UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarterly period ended
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INTERPRIVATE III FINANCIAL PARTNERS INC.
FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022
| September 30, 2023 |
December 31, 2022 |
|||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Deferred tax asset | ||||||||
| Marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Related party payable | $ | $ | ||||||
| Excise tax 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 (unaudited).
1
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 (UNAUDITED)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating and formation costs | $ | $ | $ | $ | ||||||||||||
| Related party service fees | ||||||||||||||||
| Loss from operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense): | ||||||||||||||||
| Extension fee income | ||||||||||||||||
| Change in fair value of warrant liabilities | ( |
) | ||||||||||||||
| Interest earned on money market funds | ||||||||||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||||||||||
| Unrealized loss on marketable securities held in Trust Account | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Income (loss) before provision for income taxes | ( |
) | ( |
) | ||||||||||||
| Provision for income tax (expense) benefit | ( |
) | ( |
) | ||||||||||||
| Net income (loss) | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| $ | ( |
) | $ | $ | ( |
) | $ | |||||||||
| $ | ( |
) | $ | $ | ( |
) | $ | |||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
2
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Excise taxes on Class A Common stock redemptions | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| BALANCE – June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| BALANCE – September 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated Earnings | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | (Deficit) | (Deficit) | ||||||||||||||||||||||
| 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 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| BALANCE – June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||
| BALANCE – September 30, 2022 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
3
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from Operating Activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Interest earned on funds held in Trust Account | ( | ) | ( | ) | ||||
| Unrealized loss 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) provided by operating activities | ( | ) | ||||||
| Cash flows from Investing Activities: | ||||||||
| Deposits to Trust Account | ( | ) | ||||||
| Withdrawals from Trust Account | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from Financing Activities: | ||||||||
| Payment of redeemed Public Shares, net of taxes | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net Change in Cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents – Beginning of period | ||||||||
| Cash and cash equivalents – End of period | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Reclassification of Class A Common Stock from issuance costs included in accumulated deficit | $ | $ | ( | ) | ||||
| Redemption costs of Class A Common Stock included in excise tax payable | $ | ( | ) | $ | ||||
| Remeasurement in value of common stock subject to redemption | $ | ( | ) | $ | ( | ) | ||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)
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 September 30, 2023, the Company had not commenced any operations. All activity through September 30, 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 including the Proposed Business Combination with Aspiration that was terminated. (See “Termination of Proposed Business Combination With Aspiration” below). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income 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 $
5
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
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
6
The Company currently has up to
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) $
First Charter Amendment
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 “First 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 (the “Deadline Date”) 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.
Pursuant to the First Amendment to the Company’s
Amended and Restated Certificate of Incorporation, executed December 23, 2022, at the beginning of each month in which an extension has
been implemented and an initial business combination has not yet been consummated, the Company shall make a deposit from its working capital
account into the Trust Account in an amount determined by multiplying $
On March 29, 2023, the Board determined to implement
the Company’s first monthly Extension under the First Charter Amendment to allow additional time for the Company to complete its
initial business combination. In connection with the first monthly Extension, the Company deposited $
7
Second Charter Amendment
On June 5, 2023, the Company held a special meeting of stockholders (the “Second Special Meeting”) in which the Company’s stockholders voted in favor of a proposal to the Second Amendment of the Company’s Amended and Restated Certificate of Incorporation (the “Second Charter Amendment”) to extend the Deadline Date (the date by which it must consummate an initial business combination) from June 9, 2023 to July 9, 2023 and to allow the Company to elect to further extend in one-month increments up to eight additional times (each monthly election referred to herein as an “Extension”), or a total of up to nine months, until March 9, 2024 (the “Extended Deadline Date”).
Additionally, the Company’s redemption limitation
amendment proposal was approved at the Second Special Meeting whereby the Second Charter Amendment amends the Company’s Charter
to permit the Company’s Board, in its sole discretion, 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 $
Pursuant to the Second Amendment to the Company’s
Amended and Restated Certificate of Incorporation, executed June 7, 2023, at the beginning of each month in which an Extension has been
implemented and an initial business combination has not yet been consummated, the Company shall make a deposit from its working capital
account into the Trust Account in an amount determined by multiplying $
On June 29, 2023, the Company’s board of
directors elected to implement the Company’s first monthly Extension under the Second Charter Amendment to extend the Deadline Date
for an additional month to August 9, 2023. In connection with the first monthly Extension, the Company deposited $
On July 26, 2023, the Company’s board of
directors elected to implement the Company’s second monthly Extension under the Second Charter Amendment to extend the Deadline
Date for an additional month to September 9, 2023. In connection with the second monthly Extension, the Company deposited $
On September 6, 2023, the Company’s board
of directors elected to implement the Company’s third monthly Extension under the Second Charter Amendment to extend the Deadline
Date for an additional month to October 9, 2023. In connection with the third monthly Extension, the Company deposited $
On October 4, 2023, the Company’s board
of directors elected to implement the Company’s fourth monthly Extension under the Second Charter Amendment to extend the Deadline
Date for an additional month to November 9, 2023. In connection with the fourth monthly Extension, the Company deposited $
On November 1, 2023, the Company’s board
of directors elected to implement the Company’s fifth monthly Extension under the Second Charter Amendment to extend the Deadline
Date for an additional month to December 9, 2023. In connection with the fifth monthly Extension, the Company deposited $
Public Share Redemptions
In connection with the First Special Meeting held
on December 21, 2022, stockholders holding an aggregate of
In connection with the Second Special Meeting
held on June 5, 2023, stockholders holding an aggregate of
8
Under the Inflation Reduction Act of 2022 (see
Risks and Uncertainties), the Company is subject is subject to a non-deductible
To mitigate the current uncertainty surrounding the application of the Excise Tax (see Risks and Uncertainties), in the event that any Excise Tax is accrued in connection with any redemption event, including in connection with the Extension, none of the money in the Trust Account or the interest earned thereon shall be used to pay for any Excise Tax due under the IR Act in connection with any redemptions of Public Shares in connection with any redemption event. The Company intends to continue investing the Trust Account funds in a variable interest-bearing demand deposit account and does not intend to utilize any funds held in the trust account to pay excise taxes that may become due pursuant to the Inflation Reduction Act of 2022 upon a redemption of the Company’s Class A common stock, to the extent applicable to the Company.
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
Termination of Business Combination Agreement With Aspiration
As discussed in Note 6, the Second A&R Merger Agreement and related agreements were terminated on August 29, 2023.
Risks and Uncertainties
The Company’s ability to consummate an initial business combination may be adversely impacted by various factors that cause economic uncertainty and volatility in the financial markets, such as downturns in the financial markets or in economic conditions, the ongoing effects of the COVID-19 pandemic, and geopolitical instability, such as the military conflicts in the Ukraine and the Middle East. Management continues to evaluate the impacts of the COVID-19 pandemic and the ongoing conflicts in Ukraine and the Middle East and has concluded that while it is reasonably possible that these events could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
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
9
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 nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future 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 September 30, 2023, the Company had cash
held outside of the Trust Account of $
As described in Note 6 under the heading “Termination of Proposed Business Combination With Aspiration,” Aspiration is obligated to pay the Company certain termination fees in connection with the termination of the Proposed Business Combination with Aspiration. However, as of the date of this Quarterly Report on Form 10-Q, Aspiration has not paid the Cash Termination Fee to the Company, which became due on August 31, 2023. The Company cannot provide any assurance that it will receive the termination payments to which it is entitled under the Second A&R Merger Agreement or the timing thereof.
The Company currently has less than 12 months from the date these financial statements were issued to complete a business combination, the latest date by which the Company must consummate an initial business combination is December 9, 2023, or March 9, 2024, if all extensions are exercised. 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 March 9, 2024, the date currently specified in the Company’s charter by which the Company must consummate a Business Combination.
10
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 highly liquid and short-term
investments with an original maturity of three months or less when purchased to be cash equivalents. As of September 30, 2023 and December
31, 2022, the Company had cash of $
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 September 30, 2023, substantially all of the assets held in the Trust Account were held in such an interest-bearing demand deposit account.
11
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 September 30, 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 remeasurement 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 September 30, 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.
| Shares | Amount | |||||||
| Class A common stock subject to possible redemption at December 31, 2021 | $ | |||||||
| Less: Redemption of shares | ( | ) | ( | ) | ||||
| Plus: Remeasurement of Class A Common Stock subject to possible redemption | – | |||||||
| Class A common stock subject to possible redemption at December 31, 2022 | ||||||||
| Less: Redemption of shares | ( | ) | ( | ) | ||||
| Plus: Remeasurement of Class A Common Stock subject to possible redemption | – | |||||||
| Class A common stock subject to possible redemption at September 30, 2023 | $ | |||||||
12
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 September 30, 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 September 30, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
For the three months ended September 30, 2023
and 2022, the Company’s effective tax rate was (
Net Income (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.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Class A common stock subject to possible redemption | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Net income (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 income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Less: Net income (loss) attributable to Class A common stock subject to possible redemption | ( | ) | ( | ) | ||||||||||||
| Net income (loss) attributable to common stock not subject to possible redemption | ( | ) | ( | ) | ||||||||||||
| Denominator: Weighted Average Non-Redeemable Common Stock | ||||||||||||||||
| $ | ( | ) | $ | $ | ( | ) | $ | |||||||||
13
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. | |
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information. ASU 2016-13 was effective for SEC filers, excluding smaller reporting companies, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As an emerging growth company, the Company was permitted to adopt the new standard for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Effective January 1, 2023, the Company adopted ASU 2016-13 using a modified retrospective transition method. There were no effects on the Company’s financial position, results of operations, or cash flows upon adoption of ASU 2016-13.
14
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 and the Second Special Meeting held on June 5, 2023 (disclosed in Note 1), stockholders who owned
shares of the Company’s common stock issued in our IPO (such stockholders as are referred to 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 June 5, 2023 and December 21, 2022,
At June 5, 2023 and 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
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 $
15
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
As of September 30, 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 $
Consulting Agreement and Audit Committee Resignation
Effective August 18, 2023, the Company entered
into a consulting service agreement with Richard McGinn, a director and beneficial owner of the Company, for consulting and advisory services,
and effective August 20, 2023, Mr. McGinn resigned from the Company’s Audit Committee prior to entering into the consulting service
agreement. The services to be provided under the consulting service agreement include assistance with the Company’s due diligence
and analysis of one or more potential business combination targets identified by the Company, and advice and assistance in negotiating
the terms, structure and the execution of one or more business combination transactions involving the Company. For the services rendered,
the Company is to pay Mr. McGinn a monthly retainer of $
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital
Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
In addition, the Company reimburses InterPrivate
LLC, an affiliate entity, for any expenses paid on behalf of the Company. As of September 30, 2023 and December 31 2022, the Company had
a related party payable of $
16
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.
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
Termination of Proposed Business Combination With Aspiration
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”). As previously disclosed, on July 21, 2022, the Company entered into a Second Amended and Restated Agreement and Plan of Merger as amended by Amendment No. 1 thereto dated as of December 29, 2022 (“Amendment No. 1”), as further amended by Amendment No. 2 thereto dated as of March 30, 2023, as further amended by Amendment No. 3 thereto dated as of April 29, 2023 and as further amended by Amendment No. 4 thereto dated as of May 31, 2023 (as amended, the “Second A&R Merger Agreement”), by and among the Company, InterPrivate III Merger Sub Inc., a wholly owned subsidiary of the Company, InterPrivate III Merger Sub II LLC, a wholly owned subsidiary of the Company, and Aspiration Partners, Inc. The transactions contemplated by the Second A&R Merger Agreement, amended as described below, are referred to as the “Proposed Business Combination with Aspiration.”
In connection with the Second A&R Merger Agreement,
Aspiration paid the Company an extension fee of $
17
As previously disclosed, on August 22, 2023 the
Company terminated the Second A&R Merger Agreement, effective on August 29, 2023, pursuant to Section 9.01(n) thereof. Such termination
constitutes a “Qualifying Termination” (as defined under Section 9.01(n), as amended by the Amendment No. 1 (the “Termination
Provision”)). The Termination Provision provides that upon a Qualifying Termination, Aspiration must pay the Company (i) a cash
termination fee of $
The Company intends to continue its search for an initial Business Combination. If the Company does not complete an initial Business Combination, any funds remaining, after paying expenses including those incurred in the Company’s search for a Business Combination, from payments (if any) under the Termination Provision, are expected to remain outside of the Trust Account and not be part of liquidating distributions with respect to the Public Shares.
On August 31, 2023 the Company requested that its Registration Statement on Form S-4 (File No. 333-262732) related to the Aspiration Business Combination, together with all exhibits thereto (the “Registration Statement”), initially filed with the SEC on February 15, 2022, be withdrawn.
Termination of Related Agreements
As a result of the termination of the Proposed Business Combination with Aspiration, the Second A&R Merger Agreement will be of no further force and effect (other than the Termination Provision and other ancillary provisions thereof, each of which survives the termination), and each of the transaction agreements entered into in connection therewith, including, but not limited to, the following, have either automatically been terminated in accordance with their terms or are of no further force and effect: (i) the Subscription Agreements dated as of August 18, 2021 by and among the Company and certain accredited investors; (ii) the Aspiration Support Agreement; (iii) the Sponsor Support Agreement; (iv) the Amended and Restated Registration Rights Agreement; (v) the Stockholders Agreement; (vi) the Series X Preferred Stock Purchase Agreement with OCM Aspiration Holdings LLC (“Oaktree”); (vii) the Investor Rights Agreement with Oaktree.
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
18
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.
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.
19
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 $
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.
20
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are remeasured and reported at fair value at each reporting period, and non-financial assets and liabilities that are remeasured 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 money market funds included
in cash equivalents, marketable securities held in the trust account, and warrant liabilities are measured at fair value on a recurring
basis.
| September 30, | ||||||||
| Description | Level | 2023 | ||||||
| Assets: | ||||||||
| Cash equivalents | ||||||||
| Money market funds included in cash and cash equivalents (Note 1) | 1 | $ | ||||||
| Liabilities: | ||||||||
| Private Placement Warrants - Sponsor | 3 | $ | ||||||
| Private Placement Warrants - Underwriter | 3 | |||||||
| Total warrant liability | $ | |||||||
| 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 nine months ended September 30, 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.
21
| September 30, 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 February 29, 2024.
At September 30, 2023 and December 31, 2022, the
Private Placement Warrants were determined to be valued at $
| 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 | ||||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value as of June 30, 2023 | ||||||||
| Change in valuation inputs or other assumptions | ||||||||
| Fair value as of September 30, 2023 | $ | $ | ||||||
| Term | Private Placement Warrants | Underwriters Warrants | ||||||
| Fair value as of December 31, 2021 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of March 31, 2022 | ||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | |||||
| Fair value as of June 30, 2022 | ||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ||||
| Fair value as of September 30, 2022 | $ | $ | ||||||
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 additional disclosure in the condensed consolidated financial statements.
As previously disclosed in Note 1, the Company’s
Amended and Restated Certificate of Incorporation provides the Company the right to extend the Deadline Date up to eight times for an
additional one month each time (each, an “Extension”), from June 9, 2023 to up to March 9, 2024. On October 4, 2023, the Company’s
board of directors elected to implement the Company’s fourth monthly Extension under the Second Charter Amendment to extend the
Deadline Date for an additional month to November 9, 2023. In connection with the fourth monthly Extension, the Company deposited $
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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.
Significant Developments
Termination of Proposed Business Combination With Aspiration
As described in Note 6 under the heading “Termination of Proposed Business Combination With Aspiration”, on August 22, 2023 the Company terminated the Second A&R Merger Agreement with Aspiration, effective on August 29, 2023, pursuant to Section 9.01(n) thereof. Such termination obligates Aspiration to pay the Company a Cash Termination Fee and an Equity Termination Fee. However, as of the date of this Quarterly Report, Aspiration has not paid the Cash Termination Fee to the Company, and the Company cannot provide any assurance that it will receive the termination payments to which it is entitled under the Second A&R Merger Agreement or the timing thereof.
On August 31, 2023 the Company requested that its Registration Statement on Form S-4 (File No. 333-262732) related to the Aspiration Business Combination, together with all exhibits thereto, and as subsequently amended (the “Registration Statement”), initially filed with the SEC on February 15, 2022, be withdrawn.
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Termination of Related Agreements
As a result of the termination of the Proposed Aspiration Business Combination, the Second A&R Merger Agreement will be of no further force and effect (other than the Termination Provision and other ancillary provisions thereof, each of which survives the termination), and each of the transaction agreements entered into in connection therewith, including, but not limited to, the following, have either automatically been terminated in accordance with their terms or are of no further force and effect: (i) the Subscription Agreements dated as of August 18, 2021 by and among the Company and certain accredited investors; (ii) the Aspiration Support Agreement; (iii) the Sponsor Support Agreement; (iv) the Amended and Restated Registration Rights Agreement; (v) the Stockholders Agreement; (vi) the Series X Preferred Stock Purchase Agreement with OCM Aspiration Holdings LLC (“Oaktree”); (vii) the Investor Rights Agreement with Oaktree.
First Special Meeting
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 “First 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 (the “Deadline Date”) 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.
Pursuant to the First Amendment to the Company’s Amended and Restated Certificate of Incorporation, executed December 23, 2022, at the beginning of each month in which an extension was implemented and an initial business combination has not yet been consummated, the Company made a deposit from its working capital account into the Trust Account in an amount determined by multiplying $0.06 by the number of public shares then outstanding, up to a maximum monthly deposit of $210,000, or an aggregate deposit of up to $630,000 (if all extensions were exercised).
On March 29, 2023, the Board determined to implement the Company’s first monthly Extension under the First Charter Amendment to allow additional time for the Company to complete its initial business combination. In connection with the first monthly Extension, the Company deposited $120,100 into the Trust Account on April 4, 2023. On May 3, 2023 the Board determined to implement the Company’s second monthly Extension under the First Charter Amendment to extend the Deadline Date for an additional month to June 9, 2023. In connection with the second monthly Extension, the Company deposited $120,100 to into the Trust Account on May 3, 2023.
Second Special Meeting
On June 5, 2023, the Company held a special meeting of stockholders (the “Second Special Meeting”) in which the Company’s stockholders voted in favor of a proposal to the Second Amendment of the Company’s Amended and Restated Certificate of Incorporation (the “Second Charter Amendment”) to extend the Deadline Date (the date by which it must consummate an initial business combination) from June 9, 2023 to July 9, 2023 and to allow the Company to elect to further extend in one-month increments up to eight additional times (each monthly election referred to herein as an “Extension”), or a total of up to nine months, until March 9, 2024 (the “Extended Deadline Date”).
Additionally, the Company’s redemption limitation amendment proposal was approved at the Second Special Meeting whereby the Second Charter Amendment amends the Company’s Charter to permit the Company’s Board, in its sole discretion, 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.
Pursuant to the Second Amendment to the Company’s Amended and Restated Certificate of Incorporation, executed June 7, 2023, at the beginning of each month in which an Extension has been implemented and an initial business combination has not yet been consummated, the Company shall make a deposit from its working capital account into the Trust Account of $21,000, or an aggregate deposit of up to $189,000 (if all extensions are exercised). In connection with the Second Special Meeting, the Company deposited $21,000 in the Trust Account on June 7, 2023.
On June 29, 2023, the Company’s board of directors elected to implement the Company’s first monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to August 9, 2023. In connection with the Extension, the Company deposited $21,000 in the Trust Account on June 30, 2023.
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On July 26, 2023, the Company’s board of directors elected to implement the Company’s second monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to September 9, 2023. In connection with the second monthly Extension, the Company deposited $21,000 in the Trust Account on July 27, 2023.
On September 6, 2023, the Company’s board of directors elected to implement the Company’s third monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to October 9, 2023. In connection with the third monthly Extension, the Company deposited $21,000 in the Trust Account on September 5, 2023.
On October 4, 2023, the Company’s board of directors elected to implement the Company’s fourth monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to November 9, 2023. In connection with the fourth monthly Extension, the Company deposited $21,000 in the Trust Account on October 5, 2023.
On November 1, 2023, the Company’s board of directors elected to implement the Company’s fifth monthly Extension under the Second Charter Amendment to extend the Deadline Date for an additional month to December 9, 2023. In connection with the fifth monthly Extension, the Company deposited $21,000 in the Trust Account on November 2, 2023.
Public Share Redemptions
In connection with the First Special Meeting held on December 21, 2022, stockholders holding an aggregate of 23,873,324 shares of the Company’s Class A common stock exercised their right to redeem their shares for approximately $10.10 per share of the funds held in the Company’s trust account. After satisfaction of the redemptions exercised on December 21, 2022, approximately $20.6 million in cash remained in the trust account and 2,001,676 shares of Class A common stock subject to redemption were outstanding. Warrants previously issued as Units in the initial IPO were segregated and retained by stockholders that redeemed their public shares.
In connection with the Second Special Meeting held on June 5, 2023, stockholders holding an aggregate of 1,542,147 shares of the Company’s Class A common stock exercised their right to redeem their shares for approximately $10.39 per share of the funds held in the Company’s trust account. After satisfaction of the redemptions exercised on June 5, 2023, approximately $4.8 million in cash remained in the trust account and 459,529 shares of Class A common stock subject to redemption were outstanding. Warrants previously issued as Units in the initial IPO were segregated and retained by stockholders that redeemed their public shares.
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.
Termination of Proposed Business Combination With Aspiration
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”). As previously disclosed, on July 21, 2022, the Company entered into a Second Amended and Restated Agreement and Plan of Merger, as amended by Amendment No. 1 thereto dated as of December 29, 2022 (“Amendment No. 1”), as further amended by Amendment No. 2 thereto dated as of March 30, 2023, as further amended by Amendment No. 3 thereto dated as of April 29, 2023 and as further amended by Amendment No. 4 thereto dated as of May 31, 2023 (as amended, the “Second A&R Merger Agreement”), by and among the Company, InterPrivate III Merger Sub Inc., a wholly owned subsidiary of the Company, InterPrivate III Merger Sub II LLC, a wholly owned subsidiary of the Company, and Aspiration Partners, Inc. The transactions contemplated by the second A&R Merger Agreement, amended as described below, are referred to as the “Proposed Aspiration Business Combination.”
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As previously disclosed, on August 22, 2023 the Company terminated the Second A&R Merger Agreement, effective on August 29, 2023, pursuant to Section 9.01(n) thereof. Such termination constitutes a “Qualifying Termination” (as defined under Section 9.01(n), as amended by the Amendment No. 1 (the “Termination Provision”)). The Termination Provision provides that upon a Qualifying Termination, Aspiration must pay the Company (i) a cash termination fee of $7.0 million (the “Cash Termination Fee”), and (ii) a termination fee in the form of a number of equity securities of Aspiration (the “Equity Termination Fee”) calculated as $13,000,000 (A) divided by a price per equity interest of Aspiration and on the same terms as (1) those issued to investors in the first issuance or series of related issuance of equity securities by Aspiration (other than issuances of certain derivative rights) occurring on or before the date that is 180 days following the Qualifying Termination from which Aspiration receives immediately available gross proceeds of at least $50,000,000 (a “Qualified Aspiration Financing”) or (2) in the absence of such Qualified Aspiration Financing during such period, the last issuance of Aspiration’s Series C-4 Preferred Stock by Aspiration immediately prior to July 21, 2022, the date of the Second A&R Merger Agreement (the “Second Amendment Effective Time”) or (B) on such other terms as the Company and Parent may mutually agree. The Termination Provision provides that the Cash Termination Fee is payable by Aspiration within two business days of the Qualifying Termination and the Equity Termination Fee shall not be issued by Aspiration prior to the earlier to occur of (i) the completion of the redemption of all outstanding shares of the Company’s Class A Stock, including in accordance with Section 9.2(d) of the certificate of incorporation of the Company, such that no shares of Class A Stock of the Company remain outstanding, and (ii) the closing of an alternative business combination by the Company.
As of the date of this Quarterly Report on Form 10-Q, Aspiration has not paid the Cash Termination Fee to the Company, and the Company cannot provide any assurance that it will receive the termination payments to which it is entitled under the Second A&R Merger Agreement or the timing thereof.
The Company intends to continue its search for an initial Business Combination. If the Company does not complete an initial Business Combination, any funds remaining, after paying expenses including those incurred in the Company’s search for a Business Combination, from payments (if any) under the Termination Provision, are expected to remain outside of the Trust Account and not be part of liquidating distributions with respect to the Public Shares.
On August 31, 2023 the Company requested that its Registration Statement on Form S-4 (File No. 333-262732) related to the Aspiration Business Combination, together with all exhibits thereto (the “Registration Statement”), initially filed with the SEC on February 15, 2022, be withdrawn.
Termination of Related Agreements
As a result of the termination of the Proposed Aspiration Business Combination, the Second A&R Merger Agreement will be of no further force and effect (other than the Termination Provision and other ancillary provisions thereof, each of which survives the termination), and each of the transaction agreements entered into in connection therewith, including, but not limited to, the following, have either automatically been terminated in accordance with their terms or are of no further force and effect: (i) the Subscription Agreements dated as of August 18, 2021 by and among the Company and certain accredited investors; (ii) the Aspiration Support Agreement; (iii) the Sponsor Support Agreement; (iv) the Amended and Restated Registration Rights Agreement; (v) the Stockholders Agreement; (vi) the Series X Preferred Stock Purchase Agreement with OCM Aspiration Holdings LLC (“Oaktree”); (vii) the Investor Rights Agreement with Oaktree.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through September 30, 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 September 30, 2023 compared to the three months ended September 30, 2022
For the three months ended September 30, 2023, we had a net loss of $213,383 which consists of operating costs of $1,018,333, a loss on the change in fair value of the warrant liability of $736, dividend and interest income on marketable securities held in the Trust Account and cash equivalents of $98,376, and a provision for income tax benefit of $707,310.
For the three months ended September 30, 2022, we had net income of $8,171,298 which consists of operating costs of $871,338, extension fee income of $10,000,000, a gain on the change in fair value of the warrant liability of $46,385, interest income on marketable securities held in the Trust Account of $1,318,723, an unrealized gain on marketable securities held in Trust Account $47,946, and a provision for income tax expense of $2,370,418.
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The nine months ended September 30, 2023 compared to the nine months ended September 30, 2022
For the nine months ended September 30, 2023, we had a net loss of $1,922,716 which consists of operating costs of $3,054,449, a gain on the change in fair value of the warrant liability of $654, dividend and interest income on marketable securities held in the Trust Account and cash equivalents of $481,423, and a provision for income tax benefit of $649,656.
For the nine months ended September 30, 2022, we had net income of $7,046,193, which consists of operating costs of $2,571,972, extension fee income of $10,000,000, a gain on the change in fair value of the warrant liability of $227,660, and interest income on marketable securities held in the Trust Account of $1,789,598, an unrealized gain on marketable securities held in Trust Account $18,983, and a provision for income tax expense of $2,418,076.
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 September 30, 2023, we had cash held in the Trust Account of $4,957,032. Interest earned on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2023, we have withdrawn $406,202 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 September 30, 2023, we had cash and cash equivalents held outside of the Trust Account of $2,566,902. 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 will 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 the Company became entitled to certain termination fees in connection with the termination of the Proposed Business Combination with Aspiration, as more fully described in Note 6 under the heading “Termination of Proposed Business Combination With Aspiration.” However, as of the date of this Quarterly Report on Form 10-Q, Aspiration has not paid the Cash Termination Fee to the Company, which became due on August 31, 2023. The Company cannot provide any assurance that it will receive the termination payments to which it is entitled under the Second A&R Merger Agreement or the timing thereof.
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 in depth 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.
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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, the latest date by which we must consummate a business combination is December 9, 2023, or March 9, 2024, if all extensions are exercised. 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 September 30, 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.
In connection with our IPO, the Company engaged Morgan Stanley and EarlyBirdCapital as advisors pursuant to a business combination and marketing agreement (the “BCMA”) to assist the Company in holding meetings with its stockholders to discuss a 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 a Business Combination, assist the Company in obtaining stockholder approval for a Business Combination and assist the Company 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.
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.
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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 September 30, 2023 and December 31, 2022, 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, 2023, 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 Income (loss) Per Share of Common Stock
The Company’s statement of operations includes a presentation of income (loss) per share of common stock in a manner similar to the two-class method of loss per share.
Net income (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 income (loss) by (ii) the weighted average number of shares of our Class A common stock subject to possible redemption outstanding during the period.
Net income (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 income (loss) by (ii) the weighted average number of shares of our non-redeemable Class A common stock outstanding during the period.
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 income (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 income (loss) per common stock is the same as basic net income (loss) per common stock for the periods presented.
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Non-redeemable Class A common stock includes the Founder Shares and other shares of Class A common stock that do not have redemption features.
Measurement of Credit Losses on Financial Instruments
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments in ASU 2016-13 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information. ASU 2016-13 was effective for SEC filers, excluding smaller reporting companies, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. As an emerging growth company, the Company was permitted to adopt the new standard for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Effective January 1, 2023, the Company adopted ASU 2016-13 using a modified retrospective transition method. There were no effects on the Company’s financial position, results of operations, or cash flows upon adoption of ASU 2016-13.
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 September 30, 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 September 30, 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 September 30, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, our Chief Executive Officer determined that our internal controls over financial reporting were not effective as of September 30, 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
Effective August 18, 2023, the Company entered into a consulting service agreement with Richard McGinn, a director and beneficial owner of the Company, for consulting and advisory services, and effective August 20, 2023, Mr. McGinn resigned from the Company’s Audit Committee prior to entering into the consulting service agreement. The services to be provided under the consulting service agreement include assistance with the Company’s due diligence and analysis of one or more potential business combination targets identified by the Company, and advice and assistance in negotiating the terms, structure and the execution of one or more business combination transactions involving the Company. For the services rendered, the Company is to pay Mr. McGinn a monthly retainer of $50,000 per month (the “Consulting Fee”) until the consulting service agreement is terminated by either party. On October 17, 2023, the Company and Mr. McGinn entered into an amendment to the consulting service agreement. For the three months ended September 30, 2023 the Company incurred and paid Consulting Fees of $150,000. For the nine months ended September 30, 2023 the Company incurred and paid Consulting Fees of $150,000. As of September 30, 2023, no fees were payable by the Company.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| No. | Description of Exhibit | |
| 10.1* | Consulting Services Agreement by and between the Company and Richard McGinn. | |
| 10.2* | Amendment No. 1 to Consulting Agreement. | |
| 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: November 20, 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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