UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For
the quarterly period ended
OR
For the transition period from to
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification Number) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of November 18, 2022, there were shares of the Class A Common Stock, par value $0.0001 per share, and shares of the Class B Common Stock, par value $0.0001 per share, of the Company issued and outstanding.
PARSEC CAPITAL ACQUISITIONS CORP.
Form 10-Q
For the Quarter Ended September 30, 2022
Table of Contents
| 1 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PARSEC CAPITAL ACQUISITIONS CORP.
CONDENSED BALANCE SHEETS
September 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS: | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Cash and investment held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, Redeemable Common Stock and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Income tax payable | ||||||||
| Due to related party | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting commissions | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Class A common stock subject to possible redemption, shares at redemption value of $and $, respectively. | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $par value; shares authorized; issued and outstanding | ||||||||
| Class A common stock, $par value; shares authorized; issued and outstanding (excluding shares subject to possible redemption) | ||||||||
| Class B common stock, $par value; shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 2 |
PARSEC CAPITAL ACQUISITIONS CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended September 30, | Nine Months Ended September 30, | For the period from February 11, 2021 (inception) through September 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Bank interest income | ||||||||||||||||
| Trust Interest Income | ||||||||||||||||
| Total other income | ||||||||||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average shares outstanding, (redeemable) Class A common stock | ||||||||||||||||
| Basic and diluted net income (loss) per share, (redeemable) Class A common stock | $ | $ | $ | ( | ) | $ | ||||||||||
| Weighted average shares outstanding, (non-redeemable) Class B common stock | ||||||||||||||||
| Basic and diluted net income (loss) per share, (non-redeemable) Class B common stock | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
For the three months ended September 30, 2021 and for the period from February 11, 2021 (inception) through September 30, 2021, Class B common stock excluded shares subject to forfeiture.
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
PARSEC CAPITAL ACQUISITIONS CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Class B Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Remeasurement of Class A ordinary shares subject to possible redemption | ( | ) | ( | ) | ||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 AND THE PERIOD FROM FEBRUARY 11, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
| Class B Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
Balance as of February 11, 2021(inception) | $ | $ | $ | $ | ||||||||||||||||
| Issuance of Class B common stock to initial stockholders | ||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
For the three months ended September 30, 2021 and for the period from February 11, 2021 (inception) through September 30, 2021, Class B common stock included shares subject to forfeiture.
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
PARSEC CAPITAL ACQUISITIONS CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, | For the period from February 11, 2021 (inception) through September 30, | |||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Formation cost paid by Sponsor in exchange of issuance of Class B common stock | ||||||||
| Interest earned on cash and investment held in Trust Account | ( | ) | ||||||
| Changes in current assets and liabilities: | ||||||||
| Prepaid assets | ||||||||
| Accrued costs and expenses | ||||||||
| Income taxes payable | ||||||||
| Due to related party | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of promissory note to related party | ||||||||
| Proceeds from issuance of common stock to sponsor | ||||||||
| Payment of deferred offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Deferred offering costs paid through issuance of promissory note | $ | $ | ||||||
| Remeasurement of class A ordinary shares subject to redemption | $ | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
PARSEC CAPITAL ACQUISITIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 - Organization and Business Operations
Parsec
Capital Acquisitions Corp. (the “Company”) is a blank check company incorporated on
As of September 30, 2022, the Company has neither engaged in any operations nor generated any revenues. All activity through September 30, 2022 relates to the Company’s formation and preparation for the Initial Public Offering (the “Public Offering” or “IPO”) as described below and identifying a target company for an initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
The
Company’s sponsor is Parsec Acquisitions Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The registration
statement for the Company’s IPO was declared effective on October 5, 2021 (the “Effective Date”). On October 8, 2021,
the Company consummated the IPO of units at $ per unit (the “Units”), including the full exercise of the underwriters’
over-allotment of units, generating gross proceeds to the Company of $
Simultaneously
with the consummation of the IPO, the Company consummated the private placement of
Transaction
costs amounted to $
Following
the closing of the IPO on October 8, 2021, $
| 6 |
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 Business Combination or (ii) 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, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek stockholder approval under applicable law or stock exchange listing requirements. The stockholders will be entitled to redeem all or a portion of their public shares upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the Trust Account is $ per public share, however, there is no guarantee that investors will receive $ per share upon redemption. The per-share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters.
The
Company had 12 months from the closing of the IPO (or up to 18 months from the closing of the IPO at the election of the Company subject
to satisfaction of certain conditions or as extended by the Company’s stockholders in accordance with the Company’s amended
and restated certificate of incorporation) to complete the initial Business Combination (the “Combination Period”). However,
if the Company is unable to complete the initial Business Combination within the Combination Period (and the Company’s stockholders
have not approved an amendment to the Company’s charter extending this time period), the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem
the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $
The Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to any founder shares and public shares held by them in connection with a stockholder vote to approve an amendment to the Company’s certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the initial Business Combination or certain amendments to the Company’s charter prior thereto or to redeem of the public shares if the Company does not complete its initial Business Combination within the Combination Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity, (iii) waive their rights to liquidating distributions from the Trust Account with respect to any founder shares held by them if the Company fails to complete its initial Business Combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete its initial Business Combination within the prescribed time frame, and (iv) vote any founder shares held by them and any public shares purchased during or after the Initial Public Offering (including in open market and privately-negotiated transactions) in favor of the initial Business Combination.
| 7 |
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15,“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation date and subsequent dissolution, should the Company be unable to complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company had until October 8, 2022 to consummate a Business Combination. The Company will be unable to consummate a Business Combination by the Liquidation Date and intends to dissolve and liquidate in accordance with the provisions of the Amended and Restated Certificate of Incorporation. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after October 8, 2022. (see Note 9)
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and the Russia-Ukraine war 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 is not determinable as of the date of these unaudited condensed financial statements, and 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,
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.
Note 2 - Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Form 10-K annual report filed by the Company with the SEC on April 14, 2022.
| 8 |
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor 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 unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed financial statements in conformity with US GAAP requires 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. Making estimates requires management to exercise significant judgement. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2022 and December 31, 2021.
Cash and Investment Held in Trust Account
At September 30, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in money market funds and U.S. Treasury securities, respectively. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information. The Company has not withdrawn any amounts from the Trust Account.
| 9 |
As
of September 30, 2022, investments in the Company’s Trust Account consisted of $
Amortized Cost and Carrying Value | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value as of September 30, 2022 | |||||||||||||
| Money Market | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
Amortized Cost and Carrying Value | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value as of December 31, 2021 | |||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury Securities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Premiums and discounts are amortized or accreted over the life of the related held-to maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “interest income” line item in the statements of operations. Interest income is recognized when earned.
Offering Costs associated with the Initial Public Offering
The
Company complies with the requirements of the ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and
other costs incurred through the IPO that were directly related to the Public Offering. Offering costs amounted to $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets primarily due to their short-term nature.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, all shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
| 10 |
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. The following table represents Class A Common stock subject to redemption at September 30, 2022 and December 31, 2021.
| Gross proceeds | $ | |||
| Less: Proceeds Allocated to Public Warrants | ( | ) | ||
| Less: Class A Common stock issuance costs | ( | ) | ||
| Remeasurement of carrying value to redemption value | ||||
| Class A Common stock subject to possible redemption, December 31, 2021 | $ | |||
| Remeasurement of carrying value to redemption value | ||||
| Class A Common stock subject to possible redemption, September 30, 2022 | $ |
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for its outstanding warrants as equity-classified instruments.
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period, excluding common stock subject to forfeiture. At September 30, 2022 and December 31, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. The Company has not considered the effect of the warrants sold in the IPO and the Private Placement to purchase an aggregate of of the Company’s Class A common stock in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the consummation of a business combination. In addition, the Company has a net loss, and any securities would be anti-dilutive. As a result, diluted loss per common stock is the same as basic loss per common stock for the periods presented.
| Three Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
Class A (redeemable) |
Class B (non-redeemable) |
Class A (redeemable) |
Class B (non-redeemable) |
|||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) | $ | $ | $ | $ | ( |
) | ||||||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares Outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | $ | $ | ( |
) | ||||||||||
For the three months ended September 30, 2021, Class B common stock excluded shares subject to forfeiture.
| Nine Months Ended September 30, | For the period from February 11, 2021 (inception) through September 30, |
|||||||||||||||
| 2022 | 2021 | |||||||||||||||
Class A (redeemable) |
Class B (non-redeemable) |
Class A (redeemable) |
Class B (non-redeemable) |
|||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net loss | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares Outstanding | ||||||||||||||||
| Basic and diluted net loss per share | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
For the period from February 11, 2021 (inception) through September 30, 2021, Class B common stock excluded shares subject to forfeiture.
| 11 |
Income Taxes
The Company accounts for income taxes under ASC Topic 740, “Income Taxes.” ASC Topic 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 Topic 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 September 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
While ASC 740 identifies usage
of an effective annual tax rate for purposes of an interim provision, it does allow for estimating individual elements in the current
period if they are significant, unusual or infrequent. Computing the effective tax rate for the Company is complicated due to the potential
impact of the timing of any Business Combination expenses and the actual interest income that will be recognized during the year. The
Company has taken a position as to the calculation of income tax expense in a current period based on ASC 740-270-25-3 which states, “If
an entity is unable to estimate a part of its ordinary income (or loss) or the related tax (benefit) but is otherwise able to make a reasonable
estimate, the tax (or benefit) applicable to the item that cannot be estimated shall be reported in the interim period in which the item
is reported.” The Company believes its calculation to be a reliable estimate and allows it to properly take into account the usual
elements that can impact its annualized book income and its impact on the effective tax rate. As such, the Company is computing its taxable
income (loss) and associated income tax provision based on actual results through September 30, 2022. The Company’s effective tax
rate was
ASC Topic 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 Topic 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 September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal depository insurance coverage of $
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
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Note 3 - Initial Public Offering
Public Units
On October 8, 2021, the Company sold Units, including the full exercise of the underwriters’ over-allotment option to purchase units, at a purchase price of $ per Unit. Each Unit consists of one share of Class A common stock and one redeemable warrant (the “Public Warrants”). Each whole warrant entitles the registered holder to purchase one share of the Class A common stock at a price of $ per share, subject to adjustment, at any time commencing on the later of 12 months from the effective date and 30 days after the completion of the initial Business Combination (see Note 6).
The
Company paid an underwriting fee at the closing of the IPO of $
Note 4 - Private Placement
Simultaneously
with the closing of the IPO, the Company’s Sponsor purchased an aggregate of
The Private Placement Warrants are identical to the Public Warrants sold in the IPO except that the Private Placement Warrants, (a) may not (including the Class A common stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the initial Business Combination and (b) will be entitled to registration rights.
Note 5 - Related Party Transactions
Founder Shares
On
March 12, 2021, the Sponsor paid $
On
July 9, 2021, the Sponsor entered into a Stock Grant Agreement with the Company’s independent directors and certain of the Company’s
officers, under which they are granted Founder Shares and Private Placement Warrants as an inducement to serve as directors and officers
of the Company. Under the terms of the agreement, the Sponsor will transfer Founder Shares to each of the Company’s four
independent directors, Founder Shares to the Company’s Chief Executive Officer and shares to the Company’s
Chief Financial Officer, for a sales price of $ per share, or an aggregate of $
Additionally,
under the terms of the agreement, the Sponsor transferred Private Placement Warrants to each of the Company’s four independent
directors, Private Placement Warrants to the Company’s Chief Executive Officer and Private Placement Warrants to
the Company’s Chief Financial Officer, for no consideration. The granted Private Placement Warrants vested upon the consummation
of the IPO. The fair value of the granted warrants at July 9, 2021, was estimated using a Monte Carlo simulation model to be $
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The
initial stockholders have agreed not to transfer, assign or sell any of their founder shares (or shares of common stock issuable upon
conversion thereof) until the earlier to occur of: (A) nine months after the completion of the initial Business Combination and (B)
Promissory Note - Related Party
The
Sponsor issued a promissory note allowing the Company to borrow up to $
Working Capital Loans
In
addition, in order to finance transaction costs in connection with an intended 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
on a non-interest basis (“Working Capital Loans”). If the Company completes the initial Business Combination, it would repay
the Working Capital Loans. 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 the Working Capital Loans but no proceeds from the Trust Account would be used to repay
the Working Capital Loans. Up to $
Administrative Service Fee
The
Company has entered into an administrative services agreement on the effective date of the registration statement for the IPO pursuant
to which the Company will pay an affiliate of the Sponsor a total of $
Note 6 - Commitments and Contingencies
Registration Rights
The holders of the founder shares, the Private Placement Warrants (including securities contained therein) and warrants (including securities contained therein) that may be issued upon conversion of Working Capital Loans, and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and any shares of Class A common stock and warrants that may be issued upon conversion as part of the Working Capital Loans and Class A common stock issuable upon conversion of the founder shares, are entitled to registration rights pursuant to a registration rights agreement signed on October 8, 2021, requiring the Company to register such securities for resale (in the case of the founder shares, only after conversion to the Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of its initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
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Underwriting Agreement
On
October 8, 2021, the Company paid a cash underwriting discount of
The
underwriters are entitled to a deferred underwriting discount of
Note 7 - Stockholder’s Deficit
Preferred Stock - The Company is authorized to issue shares of preferred stock with a par value of $ and provides that shares of preferred stock may be issued from time to time in one or more series. The Company’s board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. At September 30, 2022 and December 31, 2021, there were shares of preferred stock issued or outstanding.
Class A Common stock - The Company is authorized to issue shares of Class A common stock with a par value of $ per share. At September 30, 2022 and December 31, 2021, there were shares of Class A common stock issued and outstanding, excluding shares of Class A common stock subject to possible redemption.
Class
B Common stock -The Company is authorized to issue shares of Class B common stock with a par value of $ per
share.
Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required by law. Unless specified in the Company’s certificate of incorporation or bylaws, or as required by applicable provisions of the Delaware General Corporate Law (“DGCL”) or applicable stock exchange rules, the affirmative vote of a majority of the Company’s shares of common stock that are voted is required to approve any such matter voted on by its stockholders.
The shares of Class B common stock will automatically convert into shares of the Class A common stock at the time of the consummation of the initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the IPO and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the IPO (excluding the placement warrants and underlying securities) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination or placement equivalent warrants to our Sponsor or its affiliates upon conversion of Working Capital Loans made to the Company). The term “equity-linked securities” refers to any debt or equity securities that are convertible, exercisable or exchangeable for shares of Class A common stock issued in a financing transaction in connection with our initial Business Combination, including but not limited to a private placement of equity or debt. Securities could be “deemed issued” for purposes of the conversion rate adjustment if such shares are issuable upon the conversion or exercise of convertible securities, warrants or similar securities.
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Warrants
- As of September 30, 2022 and December 31, 2021, there were
The Company has agreed that the Company will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. 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. Notwithstanding the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation 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 shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), provided that such exemption is available.
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the placement warrants):
| ●
at a price of $ | |
| ●
upon not less than | |
| ●
if, and only if, the reported last sale price of the Class A common stock equals or exceeds $ |
Note 8 - Fair Value of Financial Instruments
The Company follows the guidance in ASC Topic 820 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, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
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| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The following tables present information about the Company’s assets as of September 30, 2022 and December 31, 2021, and indicates the Level in the fair value hierarchy:
| Quoted | Significant | Significant | ||||||||||||||
| Prices In | Other | Other | ||||||||||||||
| Active | Observable | Unobservable | ||||||||||||||
| September 30, | Markets | Inputs | Inputs | |||||||||||||
| 2022 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Investment held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Quoted | Significant | Significant | ||||||||||||||
| Prices In | Other | Other | ||||||||||||||
| Active | Observable | Unobservable | ||||||||||||||
| December 31, | Markets | Inputs | Inputs | |||||||||||||
| 2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Cash and investment held in Trust Account | $ | $ | $ | $ | ||||||||||||
Note 9 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the unaudited condensed financial statements were issued. The Company did not identify any subsequent events, other than the below, that would have required adjustment or disclosure in the unaudited condensed financial statements.
The Company determined that it is in the best interests
of the Company and its stockholders to dissolve and liquidate in accordance with the provisions of Amended and Restated Certificate of
Incorporation, due to the Company’s inability to consummate an initial Business Combination by the Liquidation Date. The Company
will redeem all of the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust
Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations
(less up to $
Additionally, the amended articles of incorporation state that the Company must wind up and dissolve if the Company is unable to complete its Business Combination within the Combination Period and no extension is exercised, subject to approval by the Company’s board of directors and any remaining shareholders. The Company is seeking board approval to amend the articles of incorporation to continue the Company as it looks to complete its Business Combination, see below. There is no assurance the amendment to the articles of incorporation will be approved by the Company’s board of directors and any remaining shareholders.
On October 13, 2022, Parsec Capital Acquisitions Corp., a Delaware corporation (“PCX”), entered into an agreement and plan of merger (the “Merger Agreement”) by and among PCX, Enteractive Media Inc., a Canadian corporation (“Enteractive Media”) and Enteractive Merger Sub, Inc., a Canadian corporation and a wholly owned subsidiary of PCX (“Merger Sub”). PCX and Merger Sub are sometimes referred to collectively as the “PCX Parties.” Pursuant to the Merger Agreement, a business combination between PCX and Enteractive Media will be effected through the merger of Merger Sub with and into Enteractive Media, with Enteractive Media surviving the merger as a wholly owned subsidiary of PCX (the “Merger”). Upon the closing of the Merger (the “Closing”), it is anticipated that PCX will change its name to “Enteractive Media Inc.” The board of directors of PCX has (i) approved and declared advisable the Merger Agreement, the Ancillary Agreements (as defined in the Merger Agreement) and the transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related transactions by the shareholders of PCX.
If the Board of Directors and/or Shareholders approve to amend the articles of incorporation to continue the Company, the Merger is expected to be consummated in the first quarter of 2023, following the receipt of the required approval by the shareholders of PCX and the shareholder of Enteractive Media and the satisfaction of certain other customary closing conditions.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References to the “Company,” “Parsec Capital Acquisitions Corp.,” “our,” “us” or “we” refer to Parsec Capital Acquisitions Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated as a Delaware 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 intended to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
The Company has determined that it is in the best interests of the Company and its stockholders to dissolve and liquidate in accordance with the provisions of Amended and Restated Certificate of Incorporation, due to the Company’s inability to consummate an initial Business Combination by October 8, 2022, the Liquidation Date. The Company will redeem all of the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any). There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless.
Additionally, the amended articles of incorporation state that the Company must wind up and dissolve if the Company is unable to complete its Business Combination within the Combination Period and no extension is exercised, subject to approval by the Company’s board of directors and any remaining shareholders. The Company is seeking board approval to amend the articles of incorporation to continue the Company as it looks to complete its Business Combination, see below. There is no assurance the amendment to the articles of incorporation will be approved by the Company’s board of directors and any remaining shareholders.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through September 30, 2022 were organizational activities and those necessary to consummate our initial public offering and identifying a target company for an initial Business Combination. We do not expect to generate any operating revenues until after the completion of our business combination. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had a net income of $88,005, which consists of formation and operating costs of $265,405 and provision for income taxes of $42,704, offset by bank interest income of $943 and trust interest income of $395,171.
For the nine months ended September 30, 2022, we had a net loss of $296,641, which consists of formation and operating costs of $778,280 and provision for income taxes of $42,704, offset by bank interest income of $1,066 and trust interest income of $523,277.
For the three months ended September 30, 2021 and for the period from February 11, 2021 (inception) to September 30, 2021, we had a net loss of $24 and $582, which consists of formation costs.
Liquidity and Capital Resources
As of September 30, 2022, we had $297,974 in cash and a working capital deficit $292,708. Until the consummation of our initial public offering, our liquidity needs were satisfied through the receipt of $25,000 from our sale of the Founder Shares, and unsecured loans and advances in an aggregate of $118,710 from related parties.
For the nine months ended September 30, 2022, cash used in operating activities was $270,595. Net loss of $296,641 was affected by interest earned on marketable securities held in the Trust Account of $523,277. Changes in operating assets and liabilities provided $549,323 of cash used in operating activities.
For the period from February 11, 2021 (inception) to September 30, 2021, cash used in operating activities was $194 and net loss of $582 was affected by formation cost paid by Sponsor of $388. There were no changes in operating assets and liabilities.
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On October 8, 2021, we consummated our initial public offering of 8,625,000 units, including the full exercise of the underwriters’ over-allotment option to purchase 1,125,000 units, at $10.00 per Unit, generating gross proceeds of $86,250,000.
Simultaneously with the closing of our initial public offering, our Sponsor purchased an aggregate of 4,518,750 warrants at a price of $1.00 per warrant, for an aggregate purchase price of $4,518,750, in a private placement.
Upon completion of the IPO on February 1, 2021, transaction costs amounted to $5,174,429 consisting of $1,725,000 of underwriting commissions, $3,018,750 of deferred underwriting commissions, and $430,679 of other offering costs.
Following the closing of our initial public offering and the sale of over-allotment units, an aggregate of $87,543,750 from the net proceeds and the sale of the Private Placement Warrants was held in a 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, plants 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.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15,“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation date and subsequent dissolution, should the Company be unable to complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company had until October 8, 2022 to consummate a Business Combination. The Company will be unable to consummate a Business Combination by the Liquidation Date and intends to dissolve and liquidate in accordance with the provisions of the Amended and Restated Certificate of Incorporation. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after October 8, 2022. (see Note 9)
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and the Russia-Ukraine war and has concluded that while it is reasonably possible that it could have a negative effect on our 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.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of September 30, 2022 and December 31, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
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Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay Astro Aerospace Ltd., an affiliate of our sponsor, a monthly fee of $10,000 for office space, utilities and secretarial and administrative services and deferred underwriters’ commission of $3,018,750. We began incurring these fees on October 6, 2021 and will continue to incur these fees monthly until the earlier of the completion of a business combination and our liquidation.
Critical Accounting Policies
The preparation of unaudited condensed financial statements and related disclosures in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.
Recent Accounting Standards
Our management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
Inflation
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 domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. 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. The IR Act applies only to repurchases that occur after December 31, 2022.
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.
At this time, it has been determined that none of the IR Act tax provisions have an impact to the Company’s fiscal 2022 tax provision. The Company will continue to monitor for updates to the Company’s business along with guidance issued with respect to the IR Act to determine whether any adjustments are needed to the Company’s tax provision in future periods.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our 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. We have 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, us, 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 our unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.
As of September 30, 2022, 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. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting with respect to improper accounting for accruals, accounting for complex financial instruments, our going concern assessment in accordance with U.S. GAAP. Additionally, in respect the Company’s mandatory liquidation date, the Company did not assess and execute the necessary actions in accordance with the charter to liquidate or extend in a timely manner. Management concluded that such disclosure controls and procedures are not effective.
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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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 on Form 10-Q are any of the risks described in our Annual Form 10-K filed with the SEC on April 14, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| * | Filed herewith. |
| ** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 3, 2022.
| PARSEC CAPITAL ACQUISITIONS CORP. | ||
| November 18, 2022 | By: | /s/ Patricia Trompeter |
| Name: | Patricia Trompeter | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| November 18, 2022 | By: | /s/ Paul Haber |
| Name: | Paul Haber | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
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