of then outstanding Class A common stock.

The funds in the Trust Account have, since our Initial Public Offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, the Company has instructed Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to maintain the funds in the a bank demand deposit account until the earlier of consummation of the initial business combination or liquidation of the Company.

On April 10, 2023, BofA Securities Inc. (“BofA”) notified the Company that BoFa waives its entitlement to the payment of its portion of any deferred compensation in connection with its role as underwriter in the Initial Public Offering.

Results of Operations

For the three months ended March 31, 2023, we had a net loss of approximately $2.0 million, which included a loss from the change in fair value of warrant liabilities of $1.5 million, a loss from operations of $1.7 million and an income tax provision of $0.3 million, partially offset by interest income on cash and marketable securities of $1.5 million.

For the three months ended March 31, 2022, we had a net income of approximately $7.0 million, which included a loss from operations of $0.3 million, and a gain from the change in fair value of warrant liabilities of $7.3 million.

Our business activities from inception to March 31, 2023 consisted primarily of our formation and completing our IPO, and since the offering, our activity has been limited to identifying and evaluating prospective acquisition targets for a Business Combination.

Liquidity and Capital Resources

Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of Class B common stock by our Sponsor and advances from our Sponsor.

On February 9, 2021, we consummated our Initial Public Offering of 31,625,000 units (the “Units”), including 4,125,000 Units sold pursuant to the full exercise of the underwriters’ option to purchase additional Units. Each Unit consists of one share of Class A common stock, $0.0001 par value per share (the “Class A Common Stock”), and one-half of one redeemable warrant (the “Public Warrants”), each whole Public Warrant entitling the holder thereof to purchase one share of Class A Common Stock at an exercise price of $11.50 per share, subject to adjustment. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $316,250,000 (before underwriting discounts and commissions and offering expenses). Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 9,325,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to our stockholders, generating gross proceeds of $9,325,000.

Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $316,250,000 was placed in the Trust Account, and we had approximately $3.2 million of cash held outside of the Trust Account and working capital of approximately $2.6 million. We incurred approximately $17.4 million in transaction costs, including $10.6 million of deferred underwriting fees that will be paid to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.

For the three months ended March 31, 2023, net cash used in operating activities was approximately $0.8 million.

For the three months ended March 31, 2022, net cash used in operating activities was approximately $0.7 million.

At March 31, 2023, we had cash held in the Trust Account of $22,512,356. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable (if applicable) and deferred underwriting commissions) to complete our Business Combination. During the period ended March 31, 2023, the Company did withdrew an amount of $299,688,680 in the interest income from the Trust Account to pay its tax obligations and in connection with redemption. To the extent that our shares or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the post-Business Combination entity, make other acquisitions and pursue our growth strategies.

At March 31, 2023, we had cash of $1,109,593 held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, properties or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.

 

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In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $2,000,000 of such loans may be convertible into warrants, at the price of $1.00 per warrant at the option of the lender. On August 23, 2022, the Company entered into a $500,000 promissory note agreement with the Sponsor. The note is payable upon the consummation of initial business combination or convertible into warrants at a price of $1.00 at the Sponsor’s discretion. The note provides up to $500,000 in funds to be drawn against it. The note does not accrue interest. At December 31, 2022, $500,000 was outstanding from this Convertible Note. On December 21, 2022, the Company entered into a $550,000 promissory note (the “Convertible Note”) agreement with the Sponsor. The Convertible Note is payable upon the consummation of initial business combination or convertible into warrants at a price of $1.00 at the Sponsor’s discretion. The Convertible Note provides up to $550,000 in funds to be drawn against it. The Convertible Note does not accrue interest. At December 31, 2022, $550,000 was outstanding from this Convertible Note. At March 31, 2023 and December 31, 2022, other than the Convertible Notes described above, there was no outstanding balance on the Working Capital Loans.

Going Concern

In connection with our assessment of going concern considerations in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 205-40, “Presentation of Financial Statements – Going Concern,” we have until August 12, 2023, to consummate an initial business combination. It is uncertain that we will be able to consummate an initial business combination by this time. If an initial business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, it is uncertain that we will have sufficient liquidity to fund the working capital needs of the Company through August 12, 2023 or through twelve months from the issuance of this report. We have determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after August 12, 2023.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. The underwriters are entitled to a deferred fee of $0.35 per share, or $10,631,250 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

Critical Accounting Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Except as set forth below, there have been no significant changes in our critical accounting policies as discussed in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

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Recent Accounting Standards

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 at January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Through March 31, 2023, our efforts have been limited to organizational activities, activities relating to our Initial Public Offering, and searching for a target business. We have engaged in limited operations and have not generated any revenues. We have not engaged in any hedging activities since our inception. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.

The net proceeds of our Initial Public Offering, including amounts in the trust account, have been invested in U.S. government treasury obligations with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2023, due to the previous material weakness in our internal control over financial reporting related to accounting for complex financial instruments described in Item 4. Controls and Procedures included in our Quarterly Report on Form 10-Q as filed with the SEC on May 25, 2021, and due to the restatements of our February 9, 2021, March 31, 2021, and June 30, 2021 financial statements (the “restatements”) regarding the classification of redeemable Class A Shares, as described below, which combined, constitutes a material weakness in our internal control over financial reporting related to accounting for complex financial instruments. Additionally, management has identified a material weakness in internal controls related to the accounting for fair value measurements including accruals of dividend income earned on marketable securities held in Trust Account. In light of these material weaknesses, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, our Chief Executive Officer and Chief Financial Officer believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

 

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Regarding the restatements to the March 31, 2021, and June 30, 2021 quarterly financial statements included in the Company’s Form 10-Qs, as filed with the SEC on May 25, 2021 and August 20, 2021, respectively, as well as the Company’s balance sheet included on the Company’s Form 8-K, as filed with the SEC on February 16, 2021, and restated on the Form 10-Q filed with the SEC on May 25, 2021, certain redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of the Class A common stock in permanent equity. The Company restated its financial statements to classify all Class A common stock as temporary equity and any related impact, as the threshold in its charter would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent equity.

It is noted that the non-cash adjustments to the financial statement do not impact the amounts previously reported for our cash and cash equivalents or total assets. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles.

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) that occurred during the quarter ended on March 31, 2023 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for the Warrants. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.

 

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in our Annual Report of Form 10-K for the year ended December 31, 2022. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC.

 

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

On February 9, 2021, we consummated our Initial Public Offering of 31,625,000 Units, including 4,125,000 Units sold pursuant to the full exercise of the underwriters’ option to purchase additional Units. In connection with the votes to approve the Extension Amendment (as defined above), 29,446,012 shares of common stock of the Company were tendered for redemption at a per-share price of $10.125. There has otherwise been no material change in our planned use of the net proceeds from the initial public offering as described in our final prospectus filed with the SEC.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

No.

   

Description of Exhibit

31.1*    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*    Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*    Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.CAL*    Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH*    Inline XBRL Taxonomy Extension Schema Document
101.DEF*    Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*    Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*    Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*    Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

*

Filed herewith.

**

Furnished.

 

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SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Sustainable Development Acquisition I Corp.
Date: May 24, 2023      

/s/ Nicole Neeman Brady

    Name:   Nicole Neeman Brady
    Title:   Chief Executive Officer and Director
      (Principal Executive Officer)
Date: May 24, 2023      

/s/ Eric Techel

    Name:   Eric Techel
    Title:   Chief Financial Officer
      (Principal Financial and Principal Accounting Officer)

 

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