UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period
ended
For the transition period from to
| (Exact Name of Registrant as Specified in its Charter) |
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| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone
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Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
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of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
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As of August 18, 2023,
WILLIAMS ROWLAND ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2023
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WILLIAMS ROWLAND ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Cash and Investments held in trust account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Income taxes payable | ||||||||
| Promissory note – related party | ||||||||
| Total Current liabilities | ||||||||
| Deferred underwriters’ discount | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Common stock subject to redemption, | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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WILLIAMS ROWLAND ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Trust interest income | ||||||||||||||||
| Total other income, net | ||||||||||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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WILLIAMS ROWLAND ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Remeasurement of common stock to possible redemption | — | ( | ) | ( | ) | |||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||
| Remeasurement of common stock to possible redemption | — | ( | ) | ( | ) | |||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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WILLIAMS ROWLAND ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For
the Six Months Ended | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ( | ) | ||||
| Changes in current assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Due from related party | ||||||||
| Accrued payable and expenses | ( | ) | ||||||
| Income taxes payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Redemption of trust investments to pay taxes | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of promissory note to related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Remeasurement of common stock to possible redemption | $ | $ | ||||||
| Income taxes paid | $ | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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WILLIAMS ROWLAND ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Organization and Business Operations
Williams Rowland Acquisition Corp. (the “Company”) is a blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company has initiated discussions with a potential target, but has not selected any Business Combination target. The Company may pursue an initial business combination target in any business or industry.
As of June 30, 2023, the Company had not commenced any operations. All activity for the period from March 10, 2021 (inception) through June 30, 2023 relates to the Company’s formation and operation and the Initial Public Offering (“IPO” or “Public Offering”) and the pursuit of a business combination. The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on cash, the Trust Account (as defined below) and cash equivalents from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
The Company’s sponsors are Williams Rowland
Sponsor LLC, a Delaware limited liability company and WRAC Ltd (collectively, the “Sponsors”). The registration statement
for the Company’s initial public offering was declared effective on July 26, 2021 (the “Effective Date”). On July 29,
2021, the Company consummated the initial public offering (the “Public Offering” or “IPO”) of
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Transaction costs of the IPO and subsequent over-allotment
exercise amounted to $
The Company’s Business Combination must
be with one or more target businesses that together have a fair value equal to at least
Following the closing of the IPO on July 29, 2021,
and the subsequent full exercise of the underwriters’ over-allotment option on August 5, 2021 of $
5
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination either (i) in connection with a stockholder meeting called to approve the initial Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require the Company to seek stockholder approval under the law or stock exchange listing requirements. The Company will provide the public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, divided by the number of then outstanding public shares, subject to the limitations described herein.
The shares of common stock subject to redemption are recorded at redemption value and classified as temporary equity, In accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
The Company initially had only 18 months from
the closing of the Public Offering, or January 29, 2023 (the “Combination Period”) to complete the initial Business Combination.
If the Company is unable to complete the initial Business Combination within the Combination Period, the Company will: (i) cease all operations
except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to
lawfully available funds therefor, redeem
On December 22, 2022, the Company held a special meeting of stockholders
(the “Meeting’), At the Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and
Restated Certificate of Incorporation with the Delaware Secretary of State (the “Charter Amendment”), giving the Company the
right to the date by which the Company has to consummate a business combination up to six (6) times (the “Charter Amendment”),
each such extension for an additional one (1) month period (each an “Extension”), from January 29, 2023 to July 29, 2023 (or,
if not a business day, the next business day thereafter) (such date actually extended being referred to as the “Extended Termination
Date”). In connection with the vote on the Charter Amendment at the Special Meeting, a total of
On December 14, 2022, in connection with the
Extension the Company entered into Non-Redemption Agreements with certain stockholders which owned
As approved by its stockholders at the Special
Meeting of Stockholders of the Company held on July 24, 2023 (the “Special Meeting”) the Company filed an amendment to its
Amended and Restated Certificate of Incorporation with the Delaware Secretary of State on July 24, 2023 (the “Charter Amendment”),
that
In connection with the approval of the Extension at the Special Meeting,
the Sponsor or its designee agreed to deposit into the Trust Account as a loan (a “Contribution,” and the Sponsor or its designee
making such Contribution, a “Contributor”), for each month of the Extension, an amount equal to the lesser of (i) $
The initial stockholders, Sponsors, executive
officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to (i) waive their redemption
rights with respect to any founder shares and public shares they hold in connection with the completion of the initial Business Combination,
(ii) waive their redemption rights with respect to any founder shares and public shares they hold in connection with a stockholder vote
to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing
of the ability of holders of the public shares to seek redemption in connection with the initial Business Combination or the Company’s
obligation to redeem
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The Sponsors have agreed that it will 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 entered into a written letter of intent, confidentiality or other similar agreement or Business
Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $
Liquidity, Capital Resources and Going Concern
As of June 30, 2023, the Company had $
The Company’s liquidity needs up to June
30, 2023, had been satisfied through a capital contribution from the Sponsors of $
The Company anticipates that the $
On September 7, 2021, the Company executed a
convertible promissory note to the Sponsors for an amount of $
On June 29, 2022, the Company entered into a
second promissory note to the Sponsor for the amount of $
On September 20, 2022, the Company entered into
a third promissory note to the Sponsor for the amount of $
Both notes entered into in 2022 did not include conversion features.
On April 12, 2023, the Company entered into a
fourth promissory note to the Sponsor for the amount of $
7
On June 22, 2023, the Company entered into a
fifth promissory note to the Sponsor for the amount of $
The Company can raise additional capital through Working Capital Loans from the initial stockholders, the Company’s officers, directors, or their respective affiliates (which is described in Note 5), or through loans from third parties. None of the Sponsors, officers or directors are under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
The Company has until August 29, 2023 (Extended Termination Date),
to consummate a Business Combination. The Extended Termination Date may be further extended on a monthly basis upon deposit into the Trust
Account of $
Risks and Uncertainties
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act
of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
8
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023 or any future periods.
The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Form 10-K filed by the Company with the SEC on April 18, 2023.
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 auditor 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 unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with U.S. GAAP requires 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 unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Investment Held in Trust Account
The assets held in the Trust Account were held
in cash and U.S. Treasury Bills with a maturity of 185 days or less at June 30, 2023 and December 31, 2022, respectively. During the
period ended June 30, 2023, the Company withdrew from the Trust Account $
The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the geographic area or industry in which the investee operates.
9
Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method. Such amortization and accretion are included in the “Trust interest income” line item in the statements of operations. Interest income is recognized when earned.
Management has determined that there has been no impairment to carrying value of the assets held in the Trust Account as of June 30, 2023, and December 31, 2022.
Offering Costs Associated with Initial Public Offering
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs
consist of legal, accounting, underwriting and other costs incurred that are related to the IPO. Offering costs amounted to $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets, primarily due to its short-term nature.
Fair Value Measurements
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1 — | Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. | |
| Level 2 — | Valuations based on (i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through correlation or other means. | |
| Level 3 — | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
Warrants
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 FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considered 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 common shares 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, was conducted at the time warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
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 of 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 its outstanding warrants as equity-instruments since the initial public offering.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Promissory Note of the Company entered into September 7, 2021 includes conversion feature, the value of which is de minimis as of June 30, 2023 and December 31, 2022.
10
FASB ASC 470-20, Debt with Conversion and Other Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applies this guidance to allocate IPO proceeds from the Units between common stock and warrants, using the residual method by allocating IPO proceeds first to fair value of the warrants and then common stock.
The Company accounts for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. The Company reviews the terms of convertible debt issued to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense. The value of the conversion feature included in the convertible promissory note was de minimis as of June 30, 2023 and December 31, 2022.
Common Stock Subject to Possible Redemption
The Company accounts for its Common stock subject to possible redemption in accordance with the guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) 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 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, Common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the Stockholders’ deficit section of the Company’s balance sheets.
Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital and accumulated deficit.
| Gross Proceeds from IPO | $ | |||
| Less: | ||||
| Issuance costs related to redeemable common stock | ( | ) | ||
| Proceeds allocated to Public Warrants, based on the estimated fair value as of date of the IPO | ( | ) | ||
| Plus: | ||||
| Remeasurement of common stock to redemption value | ||||
| Common stock subject to possible redemption (December 31, 2021) | ||||
| Less: | ||||
| Redemptions of common stock | ( | ) | ||
| Plus: | ||||
| Remeasurement of common stock to redemption value | ||||
| Common stock subject to possible redemption (December 31, 2022) | $ | |||
| Plus: | ||||
| Remeasurement of common stock to redemption value | ||||
| Common stock subject to possible redemption (June 30, 2023) | $ |
Net Loss Per Common Share
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company applies the two-class method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of common stock. Changes in fair value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net loss per share of common stock is computed by dividing the pro rata net loss between the shares of redeemable common stock and the shares of non-redeemable common stock by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted loss per share does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
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| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||
| Shares Subject to Redemption | Shares Not Subject to Redemption | Shares Subject to Redemption | Shares Not Subject to Redemption | Shares Subject to Redemption | Shares Not Subject to Redemption | Shares Subject to Redemption | Shares Not Subject to Redemption | |||||||||||||||||||||||||
| Basic and diluted net loss per common stock | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net loss, as adjusted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||
Income Taxes
The Company accounts for income taxes under ASC
740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be
established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of June 30, 2023 and
December 31, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate differs
from the statutory tax rate of
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 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 has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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
Deposit Insurance Corporation (FDIC) insurance coverage limit of $
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company deferred the adoption of ASU 2020-06 and is currently assessing the impact, if any, it would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on its unaudited condensed financial statements.
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Note 3 — Initial Public Offering
Public Units
On July 29, 2021, the Company sold
Each Unit consists of one share of Common stock,
and one-half (1/2) of one warrant (“Public Warrant”). Each whole public warrant entitles the holder to purchase one share
of Common stock at an exercise price of $
On December 22, 2022,
Note 4 — Private Placement
Simultaneously with the closing of the IPO on
July 29, 2021, the Sponsor purchased an aggregate of
Each Private Placement Warrant entitles the holder
thereof to purchase one share of the Company’s Common stock at a price of $
Note 5 — Related Party Transactions
Founder Shares
Upon inception the Sponsors paid $
On June 26, 2021, the Sponsor transferred
13
On June 22, 2023, Wrac, Ltd. a Guernsey
Limited Liability Company (“Seller”), Williams Rowland Sponsor, LLC, a Delaware Limited Liability Company (“Buyer”),
Jonathan Rowland and David B. Williams (each, a “Party” and, collectively, the “Parties”) entered into a Securities
Purchase Agreement (the “Agreement”) pursuant to which Seller transferred
Of the aggregate
On December 14, 2022, the Company entered into
Non-Redemption Agreements with certain stockholders pursuant to which these stockholders have committed not to redeem their redeemable
shares in connection with the extension vote. In consideration of this agreement, the Sponsor has agreed to transfer a portion of its
Common Stock to the Non-Redeeming Stockholders. The Company estimated the aggregate fair value of the
| Inputs | As of December 14, 2022 | |||
| Stock price | $ | |||
| Volatility | % | |||
| Expected term to warrant expiration | ||||
| Risk-free-rate | % | |||
| Dividend yield | ||||
The Company’s initial stockholders have
agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of: (A) one year after the completion of
the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the common
stock equals or exceeds $
Promissory Notes with Sponsor
The Sponsors agreed to loan the Company up to
$
14
On September 7, 2021, the Company executed a Convertible
Promissory Note with the Sponsor for an amount of $
On June 29, 2022, the Company entered into a
second promissory note to the Sponsor for the amount of $
On September 20, 2022, the Company entered into
a third promissory note to the Sponsor for the amount of $
Both promissory notes entered into in 2022, totaling
$
On April 12, 2023, the Company entered into a
fourth promissory note to the Sponsor for the amount of $
On June 22, 2023, the Company entered into a
fifth promissory note to the Sponsor for the amount of $
Both promissory notes entered into in 2023, totaling
$
Administrative Service Fee
The Company has entered into an administrative
services agreement on July 26, 2021, commencing on that date, pursuant to which the Company will pay an affiliate of the Sponsors a total
of $
Note 6 — Investments Held in Trust Account
At June 30, 2023 and at December 31, 2022, the
assets held in the Trust Account were held in U.S. Treasury Bills with a maturity of 185 days or less. During the period ended June 30,
2023, the Company withdrew $
The Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
| Amortized Cost and Carrying Value as of June 30, 2023 | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value as of June 30, 2023 | |||||||||||||
| Cash held in Trust Account | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury Securities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
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| Amortized Cost and Carrying Value as of December 31, 2022 | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value as of December 31, 2022 | |||||||||||||
| U.S. Treasury Securities | $ | $ | $ | $ | ||||||||||||
| Cash held in Trust Account | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Note 7 — Commitments and Contingencies
Registration Rights
The holders of the founder shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights agreement requiring the Company to register such securities for resale. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s completion of the initial Business Combination.
Underwriting Agreement
The Company granted the underwriter a 45-day option
to purchase up to
The underwriter was entitled to a cash underwriting
discount of two percent (
Additionally, the underwriter will be entitled
to a deferred underwriting discount of
Note 8 — Stockholders’ Deficit
Preferred Stock
The Company is authorized to issue
Common Stock
The Company is authorized to issue
Warrants
Each whole warrant will entitle the holder to
purchase one share of the Company’s common stock at a price of $
The warrants will expire at 5:00 p.m., New York
City time on the warrant expiration date, which is
The Company will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of common stock upon exercise of a warrant unless 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. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a Unit containing such warrant will have paid the full purchase price for the Unit solely for the share of common stock underlying such Unit.
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The Company is not registering the shares of common stock issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial 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 shares of common stock issuable upon exercise of the warrants and thereafter will use its best efforts to cause the same to become effective within 60 business days following the initial Business Combination and to maintain a current prospectus relating to the common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of the initial 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. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
The warrants are no longer traded on a national securities exchange but are traded in the over the counter market.
Redemption of warrants
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | at a price of $0.01 per warrant; |
| ● | upon a minimum of 30 days’ prior written notice of redemption (the “30-day redemption period”); and |
| ● | if, and only if, the last reported sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
The Private Placement Warrants are identical to the Public Warrants sold as part of the Units in the Initial Public Offering, subject to limited exceptions.
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
On July 24, 2023, the Company held the Special
Meeting in which the stockholders approved and filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware
Secretary of State on July 24, 2023 (the “Charter Amendment”), that (i) gives the Company the right to extend the date by
which Williams Rowland has to consummate a business combination up to eight (8) times (the “Extension Amendment”), each such
extension for an additional one (1) month period (each an “Extension”), from July 29, 2023 to March 29, 2024 (such date actually
extended being referred to as the “Extended Termination Date”) and (ii) removed from the Charter the limitation that the Company
may not redeem public shares to the extent that such redemption would result in the Company having net tangible assets of less than $
In connection with the Special Meeting, a total
of
In connection with redemptions the Company withdrew
$
In connection with the approval of the Extension
Amendment at the Special Meeting of Stockholders of the Company held on July 24, 2023, the Sponsor or its designee agreed to deposit into
the Trust Account as a Contribution for each month of the Extension, an amount equal to the lesser of (i) $
On July 27, 2023, the Company entered into a fifth
promissory note to the Sponsor for the amount of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “our,” “us” or “we” refer to Williams Rowland Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated as a Delaware corporation on March 10, 2021. We were incorporated for the purpose of effecting a Business Combination.
As of June 30, 2023, we have not yet commenced operations. All activity for the period from March 10, 2021 (inception) through June 30, 2023 relates to our formation and the initial public offering (the “Initial Public Offering”), which is described below, as well as the pursuit of a business combination. We will not generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We generate non-operating income in the form of interest income from the proceeds held in the Trust Account. We have selected December 31 as our fiscal year end.
Our Sponsors are Williams Rowland Sponsor LLC, a Delaware limited liability company and WRAC, Ltd, a Guernsey company. The registration statement for our Initial Public Offering was declared effective on July 26, 2021. On July 29, 2021, we consummated the Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the shares of Common Stock included in the Units offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $200 million. On August 5, 2021, the underwriter fully exercised its option and purchased 3,000,000 additional Units, generating gross proceeds of $30 million (the “Over-Allotment”).
Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of 9,900,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $9.9 million. Concurrent with the consummation of the Over-Allotment on August 5, 2021, the Sponsors purchased 1,200,000 additional Private Placement Warrants, generating proceeds of $1,200,000 in the Second Private Placement.
Transaction costs of the IPO and subsequent Over-Allotment exercise amounted to $16,074,841, comprised of $4,600,000 of underwriting discount, $8,050,000 of deferred underwriting discount, $2,772,169 of fair value of shares transferred to Anchor Investors, and $652,672 of other offering costs.
Upon the closing of the Initial Public Offering and the Private Placement on July 29, 2021, and the Over-Allotment and Second Private Placement on August 5, 2021, approximately $234.6 million ($10.20 per Unit) of the net proceeds of the Initial Public Offering and the Private Placement was placed in a Trust Account with Continental Stock Transfer & Trust Company acting as trustee and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, (the “Investment Company Act”) having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) 24 months after completion of the IPO at which time the investments will be held in the form of interest-bearing deposits; (ii) the completion of a Business Combination and (iii) the distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
If we are unable to complete a Business Combination by August 29, 2023 which date may be extended on a monthly basis to no later than March 29, 2024 (the “Combination Period”), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholder’s rights as stockholders (including the right to receive further liquidating distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, liquidate and dissolve, subject, in the case of clauses (ii) and (iii), our obligation under requirements of applicable law.
18
Extension Meetings
On December 22, 2022, the Company held a Special Meeting of Stockholders (the “Special Meeting”). At the Special Meeting stockholders voted on and approved an amendment (the “Extension Amendment”) to the Company’s amended and restated certificate of incorporation to extend the deadline by which the Company must complete an initial business combination from January 29, 2023 to July 29, 2023 (or, if not a business day, to the next business day (the “Extended Date”). In connection with the approval of the Extension Amendment, the Company was required to give holders of its shares of Common Stock sold to the public (the “Public Shares”) the right to redeem their shares. Holders of an aggregate of 19,533,865 Public Shares exercised their redemption rights and did not subsequently reverse that decision. The per share redemption price was $10.31. After the redemption, there was 3,466,135 Public Shares along with the 5,750,000 shares of Common Stock originally issued to the founders (the “Founders Shares”) that remained outstanding as of June 30, 2023.
On July 24, 2023, the Company held the Special Meeting in which the stockholders approved and filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of State on July 24, 2023 (the “Charter Amendment”), that (i) gives the Company the right to extend the date by which Williams Rowland has to consummate a business combination up to eight (8) times (the “Extension Amendment”), each such extension for an additional one (1) month period (each an “Extension”), from July 29, 2023 to March 29, 2024 (such date actually extended being referred to as the “Extended Termination Date”) and (ii) removed from the Charter the limitation that the Company may not redeem public shares to the extent that such redemption would result in the Company having net tangible assets of less than $5,000,001 upon consummation of a Business Combination (the “Redemption Limitation”) in order to allow the Company to redeem public shares irrespective of whether such redemption would exceed the Redemption Limitation (the “Redemption Limitation Amendment”). In connection with the Special Meeting, a total of 868,870 shares of common stock were submitted for redemption.
In connection with the approval of the Extension Amendment at the Special Meeting of Stockholders of the Company held on July 24, 2023, the Sponsor or its designee agreed to deposit into the Trust Account as a Contribution for each month of the Extension, an amount equal to the lesser of (i) $50,000 or (ii) $0.02 per public share multiplied by the number of public shares outstanding, for an aggregate deposit of up to $400,000 if all monthly Extensions are exercised. Contributions. The Contributions are be evidenced by the non-interest bearing, unsecured Contribution Note to the Contributor and will be repayable by the Company upon the earlier of the consummation of a Business Combination or the liquidation of the Company. If the Company does not consummate a Business Combination by the Extended Date, any such promissory notes will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven. A contribution of $50,000 was deposited in the Trust Account on July 27, 2023 to extend the Extended Termination Date to August 29, 2023.
At June 30, 2023, the remaining balance in the trust account after the redemptions in connection with the Extension Amendment was $35,710,480. None of the remaining funds held in trust will be released from the trust account, other than interest income to pay any tax obligations until the earlier of (i) our consummation of our initial business combination, and then only in connection with those shares of common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (ii) the redemption of our public shares if we are unable to consummate our initial business combination by the Extended Date, or (iii) if we seek to further amend our certificate of incorporation to affect the substance or timing of our obligation to redeem all public shares if we cannot complete an initial business combination by such further extended date.
Liquidity, Capital Resources and Going Concern
As of June 30, 2023, we had $197,541 in our operating bank account and working capital deficiency of $1,165,730.
Our liquidity needs up to June 30, 2023, had been satisfied through a capital contribution from the Sponsors of $25,000 (see Notes to the financial statements) for the founder shares and the loan under an unsecured promissory note, from the Sponsors, initially of up to $600,000 to cover expenses related to the Initial Public Offering. This loan was repaid and cancelled upon consummation of IPO and is no longer available for liquidity needs as of June 30, 2023.
We anticipate that the $197,541 outside of the Trust Account as of June 30, 2023, will not be sufficient to allow us to operate until the Extended Date, assuming that a Business Combination is not consummated during that time. Until consummation of our Business Combination, we will be using the funds not held in the Trust Account, and any additional Working Capital Loans from the initial stockholders, our officers and directors, or their respective affiliates, for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination.
On September 7, 2021, we executed the Promissory Note to the Sponsors for an amount of $500,000. The Promissory Note is a part of $1,000,000 working capital facility described in the Note 5 to the financial statements. The Promissory Note is non-interest bearing and is repayable at the earlier of the date of when the Company consummates a Business Combination with another entity, the date on which the Company determines to liquidate or December 31, 2023. At the option of the Sponsors, in lieu of cash payment of the principal, the Sponsors may receive warrants to purchase Common Stock of the Company. On November 15, 2021 the Company borrowed $125,000 under the Promissory Note which remained outstanding as of June 30, 2023 and December 31, 2022.
19
On June 29, 2022, the Company entered into a second promissory note to the Sponsor for the amount of $250,000. The note is non-interest bearing and is payable at the earlier of the date on which the Maker consummates an initial business combination and January 26, 2023. The Company borrowed $250,000 under this promissory note which was outstanding as of June 30, 2023 and December 31, 2022. On January 20, 2023, the terms of repayment of this note were amended to extend its maturity date to the earlier of the close of its initial business combination or August 31, 2023.
On September 20, 2022, the Company entered into a third promissory note to the Sponsor for the amount of $300,000. The note is non-interest bearing and is payable at the earlier of the date on which the Maker consummates an initial business combination and January 26, 2023. The Company borrowed $300,000 under this promissory note which was outstanding as of June 30, 2023 and December 31, 2022. On January 20, 2023, the terms of repayment of this note were amended to extend its maturity date to r the earlier of the close of its initial business combination or August 31, 2023.
Both promissory notes entered into in 2022, totaling $550,000 do not contain conversion provisions.
On April 12, 2023, the Company entered into a fourth promissory note to the Sponsor for the amount of $150,000. The note is non-interest bearing and is payable at the earlier of the date on which the Maker consummates an initial business combination and July 29, 2023. The Company borrowed $150,000 under this promissory note which was outstanding as of June 30, 2023.
On June 22, 2023, the Company entered into a fifth promissory note to the Sponsor for the amount of $200,000. The note is non-interest bearing and is payable at the earlier of the date on which the Maker consummates an initial business combination and July 29, 2023. The Company borrowed $200,000 under this promissory note which was outstanding as of June 30, 2023.
We can raise additional capital through Working Capital Loans from the initial stockholders, the Company’s officers, directors, or their respective affiliates or through loans from third parties. None of the Sponsors, officers or directors are under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
We have until the Extended Date to consummate a Business Combination. It is uncertain that it will be able consummate a Business Combination within the Combination Period. If a Business Combination is not consummated within the Combination Period, there will be a mandatory liquidation and subsequent dissolution. In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance FASB Accounting Standards Update (“ASU”) Topic 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”, management has determined that the potential liquidity and capital constraints as described above, in addition to potential mandatory liquidation, and subsequent dissolution, should the Company be unable to complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern through the earlier of one year from the issuance date of these unaudited condensed financial statements or March 29, 2024. No adjustments have been made to the carrying amounts of assets and liabilities should the Company be required to liquidate after August 29, 2023. The unaudited condensed financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
Results of Operations
All of our activity from March 10, 2021 (inception) through June 30, 2023, was in preparation for an Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination.
For the three months ended June 30, 2023, we had a net loss of $113,611, which consisted of formation and operating costs of $344,470, provision for income taxes of $106,859 and interest expense of $79,896, offset by trust interest income of $417,614.
For the three months ended June 30, 2022, we had a loss of $404,873, which consisted solely of formation and operating costs of $573,385, offset by trust interest income of $168,512.
For the six months ended June 30, 2023, we had a net loss of $316,398, which consisted of formation and operating costs of $861,408, provision for income taxes of $207,883 and interest expense of $79,896, offset by trust interest income of $832,789.
For the six months ended June 30, 2022, we had a loss of $765,780, which consisted solely of formation and operating costs of $1,021,749, offset by trust interest income of $255,969.
Contractual Obligations
Underwriting Agreement
The underwriter is entitled to $0.35 per unit, or approximately $7.0 million in the aggregate, which will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that that we complete a Business Combination, subject to the terms of the underwriting agreement.
20
In connection with the consummation of the Over-Allotment on August 5, 2021, the underwriter was paid an additional fee of $600,000 upon closing of the Over-Allotment and approximately $1.05 million in deferred underwriting commissions.
Total deferred underwriting commissions was $8,050,000 as June 30, 2023 and December 31, 2022.
Administrative Support Agreement
We agreed to pay the Sponsor a total of $10,000 per month, commencing on the date of listing on the NYSE, for office space, utilities, secretarial and administrative support services provided to members of the management team. Upon completion of the initial Business Combination or our liquidation, we will cease paying these monthly fees.
Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as our critical accounting policies:
Offering costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A-” Expenses of Offering”. Offering costs consist of legal, accounting, underwriting, fair value of founder shares transferred to Anchor Investors, and other costs incurred through the balance sheet date that are related to the IPO. Offering costs amounted to $16,074,841, for the Initial Public Offering and subsequent over-allotment. Total amount of Offering costs is allocated between redeemable shares and Public Warrants based on their relative fair values.
Net Loss Per Share
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company applies the two-class method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to redeem at fair value means that there is effectively only one class of common stock. Changes in fair value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net loss per share of common stock is computed by dividing the pro rata net loss between the shares of redeemable common stock and the shares of non-redeemable common stock by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted loss per share does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company deferred application of ASU 2020-06 and is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
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Off-Balance Sheet Arrangements
As of June 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company we are not required to make disclosures under this Item.
Item 4. 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. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of June 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of June 30, 2023, our disclosure controls and procedures were not effective due to:
| ● | Failure to properly evaluate and account for complex financial instruments, including classification of common stock subject to possible redemption, recognition of the overallotment liability on the IPO date, evaluation of the accounting for a convertible promissory note, evaluation of fair value of shares issued to Anchor Investors and proper classification of amounts owing to related parties. |
| ● | Failure to accrue Connecticut Capital tax and NYSE listing and annual fees in an appropriate and timely manner, overstatement of previously recorded amounts for Delaware Franchise tax, and FINRA fees, which necessitated the restatement of our March 31, 2022 Quarterly Report on Form 10-Q. Such restatement is included in the Note on Restatement of Previously Issued Financial Statements in the Annual Report on Form 10-K. |
| ● | Failure to ensure completeness and accuracy of accruals, including unbilled legal expenses, as well as lack of review of the manual spreadsheet calculations. |
| ● | Failure to accrue interest and penalties related to late payment of taxes. |
These matters constitute material weaknesses in our internal control over financial reporting. They remain non remediated through the date of this report. In light of these material weaknesses, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
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.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As a smaller reporting company we are not required to make disclosures under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits
| * | Filed herewith. |
| ** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WILLIAMS ROWLAND ACQUISITION CORP. | ||
| Date: August 21, 2023 | By: | /s/ David B. Williams |
| Name: | David B. Williams | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: August 21, 2023 | By: | /s/ Bobby Morovati |
| Name: | Bobby Morovati | |
| Title: | Chief Financial Officer | |
| (Principal Financial Officer) |
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