UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarterly period ended
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
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| Emerging growth company | |||
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As of May 18, 2023 the Registrant
had
INTERPRIVATE III FINANCIAL PARTNERS INC.
FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2023
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| March 31, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Prepaid expense, net of current assets | ||||||||
| Marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Related party payable | $ | $ | ||||||
| Income tax payable | ||||||||
| Redemptions payable (See Note 3) | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Warrant liability | ||||||||
| Deferred tax liability | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (See Note 6) | ||||||||
| Class A common stock subject to possible redemption, | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained Earnings | ||||||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
1
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For The Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating and formation costs | $ | $ | ||||||
| Related party administrative fees | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Interest earned on marketable securities held in Trust Account | ||||||||
| Other income, net | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of the condensed consolidated financial statements
2
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (UNAUDITED)
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Earnings | Equity | ||||||||||||||||||||||
| BALANCE – January 1, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| BALANCE – March 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Earnings | Equity | ||||||||||||||||||||||
| BALANCE – January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Reclassification of Class A Common Stock from issuance costs included in accumulated deficit | — | ( | ) | — | ||||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| BALANCE – March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements
3
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Three Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Deferred income taxes | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Related party payable | ( | ) | ( | ) | ||||
| Income tax payable | ||||||||
| Accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Reclassification of Class A Common Stock from issuance costs included in accumulated deficit | $ | $ | ||||||
| Remeasurement in value of common stock subject to redemption | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of the condensed consolidated financial statements
4
INTERPRIVATE
III FINANCIAL PARTNERS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
InterPrivate III Financial Partners Inc. (the “Company”) is a blank check company incorporated in Delaware on September 10, 2020. It was originally incorporated under the name “InterPrivate II Financial Holdings Corp.”, but the Company changed its name to “InterPrivate III Financial Partners Inc.” on January 6, 2021. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (each, a “Business Combination”).
The Company has two wholly-owned subsidiaries InterPrivate III Merger Sub Inc., incorporated in Delaware on August 11, 2021 (“Merger Sub”), and InterPrivate III Merger Sub II LLC organized in Delaware on August 11, 2021(“Merger Sub II”), (collectively the “Subsidiaries”).
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 through March 31, 2023 relates to the Company’s formation, its initial public offering (the “Initial Public Offering”), and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income on cash and cash equivalents 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 Initial Public
Offering was declared effective on March 4, 2021. On March 9, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of
Following the closing of the Initial Public Offering
on March 9, 2021, an amount of $
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 the Private Placement Units,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The NYSE
American rules provide that the Business Combination must be with one or more target businesses that together have a fair market value
equal to at least
5
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 upon the
completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination
or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account ($
If the Company seeks stockholder approval, the
Company will proceed with a Business Combination only if a majority of the shares voted are voted in favor of the Business Combination.
If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons,
the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file
tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction
is required by law, 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. The Company will
not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $
Notwithstanding the above, if the Company seeks
stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and
Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of
The Sponsor and EarlyBirdCapital have agreed
(a) to waive their redemption rights with respect to their Founder Shares, Representative Shares and Public Shares held by them
in connection with the completion of a Business Combination, (b) waive their liquidation rights with respect to the Founder Shares, Private
Placement Shares and Representative Shares if the Company fails to complete a Business Combination and (c) not to propose an amendment
to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation
to allow redemption in connection with the Company’s initial Business Combination or to redeem
The Company currently has until June 9, 2023
or any extended period of time that the Company may have to consummate a Business Combination as a result of an amendment to the Company’s
Amended and Restated Certificate of Incorporation to complete a Business Combination (the “Combination Period”). If the Company
is unable to complete a Business Combination within the 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 the Company to pay its tax obligations (less up to $
6
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 (1) $
On December 21, 2022, the Company held a special meeting of stockholders (the “First Special Meeting”). At the First Special Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter Amendment”) to extend the date by which the Company must complete a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination involving the Company and one or more businesses (a “business combination”) from March 9, 2023 to April 9, 2023, and to allow the Company to elect to further extend in one-month increments up to two additional times, or a total of up to three months after March 9, 2023, until June 9, 2023, unless the closing of a business combination should have occurred prior thereto.
In connection with the First Special Meeting,
stockholders holding an aggregate of
Company will contribute funds from its working
capital account, or if such working capital account is depleted, then the Sponsor has agreed to lend to the Company an amount per month
of the extension of the date by which
On February 2, 2023, the New York Stock Exchange
(the “NYSE”) notified the Company that trading in the Company’s common stock, units and warrants had been halted, as
the Company no longer satisfied the continued listing standard of the NYSE requiring the Company to maintain an average aggregate global
market capitalization attributable to its publicly held shares over a consecutive 30 trading day period of at least $
Risks and Uncertainties
Management continues to evaluate 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 and/or search for a target company, the specific impact is not readily determinable as of the date of the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, The Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these consolidated financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these condensed consolidated financial statements.
7
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, the financial statements do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on April 17, 2023 (the “Annual Report”, “10-K”). The interim results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future periods.
Basis of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Reclassifications
Certain reclassifications were made to the prior period balances to conform to the current period presentation. These reclassifications do not restate the prior period financial statements and are for presentation purposes only.
Going Concern, Liquidity and Financial Condition
As of March 31, 2023 the Company had cash held
outside of the Trust Account of $
The Company currently has less than 12 months from the issuance date of these consolidated financial statements to complete a Business Combination. The mandatory liquidation requirement that the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. Management has determined that the Company has funds that are sufficient to fund the working capital needs of the Company until the consummation of a Business Combination or the winding up of the Company. However, the Company cannot provide any assurance that, if needed, new financing will be available to the Company on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through one year and one day from the issuance of these financial statements. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after June 9, 2023, the date currently specified in the Company’s charter by which the Company must consummate a Business Combination. As described below under “Note 10. Subsequent Events,” on May 8, 2023, the Company filed a preliminary proxy statement to hold a Second Special Meeting (defined below) to amend its charter to further extend the date by which the Company must consummate a business combination from June 9, 2023 to July 9, 2023, and to allow the Company, without another stockholder vote, by resolution of the Company’s Board, to elect to further extend the deadline in one-month increments up to eight additional times, or a total of up to nine months after June 9, 2023, until March 9, 2024.
8
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of the Accounting Standards Codification (the “ASC”) 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A — “Expenses of Offering.” Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Company’s Initial Public Offering and were charged to stockholders’ equity upon the completion of the Company’s Initial Public Offering.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and 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 consolidated 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.
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 (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 consolidated 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.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2023 and December 31, 2022.
Marketable Securities Held in Trust Account
As of December 31, 2022, substantially all of the assets held in the Trust Account were held in cash and money market funds which were invested primarily in U.S. Treasury securities.
To mitigate the risk of the Company being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the 1940 Act), on March 3, 2023 the Company instructed Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in an interest-bearing demand deposit account until the earlier of consummation of the Company’s initial business combination or liquidation. As of March 31, 2023, substantially all of the assets held in the Trust Account were held in such an interest-bearing demand deposit account.
9
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. As of March 31, 2023 and March 9, 2021, the Private Placement Warrants were accounted for as liabilities, and the Public Warrants were accounted for as temporary equity (see Note 8).
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for the Private Placement Warrants issued in connection with its Initial Public Offering in accordance with the guidance contained in ASC 815-40-15-7D, under which the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private Placement Warrants as liabilities at their fair value and adjusts the Private Placement Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of the Private Placement Warrants initially was estimated using a Binomial Lattice Model (see Note 9).
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A 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 features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at March 31, 2023 and December 31, 2022, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income
Taxes” (“ASC 740”), which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets
and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized. As of March 31, 2023 and December 31, 2022, the Company’s deferred tax asset was
reduced by a valuation allowance of $
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, if any, as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
For the three months ended March 31, 2023 and 2022, the Company’s
effective tax rate was -
10
Net Loss Per Share of Common Stock
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share” (“ASC Topic 260”). Net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from loss per share as the redemption value approximates fair value.
The following table reflects the calculation of basic and diluted net loss per common share (in dollars, except per share amounts):
| Three Months Ended March 31, | ||||||||
| Class A common stock subject to possible redemption | 2023 | 2022 | ||||||
| Numerator: | ||||||||
| Net loss attributable to Class A common stock subject to possible redemption | $ | ( | ) | $ | ( | ) | ||
| Denominator: Weighted Average Class A common stock subject to possible redemption | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Non-Redeemable Common Stock | ||||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: Net loss attributable to Class A common stock subject to possible redemption | ||||||||
| Net loss attributable to common stock not subject to possible redemption | ( | ) | ( | ) | ||||
| Denominator: Weighted Average Non-Redeemable Common Stock | ||||||||
| $ | ( | ) | $ | ( | ) | |||
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal
Depository Insurance Coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement” (“ASC 820”), approximates the carrying amounts represented in the accompanying condensed consolidated balance sheets, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| Level 1 - | defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| Level 2 - | defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| Level 3 - | defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. | |
11
Recently Adopted Accounting Standards
Recently Issued Accounting Standards
In August 2020, the FASB issued Accounting Standards Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —Contracts in Entity’ Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’ Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020- 06 on its consolidated financial statements.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying balance sheet.
NOTE 3. PUBLIC OFFERING
Pursuant to the Initial Public Offering, the
Company sold
In connection with the First Special Meeting of
stockholders held on December 21, 2022 (disclosed in Note 1), stockholders who owned shares of our common stock issued in our IPO (we
refer to such stockholders as “public stockholders” and such shares as “public shares”) elected to redeem all
or a portion of their public shares. Stockholders who elected to redeem, the redemption for a per-share price, payable in cash, was equal
to the aggregate amount then on deposit in the Company’s Trust Account, including interest (which interest was net of taxes payable),
divided by the number of then outstanding public shares. On December 21, 2022,
To mitigate the risk of the Company being deemed to have been operating as an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the 1940 Act), on March 3, 2023 the Company instructed Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in an interest-bearing demand deposit account until the earlier of consummation of the Company’s initial business combination or liquidation.
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor and EarlyBirdCapital purchased an aggregate of
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During the fourth quarter of 2022, the Company
recorded an out-of-period adjustment to correct an immaterial error in its previously issued quarterly and annual financial
statements related to the issuance of the Private Placement Shares. This adjustment included a reclassification of $
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
As of March 31, 2023, there have been no changes to the Founder Shares previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
Administrative Services Agreement
The Company entered into an agreement, commencing
on March 4, 2021, pursuant to which the Company will pay the Sponsor a total of $
Services Agreement
The Company entered into an agreement, pursuant
to which the Company will pay its Vice President a total of $
Related Party Loans
In addition, the Company reimburses InterPrivate
LLC, an affiliate entity, for any expenses paid on behalf of the Company. As of March 31, 2023 and December 31 2022, the Company had
a related party payable of $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on March 4, 2021, the holders of the Founder Shares, Representative Shares, Private Placement Units and any units that may be issued upon conversion of the Working Capital Loans (and all underlying securities) have registration rights requiring the Company to register a sale of any of the securities held by them prior to the consummation of a Business Combination. 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 the completion of a Business Combination. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
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Business Combination Marketing Agreement
In conjunction with the Initial Public Offering,
the Company entered into a Business Combination Marketing Agreement (the “BCMA”) under which the Company engaged Morgan Stanley
and EarlyBirdCapital as advisors in connection with the Business Combination to assist the Company in holding meetings with its stockholders
to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors
that are interested in purchasing the Company’s securities in connection with the Business Combination, assist the Company in obtaining
stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with
the Business Combination. Under the BCMA, the Company agreed to pay Morgan Stanley and EarlyBirdCapital a cash fee for such services
upon the consummation of a Business Combination in an amount equal to
On February 14, 2022, Morgan Stanley entered into a letter agreement with the Company and EarlyBirdCapital that amended the BCMA by (i) removing Morgan Stanley as a party to the BCMA and releasing it from its obligations thereunder; (ii) stating that Morgan Stanley would no longer have any rights, benefits, liabilities or obligations thereunder; (iii) reducing the fee payable thereunder from 3.5% to 1.75% of the gross proceeds of the Initial Public Offering (such reduced amount totaling $4,528,125), which becomes payable solely to EarlyBirdCapital on the condition that the Company successfully completes a business combination transaction; and (iv) obligating the Company to indemnify Morgan Stanley for any claims arising out of the letter agreement and to continue to indemnify Morgan Stanley as provided under the BCMA. As a result of such letter agreement, Morgan Stanley is no longer required to perform any services under the BCMA and is not entitled to receive any compensation thereunder. The letter agreement did not amend the provision of the BCMA which provides that the full amount of the original BCMA Fee (totaling $9,056,250) will be returned to the Public Stockholders upon the Company’s liquidation if the Company does not consummate a Business Combination within 24 months of the Initial Public Offering (or any extension thereof).
Merger Agreement
On August 18, 2021, the Company entered into an Agreement and Plan of Merger (as amended and restated, the “Merger Agreement”) with Merger Sub, Merger Sub II, and Aspiration Partners Inc. (“Aspiration”). Pursuant to the Merger Agreement, Merger Sub will merge with and into Aspiration, with Aspiration surviving the merger as a wholly owned subsidiary of the Company (the “First Merger”) and, immediately following the First Merger and as part of the same overall transaction as the First Merger, the surviving corporation will merge with and into Merger Sub II, with Merger Sub II surviving the merger (the “Second Merger”). The transactions contemplated by the Merger Agreement are referred to as the “Business Combination.” In addition, in connection with the consummation of the Business Combination, the Company will be renamed and is referred to herein as “New Aspiration” as of the time following such change of name.
On December 15, 2021, the Company, Merger Sub, Merger Sub II and Aspiration amended and restated the Merger Agreement in connection with the entry and execution of the Purchase Agreement (as defined herein). On July 18, 2022, the Company, Merger Sub, Merger Sub II and Aspiration amended the Merger Agreement to extend the Outside Date (as defined in the Merger Agreement) from July 19, 2022 to July 22, 2022. On July 21, 2022 (the “Second Amendment Date”), the Company, Merger Sub, Merger Sub II and Aspiration further amended and restated the Merger Agreement to effect, among other things, (i) an extension of the Outside Date from July 22, 2022 to December 31, 2022, (ii) a change to the procedures for the reservation and release of Additional Shares (as defined in the Merger Agreement), (iii) the clarification of the treatment of certain warrants to be issued immediately following the closing, (iv) the inclusion of additional covenants with respect to the preparation and delivery of financial statements by Aspiration, (v) the modification of certain non-solicitation provisions, (vi) an extension payment by Aspiration to the Company of $10,000,000, payable in two equal installments on the Second Amendment Date and the 45th day following the Second Amendment Date, (vii) the addition of certain additional termination rights for the each of the Company and Aspiration and related termination fees and (viii) mutual releases of certain matters arising prior to the Second Amendment Date. On March 30, 2023, the Company and Aspiration Partners, Inc. entered into an amendment to the Second Amended and Restated Merger Agreement to extend the Outside Date (as defined therein) from March 31, 2023 to May 1, 2023. On April 29, 2023, the Company and Aspiration Partners, Inc. entered into an amendment to the Second A&R Merger Agreement to extend the Outside Date (as defined therein) from May 1, 2023 to June 2, 2023.
In connection with the closing of the Business Combination (the “Closing”), at the effective time of the Business Combination (the “Effective Time”) and by virtue of the Business Combination, (i) all shares of Aspiration common stock issued and outstanding immediately prior to the Effective Time will be canceled and converted into the right to receive shares of New Aspiration Class A common stock, (ii) all outstanding Aspiration options, whether or not then exercisable, will be assumed by New Aspiration and converted into options to purchase New Aspiration Class A common stock, (iii) each Aspiration stockholder (other than (i) holders of Aspiration Series C-4 preferred stock, (ii) Aspiration Series X Preferred Stock, (iii) Aspiration common stock issued upon conversion of certain convertible senior notes and (iv) Aspiration common stock that is subject to forfeiture under earnout arrangements entered into strategic transactions irrespective of the Business Combination) and each holder of a vested Aspiration option shall also receive a contingent right to receive a pro rata portion of up to 100,000,000 shares of New Aspiration Class A common stock, (iv) all outstanding Aspiration warrants will be either (a) exercised or terminated in accordance with its terms or (b) assumed by New Aspiration and converted into a warrant of New Aspiration to purchase shares of New Aspiration Class A common stock and, prior to the Effective Time, (v) each convertible note of Aspiration will be converted into Aspiration capital stock, paid off in accordance with the terms thereof or remain outstanding as indebtedness of New Aspiration without the right to convert into capital stock of New Aspiration. The aggregate number of shares of common stock to be issued in the Business Combination will be equal to $1.75 billion plus the exercise price of all outstanding Aspiration options, divided by $10.00.
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The parties to the Merger Agreement have made customary representations and warranties and have agreed to certain customary covenants for a transaction of this type. The Closing is subject to certain conditions, including but not limited to the approval of the Company’s stockholders and Aspiration’s stockholders of the Business Combination Agreement. The Merger Agreement may also be terminated by either party under certain circumstances, including if the Business Combination has not occurred by the Outside Date (as defined therein).
Subscription Agreements
On August 18, 2021, the Company entered into
subscription agreements (the “Subscription Agreements”) with certain accredited investors, pursuant to which, among other
things, the Company agreed to issue and sell, in private placements to close concurrently with the Closing, an aggregate of
Aspiration Support Agreement
In connection with and following the execution of the Merger Agreement, the Company will enter into support agreements with certain Aspiration stockholders (the “Aspiration Support Agreements”), pursuant to which such Aspiration stockholders will agree, among other things, to vote in favor of the adoption and approval of the Business Combination and any of the documents and transactions contemplated by the Merger Agreement. Additionally, such Aspiration stockholders agreed to not transfer any securities of Aspiration held by such stockholder from the date of execution of the Aspiration Support Agreement until the earlier of the Effective Time and the termination of the Merger Agreement in accordance with its terms, subject to certain exceptions, and to not solicit any Company Business Combination (as defined in the Merger Agreement), in each case, subject to the terms and conditions of the Aspiration Support Agreements.
Sponsor Support Agreement
In connection with the execution of the Merger Agreement, InterPrivate Acquisition Management III, LLC, a Delaware limited liability company (the “Sponsor”), entered into a support agreement (the “Sponsor Support Agreement”) with the Company and Aspiration, pursuant to which the Sponsor agreed, among other things, to vote to adopt and approve the Merger Agreement and all other documents and transactions contemplated thereby, to vote against any Business Combination proposal other than the Business Combination or other proposals that would impede or frustrate the Business Combination, to comply with the Merger Agreement’s prohibition on soliciting any alternative Business Combination and to not transfer the equity interests in the Company that it owns, in each case, subject to the terms and conditions of the Sponsor Support Agreement.
Amended and Restated Registration Rights Agreement
At the Closing, New Aspiration, the Sponsor and certain stockholders of New Aspiration will enter into an Amended and Restated Registration Rights Agreement, pursuant to which, among other things, the parties thereto will be granted certain customary registration rights with respect to shares of common stock of New Aspiration.
Stockholders’ Agreement
At the Closing, New Aspiration, Andrei Cherny, Joseph Sanberg and certain of their respective controlled affiliates will enter into a Stockholders’ Agreement (the “Stockholders’ Agreement”) to provide for certain governance rights and address certain governance matters relating to New Aspiration. The Stockholders’ Agreement will provide each of Mr. Cherny and Mr. Sanberg the right to nominate one individual to the New Aspiration board of directors, subject to certain qualifications, requirements and exceptions as set forth therein.
Transfer Restrictions
The Sponsor and its directors and executive officers
are subject to certain restrictions on transfer with respect to their shares of New Aspiration common stock pursuant to that certain
Letter Agreement, dated as of March 4, 2021, by and among the Company, the Sponsor, and the other parties signatory thereto. Such restrictions
end on the date that is one year following the Closing, or are subject to an early price-based release with respect to
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Series X Preferred Stock Purchase Agreement
Concurrently with the execution of the Merger
Agreement, the Company and Aspiration entered into a Series X Preferred Stock Purchase Agreement (the “Purchase Agreement”)
with OCM Aspiration Holdings, LLC (“Oaktree”). Pursuant to the Purchase Agreement, Aspiration has agreed to issue and sell
to Oaktree an aggregate of
Certificate of Designations
The shares of New Aspiration Series X Preferred Stock to be issued in exchange for shares of Aspiration Series X Preferred Stock pursuant to the Merger Agreement, upon their issuance, will have the powers, designations, preferences, and other rights as set forth in a Certificate of Designations of the New Aspiration Series X Preferred Stock that the Company will file with the Secretary of State of the State of Delaware on or prior to the Closing Date (the “New Aspiration Certificate of Designations”). The New Aspiration Series X Preferred Stock will have, mutatis mutandis, substantially similar powers, designations, preferences, and other rights as set forth in the Certificate of Designations of the Aspiration Series X Preferred Stock that was filed with the Secretary of State of the State of Delaware upon the consummation of the transactions contemplated by the Purchase Agreement (the “Aspiration Certificate of Designations”).
Voting and Consent Rights
The New Aspiration Series X Preferred Stock will not have any voting rights or rights to convert such preferred shares into shares of New Aspiration Class A common stock. Holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock will be entitled to elect (i) one director to the board of directors of New Aspiration after the ninth anniversary of the Closing Date and upon a Medium Event (as defined below) and (ii) two directors to the board of directors of New Aspiration upon a Major Event (as defined below). New Aspiration will need to obtain the prior written consent of holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock for, among other things: (i) effecting any change of control, liquidation event or merger or consolidation of New Aspiration unless the entirety of the applicable Series X Redemption Price (as defined below) is paid with respect to all then issued and outstanding shares of Series X Preferred Stock, (ii) amending Aspiration’s organizational documents to the extent such amendment has an adverse effect on the holders of Series X Preferred Stock, (iii) increasing or decreasing the number of authorized shares of New Aspiration Series X Preferred Stock, (iv) creating any class or series of New Aspiration capital stock that is pari passu or senior to the New Aspiration Series X Preferred Stock, (v) incurring indebtedness, except for indebtedness incurred under Aspiration’s existing secured debt facilities, debt incurred that allows New Aspiration to satisfy a total net leverage ratio of 3.0x and debt incurred for the redemption of the New Aspiration Series X Preferred Stock (subject to limited exceptions), (vi) declaring, paying or making certain dividends and undertaking certain stock repurchases (subject to limited exceptions) and (vii) certain other specified actions.
Dividends
The dividend rate with respect to the New Aspiration Series X Preferred Stock will be either 8.0% per year in cash or, if not paid in cash, will be paid “in-kind” by accruing at a rate of 8.0%, 11.0% or 12.0% per year for any dividend period ending on or prior to the second anniversary of the Closing Date, between the second and third anniversaries of the Closing Date or between the third and fourth anniversaries of the Closing Date, respectively. New Aspiration may elect either form of dividend payment until the fourth anniversary of the Closing Date, and dividends must be paid in cash thereafter.
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Springing Rights
Upon the occurrence of a Major Event that has continued for 90 days (and upon the occurrence of certain Major Events, and in certain circumstances, 180 days) or upon the occurrence of a Medium Event that has continued for 180 days, subject to certain time extensions, for so long as such Event of Noncompliance is continuing (the period following termination of the foregoing cure periods, the “Liquidity Period”), the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock shall have the right to cause New Aspiration to pursue an issuance of securities, a Liquidation (as defined below), merger, sale of assets or similar transaction or series of transactions, a leveraged recapitalization or any other transaction or series of transactions (each, a “Liquidity Transaction”) generating sufficient proceeds available for distribution to holders of New Aspiration Series X Preferred Stock to pay the entirety of the Series X Redemption Price (as defined below). During the Liquidity Period, New Aspiration shall direct an independent financial advisor, approved by the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock then outstanding, to establish procedures to effect a Liquidity Transaction in an orderly manner with the objective of achieving the highest available value for New Aspiration within a reasonable period of time and the payment of the entire Series X Redemption Price payable in respect of all outstanding shares of New Aspiration Series X Preferred Stock. However, if a Liquidity Period has commenced and the Event of Noncompliance is cured, New Aspiration may discontinue and will not be required to pursue a Liquidity Transaction.
Immediately following the commencement of a Liquidity Transaction, holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock may take control of and direct the process of a Liquidity Transaction and cause New Aspiration to consummate, subject to any requisite stockholder approvals, any Liquidity Transaction in order to redeem the New Aspiration Series X Preferred Stock at the Series X Redemption Price.
Furthermore, during a Liquidity Period, unless New Aspiration is able to redeem outstanding New Aspiration Series X Preferred Stock at the then applicable Series X Redemption Price as a result, New Aspiration will need to obtain the prior written consent of holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock to acquire any business, incur any indebtedness, repurchase capital stock or make distributions (subject to certain exceptions) or fail to redeem outstanding New Aspiration Series X Preferred Stock with surplus cash (subject to applicable law and the terms of any indebtedness of New Aspiration).
Ranking and Liquidation Preference
The New Aspiration Series X Preferred Stock will
rank senior to New Aspiration’s common stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation,
dissolution or winding up of the affairs of New Aspiration (a “Liquidation”). Upon a Liquidation, each share of New Aspiration
Series X Preferred Stock would be entitled to the applicable Series X Redemption Price. The liquidation preference of the New Aspiration
Series X Preferred Stock will be equal to $
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Redemption Rights and Series X Redemption Price
New Aspiration will have the right to redeem
all or any portion of the New Aspiration Series X Preferred Stock at any time by paying the applicable Series X Redemption Price; provided,
however, that no optional redemption will be permitted that would result in less than
Each holder of New Aspiration Series X Preferred Stock will have the option to require New Aspiration to redeem any portion of the New Aspiration Series X Preferred Stock at the Series X Redemption Price: (i) at any time after the ninth anniversary of the Closing Date or (ii) upon the occurrence of a Major Event (following the expiration of the applicable cure period) at the election of the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock. New Aspiration will be required to redeem all of the outstanding shares of New Aspiration Series X Preferred Stock at the Series X Redemption Price automatically upon the occurrence of a change of control, a Liquidation or an insolvency event.
The following table sets forth the “Series X Redemption Price”:
| Timing of Redemption | Series X Redemption Price | |
The “Make-Whole Amount” with respect
to any redemption of any share of New Aspiration Series X Preferred Stock prior to the First Optional Call Date is defined in the New
Aspiration Certificate of Designations as an amount equal to the sum of (A) the remaining dividends that would accrue on such shares
being redeemed from the day immediately following the redemption date to the First Optional Call Date at
Series X Minimum Cash Balance
Pursuant to the New Aspiration Certificate of Designations, New Aspiration will also be required to maintain a minimum cash balance of $50,000,000 at all times so long as the New Aspiration Series X Preferred Stock remains outstanding. However, if Aspiration and its subsidiaries have less than $10,000,000 in outstanding indebtedness, the required minimum cash balance is reduced to $30,000,000.
Investor Rights Agreement
The Company entered into an Investor Rights Agreement with Oaktree to be effective upon the Closing Date (the “New Aspiration Investor Rights Agreement”) on substantially similar terms and conditions (while taking into account the consummation of the Business Combination), as those contained in the Investor Rights Agreement (as defined below) set forth below, such that New Aspiration, upon the Closing, shall be subject to the New Aspiration Investor Right Agreement.
As a condition to the closing of the Purchase Agreement, Aspiration and Oaktree entered into an Investor Rights Agreement (the “Investor Rights Agreement”) pursuant to which, among other things, Aspiration granted Oaktree certain customary registration rights with respect to the shares of Aspiration common stock underlying the Warrant and certain other securities that may be issued to Oaktree in respect of the Warrant.
In addition, pursuant to the Investor Rights
Agreement, for so long as shares of the Aspiration Series X Preferred Stock issued on the Series X Closing Date remain outstanding, Oaktree
will have (i) a participation right, subject to certain exceptions, pursuant to which Oaktree may maintain its ownership percentage of
Aspiration common stock in connection with future offerings or sales of Aspiration equity securities and (ii) a right of first offer
with respect to the provision of any future debt or preferred equity financing to Aspiration or its subsidiaries. The Investor Rights
Agreement also provides that, so long as
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The Investor Rights Agreement provides that Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated with Oaktree without the prior written consent of Aspiration for one year following the closing of the issuance of Aspiration Series X Preferred Stock. From and after such date, Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated with Oaktree without the prior written consent of Aspiration, which consent may not be unreasonably withheld by Aspiration (other than in the event of a transfer to certain restricted transferees).
Warrant
Pursuant to the Purchase Agreement, at the Closing
Date, New Aspiration will issue to Oaktree a warrant (the “Warrant”) to purchase a number of shares of New Aspiration common
stock equal to
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company
is authorized to issue
Class A Common Stock —
The Company is authorized to issue up to
Class B Common Stock —
The Company is authorized to issue up to
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law.
The shares of Class B common stock will
automatically convert into shares of Class A common stock concurrently with or immediately following the consummation of a Business
Combination 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 connection with a Business Combination, 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,
NOTE 8. WARRANTS
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable 30 days after the consummation of a Business Combination. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation. The Public Warrants are accounted for as a component of temporary equity.
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The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than twenty (20) business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy 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, and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the closing price of the Class A common stock for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders equals or exceeds $ |
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.
The exercise price and number of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the 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.
In addition, if (x) the Company issues additional
shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its Business
Combination at an issue price or effective issue price of less than $
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The Private Placement Warrants underlying the Private Placement Units are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the shares of common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Representative Shares
The Company issued to EarlyBirdCapital and its
designees
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of the registration statement related to the Initial Public Offering pursuant to FINRA Rule 5110(g)(1). Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statements related to the Initial Public Offering, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statements related to the Initial Public Offering except to any underwriter and selected dealer participating in the Initial Public Offering and their bona fide officers or partners.
NOTE 9. 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 Company’s marketable securities held in the trust account and warrant liabilities are measured at fair value on a recurring basis. The following tables summarize the Company’s fair value measurements and the level of inputs within the fair value hierarchy utilized to determine such fair value as of March 31, 2023 and December 31, 2022:
| March 31, | ||||||
| Description | Level | 2023 | ||||
| Assets: | ||||||
| Marketable securities held in Trust Account | 1 | $ | ||||
| Liabilities: | ||||||
| Private Placement Warrants - Sponsor | 3 | $ | ||||
| Private Placement Warrants - Underwriter | 3 | |||||
| Total warrant liability | $ | |||||
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| December 31, | ||||||
| Description | Level | 2022 | ||||
| Assets: | ||||||
| Marketable securities held in Trust Account | 1 | $ | ||||
| Liabilities: | ||||||
| Private Placement Warrants - Sponsor | 3 | $ | ||||
| Private Placement Warrants - Underwriter | 3 | |||||
| Total warrant liability | $ | |||||
There were no transfers between levels of the fair value hierarchy during the three months ended March 31, 2023 or the year ended December 31, 2022.
The Company’s Private Placement Warrants are valued using a Binomial Lattice Model, which is considered to be a Level 3 fair value measurement. The Binomial Lattice Model’s primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of the common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own public warrant pricing. A Binomial Lattice Model was used in estimating the fair value of the Private Placement Warrants for periods where no observable traded price was available.
The key inputs into the Binomial Lattice Model for the initial measurement of the Private Placement Warrants, and the subsequent measurement of the Private Placement Warrants, are as follows:
| March 31, 2023 | December 31,
2022 | |||||||
| Risk-free interest rate | % | % | ||||||
| Market price of public stock | $ | $ | ||||||
| Dividend yield | % | % | ||||||
| Implied volatility | % | % | ||||||
| Exercise price | $ | $ | ||||||
The above assumptions are based on an expected close of a de-SPAC transaction on June 30, 2023.
At March 31, 2023 and December 31, 2022, the Private Placement Warrants
were determined to be valued at $
The following table presents the changes in the fair value of the Private Placement Warrant liabilities:
| Term | Private Placement Warrants | Underwriters Warrants | ||||||
| Fair value as of December 31, 2022 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ||||||||
| Fair value as of March 31, 2023 | $ | $ | ||||||
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued, other than disclosed below. The Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
The Company’s Amended and Restated Certificate of Incorporation (the “Charter”)
provides the Company the right to extend the Deadline Date up to three times for an additional one month each time (each, an “Extension”),
from March 9, 2023 to up to June 9, 2023. As previously disclosed, in December 2022, the Board had implemented a first Extension and had
extended the initial Deadline Date to April 9, 2023. On March 29, 2023, pursuant to the Charter, the Board determined to implement a second
Extension to allow additional time for the Company to complete its initial business combination. In connection with the second Extension,
on April 4, 2023, the Company deposited $
As previously reported on a Form 8-K filed on May 1, 2023, on April 29, 2023, the Company and Aspiration Partners, Inc. entered into an amendment to the Second Amended and Restated Merger Agreement to extend the Outside Date (as defined therein) from May 1, 2023 to June 2, 2023.
On May 8, 2023, the Company filed a preliminary proxy
statement to hold a special meeting of stockholders (the “Second Special Meeting”) to amend its charter to further extend
the date by which the Company must consummate a business combination from June 9, 2023 to July 9, 2023, and to allow the Company, without
another stockholder vote, by resolution of the Company’s Board, to elect to further extend the deadline in one-month increments
up to eight additional times, or a total of up to nine months after June 9, 2023, until March 9, 2024. At the Second Special Meeting,
the Company will also propose to amend its charter to eliminate (i) the limitation that the Company may not redeem public shares in an
amount that would cause the Company’s net tangible assets to be less than $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this quarterly report on Form 10-Q (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” are to InterPrivate III Financial Partners Inc., except where the context requires otherwise. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to InterPrivate Acquisition Management III, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Quarterly Report and the Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 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 completion of the Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Business Combination are not satisfied. 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 Annual Report. 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.
We are a blank check company formed under the laws of the State of Delaware on September 10, 2020 for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of the Public Offering and the sale of the private placement units, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
NYSE American Listing
On February 2, 2023, the New York Stock Exchange (the “NYSE”) notified the Company that trading in the Company’s common stock, units and warrants had been halted, as the Company no longer satisfied the continued listing standard of the NYSE requiring the Company to maintain an average aggregate global market capitalization attributable to its publicly held shares over a consecutive 30 trading day period of at least $40,000,000. On February 13, 2023, the Company was approved for listing on the NYSE American LLC (the “NYSE American”) and its common stock, units and warrants began trading on the NYSE American on February 16, 2023.
Business Combination
Merger Agreement
On August 18, 2021, we entered into an agreement and plan of merger with Merger Sub, Merger Sub II and Aspiration (as amended and restated, the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub will merge with and into Aspiration with Aspiration surviving such merger as a wholly owned subsidiary of the Company and, immediately following and as part of the same overall transaction, the surviving corporation will merge with and into Merger Sub II (the “Second Merger”) with Merger Sub II surviving such merger. The transactions contemplated by the Merger Agreement are referred to as the “Business Combination.” In addition, in connection with the consummation of the Business Combination, we will be renamed “Aspiration, Inc.” The combined company following the consummation of the Business combination is referred to herein as “New Aspiration.” The Business Combination has been approved by the boards of directors of each of the Company, Merger Sub, Merger Sub II and Aspiration.
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On December 15, 2021, the Company, Merger Sub, Merger Sub II and Aspiration amended and restated the Merger Agreement in connection with the entry and execution of the Purchase Agreement (as defined herein). On July 18, 2022, the Company, Merger Sub, Merger Sub II and Aspiration amended the Merger Agreement to extend the Outside Date (as defined in the Merger Agreement) from July 19, 2022 to July 22, 2022. On July 21, 2022 (the “Second Amendment Date”), the Company, Merger Sub, Merger Sub II and Aspiration further amended and restated the Merger Agreement to effect, among other things, (i) an extension of the Outside Date from July 22, 2022 to December 31, 2022, (ii) a change to the procedures for the reservation and release of Additional Shares (as defined in the Merger Agreement), (iii) the clarification of the treatment of certain warrants to be issued immediately following the closing, (iv) the inclusion of additional covenants with respect to the preparation and delivery of financial statements by Aspiration, (v) the modification of certain non-solicitation provisions, (vi) an extension payment by Aspiration to the Company of $10,000,000, payable in two equal installments on the Second Amendment Date and the 45th day following the Second Amendment Date, (vii) the addition of certain additional termination rights for the each of the Company and Aspiration and related termination fees and (viii) mutual releases of certain matters arising prior to the Second Amendment Date. On March 30, 2023, the Company and Aspiration Partners, Inc. entered into an amendment to the Second Amended and Restated Merger Agreement to extend the Outside Date (as defined therein) from March 31, 2023 to May 1, 2023. On April 29, 2023, the Company and Aspiration Partners, Inc. entered into an amendment to the Second A&R Merger Agreement to extend the Outside Date (as defined therein) from May 1, 2023 to June 2, 2023.
Under the Merger Agreement, the Company has agreed to acquire all of the outstanding equity interests of Aspiration in exchange for a number of shares of Class A common stock (valued for this purpose at $10.00 per share) equal to (subject to certain adjustments as described therein) (i) $1,750,000,000 plus (ii) the Equity Financing Proceeds (as provided in the Merger Agreement) minus (iii) the number of shares of Class A common stock to underlie the warrant to be issued immediately following the consummation of the Business Combination pursuant to the Series X Preferred Stock Purchase Agreement, dated December 15, 2021, by and among the Company, Aspiration and OCM Aspiration Holdings, LLC (prongs (i), (ii) and (iii) collectively, the “Aggregate Consideration”), $200,000,000 of such Aggregate Consideration (represented by 20,000,000 shares of Class A common stock) which will initially be held back in connection with private placements entered into with certain accredited investors (the “PIPE Investors”) to close concurrently with the closing of the Business Combination (the “Closing”), pursuant to which, among other things, the Company has agreed to issue and sell an aggregate of 20,000,000 shares of the Company Class A common stock, at a purchase price of $10.00 per share (the “PIPE Investment”) and up to $77,828,400 of which (represented by 7,782,840 shares of Class A common stock) will be initially held back for the benefit of the holders of Aspiration’s convertible senior notes (such shares to be held back, the “Additional Shares”). The shares of Class A common stock to be held back at the effective time of the Business Combination (the “Effective Time”) will be released to the Company to the extent the Company is obligated to issue Additional Shares to the PIPE Investors that are participating in the PIPE Investment or the convertible note holders, as applicable, and, otherwise, to the holders of capital stock of Aspiration as of immediately prior to the Effective Time.
Each Aspiration stockholder (other than (i) holders of Aspiration Series C-4 preferred stock, (ii) Aspiration Series X Preferred Stock, (iii) Aspiration common stock issued upon conversion of certain convertible senior notes and (iv) Aspiration common stock that is subject to forfeiture under earnout arrangements entered into strategic transactions irrespective of the Business Combination) and each holder of a vested Aspiration option (as defined below) shall also receive a contingent right to receive a pro rata portion of up to 100,000,000 shares of Class A common stock of New Aspiration (the “Contingent Consideration”). The Contingent Consideration may be earned in five equal tranches of 20,000,000 shares of New Aspiration Class A common stock (a) when the closing price of New Aspiration Class A common stock equals or exceeds (i) $12.50 per share prior to the 18-month anniversary of the Effective Time, (ii) $15.00 per share prior to the 36-month anniversary of the Effective Time, (iii) $17.50 per share prior to the 36-month anniversary of the Effective Time, (iv) $20.00 per share prior to the 48-month anniversary of the Effective Time and (v) $25.00 per share prior to the 60-month anniversary of the Effective Time, in each case, as measured over any 20 trading days within any 30-day trading period prior to the end of the relevant time period applicable to each such earn out tranche or (b) when New Aspiration consummates a change of control transaction that entitles its stockholders to receive a per share consideration of at least $12.50, $15.00, $17.50, $20.00 and $25.00, as applicable. Any right to Contingent Consideration that remains unvested on the first business day after five years from Effective Time will be forfeited without any further consideration.
Pursuant to the Merger Agreement, at the Effective Time, the consideration to be issued to the holders of Aspiration capital stock (other than holders of Aspiration Series X Preferred Stock) will be in the form of Class A common stock of New Aspiration (valued at $10.00 per share). Additionally, each option to purchase shares of Aspiration common stock (an “Aspiration option”) that is outstanding and unexercised, whether or not then vested or exercisable, will be assumed by New Aspiration and converted into an option to acquire shares of Class A common stock of New Aspiration with the same terms and conditions as applied to such Aspiration option immediately prior to the Effective Time; provided that the number of shares underlying such New Aspiration option will be determined by multiplying the number of shares of Aspiration common stock subject to such option immediately prior to the Effective Time by the ratio determined by dividing the per share merger consideration value by $10.00 (the quotient being the “option exchange ratio”), which product shall be rounded down to the nearest whole number of shares, and the per share exercise price of such New Aspiration option will be determined by dividing the per share exercise price immediately prior to the Effective Time by the option exchange ratio, which quotient shall be rounded up to the nearest whole cent.
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Pursuant to the Merger Agreement, (a) immediately prior to the Effective Time, each warrant to purchase shares of Aspiration common stock that is issued and outstanding prior to the Effective Time will be either (i) exercised or terminated in accordance with its terms or (ii) assumed by New Aspiration and converted into a warrant of New Aspiration to purchase shares of New Aspiration Class A common stock and prior to the Effective Time, each convertible note of Aspiration will be converted into Aspiration capital stock, paid off in accordance with the terms thereof or remain outstanding as indebtedness of New Aspiration without the right to convert into capital stock of New Aspiration. If any indebtedness of Aspiration (including with respect to convertible notes of Aspiration that remain outstanding) is not paid off at the Closing, it will be assumed by New Aspiration.
The parties to the Merger Agreement have made customary representations and warranties and have agreed to certain customary covenants for a transaction of this type. The Closing is subject to certain conditions, including but not limited to the adoption by our stockholders and Aspiration’s stockholders of the Merger Agreement. The Merger Agreement may also be terminated by either party under certain circumstances, including if the Business Combination has not occurred by the Outside Date (or such later date as the parties may mutually agree).
As previously disclosed in the Form 8-K filed on July 22, 2022, the Company, Merger Sub, Merger Sub II and Aspiration entered into a Second Amended and Restated Agreement and Plan of Merger (the “Second A&R Merger Agreement”), which further amends and restates the A&R Merger Agreement. One of the conditions of the Second A&R Agreement states an extension payment will be made by Aspiration to the Company in the amount of $10,000,000, payable in two equal installments on the Second Amendment Date and the 45th day following the Second Amendment Date. We have recorded the $10,000,000 as other income in the financial statements.
As previously disclosed in the Form 8-K filed on December 29, 2022, the Company, Merger Sub, Merger Sub II and Aspiration entered into an amendment to the Second A&R Merger Agreement to (i) extend the Outside Date (as defined in the Second A&R Merger Agreement) from December 31, 2022 to March 31, 2023, (ii) provide that the Other Termination Fee (as defined in the Second A&R Merger Agreement) is payable if the Second A&R Merger Agreement is terminated by either Aspiration or the Company for convenience (and not pursuant to any other enumerated termination right) and (iii) include Aspiration’s recently issued Series C-5 Preferred Stock, par value $0.000003 per share, within the definition of “Company Preferred Stock.” On March 30, 2023, the Company and Aspiration Partners, Inc. entered into an amendment to the Second Amended and Restated Merger Agreement to extend the Outside Date (as defined therein) from March 31, 2023 to May 1, 2023. On April 29, 2023, the Company and Aspiration Partners, Inc. entered into an amendment to the Second A&R Merger Agreement to extend the Outside Date (as defined therein) from May 1, 2023 to June 2, 2023.
Subscription Agreements
In connection with the Business Combination, we entered into subscription agreements with the Base PIPE Investors (the “Base Subscription Agreements”), pursuant to which, among other things, we agreed to issue and sell, immediately prior to the Closing, an aggregate of 20,000,000 shares of our Class A common stock (the “PIPE Committed Shares”) at a purchase price of $10.00 per share for an aggregate consideration of $200,000,000, and we entered into subscription agreements (the “Subsequent Subscription Agreements”) with certain other investors (the “Subsequent PIPE Investors” and, together with the Base PIPE Investors, the “PIPE Investors”), pursuant to which, among other things, we agreed to issue and sell, immediately prior to the Closing, an aggregate of 1,363,636 shares of our Class A common stock at a purchase price of $11.00 per share for an aggregate consideration of $15,000,000. We refer to the Base Subscription Agreements and the Subsequent Subscription Agreements collectively as the “Subscription Agreements.”
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Pursuant to the terms of the Base Subscription Agreements and the Conversion Stockholder Side Letters (as defined below), if during the last 10 trading days of the 60-day period following the effectiveness of the re-sale registration statement that New Aspiration has agreed to file with the SEC pursuant to the Subscription Agreements (the “Adjustment Period”), the volume weighted average price of one share of New Aspiration Class A common stock (as reported on the New York Stock Exchange) (the “Adjustment Period VWAP”) is less than $10.00 per share, each Base PIPE Investor and former Conversion Stockholder, as applicable, will be entitled to receive from New Aspiration, for no additional consideration, a number of additional shares of New Aspiration Class A common stock (the “Additional Shares”) equal to the product of (x) (i) with respect to each Base PIPE Investor, the number of PIPE Committed Shares issued to such Base PIPE Investor at the Closing that such Base PIPE Investor holds through the last day of the Adjustment Period or (ii) with respect to the former Conversion Stockholders, the number of shares of Aspiration capital stock issued upon conversion of such former Conversion Stockholder’s Convertible Notes (“Conversion Stock”) and any Convertible Notes which such former Conversion Stockholder continues to hold through the last day of the Adjustment Period, in each case, multiplied by (y) a fraction, (A) the numerator of which is $10.00 minus the Adjustment Period VWAP and (B) the denominator of which is the Adjustment Period VWAP; provided that, with respect to the Base PIPE Investors, in no event shall the number of Additional Shares exceed the lesser of (i) the number of PIPE Committed Shares and (ii) such Base PIPE Investor’s pro rata portion of 20,000,000 shares of New Aspiration Class A common stock; provided further that, with respect to the former Conversion Stockholders, in no event shall the number of Additional Shares issuable in respect of Conversion Stock exceed 7,782,840 shares of New Aspiration Class A common stock. If the Additional Shares are issued to the Base PIPE Investors and the former Conversion Stockholders, as applicable, there will be a corresponding adjustment to the portion of the aggregate consideration held in escrow to be released to the prior holders of Aspiration common stock (other than, for the avoidance of doubt, the prior holders of Aspiration Series X preferred stock and the Conversion Stockholders) as of immediately prior to the First Effective Time such that the number of issued and outstanding shares of New Aspiration Class A common stock will not change.
Conversion Stockholder Side Letters
On December 15, 2021, we and each of the Conversion Stockholders entered into amendments to certain side letter agreements (the “Conversion Stockholder Side Letters”), pursuant to which, among other things, in the event that the Adjustment Period VWAP is less than $10.00 per share of New Aspiration Class A common stock, each former Conversion Stockholder will be entitled to receive from New Aspiration, for no additional consideration, a number of shares of New Aspiration Class A common stock equal to the product of (x) the number of shares of New Aspiration Class A common stock issued to such Conversion Stockholder at the Closing pursuant to the terms of the Merger Agreement (the “Conversion Stockholder Committed Shares”) that such former Conversion Stockholder holds through the Adjustment Period (as defined below), multiplied by (y) a fraction, (A) the numerator of which is $10.00 minus the Adjustment Period VWAP, and (B) the denominator of which is the Adjustment Period VWAP (such additional shares, the “Conversion Stockholder Additional Shares”); provided that in no event shall the number of Conversion Stockholder Additional Shares exceed the product of 1.00 multiplied by the number of Conversion Stockholder Committed Shares of which such former Conversion Stockholder continues to be the record and beneficial owner through the Adjustment Period or 7,782,840 shares of New Aspiration Class A common stock in the aggregate.
Pursuant to the Conversion Stockholder Side Letters, in the event that the former Conversion Stockholders are issued Conversion Stockholder Additional Shares, each former Conversion Stockholder will have the same registration rights with respect to the Conversion Stockholder Additional Shares as the PIPE Investors have with respect to the resale of the Additional Shares. If a former Conversion Stockholder, in good faith and on the advice of its counsel, determines that it is an “affiliate” (as defined in Rule 144 under the Securities Act) of either us or New Aspiration either at the Closing or at the time the transactions contemplated by the Merger Agreement are submitted for a vote or consent, such former Conversion Stockholder will have the same registration rights with respect to the Conversion Stockholder Committed Shares as the PIPE Investors have with respect to the PIPE Committed Shares (as described above).
Furthermore, we and the PIPE Investors may not amend an existing Subscription Agreement or enter into Subsequent Subscription Agreements which provide for materially different rights, benefits and obligations with respect to the PIPE Investor party thereto without first amending the Conversion Stockholder Side Letters to ensure that the rights, benefits and obligations of the former Conversion Stockholders are consistent with those of the PIPE Investors.
A Base PIPE Investor or former Conversion Stockholder will automatically forfeit any right to receive any Additional Shares if (i) at any time from the Closing through the Adjustment Period, such Base PIPE Investor or former Conversion Stockholder is not the record and beneficial owner of the PIPE Committed Shares or Conversion Stockholder Committed Shares, as applicable, or such Base PIPE Investor or former Conversion Stockholder otherwise transfers its PIPE Committed Shares or Conversion Stockholder Committed Shares, as applicable, from New Aspiration’s transfer agent’s custody to a brokerage or other account not controlled by New Aspiration’s transfer agent on behalf of such Base PIPE Investor or former Conversion Stockholder or (ii) at any time prior to the last day of the Adjustment Period, such Base PIPE Investor or former Conversion Stockholder or any person acting on its behalf or pursuant to any understanding with such Base PIPE Investor or former Conversion Stockholder, as applicable, directly or indirectly, engages in a Hedging Transaction (as defined in the Merger Agreement).
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Aspiration Support Agreement
In connection with and following the execution of the Merger Agreement, we will enter into support agreements with certain Aspiration stockholders (the “Aspiration Support Agreements”), pursuant to which such Aspiration stockholders will agree, among other things, to vote in favor of the adoption and approval of the Business Combination and any of the documents and transactions contemplated by the Merger Agreement. Additionally, such Aspiration stockholders agreed to not transfer any securities of Aspiration held by such stockholder from the date of execution of the Aspiration Support Agreement until the earlier of the Effective Time and the termination of the Merger Agreement in accordance with its terms, subject to certain exceptions and to not solicit any Company Business Combination (as defined in the Merger Agreement), in each case, subject to the terms and conditions of the Aspiration Support Agreements.
Sponsor Support Agreement
In connection with the execution of the Merger Agreement, the Sponsor entered into a support agreement (the “Sponsor Support Agreement”) with us and Aspiration, pursuant to which the Sponsor agreed, among other things, to vote to adopt and approve the Merger Agreement and all other documents and transactions contemplated thereby, to vote against any Business Combination proposal other than the Business Combination or other proposals that would impede or frustrate the Business Combination, to comply with the Merger Agreement’s prohibition on soliciting any alternative Business Combination and to not transfer the equity interests in us that it owns, in each case, subject to the terms and conditions of the Sponsor Support Agreement.
Amended and Restated Registration Rights Agreement
At the Closing, New Aspiration, the Sponsor and certain stockholders of New Aspiration will enter into an Amended and Restated Registration Rights Agreement, pursuant to which, among other things, the parties thereto will be granted certain customary registration rights with respect to shares of common stock of New Aspiration.
Stockholders’ Agreement
At the Closing, New Aspiration, Andrei Cherny, Joseph Sanberg and certain of their respective controlled affiliates will enter into a Stockholders’ Agreement (the “Stockholders’ Agreement”) to provide for certain governance rights and address certain governance matters relating to New Aspiration. The Stockholders’ Agreement will provide each of Mr. Cherny and Mr. Sanberg the right to nominate one individual to the New Aspiration board of directors, subject to certain qualifications, requirements and exceptions as set forth therein.
Transfer Restrictions
The Sponsor and its directors and executive officers are subject to certain restrictions on transfer with respect to their shares of New Aspiration common stock pursuant to that certain Letter Agreement, dated as of March 4, 2021, by and among us, the Sponsor, and the other parties signatory thereto. Such restrictions end on the date that is one year following the Closing, or are subject to an early price-based release with respect to 50% of such shares if the price per share of New Aspiration Class A common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-day trading period following the Closing.
Series X Preferred Stock Purchase Agreement
Concurrently with the execution of the Merger Agreement, we and Aspiration entered into a Series X Preferred Stock Purchase Agreement (the “Purchase Agreement”) with OCM Aspiration Holdings, LLC (“Oaktree”). Pursuant to the Purchase Agreement, Aspiration has agreed to issue and sell to Oaktree an aggregate of 27,777,777 shares of a newly designated series of preferred stock designated as Series X Preferred Stock of Aspiration, par value $0.000003 per share (the “Aspiration Series X Preferred Stock”), for an aggregate purchase price of $250,000,000, which is net of the original issue discount of 10% (the “Series X Financing”), with shares of Aspiration Series X Preferred Stock having the powers, designations, preferences and other rights set forth in the Aspiration Certificate of Designations (as defined below). The closing of the issuance and sale of Aspiration Series X Preferred Stock occurred concurrently with the execution of the Merger Agreement. The Purchase Agreement also provides that New Aspiration will grant Oaktree registration rights pursuant to the Registration Rights Agreement (as defined below).
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Certificate of Designations
The shares of New Aspiration Series X Preferred Stock to be issued in exchange for shares of Aspiration Series X Preferred Stock pursuant to the Merger Agreement, upon their issuance, will have the powers, designations, preferences, and other rights as set forth in a Certificate of Designations of the New Aspiration Series X Preferred Stock that we will file with the Secretary of State of the State of Delaware on or prior to the Closing Date (the “New Aspiration Certificate of Designations”). The New Aspiration Series X Preferred Stock will have, mutatis mutandis, substantially similar powers, designations, preferences, and other rights as set forth in the Certificate of Designations of the Aspiration Series X Preferred Stock that was filed with the Secretary of State of the State of Delaware upon the consummation of the transactions contemplated by the Purchase Agreement (the “Aspiration Certificate of Designations”).
Voting and Consent Rights
The New Aspiration Series X Preferred Stock will not have any voting rights or rights to convert such preferred shares into shares of New Aspiration Class A common stock. Holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock will be entitled to elect (i) one director to the board of directors of New Aspiration after the ninth anniversary of the Closing Date and upon a Medium Event (as defined below) and (ii) two directors to the board of directors of New Aspiration upon a Major Event (as defined below). New Aspiration will need to obtain the prior written consent of holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock for, among other things: (i) effecting any change of control, liquidation event or merger or consolidation of New Aspiration unless the entirety of the applicable Series X Redemption Price (as defined below) is paid with respect to all then issued and outstanding shares of Series X Preferred Stock, (ii) amending Aspiration’s organizational documents to the extent such amendment has an adverse effect on the holders of Series X Preferred Stock, (iii) increasing or decreasing the number of authorized shares of New Aspiration Series X Preferred Stock, (iv) creating any class or series of New Aspiration capital stock that is pari passu or senior to the New Aspiration Series X Preferred Stock, (v) incurring indebtedness, except for indebtedness incurred under Aspiration’s existing secured debt facilities, debt incurred that allows New Aspiration to satisfy a total net leverage ratio of 3.0x and debt incurred for the redemption of the New Aspiration Series X Preferred Stock (subject to limited exceptions), (vi) declaring, paying or making certain dividends and undertaking certain stock repurchases (subject to limited exceptions) and (vii) certain other specified actions.
Dividends
The dividend rate with respect to the New Aspiration Series X Preferred Stock will be either 8.0% per year in cash or, if not paid in cash, will be paid “in-kind” by accruing at a rate of 8.0%, 11.0% or 12.0% per year for any dividend period ending on or prior to the second anniversary of the Closing Date, between the second and third anniversaries of the Closing Date or between the third and fourth anniversaries of the Closing Date, respectively. New Aspiration may elect either form of dividend payment until the fourth anniversary of the Closing Date, and dividends must be paid in cash thereafter.
Each of the dividend rates set forth above will increase by (i) 5.0% per annum (a) if New Aspiration fails to pay any dividend that is required to be paid in cash if surplus cash is available, (b) if New Aspiration defaults on payment with respect to a Liquidation (as defined below) or redemption, (c) if New Aspiration is in material breach of certain covenants under the New Aspiration Certificate of Designations, subject to certain cure periods, (d) if New Aspiration experiences a bankruptcy or insolvency event, whether voluntary or involuntary, (e) if New Aspiration fails to deliver New Aspiration Class A common stock to a holder of New Aspiration Series X Preferred Stock upon the valid exercise of the Warrant (the foregoing clauses (a) through (e), a “Major Event”), (f) if New Aspiration fails to pay any dividend that is required to be paid in cash if surplus cash is unavailable, (g) if New Aspiration is in material breach of certain other covenants under the New Aspiration Certificate of Designations, subject to certain cure periods, (h) if New Aspiration defaults on outstanding indebtedness or if outstanding indebtedness is accelerated, in each case, in excess of $50,000,000 or (i) if New Aspiration fails to pay an applicable final judgment in excess of $25,000,000 (the foregoing clauses (f) through (i), a “Medium Event,” and together with a Major Event, an “Event of Noncompliance”), or (ii) 3.0% per annum if New Aspiration is in material breach of certain other covenants under the New Aspiration Certificate of Designations that is not a Major Event or Medium Event, subject to certain cure periods (the dividend rate as increased in each of the foregoing cases, the “Noncompliance Incremental Rate”). In addition, if we do not have at least $200,000,000 of cash at the Closing (excluding proceeds from the issuance of New Aspiration Series X Preferred Stock), the dividend rates set forth above will increase by 5.0% per annum (exclusive of any Noncompliance Incremental Rate then in effect) and will remain in effect until, after the Closing Date, New Aspiration has $200,000,000 of cash (the dividend rate as increased by this sentence, the “de-SPAC Incremental Rate”). New Aspiration may elect to pay both the Noncompliance Incremental Rate and the de-SPAC Incremental Rate in cash or “in-kind.”
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Springing Rights
Upon the occurrence of a Major Event that has continued for 90 days (and upon the occurrence of certain Major Events, and in certain circumstances, 180 days) or upon the occurrence of a Medium Event that has continued for 180 days, subject to certain time extensions, for so long as such Event of Noncompliance is continuing (the period following termination of the foregoing cure periods, the “Liquidity Period”), the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock shall have the right to cause New Aspiration to pursue an issuance of securities, a Liquidation (as defined below), merger, sale of assets or similar transaction or series of transactions, a leveraged recapitalization or any other transaction or series of transactions (each, a “Liquidity Transaction”) generating sufficient proceeds available for distribution to holders of New Aspiration Series X Preferred Stock to pay the entirety of the Series X Redemption Price (as defined below). During the Liquidity Period, New Aspiration shall direct an independent financial advisor, approved by the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock then outstanding, to establish procedures to effect a Liquidity Transaction in an orderly manner with the objective of achieving the highest available value for New Aspiration within a reasonable period of time and the payment of the entire Series X Redemption Price payable in respect of all outstanding shares of New Aspiration Series X Preferred Stock. However, if a Liquidity Period has commenced and the Event of Noncompliance is cured, New Aspiration may discontinue and will not be required to pursue a Liquidity Transaction.
Immediately following the commencement of a Liquidity Transaction, holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock may take control of and direct the process of a Liquidity Transaction and cause New Aspiration to consummate, subject to any requisite stockholder approvals, any Liquidity Transaction in order to redeem the New Aspiration Series X Preferred Stock at the Series X Redemption Price.
Furthermore, during a Liquidity Period, unless New Aspiration is able to redeem outstanding New Aspiration Series X Preferred Stock at the then applicable Series X Redemption Price as a result, New Aspiration will need to obtain the prior written consent of holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock to acquire any business, incur any indebtedness, repurchase capital stock or make distributions (subject to certain exceptions) or fail to redeem outstanding New Aspiration Series X Preferred Stock with surplus cash (subject to applicable law and the terms of any indebtedness of New Aspiration).
Ranking and Liquidation Preference
The New Aspiration Series X Preferred Stock will rank senior to New Aspiration’s common stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of New Aspiration (a “Liquidation”). Upon a Liquidation, each share of New Aspiration Series X Preferred Stock would be entitled to the applicable Series X Redemption Price. The liquidation preference of the New Aspiration Series X Preferred Stock will be equal to $10 per share (the “Series X Liquidation Preference”).
Redemption Rights and Series X Redemption Price
New Aspiration will have the right to redeem all or any portion of the New Aspiration Series X Preferred Stock at any time by paying the applicable Series X Redemption Price; provided, however, that no optional redemption will be permitted that would result in less than 33% of the shares of New Aspiration Series X Preferred Stock that are issued on the Closing Date to remain outstanding following such redemption unless all remaining shares of New Aspiration Series X Preferred Stock are redeemed.
Each holder of New Aspiration Series X Preferred Stock will have the option to require New Aspiration to redeem any portion of the New Aspiration Series X Preferred Stock at the Series X Redemption Price: (i) at any time after the ninth anniversary of the Closing Date or (ii) upon the occurrence of a Major Event (following the expiration of the applicable cure period) at the election of the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock. New Aspiration will be required to redeem all of the outstanding shares of New Aspiration Series X Preferred Stock at the Series X Redemption Price automatically upon the occurrence of a change of control, a Liquidation or an insolvency event.
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The following table sets forth the “Series X Redemption Price”:
| Timing of Redemption | Series X Redemption Price | |
| Until 30 months after the Closing Date (the “First Optional Call Date”) | Make-Whole Amount (as defined below) | |
| From the First Optional Call Date until the first anniversary of the First Optional Call Date | 106% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends | |
| From the first anniversary of the First Optional Call Date until 66 months following the First Optional Call Date | 103% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends | |
| From and after the date 66 months after the First Optional Call Date | 100% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends |
The “Make-Whole Amount” with respect to any redemption of any share of New Aspiration Series X Preferred Stock prior to the First Optional Call Date is defined in the New Aspiration Certificate of Designations as an amount equal to the sum of (A) the remaining dividends that would accrue on such shares being redeemed from the day immediately following the redemption date to the First Optional Call Date at 8.0% as may be increased by the de-SPAC Incremental Rate or the Noncompliance Incremental Rate, if applicable, plus (B) the Series X Liquidation Preference of such shares being redeemed plus (C) the then current amount of accrued in-kind dividends on such shares being redeemed, assuming that, for purposes of calculating the foregoing, the shares of New Aspiration Series X Preferred Stock being redeemed were to remain outstanding through the First Optional Call Date.
Series X Minimum Cash Balance
Pursuant to the New Aspiration Certificate of Designations, New Aspiration will also be required to maintain a minimum cash balance of $50,000,000 at all times so long as the New Aspiration Series X Preferred Stock remains outstanding. However, if Aspiration and its subsidiaries have less than $10,000,000 in outstanding indebtedness, the required minimum cash balance is reduced to $30,000,000.
Investor Rights Agreement
We entered into an Investor Rights Agreement with Oaktree to be effective upon the Closing Date (the “New Aspiration Investor Rights Agreement”) on substantially similar terms and conditions (while taking into account the consummation of the Business Combination), as those contained in the Investor Rights Agreement (as defined below) set forth below, such that New Aspiration, upon the Closing, shall be subject to the New Aspiration Investor Right Agreement.
As a condition to the closing of the Purchase Agreement, Aspiration and Oaktree entered into an Investor Rights Agreement (the “Investor Rights Agreement”) pursuant to which, among other things, Aspiration granted Oaktree certain customary registration rights with respect to the shares of Aspiration common stock underlying the Warrant and certain other securities that may be issued to Oaktree in respect of the Warrant.
In addition, pursuant to the Investor Rights Agreement, for so long as shares of the Aspiration Series X Preferred Stock issued on the Series X Closing Date remain outstanding, Oaktree will have (i) a participation right, subject to certain exceptions, pursuant to which Oaktree may maintain its ownership percentage of Aspiration common stock in connection with future offerings or sales of Aspiration equity securities and (ii) a right of first offer with respect to the provision of any future debt or preferred equity financing to Aspiration or its subsidiaries. The Investor Rights Agreement also provides that, so long as 33% of the Aspiration Series X Preferred Stock issued on the Series X Closing Date remains outstanding, Oaktree will be entitled to appoint one non-voting observer to the board of directors of Aspiration. The Investor Rights Agreement further contains a number of other customary covenants and agreements, including certain standstill provisions, preemptive rights, rights of first refusal with respect to future debt financing transactions and information rights.
The Investor Rights Agreement provides that Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated with Oaktree without the prior written consent of Aspiration for one year following the closing of the issuance of Aspiration Series X Preferred Stock. From and after such date, Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated with Oaktree without the prior written consent of Aspiration, which consent may not be unreasonably withheld by Aspiration (other than in the event of a transfer to certain restricted transferees).
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Warrant
Pursuant to the Purchase Agreement, at the Closing Date, New Aspiration will issue to Oaktree a warrant (the “Warrant”) to purchase a number of shares of New Aspiration common stock equal to 6.0% of the total number of shares of New Aspiration capital stock outstanding on a fully diluted basis (excluding the shares of New Aspiration Series X Preferred Stock and the Warrant) as of immediately following the consummation of the Business Combination.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2023 were organizational activities, those necessary to prepare for the Public Offering, described below, and identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our business combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
The three months ended March 31, 2023 compared to the three months ended March 31, 2022
For the three months ended March 31, 2023, we had a net loss of $988,865 which consists of operating costs of $1,088,238, a loss on the change in fair value of the warrant liability of $4,155, dividend income on marketable securities held in the Trust Account of $117,744, and a provision for income taxes of $14,216.
For the three months ended March 31, 2022, we had a net loss of $653,537 which consists of operating costs of $736,838, a gain on the change in fair value of the warrant liability of $79,686, and interest income on marketable securities held in the Trust Account of $3,615.
Liquidity, Capital Resources and Going Concern
On March 9, 2021, we consummated the Public Offering of 25,875,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 3,375,000 Units, at $10.00 per Unit, generating gross proceeds of $258,750,000. Simultaneously with the closing of the Public Offering, we consummated the sale of 692,500 private placement units at a price of $10.00 per private placement unit in a private placement to the Sponsor and EarlyBirdCapital, generating gross proceeds of $6,925,000. Following the Public Offering, the full exercise of the over-allotment option, and the sale of the private placement units, a total of $258,750,000 was placed in the Trust Account.
As of March 31, 2023, we had cash held in the Trust Account of $20,739,704. Interest earned on the balance in the Trust Account may be used by us to pay taxes. Through March 31, 2023, we have withdrawn $809,223 in interest earned from the Trust Account for tax purposes. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, net of taxes payable, to complete our business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of March 31, 2023, we had cash held outside of the Trust Account of $6,394,335. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
In order to finance transaction costs in connection with a business combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we would repay such loaned amounts. In the event that a 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 warrants at a price of $1.50 per warrant, at the option of the lender. The units would be identical to the private placement units. In addition to the $10,000,000 received during the third quarter of 2022 and as noted in the Second A&R Merger Agreement, Aspiration has agreed to deliver a termination fee of $7,000,000 if Closing does not occur on or before the Outside Date.
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We monitor the adequacy of our working capital in order to meet the expenditures required for operating our business prior to our initial business combination. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking indepth due diligence and negotiating a business combination is less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Our amended and restated certificate of incorporation provides that we must cease all operations except for the purpose of liquidating if we are unable to complete a business combination. The Company currently has less than 12 months from the date these financial statements were issued to complete a business combination (after the First Special Meeting, the latest date by which we must consummate a business combination is June 9, 2023). The date for mandatory liquidation and subsequent dissolution raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this report do not include any adjustments that might result from our inability to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements as of March 31, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, administrative and support services. We began incurring these fees on March 4, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
We have entered into an agreement, pursuant to which we will pay the Vice President a total of $10,000 per month for assisting us in negotiating and consummating an initial business combination. Upon completion of the Business Combination or the Company’s liquidation, the agreement will terminate and the Company will cease paying these monthly fees.
We engaged EarlyBirdCapital as our advisor in connection with the Business Combination to assist us in holding meetings with our stockholders to discuss the Business Combination and the Aspiration’s attributes, introduce us to potential investors that are interested in purchasing our securities in connection with the Business Combination, assist us in obtaining stockholder approval for the Business Combination and assist us with its press releases and public filings in connection with the Business Combination. On February 14, 2022, the BCMA was amended, and as a result Morgan Stanley is no longer required to perform any services under the BCMA and is not entitled to receive any compensation thereunder. We will pay EarlyBirdCapital a cash fee for such services upon the consummation of the Business Combination in an amount equal to 1.75% of the gross proceeds of the Initial Public Offering (exclusive of any applicable finders’ fees which might become payable).
We have issued to EarlyBirdCapital, and/or its designees, 200,000 representative shares (the “representative shares”) for nominal consideration. The holders of the representative shares have agreed not to transfer, assign or sell any such shares without our prior consent until the completion of our initial business combination. In addition, the holders of the representative shares have agreed (i) to waive their conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete our initial business combination within 24 months from the closing of the Initial Public Offering.
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The representative shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of the Registration Statement on Form S-1 pursuant to Rule 5110(e)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(e)(1), these securities will not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the Registration Statement on Form S-1 or commencement of sales of the Initial Public Offering, except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, provided that all securities so transferred remain subject to the lockup restriction above for the remainder of the time period.
We have granted the holders of these shares and the private placement units registration rights. EarlyBirdCapital may not exercise its demand and “piggy-back” registration rights more than five and seven years, respectively, after the effective date of our Registration Statement on Form S-1 and may not exercise its demand rights on more than one occasion in accordance with FINRA Rule 5110(g)(8).
Critical Accounting Policies
The preparation of condensed consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Classification
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. As of June 30, 2022 and December 31, 2021, the Private Placement Warrants were accounted for as liabilities, and the Public Warrants were accounted for as temporary equity.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2022, the entire amount of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed consolidated balance sheet.
Net Loss Per Share of Common Stock
The Company’s statement of operations includes a presentation of loss per share of common stock in a manner similar to the two-class method of loss per share.
Net loss per share of common stock, basic and diluted, for our Class A common stock subject to possible redemption is calculated by dividing (i) its allocable share of net loss by (ii) the weighted average number of shares of our Class A common stock subject to possible redemption outstanding during the period.
Net loss per share of common stock, basic and diluted, for our non-redeemable Class A common stock is calculated by dividing (i) its allocable share of net loss by (ii) the weighted average number of shares of our non-redeemable Class A common stock outstanding during the period.
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The Company has not considered the effect of the Public Warrants and the Private Placement Warrants to purchase shares of our Class A common stock in the calculation of diluted net loss per share, since the exercise of such warrants into shares of our Class A common stock is contingent upon the occurrence of future events and their inclusion would be anti-dilutive. As a result, diluted net loss per common stock is the same as basic net loss per common stock for the periods presented.
Non-redeemable Class A common stock includes the Founder Shares and other shares of Class A common stock that do not have redemption features.
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 our condensed consolidated financial statements.
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 are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer (who serves as our Principal Executive, Financial and Accounting Officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023. Based upon his evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of March 31, 2023 due to the material weaknesses described below.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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Management’s Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Our Chief Executive Officer assessed the effectiveness of our internal control over financial reporting as of March 31, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, our Chief Executive Officer determined that our internal controls over financial reporting were not effective as of March, 31, 2023, because of material weaknesses in our internal control over financial reporting. Specifically, our management has concluded that our controls related to the classification of redeemable common stock as components of either permanent or temporary equity, remeasurement of Class A common stock subject to redemption, and accounting for accruals of certain expenses including tax liabilities were not effectively designed or maintained.
This Quarterly Report does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
In light of the material weaknesses described above, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Management has implemented remediation steps to address the material weaknesses and to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
While we took considerable action to remediate the material weaknesses, such remediation has not been fully evidenced. Accordingly, we continue to test our controls implemented in the first quarter to assess whether our controls are operating effectively. While there can be no assurance, we believe our material weaknesses will be remediated during the course of fiscal 2023.
Other than the changes discussed above, there has been no change in our internal control over financial reporting 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, there have been no material changes from the risk factors previously disclosed in the Annual Report. However, we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
On May 8, 2023, the Company filed a preliminary proxy statement to hold a special meeting of stockholders (the “Second Special Meeting”) to amend its charter to further extend the date by which the Company must consummate a business combination from June 9, 2023 to July 9, 2023, and to allow the Company, without another stockholder vote, by resolution of the Company’s board of directors, to elect to further extend the deadline in one-month increments up to eight additional times, or a total of up to nine months after June 9, 2023, until March 9, 2024. At the Second Special Meeting, the Company will also propose to amend its charter to eliminate (i) the limitation that the Company may not redeem public shares in an amount that would cause the Company’s net tangible assets to be less than $5,000,001 and (ii) the limitation that the Company shall not consummate a business combination unless the Company has net tangible assets of at least $5,000,001.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| No. | Description of Exhibit | |
| 31.1* | Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | 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.
| INTERPRIVATE III FINANCIAL PARTNERS INC. | ||
| Date: May 18, 2023 | By: | /s/ Ahmed M. Fattouh |
| Name: | Ahmed M. Fattouh | |
| Title: | Chairman and Chief Executive Officer | |
| (Principal Executive, Financial and Accounting Officer) | ||
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