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 No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including 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 | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐Accelerated filer | |
| ☒
|
||
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):
As of May 11, 2023, there were shares of Class A common stock, $0.0001 par value, and shares of Class B common stock, $0.0001 par value, of the Company issued and outstanding.
MURPHY CANYON ACQUISITION CORP.
Form 10-Q
Table of Contents
| 2 |
PART I—FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
MURPHY CANYON ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| March 31, 2023 | December 31, 2022 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | $ | ||||||
| Income taxes payable | ||||||||
| Note payable – Sponsor | ||||||||
| Total current liabilities | ||||||||
| Deferred commission payable | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Common stock subject to possible redemption at redemption value ( shares at $ per share and shares at $ per share, as of March 31, 2023 and December 31, 2022, respectively) | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $ par value; shares authorized; issued and outstanding | ||||||||
| Class A common stock, $par value; shares authorized; (excluding shares and shares subject to possible redemption) issued and outstanding at March 31, 2023, and December 31, 2022, respectively | ||||||||
| Class B common stock, $ par value; shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
MURPHY CANYON ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended March 31, 2023 | For the Three Months Ended March 31, 2022 | |||||||
| General and administrative expenses | $ | $ | ||||||
| Administration fee – related party | ||||||||
| Total expenses | ||||||||
| Other Income | ||||||||
| Interest income – Investments held in Trust Account | ||||||||
| Total other income | ||||||||
| Net income (loss) before income taxes | ( | ) | ||||||
| Income tax expense | ( | ) | ||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Class A common stock – weighted average shares outstanding, basic and diluted | ||||||||
| Class A common stock – Basic and diluted net income (loss) per share | $ | $ | ( | ) | ||||
| Class B common stock – weighted average shares outstanding, basic and diluted | ||||||||
| Class B common stock – Basic and diluted net income (loss) per share | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
MURPHY CANYON ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (Unaudited)
| Class A | Class B | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | ( | ) | ( | ) | ||||||||||||||||||||||||
| Accrued excise tax on January 24, 2023 redemptions | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Class A | Class B | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Proceeds allocated to Public Warrants, net of offering costs | - | - | ||||||||||||||||||||||||||
| Sale of private placement units, net of offering costs | - | |||||||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
MURPHY CANYON ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, 2023 | For the Three Months Ended March 31, 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities | ||||||||
| Interest earned on investments held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Deferred offering costs | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accrued expenses | ||||||||
| Related party payable | ||||||||
| Accrued income taxes payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Extension deposit into the Trust Account | ( | ) | ||||||
| Withdrawals from Trust Account for redemptions | ||||||||
| Withdrawals from the Trust Account for taxes | ||||||||
| Cash deposited into Trust Account | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from note payable - Sponsor | ||||||||
| Redemptions of Class A common stock | ( | ) | ||||||
| Sale of units in public offering | ||||||||
| Sale of private placement units | ||||||||
| Payment of offering costs | ( | ) | ||||||
| Repayment of note payable - Sponsor | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Non-cash financing activities: | ||||||||
| Deferred commission payable | $ | $ | ||||||
| Accrued excise tax on January 24, 2023 redemptions | $ | |||||||
| Remeasurement of Class A common stock subject to possible redemption | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
MURPHY CANYON ACQUISITION CORP.
Notes to financial statements
NOTE 1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Murphy Canyon Acquisition Corp. (the “Company”) was incorporated in Delaware on October 19, 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.
As of March 31, 2023, the Company had not commenced any operations. All activity for the period from October 19, 2021 (inception), through March 31, 2023, relates to the Company’s formation, the proposed initial public offering (“Initial Public Offering”), which is described below, and searching for an initial Business Combination, as defined 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 Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The
registration statement for the Company’s Initial Public Offering (the “Registration Statement”) was declared effective
on February 2, 2022. On February 7, 2022, the Company consummated the Initial Public Offering of units (“Units”),
generating gross proceeds of $
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of units (the “Private Placement
Units”) at a price of $ per Private Placement Unit in private placements to Murphy Canyon Acquisition Sponsor LLC (the
‘Sponsor” or “our Sponsor”), with gross proceeds of $
Following
the closing of the Initial Public Offering on February 7, 2022, an amount of $
On November 8, 2022, the Company entered into a definitive Business Combination Agreement (the “BCA”) with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit”), and Conduit Merger Sub, Inc., a Cayman Islands exempted company (“Merger Sub”). Merger Sub is a wholly owned subsidiary of the Company. Conduit is a pharmaceutical company led by experienced pharma executives, established to fund the development of successful deprioritized clinical assets licensed from large pharmaceutical companies through its exclusive relationships. The BCA was amended in January 2023 and May 2023.
Upon the consummation of the transactions contemplated by the BCA, Merger Sub will merge with and into Conduit, with Conduit surviving as a wholly owned subsidiary of the Company (the “Business Combination”). The Company is expected to be renamed Conduit Pharmaceuticals Inc. at the closing of the Business Combination.
Pursuant
to the BCA, at the closing, the Company shall issue and deliver to the shareholders of Conduit an aggregate number of shares of the Company’s
common stock with an aggregate value equal to $
| 7 |
There can be no assurance that the Business Combination or PIPE Financing will occur as planned or at all.
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial 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. There is no assurance that the Company will be able to complete a Business Combination successfully.
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. 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. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation, if there is a stockholder vote or tender offer in connection with our initial business combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance with U.S. Securities and Exchange Commission (“SEC”) and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A common stock classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The Class A common stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, we have the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. We have elected to recognize the changes immediately. The accretion or remeasurement will be treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). The Public Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place.
If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate of incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other 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 Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
| 8 |
Notwithstanding
the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the
tender offer rules, the 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
holders of the Founder Shares have agreed (a) to waive their redemption rights with respect to the 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 Certificate of Incorporation
(i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination
or to redeem
If
the Company has not completed a Business Combination within 12 months from the consummation of our initial public offering (or up to
February 7, 2024 at the election of the Company subject to satisfaction of certain conditions, as amended at the January 2023 Special
Meeting, see Note 10) (“Business Combination 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 pay taxes (less up to $
The holders of the Founders 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. However, if the holders of Founder Shares acquire Public Shares in or after the Initial 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. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination 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 Initial 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
| 9 |
Initially,
the Company was required to complete an initial business combination transaction by 12 months from the consummation of initial public
offering or up to 18 months if the Company extended the period of time to consummate a business combination in accordance with the Company’s
Certificate of Incorporation. On January 26, 2023, at a special meeting of the Company’s stockholders (the “Special Meeting”),
the Company’s stockholders approved a proposal to amend the Company’s certificate of incorporation to allow the Company to
extend, at the Company’s election, the date by which the Company has to consummate a business combination up to 12 times, each
such extension for an additional one month period, from February 7, 2023, to February 7, 2024. The Company’s stockholders also
approved a related proposal to amend the trust agreement allowing the Company to deposit into the Trust Account, for each one-month extension,
one-third of
In
connection with such proposals, the Company’s public stockholders had the right to redeem their shares for cash equal to their
pro rata share of the aggregate amount on deposit in the Trust Account as of two days prior to such stockholder vote. The
Company’s public stockholders holding
shares of Class A common stock (out of a total of
shares of Class A common stock) exercised their right to redeem such shares at a redemption price of approximately $
per share. Approximately $
As
a result of the approval of such proposals, the Company agreed to deposit into the Trust Account one-third of
Management’s Plan and Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Combination Period is less than one year from the date of the issuance of the financial statements. There is no assurance that the Company’s plans to consummate a Business Combination will be successful within the Combination Period. Additionally, the Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. As a result, these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| 10 |
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, as amended (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 financial statements in conformity with US 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 and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the 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 had $
Investments Held in Trust Account
At
March 31, 2023 and December 31, 2022, the Company had $
Offering Costs Associated With a Public Offering
The
Company complies with the requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A —
“Expenses of Offering.” Offering costs of $
| 11 |
The Company accounts for its shares of Class A common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity”. Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The shares of the Company’s Class A common stock feature certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events.
During
the three months ended March 31, 2023, shares of the Class A common stock were redeemed. See Note 1 – Description of
Organization, Business Operations and Going Concern for additional information. Accordingly, as of March 31, 2023, the shares of Class
A common stock subject to possible redemption in the amount of $
The following table provides a reconciliation of the shares of Class A common stock subject to possible redemption reflected on the balance sheet as of March 31, 2023:
| Gross proceeds from IPO | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Class A common stock issuance costs | ( | ) | ||
| Plus: | ||||
| Remeasurement adjustment of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption, as of March 31, 2022 | ||||
| Plus: | ||||
| Remeasurement adjustment of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption as of December 31, 2022 | $ | |||
| Less: | ||||
| Redemptions during the three months ended March 31, 2023 * | ( | ) | ||
| Plus: | ||||
| Remeasurement adjustment of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption as of March 31, 2023 |
| * |
Excise Tax
In accordance with the Inflation Reduction Act of 2022, the Company accrues the expected excise tax obligation at the end of each reporting
period as a cost of redeeming any shares as of that date. In connection with the vote to amend the Company’s certificate of incorporation,
holders of shares of Class A common stock properly exercised their right to redeem their shares of Class A common stock for
the aggregate redemption amount of $
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share of common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. As of March 31, 2023, the Company’s outstanding warrants have been excluded from diluted net loss as their inclusion would be anti-dilutive. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the periods presented.
| 12 |
| Three Months Ended | ||||||||
| March 31, 2023 | ||||||||
Class A common stock | Class B common stock | |||||||
| Basic and diluted net income per common share | ||||||||
| Numerator: | ||||||||
| Allocation of net loss | $ | $ | ||||||
| Denominator: | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per common share | $ | $ | ||||||
| For the Three Months Ended | ||||||||
| March 31, 2022 | ||||||||
| Class A common stock | Class B common stock | |||||||
| Basic and diluted net loss per common share | ||||||||
| Numerator: | ||||||||
| Allocation of net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
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 statement 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 statement 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 no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2023 or 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.
The Company has identified the United States and California as its only tax jurisdictions. The Company is subject to income taxation by major taxing authorities since inception. All tax periods are open to examination by tax authorities. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Company actual tax expense differs from the expected tax expense due to the change in the valuation allowance.
| 13 |
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to credit risk consist principally of cash and investments held in the Trust Account.
Cash is maintained in accounts with financial institutions, which, at times may exceed the Federal Depository Insurance Corporation coverage
limit of $
Investments Held in Trust Account
The
Company’s Investments held in the Trust Account were $
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income on investments held in the Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements” approximates the carrying amounts represented in the balance sheet, partially due to their short-term nature.
Fair value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction between market participants at the measurement date. US 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. |
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.
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Warrant Instruments
The Company accounts for warrants in accordance with the guidance contained in FASB ASC 815, “Derivatives and Hedging”. Under ASC 815-40 warrants that meet the criteria for equity treatment are recorded in stockholders’ equity (deficit). The warrants are subject to re-evaluation of the proper classification and accounting treatment at each reporting period. If the warrants no longer meet the criteria for equity treatment, they will be recorded as a liability and remeasured each period with changes recorded in the statement of operations.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold Units at a price of $ per Unit. Each Unit consists of one share of Class A common stock and one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $ per share, subject to adjustment (see Note 7).
NOTE 4 — PRIVATE PLACEMENTS
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private sale to the Sponsor of Private Placement
Units at a price of $ per Private Placement Unit ($
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On
November 16, 2021, the Sponsor received shares of the Company’s Class B common stock (the “Founder Shares”)
for $
The
holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until
the earlier to occur of:
Promissory Note — Related Party
On
November 4, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to
which the Company may borrow up to an aggregate principal amount of $
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On
March 7, 2023, the Company entered into a $
General and Administrative Services
Commencing
on the date the Units are first listed on the Nasdaq, the Company has agreed to pay the Sponsor a total of $
Related Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of
a Business Combination, without interest, or, at the lender’s discretion, up to $
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale. The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to additional Units
to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The option was
fully exercised on
The
underwriters were paid a cash underwriting discount of $
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In
addition to the underwriting discount, the Company paid the underwriters $
NOTE 7 — STOCKHOLDERS’ DEFICIT
Preferred Stock — The Company is authorized to issue shares of preferred stock with a par value of $ per share. As of March 31, 2023 and December 31, 2022, there were shares of preferred stock issued or outstanding.
Class
A Common Stock — The Company is authorized to issue
shares of Class A common stock with a par value of $
per share.
Class B Common Stock — The Company is authorized to issue shares of Class B common stock with a par value of $ per share. Holders of Class B common stock are entitled to one vote for each share. As of each March 31, 2023 and December 31, 2022, there were shares of Class B common stock issued and outstanding.
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a stockholders agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering.
The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a 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 then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A common stock redeemed in connection with a Business Combination), excluding any shares or equity-linked securities issued or issuable to any seller of an interest in the target to us in a Business Combination.
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a stockholders agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering.
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
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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 covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| ● | in whole and not in part; | |
| ● | at
a price of $ | |
| ● | upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and | |
| ● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ per share (as adjusted for stock splits, stock dividends, reorganization, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to warrant holders. |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering.
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The Private Placement Warrants and Public Warrants are recorded in stockholders’ equity (deficit) as they qualify for equity treatment under ASC 815.
The
key assumptions used to value the Public Warrants, which was determined to be $
| ● | Term
– | |
| ● | Volatility
– | |
| ● | Dividends
– | |
| ● | Discount
rate – |
NOTE 8 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value at March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | March 31, 2023 | ||||||
| Assets: | ||||||||
| Investments held in Trust Account | 1 | $ | ||||||
| Description | Level | December 31, 2022 | ||||||
| Assets: | ||||||||
| Investments held in Trust Account | 1 | $ | ||||||
NOTE 9 — TAXES
The expected tax expense based on the statutory rate is reconciled with actual tax expense as follows:
The
effective tax rate differs from the statutory tax rate of
NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date the financial statements were issued. Based upon this review, except as disclosed below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On
April 5, 2023, the Company’s Sponsor advanced $
On
April 6, 2023 and May 4, 2023 the Company deposited into the Trust Account $
On
May 11, 2023, the Company, Conduit, and Merger Sub entered into a second amendment to the Merger Agreement to provide for (i) removal
of the provision that indicates that no tax opinion would be delivered in connection with the closing, (ii) a closing obligation that
that the Company either (a) be exempt from the provisions of Rule 419 promulgated under the Securities Act other than through its net
tangible assets or (b) have at least $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Murphy Canyon Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) 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, objectives of management for future operations and the proposed BCA with Conduit (as described below), 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 filings with the SEC. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of the initial public offering and the sale of the placement units, the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to backstop agreements we may enter into), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
| ● | may significantly dilute the equity interest of existing shareholders; | |
| ● | may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock; | |
| ● | could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; | |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and | |
| ● | may adversely affect prevailing market prices for our common stock and warrants. |
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Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; | |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; | |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; | |
| ● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; | |
| ● | our inability to pay dividends on our common stock; | |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and | |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
As indicated in the accompanying financial statements, at March 31, 2023 and December 31, 2022, we had $90,606 and $345,777 in cash, respectively. Additionally, the underwriters are entitled to a deferred fee of $0.35 per Unit, or $4,628,750. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement. Further, we expect to continue to incur significant costs in the pursuit of our initial business combination plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Merger Agreement
On November 8, 2022, we entered into an agreement and plan of merger (together with amendments entered into on January 27, 2023 and May 11, 2023, the “Merger Agreement”) with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit”) and Conduit Merger Sub, Inc., a Cayman Islands exempted company and our wholly owned subsidiary. If the Merger Agreement is approved by our stockholders and the transactions under the Merger Agreement are consummated, Merger Sub will merge with and into Conduit, with Conduit surviving the merger as our wholly owned subsidiary (the “Merger”). Upon the closing of the Merger, it is anticipated that we will change our name to “Conduit Pharmaceuticals Inc.” Our board of directors has (i) approved and declared advisable the Merger Agreement, the related ancillary agreements thereto and the transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related transactions by our stockholders.
Pursuant to the Merger Agreement, the outstanding ordinary shares (including the shares issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the Merger Agreement) of Conduit will be converted into an aggregate of 65,000,000 shares of our newly issued common stock, with each such outstanding Conduit ordinary share (including the ordinary shares issued upon conversion of all outstanding convertible debt, which conversion shall have occurred prior to the consummation of the Merger Agreement) converted into newly issued shares of our common stock on a pro rata basis.
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In connection with the transactions contemplated by the Merger Agreement, we entered into a subscription agreement (the “Subscription Agreement”) with an investor. Pursuant to the Subscription Agreement, the investor has agreed to purchase $27 million (the “Private Placement”) units of our securities, with each unit consisting of (i) one share of common stock and (ii) one warrant to purchase one share of common stock, for a purchase price of $10.00 per unit. The Subscription Agreement contains registration rights, pursuant to which within 15 business days after the closing, we will use reasonable best efforts to file with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement registering the resale of the shares of common stock included in the units and issued and issuable upon exercise of the warrants. The closing of the Private Placement is conditioned on, among other things, the closing of the Conduit Business Combination.
January 2023 Extension
Initially, we were required to complete our initial business combination transaction by 12 months from the consummation of our initial public offering or up to 18 months if we extended the period of time to consummate a business combination in accordance with our Certificate of Incorporation. On January 26, 2023, at a special meeting of our stockholders, our stockholders approved a proposal to amend our certificate of incorporation to allow us to extend, at our election, the date by which we have to consummate a business combination up to 12 times, each such extension for an additional one month period, from February 7, 2023, to February 7, 2024. Our stockholders also approved a related proposal to amend the trust agreement allowing us to deposit into the Trust Account, for each one-month extension, one-third of 1% of the funds remaining in the Trust Account following the redemptions made in connection with the approval of the extension proposal at the special meeting. At the special meeting our stockholders also approved a proposal to amend our certificate of incorporation to expand the methods that we may employ to not become subject to the “penny stock” rules of the SEC.
In connection with such proposals, our public stockholders had the right to redeem their shares for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account as of two days prior to such stockholder vote. Our public stockholders holding 11,037,272 shares of Class A common stock (out of a total of 13,979,000 shares of Class A common stock) exercised their right to redeem such shares at a redemption price of approximately $10.33 per share. Approximately $114 million in cash was removed from the Trust Account to pay such stockholders and, accordingly, after giving effect to such redemptions, the balance in the Trust Account was approximately $24 million.
As a result of the approval of such proposals, we agreed to deposit into the trust account one-third of 1% of the funds then on deposit in the trust account for each month of the extension period, resulting in a monthly contribution of approximately $0.035 per share that was not redeemed in connection with the special meeting, or an aggregate of approximately $77,000 per month, and an aggregate of $924,000 (the “Maximum Contribution”) if the date we have to consummate a business combination is extended 12 times, each assuming no interest is earned on the funds in the trust account. During the three months ended March 31, 2023, the Company funded $155,403 in monthly extension payment into the Trust Account.
Results of Operations and Known Trends or Future Events
Our entire activity since inception up to March 31, 2023, relates to our formation, our initial public offering and, since the closing of the initial public offering, a search for a business combination candidate. We will not be generating any operating revenues until the closing and completion of our initial business combination.
For the three months ended March 31, 2023 and 2022, we had net income of $120,269 and a net loss of $253,536, respectively. For the three months ended March 31, 2023, this consisted primarily of general and administrative expenses of $507,406 and income tax expense of $36,557. This was offset by interest income of $664,232 earned on Trust assets during the three months March 31, 2023. For the three months ended March 31, 2022, this consisted primarily of general and administrative expenses of $243,718 and related party administration fees of $20,000, offset by $10,182 of interest income on Trust assets. The increase in general and administrative expense for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 mainly consists of increased costs for D&O insurance expense, and professional fees for legal and accounting costs associated with the special meeting held in January 2023.
In January 2023, our public stockholders had the right to redeem their shares for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account. Our public stockholders holding 11,037,272 shares of Class A common stock (out of a total of 13,979,000 shares of Class A common stock) exercised their right to redeem such shares at a redemption price of approximately $10.33 per share. Approximately $114 million in cash was removed from the Trust Account to pay such stockholders and, accordingly, after giving effect to such redemptions, the balance in the Trust Account was approximately $24 million. As a result of less funds in the Trust Account, we do not expect the same level of interest income in 2023 as we experienced during the year ended December 31, 2022.
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Liquidity, Capital Resources and Going Concern
As indicated in the accompanying financial statements, at March 31, 2023, we had $90,606 in cash.
For the three months ended March 31, 2023, the net decrease in cash was $255,171. Cash used in operating activities was $599,818 and was mainly the result of a net income of $120,269, interest income earned on trust assets $664,232, cash used in accrued expenses of $13,143, and cash used in prepaid expenses of $81,445 offset by change in income taxes payable of $150,443. Cash provided by investing activities mainly consisted of $113,831,930 from the Trust Account for redemptions, and $200,050 for tax payments. This was offset by $155,403 of cash deposited into the trust account for monthly extension payments in February and March 2023. Cash used in financing activities was $113,831,930 for redemptions of Class A common stock, offset by $300,000 in funds from our Sponsor for operating activities in connection with a note payable.
On February 7, 2022, the Company consummated its initial public offering of 11,500,000 units (the “Units”). Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (“Class A Common Stock”), and one redeemable warrant of the Company (“Warrant”), with each whole Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $115,000,000 the Company granted the Underwriters in the Offering a 45-day option to purchase up to 1,725,000 additional Units solely to cover over-allotments, if any (the “Option”). The Underwriters exercised the Option in full, resulting in the sale of 13,225,000 Units in total and total gross proceeds of $132.25 million, which were placed in a U.S.-based trust account (the “Trust Account”), maintained by Wilmington Trust Company, acting as trustee.
On February 7, 2022, simultaneously with the consummation of the Offering, the Company consummated the private placement of 754,000 units (the “Private Placement Units”) to the Sponsor, which amount includes 69,000 Private Placement Units purchased by the Sponsor in connection with the Underwriters’ exercise of the Option in full, at a price of $10.00 per Private Placement Unit, generating gross proceeds of approximately $7.54 million (the “Private Placement”) a portion of the proceeds of were placed in the Trust Account and a portion was used to pay offering expenses including the non-deferred underwriting discount related to the Offering. See “January 2023 Extension” as noted above for additional information regarding proceeds currently in the Trust Account.
In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Combination Period is less than one year from the date of the issuance of the financial statements. There is no assurance that the Company’s plans to consummate a Business Combination will be successful within the Combination Period. As a result, these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.
Related Party Transactions
On November 16, 2021, Murphy Canyon Acquisition Sponsor, LLC, our Sponsor, purchased 4,312,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share. On January 26, 2022, the Sponsor surrendered and forfeited 1,006,250 Founder Shares for no consideration, following which the Sponsor holds 3,306,250 founder shares at approximately $0.008 per share. The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Commencing on the date of our initial public offering, we pay Murphy Canyon Management Group, Inc., an affiliate of our Sponsor, $10,000 per month for office space, utilities and secretarial and administrative support. For the three months ended March 31, 2023 and 2022, total payments to Murphy Canyon Management Group were $30,000 and $20,000 respectively. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
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Our Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers or directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
On November 4, 2021, our Sponsor loaned us $300,000 to be used for a portion of the expenses of the initial public offering. These loans are non-interest bearing, unsecured and were repaid upon the closing of the initial public offering in February 2022.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination. The units would be identical to the placement units. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
In connection with the initial public offering, our Sponsor purchased 754,000 placement units for an aggregate purchase price of $7,540,000. Each whole warrant is exercisable to purchase one whole share of Class A common stock at $11.50 per share. Our Sponsor has agreed to transfer, but has not yet transferred, an aggregate of 45,000 placement units (15,000 each) to each of our three independent directors. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the founder shares, or placement units, which will expire worthless if we do not consummate a business combination within 12 months from the consummation of our initial public offering (or up to February 7, 2024 at the election of the Company subject to satisfaction of certain conditions). The placement units are identical to the units sold in the initial public offering except that the placement units and their component securities will not be transferable, assignable or saleable until 30 days after the consummation of our initial business combination except to permitted transferees, the purchasers of the placement units waive any and all rights and claims that they may have to any proceeds, and any interest thereon, held in the Trust Account in respect of the common stock underlying such placement units in the event that a business combination is not consummated. The placement units are entitled registration rights. Additionally, the warrants underlying the placement units contain a cashless exercise provision and shall be non-redeemable while held by the initial purchasers thereof or their permitted assignees. There will be no underwriting fees or commissions due with the respect to the private placement.
Our Sponsor has agreed to waive its redemption rights with respect to its founder shares (i) in connection with the consummation of a business combination, (ii) in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months from the consummation of our initial public offering (or up to February 7, 2024 at the election of the Company subject to satisfaction of certain conditions) and (iii) if we fail to consummate a business combination within 12 months from the consummation of our initial public offering (or up to February 7, 2024 at the election of the Company subject to satisfaction of certain conditions) or if we liquidate prior to the expiration of such period. However, our initial stockholders will be entitled to redemption rights with respect to any public shares held by them if we fail to consummate a business combination or liquidate within 12 months from the consummation of our initial public offering (or up to February 7, 2024 at the election of the Company subject to satisfaction of certain conditions).
Pursuant to a registration rights agreement we entered into with our initial stockholders, we may be required to register certain securities for sale under the Securities Act. These holders, and holders of units issued upon conversion of working capital loans, if any, are entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by us. We will bear the costs and expenses of filing any such registration statements.
| 24 |
On March 7, 2023, the Company entered into a $1.5 million promissory note with the Company’s Sponsor. The promissory note is to fund the Trust Account and the Company’s operating expenses. On March 7, 2023 the Company’s Sponsor advanced $300,000 and an additional $200,000 on April 5, 2023. The Company’s Sponsor will provide additional funds as necessary under the promissory note. This loan is non-interest bearing, unsecured and will be repayable in cash in full upon the earlier of (i) the date on which the Company consummates an initial business combination and (ii) the date that the Company’s winding up is effective.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results
As of March 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the report of independent registered public accounting firm providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
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.
Under the supervision and with the participation of 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 March 31, 2023, 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 concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2023, covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors previously disclosed in our Annual Report for the year ended December 31, 2022, except as set forth below. Risks associated with the Merger and Conduit will be more fully discussed in the Form S-4 that the Company intends to file after the filing of this Quarterly Report on Form 10-Q. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our securities were listed on the Nasdaq Global Market, a national securities exchange, upon consummation of our initial public offering. Although we met the minimum initial listing standards of Nasdaq, which generally only requires that we meet certain requirements relating to shareholders’ equity, market capitalization, aggregate market value of publicly held shares and distribution requirements, we cannot assure you that our securities will continue to be listed on Nasdaq in the future prior to an initial business combination. The Nasdaq Global Market’s requirements for continued listing include a public float of 1,100,000, a market value of public float of $15,000,000, a market value of listed securities of $50,000,000, and 400 shareholders. The inability to comply with Nasdaq’s continued requirements or standards could result in the delisting of our Class A Common Stock, which could have a material adverse effect on our financial condition and could cause the value of our Class A Common Stock to decline.
On April 10, 2023, the Company received written notice (the “Notice”) from Nasdaq indicating that the Company is no longer in compliance with the minimum Market Value of Listed Securities (“MVLS”) of $50,000,000 required for continued listing on the Nasdaq Global Market (the “MVLS Requirement”). In accordance with Nasdaq rules, the Company has 180 calendar days, or until October 9, 2023 (the “Compliance Date”), to regain compliance with the MVLS Requirement. If, at any time before the Compliance Date, the market value of the Company’s listed securities closes at $50,000,000 or more for a minimum of 10 consecutive business days, Nasdaq will provide written notification to the Company that it has regained compliance with the MVLS Requirement. If the Company does not regain compliance with the MVLS Requirement by the Compliance Date, the Company will receive written notification that its securities are subject to delisting. At that time, the Company may appeal the delisting determination to a Nasdaq Listing Qualifications Panel. There can be no assurance that such appeal would be successful and Nasdaq would grant the Company’s request for continued listing. If the Company does not regain compliance with the MVLS Requirement by the Compliance Date, the Company may also be able to transfer the listing of its Class A Common Stock to the Nasdaq Capital Market, provided that the Company then meets the applicable requirements for continued listing on the Nasdaq Capital Market.
Additionally, in connection with our initial business combination, Nasdaq will require us to file a new initial listing application and meet its initial listing requirements as opposed to its more lenient continued listing requirements. We cannot assure you that we will be able to meet those initial listing requirements at that time.
If Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:
| ● | inability to consummate our initial business combination; | |
| ● | a limited availability of market quotations for our securities; | |
| ● | reduced liquidity with respect to our securities; | |
| ● | a determination that our shares of common stock are “penny stock” which will require brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock; | |
| ● | a limited amount of news and analyst coverage for our company; and | |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
The Company may be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in the event of a liquidation or in connection with redemptions of its Class A common stock.
Under the Inflation Reduction Act of 2022 (the “IRA”), adding Section 4501 to the U.S. Internal Revenue Code of 1986, as amended, a domestic corporation whose stock is traded on an established securities market (a “covered corporation” under the IRA) is subject to an excise tax of 1% on repurchases (redemptions) of its stock after December 31, 2022 (the “Excise Tax”). Because the Company is a Delaware corporation and its securities trade on the Nasdaq Global Market, it is a “covered corporation” within the meaning of the IRA.
The IRA became law on August 16, 2022. On December 27, 2022, the IRS published Notice 2023-2, providing “Initial Guidance” regarding the application of the Excise Tax on repurchases of corporate stock under Section 4501. Under these authorities the Company expects the Excise Tax to be imposed on the fair market value of stock repurchased by us. Under a “netting rule”, the fair market value of stock repurchased by the Company may be reduced by the fair market value of securities issued by it in the same taxable year, with the 1% Excise Tax then imposed on the excess, if any, of the value of redemptions over the value of issuances. Therefore, issuances of stock by the Company in connection with its initial business combination transaction (including any PIPE transaction at the time of our initial business combination) will reduce the amount of the Excise Tax in connection with redemptions occurring in the same taxable year. However, a business combination may not be completed during 2023 and, even if a business combination is completed, the fair market value of the securities redeemed may exceed the fair market value of the securities issued in such a combination or otherwise. (The fair market value of securities that are redeemed is determined by the market price of the stock on the day of redemption, regardless of the actual redemption amount.)
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Further, while the authorities indicate that as a general rule the Excise Tax does not apply in the event of a complete liquidation of a covered corporation, the availability of this exemption under circumstances that might surround the liquidation of a SPAC is not entirely clear.
While excise tax returns are generally filed on a quarterly basis, the IRS expects to issue regulations providing that reports of Excise Tax liability are due with the first quarterly excise tax return filed after the close of the taxable year. Except for franchise taxes and income taxes, the proceeds placed in the trust account and the interest earned thereon shall not be used to pay for possible excise tax or any other fees or taxes that may be levied on the Company pursuant to any current, pending or future rules or laws, including without limitation any excise tax due under the IRA on any redemptions or stock buybacks by the Company (except in the case of proceeds that are delivered to the Company following a business combination).
In accordance with the IRA, the Company accrues the expected excise tax obligation at the end of each reporting period as a cost of redeeming any shares as of that date. In connection with the vote to amend the Company’s certificate of incorporation, holders of 11,037,272 shares of Class A common stock properly exercised their right to redeem their shares of Class A common stock for the aggregate redemption amount of $114,068,280. As such the Company has recorded a 1% excise tax liability in the amount of $1,140,683 on the condensed balance sheet as of March 31, 2023. The liability does not impact the condensed statements of operations or condensed statement cash flows and is an offset against additional paid in capital, to the extent available, and accumulated deficit. This excise tax liability can be offset by future shares of issuance which will be evaluated and adjusted in the period in which the issuances occur. Should the Company liquidate prior to December 31, 2023, the excise tax liability will not be due.
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 on Form 10-Q.
EXHIBIT INDEX
| * | Filed herewith. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MURPHY CANYON ACQUISITION CORP. | ||
| May 15, 2023 | By: | /s/ Jack K. Heilbron |
| Name: | Jack K. Heilbron | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| May 15, 2023 | By: | /s/ Adam Sragovicz |
| Name: | Adam Sragovicz | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
| 28 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Jack K. Heilbron, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Murphy Canyon Acquisition Corp. (the Registrant); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to me by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| /s/ Jack K. Heilbron | |
| Jack K. Heilbron | |
| Chief Executive Officer (Principal Executive Officer) | |
| May 15, 2023 |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Adam Sragovicz, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Murphy Canyon Acquisition Corp. (the Registrant); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| /s/ Adam Sragovicz | |
| Adam Sragovicz | |
| Chief Financial Officer (Principal Financial Officer) | |
| May 15, 2023 |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Quarterly Report on Form 10-Q of Murphy Canyon Acquisition Corp. for the period ended March 31, 2023, I, Jack K. Heilbron, Chief Executive Officer of Murphy Canyon Acquisition Corp., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
| (1) | Such Quarterly Report on Form 10-Q of Murphy Canyon Acquisition Corp. for the period ended March 31, 2023, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in such Quarterly Report on Form 10-Q of Murphy Canyon Acquisition Corp. for the period ended March 31, 2023, fairly presents, in all material respects, the financial condition and results of operations of Murphy Canyon Acquisition Corp. |
| /s/ Jack K. Heilbron | |
| Jack K. Heilbron | |
| Chief Executive Officer (Principal Executive Officer) |
May 15, 2023
A signed original of the certification required by Section 906 has been provided to Murphy Canyon Acquisition Corp. and will be retained by Murphy Canyon Acquisition Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Quarterly Report on Form 10-Q of Murphy Canyon Acquisition Corp. for the period ended March 31, 2023, I, Adam Sragovicz, Chief Financial Officer of Murphy Canyon Acquisition Corp., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
| (1) | Such Quarterly Report on Form 10-Q of Murphy Canyon Acquisition Corp. for the period ended March 31, 2023, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in such Quarterly Report on Form 10-Q of Murphy Canyon Acquisition Corp. for the period ended March 31, 2023, fairly presents, in all material respects, the financial condition and results of operations of Murphy Canyon Acquisition Corp. |
| /s/ Adam Sragovicz | |
| Adam Sragovicz | |
| Chief Financial Officer (Principal Financial Officer) |
May 15, 2023
A signed original of the certification required by Section 906 has been provided to Murphy Canyon Acquisition Corp. and will be retained by Murphy Canyon Acquisition Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
Condensed Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Shares subject to possible redemption | 2,187,728 | 13,225,000 |
| Temporary equity, redemption price | $ 10.45 | $ 10.34 |
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common Class A [Member] | ||
| Shares subject to possible redemption | 2,187,728 | 13,225,000 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 754,000 | 754,000 |
| Common stock, shares outstanding | 754,000 | 754,000 |
| Common Class B [Member] | ||
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 10,000,000 | 10,000,000 |
| Common stock, shares issued | 3,306,250 | 3,306,250 |
| Common stock, shares outstanding | 3,306,250 | 3,306,250 |
Condensed Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| General and administrative expenses | $ 477,406 | $ 243,718 |
| Administration fee – related party | 30,000 | 20,000 |
| Total expenses | 507,406 | 263,718 |
| Other Income | ||
| Interest income – Investments held in Trust Account | 664,232 | 10,182 |
| Total other income | 664,232 | 10,182 |
| Net income (loss) before income taxes | 156,826 | (253,536) |
| Income tax expense | (36,557) | |
| Net income (loss) | $ 120,269 | $ (253,536) |
| Common Class A [Member] | ||
| Other Income | ||
| Common stock – weighted average shares outstanding, basic and diluted | 5,762,364 | 8,167,506 |
| Common stock – Basic and diluted net income (loss) per share | $ 0.01 | $ (0.02) |
| Common Class B [Member] | ||
| Other Income | ||
| Common stock – weighted average shares outstanding, basic and diluted | 3,306,250 | 3,306,250 |
| Common stock – Basic and diluted net income (loss) per share | $ 0.01 | $ (0.02) |
DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN | NOTE 1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Murphy Canyon Acquisition Corp. (the “Company”) was incorporated in Delaware on October 19, 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.
As of March 31, 2023, the Company had not commenced any operations. All activity for the period from October 19, 2021 (inception), through March 31, 2023, relates to the Company’s formation, the proposed initial public offering (“Initial Public Offering”), which is described below, and searching for an initial Business Combination, as defined 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 Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering (the “Registration Statement”) was declared effective on February 2, 2022. On February 7, 2022, the Company consummated the Initial Public Offering of units (“Units”), generating gross proceeds of $132,250,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of units (the “Private Placement Units”) at a price of $ per Private Placement Unit in private placements to Murphy Canyon Acquisition Sponsor LLC (the ‘Sponsor” or “our Sponsor”), with gross proceeds of $7,540,000.
Following the closing of the Initial Public Offering on February 7, 2022, an amount of $139,790,000 from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Units was placed in the Trust Account, as defined below. This resulted in an overfunding of the Trust Account of $4,895,000. As such, subsequent to the initial funding of the Trust Account, $2,000,000 was transferred to the Company’s operating cash account and $2,895,000 was used to pay offering costs. The funds held in the Trust Account may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the Trust Account, as described below.
On November 8, 2022, the Company entered into a definitive Business Combination Agreement (the “BCA”) with Conduit Pharmaceuticals Limited, a Cayman Islands exempted company (“Conduit”), and Conduit Merger Sub, Inc., a Cayman Islands exempted company (“Merger Sub”). Merger Sub is a wholly owned subsidiary of the Company. Conduit is a pharmaceutical company led by experienced pharma executives, established to fund the development of successful deprioritized clinical assets licensed from large pharmaceutical companies through its exclusive relationships. The BCA was amended in January 2023 and May 2023.
Upon the consummation of the transactions contemplated by the BCA, Merger Sub will merge with and into Conduit, with Conduit surviving as a wholly owned subsidiary of the Company (the “Business Combination”). The Company is expected to be renamed Conduit Pharmaceuticals Inc. at the closing of the Business Combination.
Pursuant to the BCA, at the closing, the Company shall issue and deliver to the shareholders of Conduit an aggregate number of shares of the Company’s common stock with an aggregate value equal to $650,000,000, with each share valued at $ per share. A private placement transaction shall be conducted by the Company contemporaneously with the Business Combination (the “PIPE Financing”), pursuant to which the Company has entered into subscription agreements providing for aggregate investments in the Company’s securities of $27,000,000.
There can be no assurance that the Business Combination or PIPE Financing will occur as planned or at all.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial 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. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Upon the closing of the Initial Public Offering, management has agreed that an amount equal to at least $10.00 per Unit sold in the Initial Public Offering, including proceeds of the Private Placement Warrants, will be held in a trust account (“Trust Account”), located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. 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. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation, if there is a stockholder vote or tender offer in connection with our initial business combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance with U.S. Securities and Exchange Commission (“SEC”) and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A common stock classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The Class A common stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, we have the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. We have elected to recognize the changes immediately. The accretion or remeasurement will be treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). The Public Shares are redeemable and will be classified as such on the balance sheet until such date that a redemption event takes place.
If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate of incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other 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 Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the 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 15% of the Public Shares, without the prior consent of the Company.
The holders of the Founder Shares have agreed (a) to waive their redemption rights with respect to the 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 Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company has not completed a Business Combination within 12 months from the consummation of our initial public offering (or up to February 7, 2024 at the election of the Company subject to satisfaction of certain conditions, as amended at the January 2023 Special Meeting, see Note 10) (“Business Combination 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 pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Our Sponsor has committed to provide additional funds if needed to make such a deposit for the extensions. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The holders of the Founders 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. However, if the holders of Founder Shares acquire Public Shares in or after the Initial 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. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination 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 Initial 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) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public Share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Initially, the Company was required to complete an initial business combination transaction by 12 months from the consummation of initial public offering or up to 18 months if the Company extended the period of time to consummate a business combination in accordance with the Company’s Certificate of Incorporation. On January 26, 2023, at a special meeting of the Company’s stockholders (the “Special Meeting”), the Company’s stockholders approved a proposal to amend the Company’s certificate of incorporation to allow the Company to extend, at the Company’s election, the date by which the Company has to consummate a business combination up to 12 times, each such extension for an additional one month period, from February 7, 2023, to February 7, 2024. The Company’s stockholders also approved a related proposal to amend the trust agreement allowing the Company to deposit into the Trust Account, for each one-month extension, one-third of 1% of the funds remaining in the Trust Account following the redemptions made in connection with the approval of the extension proposal at the Special Meeting. At the Special Meeting the Company’s stockholders also approved a proposal to amend the Company’s certificate of incorporation to expand the methods that the Company may employ to not become subject to the “penny stock” rules of the SEC.
In connection with such proposals, the Company’s public stockholders had the right to redeem their shares for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account as of two days prior to such stockholder vote. The Company’s public stockholders holding shares of Class A common stock (out of a total of shares of Class A common stock) exercised their right to redeem such shares at a redemption price of approximately $ per share. Approximately $114 million in cash was removed from the Trust Account to pay such stockholders and, accordingly, after giving effect to such redemptions, the balance in the Trust Account was approximately $24 million.
As a result of the approval of such proposals, the Company agreed to deposit into the Trust Account one-third of 1% of the funds then on deposit in the Trust Account for each month of the extension period, resulting in a monthly contribution of approximately $ per share that was not redeemed in connection with the Special Meeting, or an aggregate of approximately $77,000 per month, and an aggregate of $924,000 if the date the Company has to consummate a business combination is extended 12 times, each assuming no interest is earned on the funds in the Trust Account. During the three months ended March 31, 2023, the Company funded $155,403 in monthly extension payments into the Trust Account.
Management’s Plan and Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Combination Period is less than one year from the date of the issuance of the financial statements. There is no assurance that the Company’s plans to consummate a Business Combination will be successful within the Combination Period. Additionally, the Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. As a result, these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, as amended (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 financial statements in conformity with US 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 and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the 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 had $90,606 and $345,777 in cash as of March 31, 2023 and December 31, 2022, respectively. The Company did not have any cash equivalents as of March 31, 2023 and December 31, 2022.
Investments Held in Trust Account
At March 31, 2023 and December 31, 2022, the Company had $23,658,838 and $136,871,183, respectively, in investments held in the Trust Account.
Offering Costs Associated With a Public Offering
The Company complies with the requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering.” Offering costs of $7,738,161, consisting of $2,645,000 of underwriting fees, $4,628,750 of deferred underwriting fee (which are held in the Trust Account with Wilmington Trust Company acting as trustee), and $464,411 of Initial Public Offering costs. Of these costs, $1,358,457 and $19,656 were allocated to Public Warrants (as defined in Note 3) and Private Placement Warrants (as defined in Note 4), respectively.
The Company accounts for its shares of Class A common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity”. Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The shares of the Company’s Class A common stock feature certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events.
During the three months ended March 31, 2023, shares of the Class A common stock were redeemed. See Note 1 – Description of Organization, Business Operations and Going Concern for additional information. Accordingly, as of March 31, 2023, the shares of Class A common stock subject to possible redemption in the amount of $22,861,803 are presented as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheet.
The following table provides a reconciliation of the shares of Class A common stock subject to possible redemption reflected on the balance sheet as of March 31, 2023:
Excise Tax
In accordance with the Inflation Reduction Act of 2022, the Company accrues the expected excise tax obligation at the end of each reporting period as a cost of redeeming any shares as of that date. In connection with the vote to amend the Company’s certificate of incorporation, holders of shares of Class A common stock properly exercised their right to redeem their shares of Class A common stock for the aggregate redemption amount of $114,068,280. As such the Company has recorded a 1% excise tax liability in the amount of $1,140,683 on the condensed balance sheet as of March 31, 2023. The liability does not impact the condensed statements of operations or condensed statement cash flows and is an offset against additional paid in capital, to the extent available, and accumulated deficit. This excise tax liability can be offset by future shares of issuance which will be evaluated and adjusted in the period in which the issuances occur. Should the Company liquidate prior to December 31, 2023, the excise tax liability will not be due.
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share of common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. As of March 31, 2023, the Company’s outstanding warrants have been excluded from diluted net loss as their inclusion would be anti-dilutive. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the periods presented.
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 statement 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 statement 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 no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2023 or 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.
The Company has identified the United States and California as its only tax jurisdictions. The Company is subject to income taxation by major taxing authorities since inception. All tax periods are open to examination by tax authorities. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Company actual tax expense differs from the expected tax expense due to the change in the valuation allowance.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash and investments held in the Trust Account. Cash is maintained in accounts with financial institutions, which, at times may exceed the Federal Depository Insurance Corporation coverage limit of $250,000, and investments held in the Trust Account. As of March 31, 2023 and December 31, 2022, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Investments Held in Trust Account
The Company’s Investments held in the Trust Account were $23,658,838 at March 31, 2023, and $136,871,183 at December 31, 2022.
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income on investments held in the Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements” approximates the carrying amounts represented in the balance sheet, partially due to their short-term nature.
Fair value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction between market participants at the measurement date. US 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:
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.
Warrant Instruments
The Company accounts for warrants in accordance with the guidance contained in FASB ASC 815, “Derivatives and Hedging”. Under ASC 815-40 warrants that meet the criteria for equity treatment are recorded in stockholders’ equity (deficit). The warrants are subject to re-evaluation of the proper classification and accounting treatment at each reporting period. If the warrants no longer meet the criteria for equity treatment, they will be recorded as a liability and remeasured each period with changes recorded in the statement of operations.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
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INITIAL PUBLIC OFFERING |
3 Months Ended |
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Mar. 31, 2023 | |
| Initial Public Offering | |
| INITIAL PUBLIC OFFERING | NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold Units at a price of $ per Unit. Each Unit consists of one share of Class A common stock and one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $ per share, subject to adjustment (see Note 7).
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PRIVATE PLACEMENTS |
3 Months Ended |
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Mar. 31, 2023 | |
| Private Placements | |
| PRIVATE PLACEMENTS | NOTE 4 — PRIVATE PLACEMENTS
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale to the Sponsor of Private Placement Units at a price of $ per Private Placement Unit ($7,540,000). Each Private Placement Unit is comprised of one Class A share and one warrant. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7). Our Sponsor has agreed to transfer, but has not yet transferred, placement units to each of our director nominees. The proceeds from the sale of the Private Placement Units will be added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the securities comprising the Private Placement Units will expire worthless. The Private Placement Units (including the Class A common stock issuable upon exercise of the warrants included in the Private Placement Units) will not be transferable, assignable or saleable until 30 days after the completion of an Initial Business Combination, subject to certain exceptions.
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RELATED PARTY TRANSACTIONS |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
On November 16, 2021, the Sponsor received shares of the Company’s Class B common stock (the “Founder Shares”) for $25,000. On January 26, 2022, the Sponsor surrendered and forfeited Founder Shares for no consideration, following which the Sponsor holds Founder Shares.
The holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $ per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property. However, our sponsor has agreed to transfer, but has not yet transferred, 15,000 placement units to each of our director nominees.
Promissory Note — Related Party
On November 4, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) the consummation of the Initial Public Offering or (ii) the decision not to execute the Initial Public Offering. The balance of this Promissory Note in the amount of $177,057 was paid in full on February 10, 2022.
On March 7, 2023, the Company entered into a $1.5 million promissory note with the Company’s Sponsor. The promissory note is to fund the Trust Account and the Company’s operating expenses. On March 7, 2023 the Company’s Sponsor advanced $300,000 and an additional $200,000 on April 5, 2023 (see Note 9). The Company’s Sponsor will provide additional funds as necessary under the promissory note. This loan is non-interest bearing, unsecured and will be repayable in cash in full upon the earlier of (i) the date on which the Company consummates an initial business combination and (ii) the date that the Company’s winding up is effective.
General and Administrative Services
Commencing on the date the Units are first listed on the Nasdaq, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. During the three months ended March 31, 2023 and March 31, 2022, the Company incurred $ and $, respectively, of such expenses.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into units at a price of $10.00 per unit. Such units would be identical to the Private Placement Units. 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.
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale. The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. The option was fully exercised on February 7, 2022.
The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $2,645,000, payable upon the closing of the Initial Public Offering. In addition, the underwriters are entitled to a deferred fee of $ per Unit, or $4,628,750. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
In addition to the underwriting discount, the Company paid the underwriters $50,000 as an advance against out-of-pocket accountable expenses actually anticipated to be incurred by the underwriters, which advance will be returned to the Company to the extent not actually incurred. The Company agreed to pay or reimburse the underwriters for travel, lodging and other “road show” expenses, expenses of the underwriters’ legal counsel and certain diligence and other fees, which such fees and expenses are capped at an aggregate of $150,000 (less the $50,000 advance previously paid).
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STOCKHOLDERS’ DEFICIT |
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ DEFICIT | NOTE 7 — STOCKHOLDERS’ DEFICIT
Preferred Stock — The Company is authorized to issue shares of preferred stock with a par value of $ per share. As of March 31, 2023 and December 31, 2022, there were shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue shares of Class A common stock with a par value of $ per share. Holders of Class A common stock are entitled to one vote for each share. As of March 31, 2023 and December 31, 2022, there were and zero, respectively, shares of Class A common stock issued and outstanding (excluding the shares and shares subject to possible redemption as of March 31, 2023 and December 31, 2022, respectively). During the three months ended March 31, 2023, a total of , shares of Class A common stock were redeemed for $114,068,280 or approximately $ per share.
Class B Common Stock — The Company is authorized to issue shares of Class B common stock with a par value of $ per share. Holders of Class B common stock are entitled to one vote for each share. As of each March 31, 2023 and December 31, 2022, there were shares of Class B common stock issued and outstanding.
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a stockholders agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering.
The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a 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 then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A common stock redeemed in connection with a Business Combination), excluding any shares or equity-linked securities issued or issuable to any seller of an interest in the target to us in a Business Combination.
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a stockholders agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering.
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
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 covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering.
The Private Placement Warrants and Public Warrants are recorded in stockholders’ equity (deficit) as they qualify for equity treatment under ASC 815.
The key assumptions used to value the Public Warrants, which was determined to be $23,276,000, were as follows:
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FAIR VALUE MEASUREMENTS |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FAIR VALUE MEASUREMENTS | NOTE 8 — FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
The following table presents information about the Company’s assets and liabilities that are measured at fair value at March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
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TAXES |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Income Tax Disclosure [Abstract] | |
| TAXES | NOTE 9 — TAXES
The expected tax expense based on the statutory rate is reconciled with actual tax expense as follows:
The effective tax rate differs from the statutory tax rate of 21% for the year ended December 31, 2022, due to the valuation allowance recorded on the Company’s net operating losses and unrealized income on the Trust Account. During the three months ended March 31, 2023, the estimated effect tax rates is approximately 23.3% due to the change in the valuation allowance and prior year tax true up. The Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities. The Company’s tax returns since inception remain open to examination by the taxing authorities. The Company considers California to be a significant state tax jurisdiction.
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SUBSEQUENT EVENTS |
3 Months Ended |
|---|---|
Mar. 31, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 10 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date the financial statements were issued. Based upon this review, except as disclosed below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On April 5, 2023, the Company’s Sponsor advanced $200,000 to the Company under the Company’s $1.5 million promissory note issued March 7, 2023.
On April 6, 2023 and May 4, 2023 the Company deposited into the Trust Account $78,863 and $77,688, respectively, to extend the period of time to consummate a business combination each month.
On May 11, 2023, the Company, Conduit, and Merger Sub entered into a second amendment to the Merger Agreement to provide for (i) removal of the provision that indicates that no tax opinion would be delivered in connection with the closing, (ii) a closing obligation that that the Company either (a) be exempt from the provisions of Rule 419 promulgated under the Securities Act other than through its net tangible assets or (b) have at least $5,000,001 of net tangible assets either immediately prior to or upon consummation of the Merger, and (iii) extension of the outside date for the closing of the Merger from May 31, 2023, to February 7, 2024. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).
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| Emerging Growth Company | Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, as amended (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.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with US 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 and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the 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.
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| Cash and Cash Equivalents | 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 had $90,606 and $345,777 in cash as of March 31, 2023 and December 31, 2022, respectively. The Company did not have any cash equivalents as of March 31, 2023 and December 31, 2022.
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| Investments Held in Trust Account | Investments Held in Trust Account
At March 31, 2023 and December 31, 2022, the Company had $23,658,838 and $136,871,183, respectively, in investments held in the Trust Account.
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| Offering Costs Associated With a Public Offering | Offering Costs Associated With a Public Offering
The Company complies with the requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering.” Offering costs of $7,738,161, consisting of $2,645,000 of underwriting fees, $4,628,750 of deferred underwriting fee (which are held in the Trust Account with Wilmington Trust Company acting as trustee), and $464,411 of Initial Public Offering costs. Of these costs, $1,358,457 and $19,656 were allocated to Public Warrants (as defined in Note 3) and Private Placement Warrants (as defined in Note 4), respectively.
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| Class A Common Stock Subject to Possible Redemption |
The Company accounts for its shares of Class A common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity”. Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The shares of the Company’s Class A common stock feature certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events.
During the three months ended March 31, 2023, shares of the Class A common stock were redeemed. See Note 1 – Description of Organization, Business Operations and Going Concern for additional information. Accordingly, as of March 31, 2023, the shares of Class A common stock subject to possible redemption in the amount of $22,861,803 are presented as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheet.
The following table provides a reconciliation of the shares of Class A common stock subject to possible redemption reflected on the balance sheet as of March 31, 2023:
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| Excise Tax | Excise Tax
In accordance with the Inflation Reduction Act of 2022, the Company accrues the expected excise tax obligation at the end of each reporting period as a cost of redeeming any shares as of that date. In connection with the vote to amend the Company’s certificate of incorporation, holders of shares of Class A common stock properly exercised their right to redeem their shares of Class A common stock for the aggregate redemption amount of $114,068,280. As such the Company has recorded a 1% excise tax liability in the amount of $1,140,683 on the condensed balance sheet as of March 31, 2023. The liability does not impact the condensed statements of operations or condensed statement cash flows and is an offset against additional paid in capital, to the extent available, and accumulated deficit. This excise tax liability can be offset by future shares of issuance which will be evaluated and adjusted in the period in which the issuances occur. Should the Company liquidate prior to December 31, 2023, the excise tax liability will not be due.
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| Net Income (Loss) per Common Share |
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share of common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. As of March 31, 2023, the Company’s outstanding warrants have been excluded from diluted net loss as their inclusion would be anti-dilutive. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the periods presented.
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| Income Taxes | 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 statement 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 statement 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 no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2023 or 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.
The Company has identified the United States and California as its only tax jurisdictions. The Company is subject to income taxation by major taxing authorities since inception. All tax periods are open to examination by tax authorities. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Company actual tax expense differs from the expected tax expense due to the change in the valuation allowance.
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| Concentration of Credit Risk | Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash and investments held in the Trust Account. Cash is maintained in accounts with financial institutions, which, at times may exceed the Federal Depository Insurance Corporation coverage limit of $250,000, and investments held in the Trust Account. As of March 31, 2023 and December 31, 2022, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
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| Investments Held in Trust Account | Investments Held in Trust Account
The Company’s Investments held in the Trust Account were $23,658,838 at March 31, 2023, and $136,871,183 at December 31, 2022.
The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income on investments held in the Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements” approximates the carrying amounts represented in the balance sheet, partially due to their short-term nature.
Fair value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction between market participants at the measurement date. US 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:
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| Derivative Financial Instruments | 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.
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| Warrant Instruments | Warrant Instruments
The Company accounts for warrants in accordance with the guidance contained in FASB ASC 815, “Derivatives and Hedging”. Under ASC 815-40 warrants that meet the criteria for equity treatment are recorded in stockholders’ equity (deficit). The warrants are subject to re-evaluation of the proper classification and accounting treatment at each reporting period. If the warrants no longer meet the criteria for equity treatment, they will be recorded as a liability and remeasured each period with changes recorded in the statement of operations.
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| Recent Accounting Standards | Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements. |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION | The following table provides a reconciliation of the shares of Class A common stock subject to possible redemption reflected on the balance sheet as of March 31, 2023:
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| SCHEDULE OF BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE |
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FAIR VALUE MEASUREMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE OF ASSETS AND LIABILITIES | The following table presents information about the Company’s assets and liabilities that are measured at fair value at March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
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DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Jan. 26, 2023 |
Nov. 08, 2022 |
Feb. 07, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Nov. 16, 2021 |
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| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Proceeds from isssuance | $ 132,250,000 | ||||||
| Offering costs | $ 4,628,750 | ||||||
| Stock issued value, acquisitions | $ 924,000 | ||||||
| Share issued price per share | $ 0.035 | ||||||
| Business combination description of transaction | The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Upon the closing of the Initial Public Offering, management has agreed that an amount equal to at least $10.00 per Unit sold in the Initial Public Offering, including proceeds of the Private Placement Warrants, will be held in a trust account (“Trust Account”), located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below | ||||||
| Retained earnings restrictions | 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 15% of the Public Shares, without the prior consent of the Company | ||||||
| Debt instrument redemption price percentage | 100.00% | ||||||
| Interest expense | $ 100,000 | ||||||
| Percentage of deposit in trust account | 1.00% | ||||||
| Redemption price per share | $ 10.45 | $ 10.34 | |||||
| Number of stock redeemed, value | $ 114,000,000 | $ 114,068,280 | |||||
| Investments held in trust account | 24,000,000 | 23,658,838 | $ 136,871,183 | ||||
| Aggregate of deposit | $ 77,000 | ||||||
| Payments to Acquire Investments to be Held in Decommissioning Trust Fund | $ 155,403 | ||||||
| Common Class A [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Sale of stock price per share | $ 12.00 | ||||||
| Share issued price per share | $ 10.33 | ||||||
| Percentage of deposit in trust account | 1.00% | ||||||
| Stock issued | 13,979,000 | ||||||
| Number of stock redeemed, value | $ 114,068,280 | ||||||
| Common Class A [Member] | Public Stockholder [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Stock issued during period shares on hold | 11,037,272 | ||||||
| Stock issued | 13,979,000 | ||||||
| Redemption price per share | $ 10.33 | ||||||
| Business Combination Agreement [Member] | Conduit Pharmaceuticals Limited [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Stock issued value, acquisitions | $ 650,000,000 | ||||||
| Share issued price per share | $ 10.00 | ||||||
| Subscription Agreements [Member] | Conduit Pharmaceuticals Limited [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Stock issued value, acquisitions | $ 27,000,000 | ||||||
| Transaction Agreement [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Business combination description of transaction | (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public Share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”) | ||||||
| IPO [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Stock issued during period shares new issues | 13,225,000 | ||||||
| Proceeds from isssuance | $ 132,250,000 | ||||||
| Sale of stock | 13,225,000 | ||||||
| Sale of stock price per share | $ 10.00 | ||||||
| Net proceeds from sale of equity | $ 139,790,000 | ||||||
| Share issued price per share | $ 10.00 | ||||||
| Private Placement [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Sale of stock | 754,000 | 754,000 | |||||
| Sale of stock price per share | $ 10.00 | $ 10.00 | |||||
| Gross proceeds from shares issuance | $ 7,540,000 | ||||||
| Overfunding of trust account | 4,895,000 | ||||||
| Operating cash account | 2,000,000 | ||||||
| Offering costs | $ 2,895,000 | ||||||
SCHEDULE OF COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION (Details) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Jan. 26, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
|
| Accounting Policies [Abstract] | ||||
| Proceeds from Issuance Initial Public Offering | $ 132,250,000 | |||
| Proceeds allocated to Public Warrants | (23,276,000) | |||
| Class A common stock issuance costs | (6,360,054) | |||
| Remeasurement adjustment of carrying value to redemption value | 158,900 | $ 1,876,183 | 32,281,054 | |
| Common stock subject to possible redemption, beginning | 136,771,183 | |||
| Remeasurement adjustment of carrying value to redemption value | $ (114,000,000) | (114,068,280) | ||
| Common stock subject to possible redemption, ending | $ 22,861,803 | $ 136,771,183 | $ 134,895,000 | |
SCHEDULE OF COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION (Details) (Parenthetical) |
Mar. 31, 2023
USD ($)
|
|---|---|
| Accounting Policies [Abstract] | |
| Cash account in trust account | $ 236,350 |
SCHEDULE OF BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Common Class A [Member] | ||
| Allocation of net loss | $ 76,421 | $ (180,478) |
| Basic and diluted weighted average shares outstanding | 5,762,364 | 8,167,506 |
| Basic and diluted net loss per common share | $ 0.01 | $ (0.02) |
| Common Class B [Member] | ||
| Allocation of net loss | $ 43,848 | $ (73,058) |
| Basic and diluted weighted average shares outstanding | 3,306,250 | 3,306,250 |
| Basic and diluted net loss per common share | $ 0.01 | $ (0.02) |
INITIAL PUBLIC OFFERING (Details Narrative) - $ / shares |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2023 |
Jan. 26, 2023 |
Nov. 16, 2021 |
|
| Shares issued price per share | $ 0.035 | ||
| Common Class A [Member] | |||
| Sale of stock price per share | $ 12.00 | ||
| Shares issued price per share | $ 10.33 | ||
| IPO [Member] | |||
| Sale of stock | 13,225,000 | ||
| Sale of stock price per share | $ 10.00 | ||
| Shares issued price per share | 10.00 | ||
| IPO [Member] | Common Class A [Member] | Public Warrant [Member] | |||
| Shares issued price per share | $ 11.50 |
PRIVATE PLACEMENTS (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Feb. 07, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|
| Subsidiary, Sale of Stock [Line Items] | |||
| Proceeds from issuance of private placement | $ 7,540,000 | ||
| Exercise price of warrants | $ 0.01 | ||
| Director [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Number of units transferred to director | 15,000 | ||
| Private Placement [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Number of shares issued for private sale | 754,000 | 754,000 | |
| Sale of stock price per share | $ 10.00 | $ 10.00 | |
| Proceeds from issuance of private placement | $ 7,540,000 | ||
| Private Placement [Member] | Capital Unit, Class A [Member] | |||
| Subsidiary, Sale of Stock [Line Items] | |||
| Exercise price of warrants | $ 11.50 | ||
COMMITMENTS AND CONTINGENCIES (Details Narrative) |
3 Months Ended |
|---|---|
|
Mar. 31, 2023
USD ($)
$ / shares
shares
| |
| Loss Contingencies [Line Items] | |
| Option exercised date | Feb. 07, 2022 |
| Cash underwriting discount | $ / shares | $ 0.20 |
| Underwriting discount | $ 2,645,000 |
| Deferred fee per share | $ / shares | $ 0.35 |
| Deferred fee | $ 4,628,750 |
| Underwriter expenses | $ 150,000 |
| Over-Allotment Option [Member] | Maximum [Member] | |
| Loss Contingencies [Line Items] | |
| Stock issued during period shares new issues | shares | 1,725,000 |
| Underwriter [Member] | |
| Loss Contingencies [Line Items] | |
| Advance payment for underwriter expenses | $ 50,000 |
SCHEDULE OF FAIR VALUE OF ASSETS AND LIABILITIES (Details) - USD ($) |
Mar. 31, 2023 |
Jan. 26, 2023 |
Dec. 31, 2022 |
|---|---|---|---|
| Assets: | |||
| Investments held in Trust Account | $ 23,658,838 | $ 24,000,000 | $ 136,871,183 |
| Fair Value, Inputs, Level 1 [Member] | |||
| Assets: | |||
| Investments held in Trust Account | $ 23,658,838 | $ 136,871,183 |
TAXES (Details Narrative) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
| Income Tax Disclosure [Abstract] | ||
| Statutory tax rate | 21.00% | |
| Change in valuation allowance, rate | 23.30% |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
Apr. 05, 2023 |
May 11, 2023 |
May 04, 2023 |
Apr. 06, 2023 |
Mar. 07, 2023 |
|---|---|---|---|---|---|
| Subsequent Event [Line Items] | |||||
| Debt instrument, face amount | $ 1,500,000 | ||||
| Subsequent Event [Member] | |||||
| Subsequent Event [Line Items] | |||||
| Sponsor advanced amount | $ 200,000 | ||||
| Deposit | $ 77,688 | $ 78,863 | |||
| Subsequent Event [Member] | Merger Agreement [Member] | |||||
| Subsequent Event [Line Items] | |||||
| Net tangible asset | $ 5,000,001 |
;W#(6