UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
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(Exact name of registrant as specified in its charter)
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incorporation or organization) | Identification No.) |
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(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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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 (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ |
| Accelerated filer ☐ |
Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 12, 2022, there were
REVELSTONE CAPITAL ACQUISITION CORP.
TABLE OF CONTENTS
2
PART 1 – FINANCIAL INFORMATION
REVELSTONE CAPITAL ACQUISITION CORP.
CONDENSED BALANCE SHEETS
June 30, | December 31, | |||||
2022 | 2021 | |||||
| (unaudited) |
| (audited) | |||
Assets: |
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Current Assets |
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Cash |
| $ | | $ | | |
Prepaid Assets |
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Total Current Assets |
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Other Assets |
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Prepaid Assets, non-current | — | | ||||
Investments held in Trust Account |
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Total Other Assets |
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Total Assets | $ | | $ | | ||
Liabilities and Stockholders’ Deficit |
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Current Liabilities |
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Accounts payable | $ | | $ | | ||
Franchise tax liability | |
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Accrued Expenses | | | ||||
Over-allotment Units Liability | — | | ||||
Note Payable - Related Party | — |
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Income Tax Payable | | | ||||
Total Current Liabilities | |
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Long-Term Liabilities |
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Deferred underwriting commission payable | |
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Total Long-Term Liabilities | |
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Total Liabilities | |
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Commitments and Contingencies (Note 6) |
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Common stock subject to possible redemption, | |
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Stockholders’ Deficit |
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Preferred stock, $ | — |
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Class A Common stock, $ | — |
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Class B Common stock, $ | |
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Additional paid-in capital | — |
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Accumulated Deficit | ( |
| ( | |||
Total Stockholders’ Deficit | ( |
| ( | |||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | | $ | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
REVELSTONE CAPITAL ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Period | |||||||||
from April 5, | |||||||||
2021(inception) | |||||||||
Three Months Ended | Six Months Ended | through | |||||||
| June 30, 2022 |
| June 30, 2022 |
| June 30, 2021 | ||||
Operating Expenses |
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Formation and Operating Costs |
| $ | | $ | | $ | | ||
Total Operating Expenses |
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Net Operating Loss |
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Interest income from investments held in Trust Account | | | — | ||||||
Change in fair value of overallotment units | — | | — | ||||||
Fair value of forfeited overallotment option | — | | — | ||||||
Total Other Income / (Expense) |
| | | — | |||||
Income (loss) before provision for income tax | $ | | $ | ( | $ | ( | |||
Provision for income taxes | | | — | ||||||
Net income (loss) | $ | | $ | ( | $ | ( | |||
Basic and diluted weighted average shares outstanding, ordinary shares subject to possible redemption |
| | | — | |||||
Basic and diluted net income (loss) per ordinary share subject to possible redemption | ( | — | |||||||
Basic and diluted weighted average shares outstanding, nonredeemable ordinary shares |
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Basic and diluted net income (loss) per nonredeemable ordinary share | ( | ( |
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
REVELSTONE CAPITAL ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
Common Stock | Additional | Total | |||||||||||
Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||
Balance—January 1, 2022 | | $ | |
| |
| $ | ( |
| $ | ( | ||
Proceeds allocated to Public Warrants | |
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Proceeds allocated to Private Placement Warrants | |
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Offering costs allocated to warrants | — | — | ( | — | ( | ||||||||
Derecognition of overallotment unit liability | — | — | | — | | ||||||||
Re-measurement of redeemable shares to redemption value | |
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| ( |
| ( |
| ( | ||||
Net Loss | | | | ( | ( | ||||||||
Balance— March 31, 2022 | | $ | | — | $ | ( | $ | ( | |||||
Re-measurement of redeemable shares to redemption value | — | — | — | ( | ( | ||||||||
Net Income | — | — | — | | | ||||||||
Balance—June 30, 2022 | | $ | |
| |
| $ | ( |
| $ | ( |
FOR THE PERIOD FROM APRIL 5, 2021 (INCEPTION) THROUGH JUNE 30, 2021
Common Stock | Additional | Total | ||||||||||||
| Class B |
| Paid-in |
| Accumulated |
| Stockholders’ | |||||||
Shares |
| Amount | Capital | Deficit | Equity | |||||||||
Balance— April 5, 2021 (inception) |
| | $ | | $ | | $ | | $ | | ||||
Issuance of Class B common stock to Sponsor |
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Net Loss |
| — |
| — |
| — |
| ( |
| ( | ||||
Balance— June 30, 2021 |
| | $ | | $ | | $ | ( | $ | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
5
REVELSTONE CAPITAL ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the period | ||||||
For the Six Months | from April 5, 2021 | |||||
Ended | (inception) through | |||||
| June 30, 2022 |
| June 30, 2021 | |||
Cash Flows from Operating Activities: |
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Net loss |
| $ | ( | $ | ( | |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Change in fair value of overallotment units | ( | — | ||||
Fair value of forfeited overallotment units | ( | — | ||||
Interest income from investments held in Trust Account | ( | — | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid Assets |
| | — | |||
Accounts Payable | ( | — | ||||
Accrued Expenses | | — | ||||
Franchise Tax Liability |
| | — | |||
Income Tax Payable | | — | ||||
Net cash used in operating activities |
| ( | ( | |||
Cash Flows from Investing Activities: |
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Principal deposited in Trust Account | ( | — | ||||
Net cash used in investing activities |
| ( | — | |||
Cash Flows from Financing Activities: |
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Proceeds from partial exercise of overallotment option, net of costs |
| | — | |||
Proceeds from private placement related to partial exercise of overallotment option |
| | — | |||
Repayment of note payable—related party | ( | | ||||
Deferred offering costs paid | | ( | ||||
Proceeds from issuance of Class A common stock | | | ||||
Net cash provided by financing activities |
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Net Change in Cash |
| ( | | |||
Cash–Beginning |
| | — | |||
Cash–Ending | $ | | $ | | ||
Non-Cash investing and financing activities: |
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Deferred underwriting commissions payable | $ | | $ | — | ||
Re-measurement of carrying value of redeemable shares to redemption value | $ | | $ | — | ||
Exercised portion of overallotment unit liability | $ | | $ | — | ||
Deferred offering costs paid by sponsor in exchange for note payable – related party | $ | | $ | |
The accompanying notes are an integral part of the unaudited condensed financial statements.
6
REVELSTONE CAPITAL ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Note 1—Description of Organization and Business Operations
Revelstone Capital Acquisition Corp. (the “Company”) was incorporated in Delaware on April 5, 2021. 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 (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies. The Company’s sponsor is Revelstone Capital LLC, a Delaware limited liability company (the “Sponsor”).
As of June 30, 2022, the Company has neither engaged in any operations nor generated any revenues. All activity for the period from April 5, 2021 (inception) through June 30, 2022, relates to the Company’s formation and the initial public offering (“Public Offering”), which is described below. 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 from the proceeds derived from the Public Offering.
The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s IPO was declared effective on December 16, 2021 (the “Effective Date”). On December 21, 2021, the Company’s consummated the IPO of
Simultaneously with the consummation of the IPO, the Company consummated the private placement of
On January 11, 2022, the underwriters partially exercised the over-allotment option to purchase
Simultaneously with the sale of the Additional Units, the Company consummated the sale of an additional
On February 3, 2022, the Company announced that the holders of the Units may elect to separately trade the shares of Class A common stock, par value $
7
Transaction costs amounted to $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
The Company must complete a Business Combination with one or more target businesses that together have an aggregate fair market value of at least
Following the closing of the Public Offering on December 21, 2021 and partial exercise of the overallotment option on January 11, 2022, $
The Company will provide its holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a 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 Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $
8
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Sponsor and each Anchor Investor (see Note 3) holding Founder Shares have agreed (a) to waive their redemption rights with respect to any Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem
The Company will have
The Sponsor and each Anchor Investor holding Founder Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period or during any Extension Period. However, if the Sponsor or any of its affiliates acquire Public Shares after the Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period or during any Extension Period. The underwriters have agreed to waive their right to their deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period or during any Extension Period, and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Public Offering price per Unit ($
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $
9
Going concern, Liquidity and Capital Resources
As of June 30, 2022 the Company had approximately $
Prior to the completion of the Public Offering, the Company’s liquidity needs had been satisfied through a payment from the Sponsor of $
Subsequent to the consummation of the Public Offering and private placement, the Company’s liquidity needs have been satisfied through the 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, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). As of June 30, 2022 and December 31, 2021, there were
In connection with the Company’s 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,” the Company has until June 21, 2023, to consummate an initial business combination. It is uncertain that the Company 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. Management has determined that the liquidity condition and the 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 that might result from the outcome of this uncertainty for the next twelve months form the issuance of these financial statements.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 global pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. The interim results for the three and six months ended June 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 5, 2022.
Emerging Growth Company
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 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.
10
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 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 financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.
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 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 June 30, 2022 and December 31, 2021.
Investments Held in Trust Account
At June 30, 2022 and December 31, 2021, the assets held in the Trust Account were held in treasury funds. 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 the Trust Account are included in interest income in the accompanying statements of operations. The estimated fair value of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which frequently exceeds the Federal Depository Insurance Coverage of $
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes”. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
11
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statements recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
● | 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; and |
● | 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 some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the Public Warrants and Private Placement Warrants issued in the Public Offering meet the requirements for equity classification. The Company categorized the over-allotment option granted to underwriters in connection with the Public Offering as a freestanding financial instrument to be accounted for separately from the Units.
Class A Common Stock Subject to Possible Redemption
All of the
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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.
Offering Costs associated with the Initial Public Offering
The Company complies with the requirements of ASC 340-10-S99-1. Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Public Offering that were directly related to the Public Offering. The Company incurred offering costs amounting to $
Net Loss Per Ordinary Share
The Company has two categories of shares, which are referred to as redeemable ordinary shares and non-redeemable ordinary shares. Earnings and losses are shared pro rata between the two categories of shares.
The calculation of diluted net income (loss) per ordinary share does not consider the effect of the warrants issued in connection with the Initial Public Offering and the partial exercise of the over-allotment option because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and six months ended June 30, 2022.
The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each category:
For the Period from April | ||||||||||||||||||
Three Months Ended | Six Months Ended | 5, 2021(inception) through | ||||||||||||||||
June 30, 2022 | June 30, 2022 | June 30, 2021 | ||||||||||||||||
| Redeemable |
| Non-redeemable |
| Redeemable |
| Non-redeemable |
| Redeemable |
| Non-redeemable | |||||||
Numerator | ||||||||||||||||||
Allocation of net income (loss) |
| $ | |
| | ( |
| ( | — |
| ( | |||||||
Denominator | ||||||||||||||||||
Weighted average shares outstanding |
| |
| | |
| | — |
| | ||||||||
Basic and diluted net income (loss) per share |
| $ |
| ( |
| ( | — |
| ( |
Note 3—Initial Public Offering
On December 21, 2021 the Company sold
Following the closing of the Public Offering on December 21, 2021 and partial exercise of the overallotment option on January 11, 2022, $
13
Prior to the Public Offering certain qualified institutional buyers or institutional accredited investors which are not affiliated with any member of the Company’s management (the “Anchor Investors”) each expressed to the Company an interest in purchasing Units in the Public Offering at the offering price of $
As of June 30, 2022, the ordinary shares subject to redemption reflected on the balance sheet are reconciled in the following table:
Ordinary shares subject to redemption as of January 1, 2022 |
| $ | |
Gross proceeds from partial exercise of overallotment option | | ||
Less: |
|
| |
Proceeds allocated to Public Warrants |
| ( | |
Ordinary shares issuance costs |
| ( | |
Plus: |
|
| |
Re-measurement of carrying value to redemption value |
| | |
Ordinary shares subject to redemption as of March 31, 2022 | | ||
Plus: | |||
Re-measurement of carrying value to redemption value | | ||
Ordinary shares subject to redemption as of June 30, 2022 | $ | |
Note 4—Private Placement
Simultaneously with the closing of the Public Offering, the Sponsor, Roth and certain Roth affiliates purchased an aggregate of
Each Private Placement Warrant is exercisable to purchase
Note 5—Related Party Transactions
Founder Shares
On May 11, 2021, the Sponsor paid $
On November 18, 2021, the Sponsor transferred
14
The Sponsor, anchor investors, Company’s independent directors and outside advisors holding Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A)
Related Party Loans
On May 11, 2021, the Sponsor agreed to loan the Company an aggregate of up to $
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“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 proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
Administrative Service Agreement
The Company entered into an administrative services agreement with an affiliate of the Sponsor for office space, administrative and support services. The affiliate agreed to provide the above services for
Note 6—Commitments and Contingencies
Registration Rights
The holders of the majority of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans up to $
Underwriting Agreement
On December 21, 2021 the Company paid a cash underwriting commission of $
15
The Company granted the underwriters a
On January 11, 2022, the Company paid a cash underwriting commission of $
The underwriters are entitled to deferred underwriting commissions of $
Note 7—Stockholders’ Deficit
Preferred Stock—The Company is authorized to issue
Class A Common Stock—The Company is authorized to issue
Class B Common Stock—The Company is authorized to issue
Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders, except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to increase in respect of the issuance of certain securities, as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities (as described herein), are issued or deemed issued in excess of the amount issued in the Public Offering 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,
Public Warrants —Public Warrants may only be exercised for a whole number of shares. No fractional warrants are issued upon separation of the Units and only whole warrants trade. The Public Warrants will become exercisable on the date that is the later of twelve months from the date of this offering or
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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 underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue any 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.
The Company has agreed that as soon as practicable, after the closing of a Business Combination, the Company will use its best efforts to file, and within
Redemptions of Warrants When the Price Per Share of Class A Common Stock Equals or Exceeds
$
● | in whole and not in part; |
● | at a price of $ |
● | upon not less than |
● | if, and only if, the last reported sale price of Class A common stock equals or exceeds $ |
● | if , and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants. |
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If the Company calls the Public Warrants for redemption for cash, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”, as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period or during any Extension Period, and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
The Company accounted for the
Underwriters’ Over-allotment Option- The Company granted the underwriters a
Note 8— Income Taxes
Our effective tax rate was
Note 9—Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
| Quoted Prices In |
| Significant Other |
| Significant Other | ||||
June 30, | Active Markets | Observable | Unobservable | |||||||
2022 | (Level 1) | Inputs (Level 2) | Inputs (Level 3) | |||||||
Assets: |
|
|
|
|
|
|
|
| ||
Investments held in Trust Account | $ | | $ | |
| — |
| — | ||
$ | | $ | |
| — |
| — |
Quoted Prices In | Significant Other | Significant Other | |||||||||
December 31, | Active Markets | Observable | Unobservable | ||||||||
| 2021 |
| (Level 1) |
| Inputs (Level 2) |
| Inputs (Level 3) | ||||
Assets: |
|
|
|
|
|
|
|
| |||
Investments held in Trust Account |
| $ | |
| $ | |
| — |
| — | |
| $ | |
| $ | |
| — |
| — | ||
Liabilities: | |||||||||||
Over-allotment option |
| $ | |
| — |
| — |
| $ | | |
| $ | |
| — |
| — |
| $ | |
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The over-allotment option was accounted for as a liability in accordance with ASC 815-40 and is presented within liabilities on the balance sheet as of December 31, 2021. The over-allotment liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of over-allotment units in the statements of operations.
The Company used a Black Scholes model to value the over-allotment option. The over-allotment option was classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs. Inherent in pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the option. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the option. The expected life of the option is assumed to be equivalent to its remaining contractual term.
The key inputs into the Black Scholes model for the over-allotment liability were as follows at December 31, 2021 and January 11, 2022, the date of the partial exercise of the overallotment option:
| December 31, |
| ||
Input | 2021 |
| ||
Risk-free interest rate |
| | % | |
Expected term (years) |
| | ||
Expected volatility |
| | % | |
Exercise price |
| $ | | |
Unit Price |
| $ | |
| January 11, |
| ||
Input | 2022 |
| ||
Risk-free interest rate |
| | % | |
Expected term (years) |
| | ||
Expected volatility |
| | % | |
Exercise price |
| $ | | |
Unit Price |
| $ | |
The following table sets forth a summary of the changes in the fair value of the Level 3 over-allotment liability for the six months ended June 30, 2022:
| Over-allotment | ||
Liability | |||
Fair value as of December 31, 2021 | $ | | |
Change in fair value at January 11, 2022 | $ | ( | |
Fair value of forfeited overallotment units at January 11, 2022 | $ | ( | |
Elimination of overallotment liability at January 11, 2022 | $ | ( | |
Fair value as of June 30, 2022 | $ | |
Note 10—Subsequent Events
The Company has evaluated subsequent events that occurred after the balance sheet date up to the date the financial statements were issued. Based on the Company’s review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to Revelstone Capital Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Revelstone Capital, LLC. 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 Quarterly 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 final prospectus for its Initial Public Offering (as defined below) filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s filings with the SEC 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 in Delaware on April 5, 2021. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” Our efforts to identify a prospective target business will not be limited to a particular industry or geographic location, although we intend to focus our search for target businesses in the cannabis industry. We intend 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.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
Results of Operations
As of June 30, 2022, we have neither engaged in any operations nor generated any revenues. All activity for the period from April 5, 2021 (inception) through June 30, 2022 relates to our formation and the initial public offering. We will not generate any operating revenues until after the completion of our initial business combination, at the earliest. We have generated and will continue to generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the initial public offering.
For the three months ended June 30, 2022, we had a net income of $67,709, which resulted from interest income from investments held in the trust account of $232,604 offset by formation and operating costs of $142,732 and income tax provision of $22,163.
For the six months ended June 30, 2022, we had a net loss of $26,990, which resulted from formation and operating costs of $344,298, income tax provision of $22,163, offset by the fair value of forfeited overallotment option of $79,071, the change in fair market value of the over-allotment option of $15,119 and interest income from investments held in the trust account of $245,281.
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For the period from April 5, 2021 (inception) through June 30, 2021, we had a net loss of $330, which resulted from formation and operating costs of $330.
Liquidity and Capital Resources
As of June 30, 2022, we had $811,378 in cash and working capital of $835,954.
Prior to the completion of the Initial Public Offering, our liquidity needs had been satisfied through a payment from the sponsor of $25,000 for the founder shares to cover certain offering costs, and the loan under an unsecured promissory note from the sponsor of $189,789. The promissory note was paid in full on January 11, 2022. Subsequent to the consummation of the initial public offering and private placement, our liquidity needs have been satisfied through the 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, the sponsor, initial shareholders, officers, directors or their affiliates may, but are not obligated to, provide us working capital loans. As of June 30, 2022, there were no amounts outstanding under any working capital loans.
In connection with the Company’s 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,” the Company has until June 21, 2023, to consummate an initial business combination. It is uncertain that the Company 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. Management has determined that the liquidity condition and the 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 that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2022.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities except for deferred underwriting commissions of $5,775,000 as of June 30, 2022.
Critical Accounting Policies
Public and Private Warrants
The Company accounted for the 14,500,000 warrants issued in connection with the Public Offering and partial exercise of the over-allotment option, including 8,250,000 Public Warrants and 6,250,000 Private Placement Warrants in accordance with the guidance contained in ASC 815-40. The Company concluded that the Public and Private Placement Warrants are considered indexed to the entity’s own stock and meet other equity classification requirements. Therefore, Public and Private Placement Warrants are considered equity instruments and are classified as such.
Net Income/(Loss) Per Share of Class A Common Stock
We have two categories of shares, which are referred to as redeemable shares and non-redeemable shares. Earnings and losses are shared pro rata between the two categories of shares.
Shares of Class A Common Stock Subject to Possible Redemption
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All of the 16,500,000 shares of Class A common stock sold as part of the units contain a redemption feature which allows for the redemption of such public shares in connection with our liquidation, if there is a shareholder vote or tender offer in connection with the business combination and in connection with certain amendments to our second amended and restated certificate of incorporation. In accordance with ASC 480-10-S99, redemption provisions not solely within the control of us require shares of Class A common stock subject to redemption to be classified outside of permanent equity. Therefore, all 16,500,000 shares of Class A common stock were classified outside of permanent equity as of June 30, 2022.
We recognized changes in redemption value immediately as they occur upon the IPO and will adjust the carrying value of redeemable shares of Class A common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable shares of Class A common stock are affected by charges against additional paid in capital and accumulated deficit.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company we are not required to make disclosures under this Item.
Item 4. Control 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 Securities Exchange Act of 1934, as amended (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 principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer has concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports 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 principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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ITEM 1A. RISK FACTORS
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 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.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report:
Exhibit No. |
| Description |
31.1* | ||
31.2* | ||
32** | ||
101.INS | XBRL Instance Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
** | Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
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SIGNATURES
Pursuant to the requirements 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.
| Revelstone Capital Acquisition Corp. | |
| ||
Date:August 12, 2022 | By: | /s/ Daniel Neukomm |
|
| Daniel Neukomm |
|
| Co-Chief Executive Officer |
(Principal Executive Officer) |
Date:August 12, 2022 | By: | /s/ Morgan Callagy |
| Morgan Callagy | |
| Co-Chief Executive Officer and Secretary | |
(Principal Financial and Accounting Officer) |
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