UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from _____________ to ________________
Commission File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices and zip code) |
(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 | Trading Symbol(s) | Name of each exchange on which registered | ||
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 November 17, 2023, there were
REVELSTONE CAPITAL ACQUISITION CORP.
TABLE OF CONTENTS
i
PART 1 – FINANCIAL INFORMATION
REVELSTONE CAPITAL ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (unaudited) | ||||||||
| Assets: | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid Assets | ||||||||
| Total Current Assets | ||||||||
| Other Assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Franchise tax liability | ||||||||
| Accrued Expenses | ||||||||
| Income Tax Payable | ||||||||
| Note and Other Payable – Related Party | ||||||||
| Excise tax payable | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities | ||||||||
| Deferred underwriting commission payable | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Class A Common stock subject to possible redemption, | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $ | ||||||||
| Class A Common stock, $ | ||||||||
| Class B Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
REVELSTONE CAPITAL ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | |||||||||||||
| Operating Expenses | ||||||||||||||||
| Formation and Operating Costs | $ | $ | $ | $ | ||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net Operating Loss | ||||||||||||||||
| Gain from investments held in Trust Account | ||||||||||||||||
| Change in fair value of overallotment units | ||||||||||||||||
| Fair value of forfeited overallotment option | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| Income (loss) before provision for income tax | $ | ( | ) | $ | $ | $ | ||||||||||
| Provision for income taxes- loss | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | $ | ||||||||||
| $ | ( | ) | $ | $ | $ | |||||||||||
| $ | ( | ) | $ | $ | $ | |||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
REVELSTONE CAPITAL ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
Common Stock Class A | Common Stock Class B | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance— January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Re-measurement of redeemable shares of Class A common stock to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net Income | — | — | ||||||||||||||||||||||||||
| Balance—March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Re-measurement of redeemable shares of Class A common stock to redemption value | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||
| Re-measurement of redeemable shares to redemption value– waiver of deferred underwriting commission | — | — | — | |||||||||||||||||||||||||
| Recognition of excise tax liability on trust redemptions | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||
| Net Income | ||||||||||||||||||||||||||||
| Balance – June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Re-measurement of redeemable shares to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net Income | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Conversion of Class B shares to Class A | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance—September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
| Common Stock Class A | Common Stock Class B | Additional Paid-In | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance— January 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Proceeds allocated to Public Warrants | — | — | ||||||||||||||||||||||||||
| Proceeds allocated to Private Placement Warrants | — | — | ||||||||||||||||||||||||||
| Offering costs allocated to warrants | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Derecognition of overallotment unit liability | — | — | ||||||||||||||||||||||||||
| Re-measurement of redeemable shares to redemption value | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net Loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance— March 31, 2022 | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Re-measurement of redeemable shares to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net Income | — | — | ||||||||||||||||||||||||||
| Balance— June 30, 2022 | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Re-measurement of redeemable shares to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net Income | — | — | ||||||||||||||||||||||||||
| Balance—September 30, 2022 | $ | ( | ) | ( | ) | |||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
REVELSTONE CAPITAL ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Change in fair value of overallotment units | ( | ) | ||||||
| Fair value of forfeited overallotment units | ( | ) | ||||||
| Gain from investments held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid Assets | ||||||||
| Accounts Payable | ( | ) | ||||||
| Accrued Expenses | ||||||||
| Franchise Tax Liability | ( | ) | ||||||
| Income tax receivable/payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Principal deposited in Trust Account | ( | ) | ||||||
| Cash withdrawn from Trust Account in connection with redemption | ||||||||
| Payment of extension fee into Trust Account | ( | ) | ||||||
| Withdrawals from Trust Account for income and franchise taxes | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Redemption of common stock | ( | ) | ||||||
| Proceeds from partial exercise of overallotment option, net of costs | ||||||||
| Proceeds from private placement related to partial exercise of overallotment option | ||||||||
| Proceeds from note and other payable—related party | ( | ) | ||||||
| Net cash provided by/(used in) financing activities | ( | ) | ||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash–Beginning | ||||||||
| Cash–Ending | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Waiver of deferred underwriting commissions payable | $ | $ | ||||||
| Re-measurement of carrying value of redeemable shares of Class A common stock to redemption value | $ | $ | ||||||
| Exercised portion of overallotment unit liability | $ | $ | ||||||
| Excise tax related to stock redemptions | $ | $ | ||||||
| Conversion of Class B shares to Class A shares | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
REVELSTONE CAPITAL ACQUISITION CORP.
NOTES TO CONDENSED 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 September 30, 2023, the Company has neither engaged in any operations nor generated any revenues. All activity for the period from April 5, 2021 (inception) through September 30, 2023, 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 $
Transaction costs amounted
to $
5
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 $
If the Company seeks stockholder approval to a proceed with a Business Combination, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor, officers and directors will agree to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.
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
6
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 has until December
21, 2023 to complete a Business Combination (the “Combination Period”), or during any extended time that the Company has to
consummate a business combination beyond such date as a result of a stockholder vote to amend the Amended and Restated Certificate of
Incorporation (an “Extension Period”). If the Company is unable to complete a Business Combination within the Combination
Period or during any Extension 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 tax obligations (less up to $
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) $
Going Concern, Liquidity and Capital Resources
As of September 30, 2023
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 $
7
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 September 30, 2023 and December 31, 2022, there were amounts outstanding under any Working Capital Loans.
On August 24, 2023, a company
affiliated with the Sponsor agreed to loan the Company an aggregate of up to $
The
Company held a meeting on June 14, 2023 to vote on the proposal to amend its charter and the investment management trust agreement dated
as of December 16, 2021 with Continental Stock Transfer & Trust Company. Pursuant to the charter amendment and the trust amendment,
the Company has the right to extend the time to complete a business combination from June 21, 2023 until December 21, 2023, on a month-to-month
basis by depositing into the Company’s trust account a $
In
connection with the stockholders’ vote at the special meeting of stockholders held by the Company on June 14, 2023,
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, according to the amended charter and the investment management trust agreement, until December 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.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation
Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S.
federal
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.
On
June 23, 2023,
8
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 nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 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 March 27, 2023.
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.
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.
9
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 have any cash equivalents as of September 30, 2023 and December 31, 2022.
Investments Held in Trust Account
At September 30, 2023 and December 31, 2022, 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.
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 unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
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.
10
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
The
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 $
In June 2023, deferred underwriting
fee payable was reduced by $
Net Loss Per Share of Common Stock
The Company has two categories of shares, which are referred to as redeemable shares of common stock and non-redeemable shares of common stock. Earnings and losses are shared pro rata between the two categories of shares.
11
The calculation of diluted net income (loss) per share of common stock 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 nine months ended September 30, 2023 and 2022.
| Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
| September
30, 2023 | September
30, 2023 | September
30, 2022 | September
30, 2022 | |||||||||||||||||||||||||||||
| Redeemable | Non-redeemable | Redeemable | Non-redeemable | Redeemable | Non-redeemable | Redeemable | Non-redeemable | |||||||||||||||||||||||||
| Numerator | ||||||||||||||||||||||||||||||||
| Allocation of net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
| Denominator | ||||||||||||||||||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
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, $
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 $
12
| Gross proceeds from IPO | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Class A common stock issuance costs | ( | ) | ||
| Plus: | ||||
| Re-measurement of carrying value to redemption value | ||||
| Gross proceeds from partial exercise of overallotment option | ||||
| Class A common stock subject to redemption as of December 31, 2022 | $ | |||
| Plus: | ||||
| Re-measurement of carrying value to redemption value | ||||
| Class A common stock subject to redemption as of March 31, 2023 | $ | |||
| Plus: | ||||
| Re-measurement of carrying value to redemption value | ||||
| Less: | ||||
| Partial redemptions | ( | ) | ||
| Class A common stock subject to redemption as of June 30, 2023 | $ | |||
| Plus: | ||||
| Re-measurement of carrying value to redemption value | ||||
| Class A common stock subject to redemption as of September 30, 2023 | $ |
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
13
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) one year after the completion of a Business Combination
or (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or
exceeds $
On July 27, 2023, the
Company issued an aggregate of
Related Party Loans
On
May 11, 2021, the Sponsor agreed to loan the Company an aggregate of up to $
On June 22, 2023, the Sponsor
and Set Jet, Inc., a Nevada corporation each contributed $
On
August 24, 2023, a company affiliated with 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 no consideration.
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 $
14
Underwriting Agreement
On December 21, 2021
the Company paid a cash underwriting commission of $
The Company granted the underwriters
a 45-day option from the date of the Public Offering to purchase up to
On January 11, 2022, the
Company paid a cash underwriting commission of $
The underwriters were entitled
to deferred underwriting commissions of $
In June 2023 BofA Securities,
Inc., one of the underwriters, waived their portion of the deferred underwriting fee which is reflected in the condensed balance sheet
and the condensed statements of changes in stockholders’ deficit. Therefore, the deferred underwriting fee was reduced by $
Legal Advisory Agreement
On July 7, 2022, the Company
signed an agreement with a legal advisor that will represent the Company on corporate and securities compliance matters related to its
pursuit of a Business Combination. According to the terms of the agreement, the Company was obligated to pay a retainer fee of $
M&A Advisory Agreement
On October 13, 2022, the
Company signed an agreement with an advisor to assist the Company on merger and acquisition matters as they relate to a Business Combination.
According to the terms of the agreement, as amended on July 7, 2023, the Company is obligated to pay the advisor a fee determined as a
percentage of the enterprise value of a target. The percentage ranges from
Private Placement Agreements
On October 13, 2022, the
Company signed a private placement agreement with an agent to assist the Company with the private placement of the Company’s stock
or other securities. According to the terms of the agreement, as amended on July 7, 2023, the Company is obligated to pay the agent, concurrently
with the consummation of the placement, a fee determined as
15
Merger Agreement
On July 17, 2023, the Company entered into a merger agreement, by and among the Company, Revelstone Capital Merger Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“Merger Sub”), Set Jet, Inc., a Nevada corporation “Set Jet” and Thomas P. Smith.
The merger agreement provides that, among other things, at the closing of the transactions, Merger Sub will merge with and into Set Jet, with Set Jet surviving as a wholly-owned subsidiary of the Company. In connection with the merger, the Company will change its name to Set Jet, Inc.
The Business Combination is subject to customary closing conditions, including the satisfaction of the minimum net tangible assets condition, the receipt of certain governmental approvals and the required approval by the stockholders of the Company and Set Jet. There is no assurance that the Business Combination will be completed.
The
total consideration to be received by the Set Jet stockholders from the Company at closing and via earnout is up to $
On August 16, 2023, the Company, Merger Sub and Set Jet entered into an amended and restated merger agreement amending certain covenants and closing conditions, none of which were material to the Business Combination
Note 7—Stockholders’ Deficit
Preferred Stock—The
Company is authorized to issue
Shares of
Class A Common Stock—The Company is authorized to issue
Shares of Class B
Common Stock—The Company is authorized to issue
On July 27, 2023, the Company
issued an aggregate of
16
Holders of shares of Class A common stock and shares of 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
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.
17
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 30 days’ prior written notice of redemption to each warrant holder; |
| ● | 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. |
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 will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
18
The Company accounted for
the
On
June 23, 2023,
Underwriters’
Over-allotment Option- The Company granted the underwriters a 45-day option from the date of the Public Offering to purchase up
to
Note 8—Income Taxes
Our effective tax rate was
Note 9—Fair Value Measurements
Investments held in Trust Account
| Quoted Prices In | Significant Other Observable | Significant Other Unobservable | ||||||||||||||
| September 30, | Active Markets | Inputs | Inputs | |||||||||||||
| 2023 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Investments held in Trust Account | $ | $ | ||||||||||||||
| $ | $ | |||||||||||||||
| Quoted Prices In | Significant Other Observable | Significant Other Unobservable | ||||||||||||||
| December 31, | Active Markets | Inputs | Inputs | |||||||||||||
| 2022 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Investments held in Trust Account | $ | $ | ||||||||||||||
| $ | $ | |||||||||||||||
Underwriters’ over-allotment option
The Company accounted for the over-allotment option as a liability in accordance with ASC 815-40 and presented it within liabilities on the balance sheet before the option was partially settled on January 11, 2022. The over-allotment liability was 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 statement 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 shares of Class A common stock 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.
19
| January 11, | ||||
| Input | 2022 | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Unit Price | $ | |||
| 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 December 31, 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, except as indicated below.
On October 19, 2023, a company
affiliated with the Sponsor agreed to loan the Company, under the terms of a promissory note, an aggregate of up to $
20
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, capital stock 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 consumer, media and/or technology sectors. 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 September 30, 2023, we have neither engaged in any operations nor generated any revenues. All activity for the period from April 5, 2021 (inception) through September 30, 2023 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 September 30, 2023, we had a net loss of $415,420, which resulted from formation and operating costs of $804,083 offset by gain from investments held in the trust account of $478,474, and income tax expense of $89,811.
21
For the nine months ended September 30, 2023, we had net income of $830,673, which resulted from gain from investments held in the trust account of $4,137,173 offset by formation and operating costs of $2,484,680 and income tax expense of $821,820.
For the three months ended September 30, 2022, we had a net income of $413,464, which resulted from interest income from investments held in the trust account of $758,134 offset by formation and operating costs of $201,493 and income tax expense of $143,177.
For the nine months ended September 30, 2022, we had net income of $386,474, which resulted from 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 $1,003,415, offset by formation and operating costs of $545,791 and income tax provision of $165,340.
Liquidity and Capital Resources
As of September 30, 2023, we had $152,956 in cash and a working capital deficit of $3,460,817.
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.
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 September 30, 2023, there were no amounts outstanding under any working capital loans.
On August 24, 2023, a company affiliated with the sponsor agreed to loan the Company, under an unsecured promissory note, an aggregate of up to $100,000. Second promissory note is non-interest bearing and payable, according to contractual terms, on the earlier of December 21, 2023 or the completion of the business combination. As of September 30, 2023, the Company had borrowed $100,000 under second promissory note. On October 19, 2023, a company affiliated with the Sponsor agreed to loan the Company, under the terms of a promissory note, an aggregate of up to $100,000. Third promissory note is non-interest bearing and payable, according to contractual terms, on the earlier of December 21, 2023 or the completion of the business combination. 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.
The Company held a meeting on June 14, 2023 to vote on the proposal to amend its charter and the investment management trust agreement dated as of December 16, 2021 with Continental Stock Transfer & Trust Company. Pursuant to the charter amendment and the trust amendment, the Company has the right to extend the time to complete a business combination from June 21, 2023 until December 21, 2023, on a month-to-month basis by depositing into the Company’s trust account $90,000 fee for each one month of extension.
In connection with the stockholders’ vote at the special meeting of stockholders held by the Company on June 14, 2023, 12,980,181 shares of the Company’s common stock were redeemed with a total redemption payment of $134,295,092.
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, according to the amended charter and the investment management trust agreement, until December 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 from the issuance of these financial statements.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2023.
22
Contractual Obligations
Legal Advisory Agreement
On July 7, 2022 the Company signed an agreement with a legal advisor that will represent the Company on corporate and securities compliance matters related to its pursuit of a Business Combination. According to the terms of the agreement, the Company was obligated to pay a retainer fee of $50,000 upon the signing of this agreement, and is further obligated to pay up to an additional $200,000 when certain milestones are met prior to the closing of the Business Combination. Legal fees incurred in connection with the business combination above $250,000 will be due and payable upon completion of the Business Combination. The initial retainer fee of $150,000 was paid as of September 30, 2023. The amount of legal fees recorded as part of the Company’s accrued expenses and accounts payable was $1,469,530 and $50,000, respectively, as of September 30, 2023.
Deferred Underwriting Commission
As of September, 30, 2023 the Company has a long-term liability represented by deferred underwriting commissions of $1,732,500.
M&A Advisory Agreement
On October 13, 2022, the Company signed an agreement with an advisor to assist the Company on merger and acquisition matters as they relate to a Business Combination. According to the terms of the agreement, as amended on July 7, 2023, the Company is obligated to pay the advisor a fee determined as a percentage of the enterprise value of a target. The percentage ranges from 0.5%, which would apply to an enterprise value of $600,000,000 or more, and 1.5%, which would apply to an enterprise value of $200,000,000 or less. The advisory fee is payable by the Company to the advisor in shares of the Company’s Class A common stock at $10.00 per share. The Company has not recorded any advisory fees through September 30, 2023 as stock compensation recognition criteria per ASC 718-10-25 have not been met.
Private Placement Agreements
On October 13, 2022, the Company signed a private placement agreement with an agent to assist the Company with the private placement of the Company’s stock or other securities. According to the terms of the agreement, as amended on July 7, 2023, the Company is obligated to pay the agent, concurrently with the consummation of the placement, a fee determined as 2% of gross receipts from the placement. The advisory fee is payable in shares of the Company’s Class A common stock at $10.00 per share. No fee has been recorded by the Company through September 30, 2023 as this private placement has not yet taken place.
Merger Agreement
On July 17, 2023, the Company entered into a merger agreement, by and among the Company, Revelstone Capital Merger Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of the Company (“Merger Sub”), Set Jet, Inc., a Nevada corporation “Set Jet” and Thomas P. Smith.
The merger agreement provides that, among other things, at the closing of the transactions, Merger Sub will merge with and into Set Jet, with Set Jet surviving as a wholly-owned subsidiary of the Company. In connection with the merger, the Company will change its name to Set Jet, Inc.
The Business Combination is subject to customary closing conditions, including the satisfaction of the minimum net tangible assets condition, the receipt of certain governmental approvals and the required approval by the stockholders of the Company and Set Jet. There is no assurance that the Business Combination will be completed.
The total consideration to be received by the Set Jet stockholders from the Company at closing and via earnout is up to $145 million subject to adjustment. Consideration paid at closing is in an amount equal to $80 million, subject to adjustment, based on the Company’s debt net of the Company’s cash and cash equivalents at closing, as defined in the merger agreement. Merger consideration at closing is paid in shares of Class A common stock of the Company. Earnout consideration of up to $65 million consists of (i) up to $45 million to shareholders of Set Jet pursuant to the earnout escrow agreement and (ii) up to $20 million to certain executive officers and directors of the combined company under the retention bonus agreement.
On August 16, 2023, the Company, Merger Sub and Set Jet entered into an amended and restated merger agreement amending certain covenants and closing conditions, none of which were material to the Business Combination
Critical Accounting Policies
Public and Private Warrants
The Company accounted for the 14,500,000 warrants issued and outstanding at September 30, 2023, 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.
23
Net Income/(Loss) Per Share of Class A Common Stock
We have two categories of shares, which are referred to as redeemable shares of Class A common stock and non-redeemable shares of Class B and Class A common stock. Earnings and losses are shared pro rata between the two categories of shares of common stock.
Shares of Class A Common Stock Subject to Possible Redemption
The 3,519,819 remaining shares of Class A common stock issued as part of the Units in the Public Offering and outstanding at September 30, 2023 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 redeemable shares of Class A common stock were classified outside of permanent equity as of September 30, 2023.
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
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2023, pursuant to Rule 15d-15(e) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, our disclosure controls and procedures were not effective as of September 30, 2023 due to the material weakness in our internal control over financial reporting related to a) timely recognition of accounts payable, accrued liabilities as well as related expenses, b) calculation of the provision for income taxes and c) calculation of shares subject to redemption and non-redeemable shares, including calculations of net income (loss) per share associated with both classes of shares.
Management’s Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
| 1. | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, |
| 2. | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
| 3. | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
24
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at September 30, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of September 30, 2023.
Management has implemented steps to improve our internal control over financial reporting. To respond to the material weakness related to timely recognition of accounts payable, accrued liabilities as well as related expenses, we have devoted, and plan to continue to devote, additional effort and resources to the remediation and improvement of our internal control over financial reporting. Our plans at this time include performing, as part of financial close, additional analysis and procedures, as deemed necessary to ensure complete recognition of all vendor invoices and expenses incurred but not yet invoiced in addition to proper review controls over the provision for income taxes and calculations of non-redeemable and redeemable shares, including related net income (loss) per share. 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.
This report does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
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, except for the changes noted above to address the aforementioned material weakness.
25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Except as disclosed herein, as of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on March 27, 2023. Any of those risk 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. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Revelstone is currently not in compliance with the Nasdaq continued listing requirements. If Revelstone is unable to regain compliance with Nasdaq’s listing requirements, its warrants could be delisted, which could affect its securities’ market price and liquidity.
On June 14, 2023, the Company received a notification letter (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that that it was not in compliance with Nasdaq Listing Rule 5452(b)(C) with respect to its warrants for failing to maintain a minimum of $1,000,000 in aggregate market value of its outstanding warrants which is required by the Nasdaq Global Market.
On July 31, 2023, the Company submitted a plan to regain compliance and Nasdaq granted an extension of time until December 11, 2023, to regain compliance. The Company cannot assure you that it will be able to regain compliance. The Company’s failure to meet this, or any other requirement would result in its warrants being delisted from Nasdaq. The Company and holders of its securities could be materially adversely impacted if its securities are delisted from Nasdaq. In particular:
| ● | the price of the Company’s securities will likely decrease as a result of the loss of market efficiencies associated with Nasdaq; |
| ● | holders may be unable to sell or purchase the Company’s securities when they wish to do so; |
| ● | The Company may become subject to stockholder litigation; |
| ● | The Company may lose the interest of institutional investors in its securities; |
| ● | The Company may lose media and analyst coverage; and |
| ● | The Company would likely lose any active trading market for its securities, as it may only be traded on one of the over-the-counter markets, if at all. |
26
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
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report:
| * | 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. |
27
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: November 17, 2023 | By: | /s/ Daniel Neukomm |
| Daniel Neukomm | ||
| Co-Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 17, 2023 | By: | /s/ Morgan Callagy |
| Morgan Callagy | ||
| Co-Chief Executive Officer and Secretary | ||
| (Principal Financial and Accounting Officer) |
28