Related Party Transactions

3 Months Ended

Mar. 31, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Note 6 — Related Party Transactions

Founder and Private Placement Shares

On February 18, 2021, the Sponsor acquired 2,443,750 shares of common stock for a purchase price of $25,000. On March 2, 2021, the Company adopted first and amended certificate of incorporation to divide its common stock into Class A Common Stock and Class B Common Stock without changing the total amount of the authorized capital of common stock. As a result, the Company forfeited 2,443,750 shares of common stock and issued 2,443,750 shares (the “Founder Shares”) of Class B common stock, par value $0.0001 per share (“Class B Common Stock”) to the Sponsor.

As of March 31, 2023 and December 31, 2022, there were 2,443,750 Founder Shares issued and outstanding. The aggregate capital contribution was $25,000, or approximately $0.01 per share.

The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 20% of the outstanding shares upon completion of the IPO (excluding the sale of Private Placement Shares and issuance of the Representative Shares).

In November 2021, the Sponsor has transferred an aggregated amount of 443,750 Founder Shares to the Company’s former officers, directors, secretary and their designees at the same price originally paid for such shares prior to the closing of the IPO. As a result of such transfers, US Tiger Securities, Inc., a Representative of the underwriters of the IPO, as the designee of Mr. Lei Huang, former Chief Executive Officer who resigned on December 22, 2022, acquired 122,000 Founder Shares at the same price originally paid for such shares. Dr. Lei Xu, the Company’s former President, Ms. Yuanmei Ma, the Company’s former Chief Financial Officer, Ms. Christy Szeto, the Company’s former secretary, Dr. David Xianglin Li, Mr. Michael Daidov, and Mr. Norman Kristoff, each of the Company’s former directors collectively acquired the remaining 321,750 Founder Shares at the same price originally paid for such shares. On December 22, 2022, the Company’s officers, directors and secretary resigned from their respective positions, returned and sold a total of 343,750 Founder Shares back to the Sponsor with the original purchase price. Out of the issued and outstanding shares of Class B Common Stock, an aggregate of 100,000 shares remains owned by former management.

The sale of the Founder Shares from Sponsor to the Company’s officers, directors and secretary is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The grant date fair value of the remaining 100,000 shares, net of forfeiture of 343,750 shares, granted to the Company’s officers, directors and secretary was $716,250 or $7.16 per share. The Founders Shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares is 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 would be recognized at the date a Business Combination is considered probable (i.e., upon consummation of a Business Combination) in an amount equal to the number of Founders Shares times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founder Shares.

The holders of the Founder Shares have agreed not to transfer, assign or sell 50% of their Founder Shares until the earlier to occur of: (A) six months after the date of the consummation of the Company’s initial Business Combination, or (B) the date on which the closing price of the Company’s Class A Common Stock equals or exceeds $12.50 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after the Company’s initial Business Combination and the remaining 50% of the Founder Shares may not be transferred, assigned or sold until six months after the date of the consummation of the Company’s initial Business Combination, or earlier, in either case, if, subsequent to the Company’s initial Business Combination, the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares for cash, securities or other property.

On November 5, 2021, the Company completed the private sale of 505,500 shares of Class A Common Stock to the Sponsor, Fortune Rise Sponsor LLC, at a purchase price of $10.00 per Private Placement Share, generating gross proceeds to the Company of $5,055,000. The Private Placement Shares are identical to the shares of Class A Common Stock sold as part of the Units in the IPO, except that the holders have agreed not to transfer, assign or sell any of the Private Placement Shares (except to certain permitted transferees) until 30 days after the completion of the Company’s initial Business Combination.

Representative Shares

The Company issued 120,000 Representative Shares to two Representatives without any consideration as part of the IPO compensation. The Representative Shares are identical to the public shares except that the representatives have agreed not to transfer, assign or sell any such representative shares until the completion of the Company’s initial Business Combination. The Representative Shares are deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the commencement of sales in this offering pursuant to FINRA Rule 5110(e)(1). In addition, the Representatives have agreed (i) to waive their redemption rights with respect to such shares in connection with the completion of the Company’s initial Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account (as defined below) with respect to such shares if the Company fails to complete its initial Business Combination by June 5, 2023 (or up to November 5, 2023, if the Company extends the time to complete a Business Combination) and payment of the extension by our Sponsor, or its affiliates.

Prepaid Expenses – Related Party

Effective December 1, 2022 (the “Effective Date”), Mr. J Richard Iler, the Company’s Principal Executive Officer, Chief Financial Officer, Secretary, and Treasurer, entered into a Consulting Agreement (the “Agreement”) with the Company and OriginClear, Inc. (OriginClear), a Nevada corporation and the parent company of the Sponsor pursuant to which Mr. Iler received an initial payment of $50,000 and is to receive separate payments of $25,000 monthly from January through April 2023. The term of the Agreement is for six months starting from the Effective Date, unless earlier terminated. The Agreement may be extended upon agreement by both parties, unless or until the Agreement is terminated. Either party may cancel this Agreement upon ten days written notice in the event either party violates any material provision of the Agreement and fails to cure such violation within ten days of written notification of such violation from the other party. As of March 31, 2023 and December 31, 2022, the Company prepaid to Mr. Iler under the Agreement amounted to $25,000 and $25,000, respectively.

Due to Related Parties

In December 2022, OriginClear advanced $50,000 to the Company for working capital purpose. As of March 31, 2023 and December 31, 2022, balance due to OriginClear amounted to $50,000 and $50,000, respectively.

During the three months ended March 31, 2023, WODI advanced $555,420 to the Company for working capital purpose. As  of March 31, 2023 and December 31, 2022, balances due to WODI amounted to $555,420 and $0, respectively.

Promissory Notes — Related Party (Working Capital Loans)

On November 4, 2022, an aggregate of $977,500 (the “First Extension Payment”) was deposited into the Company’s Trust Account for the public stockholders, representing $0.10 per public share, which enables the Company to extend the period of time it has to consummate its initial Business Combination by three months from November 5, 2022 to February 5, 2023 (the “First Extension”). The First Extension is the first of the two three-month extensions permitted under the Company’s governing documents. In connection with the First Extension Payment, the Company issued unsecured promissory notes (the “First Extension Note”) to certain initial stockholders including (i) a note of $413,750 to Mr. Koon Keung Chan, the former manager of the Sponsor of the Company who resigned on December 22, 2022, (ii) a note of $150,000 to U.S. Tiger Securities, an existing stockholder, and (iv) a note of $170,000 to Dr. Lei Xu, the former President and Chairwoman of the Company who resigned on December 22, 2022. The three promissory notes together with the Company’s working capital fund were used to pay for the First Extension Payment. These three promissory notes were assigned to WODI as creditor on December 22, 2022.

On February 6, 2023, $977,500 (the “Second Extension Payment”) was deposited into the Trust Account, for the public stockholders, representing $0.10 per public share, which enables the Company to extend the period of time it has to consummate its initial Business Combination by three months from February 5, 2023 to May 5, 2023 (the “Second Extension”). The Second Extension is the second and final of the two three-month extensions permitted under the Company’s governing documents. In connection with the Second Extension Payment, the Company issued an unsecured promissory note (the “Second Extension Note”) to WODI. The Company’s board of directors has approved an amendment to our amended and restated certificate of incorporation that would extend the period of time we have to consummate its initial Business Combination by an additional six months from May 5, 2023 to November 5, 2023.

On March 16, 2023, the board of directors of the Company approved the issuance of an unsecured promissory note dated March 9, 2023 in the principal amount of $75,000 (the “Note 1”) to WODI.

The First Extension Note, the Second Extension Note, and Note 1 (herein referred to as the “Notes”) are non-interest bearing and payable (subject to the waiver against trust provisions) on the earlier of (i) consummation of the Company’s initial Business Combination and (ii) the date of the liquidation of the Company. The principal balance may be prepaid at any time, at the election of the Company. The holders of the Notes have the right, but not the obligation, to convert their Notes, in whole or in part, respectively, into private shares of the Class A common stock (the “Conversion Shares”) of the Company, as described in the prospectus of the Company (File Number 333-256511). The number of Conversion Shares to be received by the holders in connection with such conversion shall be an amount determined by dividing (x) the sum of the outstanding principal amount payable to such holders by (y) $10.00.

In order to finance transaction costs in connection with an intended initial Business Combination, the founders or an affiliate of the founders or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required. If the Company completes the initial Business Combination, it would repay such loaned amounts. Up to $3,000,000 of such loans may be convertible into working capital shares, at a price of $10.00 per share at the option of the lender. Such working capital shares would be identical to the Private Placement Shares. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used for such repayment.

As of March 31, 2023 and December 31, 2022, the Company had borrowings of $1,786,250 and $733,750, respectively, under the promissory notes — related party (working capital loans).