Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
    
    
to
    
    
    
    
Commission File
No. 001-41006
 
 
INTEGRAL ACQUISITION CORPORATION 1
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
  
86-2148394
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
667 Madison Avenue
New York, New York 10065
(Address of Principal Executive Offices, including zip code)
(212)209-6132
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading
Symbol(s)
  
Name of each exchange
on which registered
Units, each consisting of one share of Class A common stock, $0.0001 par value, and one half of one redeemable warrant   INTEU   The NASDAQ Stock Market LLC
Class A common stock, $0.0001 par value   INTE   The NASDAQ Stock Market LLC
Redeemable Warrants, each whole warrant exercisable for one share of Class A Common stock at an exercise price of $11.50   INTEW   The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐    No  ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of
the Exchange Act.
 
Large accelerated filer   ☐    Accelerated filer   ☐
Non-accelerated
filer		   ☒    Smaller reporting company   ☒
     Emerging growth company   ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of
the Exchange Act):    Yes  ☒    No  ☐
As of May
15
, 2023, there were 3,029,941 shares of Class A common stock, $0.0001 par value, and 2,875,000 shares of Class B common stock, $0.0001 par value, of the registrant issued and outstanding.
 
 
 

Table of Contents

INTEGRAL ACQUISITION CORPORATION 1

Form 10-Q For the Quarter Ended March 31, 2023

Table of Contents

 

     Page  

Part I. Financial Information

     1  

Item 1.

   Financial Statements      1  
  Condensed Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022      1  
  Condensed Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)      2  
  Condensed Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2023 and 2022 (unaudited)      3  
  Condensed Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)      4  
  Notes to Unaudited Condensed Financial Statements      5  

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      16  

Item 3.

   Quantitative and Qualitative Disclosures Regarding Market Risk      21  

Item 4.

   Controls and Procedures      22  

Part II. Other Information

     23  

Item 1.

   Legal Proceedings      23  

Item 1A.

   Risk Factors      23  

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      23  

Item 3.

   Defaults Upon Senior Securities      23  

Item 4.

   Mine Safety Disclosures      23  

Item 5.

   Other Information      23  

Item 6.

   Exhibits      23  

Part III. Signatures

     24  

 

i

Table of Contents

GLOSSARY OF TERMS

Unless otherwise stated in this Report (as defined below), or the context otherwise requires, references to:

 

  •  

“ASC” are to the Accounting Standards Codification;

 

  •  

“ASU” are to the Accounting Standards Update;

 

  •  

“board of directors,” “board” or “directors” are to the board of directors of the Company (as defined below);

 

  •  

“Business Combination” are to a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses;

 

  •  

“Class A common stock” are to the shares of Class A common stock of the Company, par value $0.0001 per share;

 

  •  

“Class B common stock” are to the shares of Class B common stock of the Company, par value $0.0001 per share;

 

  •  

“common stock” are to the Class A common stock and the Class B common stock;

 

  •  

“Company,” “our Company,” “we” or “us” are to Integral Acquisition Corporation 1, a Delaware corporation;

 

  •  

“Continental” are to Continental Stock Transfer & Trust Company, trustee of our trust account (as defined below) and warrant agent of our public warrants (as defined below);

 

  •  

“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

“Extension” are to the extension of the date by which we must consummate our initial Business Combination from May 5, 2023 to November 3, 2023 (or such earlier date as determined by our board of directors), as approved by the stockholders at a special meeting of the stockholders of the Company on May 3, 2023;

 

  •  

“FASB” are to the Financial Accounting Standards Board;

 

  •  

“founder shares” are to the shares of Class B common stock initially purchased by our Sponsor (as defined below) in the private placement (as defined below) and the shares of Class A common stock that will be issued upon the automatic conversion of the shares of Class B common stock at the time of our Business Combination as described herein (for the avoidance of doubt, such Class A common stock will not be “public shares” (as defined below);

 

  •  

“GAAP” are to the accounting principles generally accepted in the United States of America;

 

  •  

“IFRS” are to the International Financial Reporting Standards, as issued by the International Accounting Standards Board;

 

  •  

“initial public offering” or “IPO” are to the initial public offering that was consummated by the Company on November 2, 2021;

 

  •  

“initial stockholders” are to holders of our founder shares prior to our initial public offering;

 

  •  

“Investment Company Act” are to the Investment Company Act of 1940, as amended;

 

  •  

“JOBS Act” are to the Jumpstart Our Business Startups Act of 2012;

 

  •  

“Nasdaq” are to the Nasdaq Global Market;

 

  •  

“private placement” are to the private placement of warrants that occurred simultaneously with the closing of our initial public offering;

 

  •  

“private placement warrants” are to the warrants issued to our Sponsor in the private placement;

 

  •  

“public shares” are to the shares of Class A common stock sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market);

 

  •  

“public stockholders” are to the holders of our public shares, including our initial stockholders and team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” will only exist with respect to such public shares;

 

  •  

“public warrants” refer to the redeemable warrants sold as part of the units in our initial public offering (whether they were subscribed for in our initial public offering or purchased in the open market);

Table of Contents
  •  

“Registration Statement” are to the Registration Statement on Form S-1 initially filed with the SEC (as defined below) on June 14, 2021, as amended, and declared effective on November 2, 2021 (File No. 333- 257058);

 

  •  

“Report” are to this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023;

 

  •  

“Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002;

 

  •  

“SEC” are to the U.S. Securities and Exchange Commission;

 

  •  

“Securities Act” are to the Securities Act of 1933, as amended;

 

  •  

“Sponsor” are to Integral Sponsor LLC, a Delaware limited liability company;

 

  •  

“trust account” are to the U.S.-based trust account in which an amount of $116,725,000 from the net proceeds of the sale of the units in the initial public offering and the private placement warrants was placed following the closing of the initial public offering, as such amount was reduced in connection with redemptions of public shares validly submitted by public stockholders following the Extension; and

 

  •  

“units” are to the units sold in our initial public offering, which consist of one share of Class A common stock and one-half of one redeemable warrant.

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
INTEGRAL ACQUISITION CORPORATION 1
CONDENSED BALANCE SHEETS
 
    
March 31, 2023
    
December 31, 2022
  
     (Unaudited)        
Assets
                 
Cash
    $ 443,442     $ 601,088  
Prepaid expenses
      163,322       234,276  
    
 
 
    
 
 
  
Total current assets
      606,764       835,364  
Investments held in trust account
      118,985,547       118,064,355  
    
 
 
    
 
 
  
Total Assets
   
$
119,592,311
 
  
$
118,899,719
 
    
 
 
    
 
 
  
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit
                 
Current liabilities:
                 
Accrued expenses
    $ 85,069     $ 35,499  
Income taxes payable
      251,481       190,069  
Franchise tax payable
      50,000       60,164  
    
 
 
    
 
 
  
Total current liabilities
      386,550       285,732  
Deferred tax liability
      —         79,128  
Deferred underwriting commission
      6,050,000       6,050,000  
Forward Purchase Agreement liability
      2,928,559       2,708,717  
    
 
 
    
 
 
  
Total liabilities
   
 
9,365,109
 
  
 
9,123,577
 
    
 
 
    
 
 
  
Commitments and Contingencies (Note 4)
                 
Class A common stock subject to possible redemption, 11,500,000 shares at redemption value of $10.32 and $10.23 per share at March 31, 2023 and December 31, 2022, respectively.
      118,686,737       117,737,665  
Stockholders’ Deficit
                 
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
      —         —    
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; none issued and outstanding, (excluding 11,500,000 shares subject to possible redemption)
      —         —    
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 2,875,000 shares issued and outstanding
      288       288  
Additional
paid-in
capital
      —         —    
Accumulated deficit
      (8,459,823 )      (7,961,811 ) 
    
 
 
    
 
 
  
Total stockholders’ deficit
      (8,459,535 )      (7,961,523 ) 
    
 
 
    
 
 
  
Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit
   
$
119,592,311
 
  
$
118,899,719
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
F-1
INTEGRAL ACQUISITION CORPORATION 1
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
    
For the Three Months Ended
March 31,
  
    
2023
    
2022
  
Operating costs
    $ 328,220     $ 286,206  
    
 
 
    
 
 
  
Loss from operations
   
 
(328,220
) 
  
 
(286,206
) 
Other income (expenses):
                 
Unrealized loss on change in fair value of Forward Purchase Agreement liability
      (219,842 )      (1,005,557 ) 
Unrealized gain on Trust account
      451,512       —    
Interest income
      799,894       14,279  
    
 
 
    
 
 
  
Total other income (expenses), net
      1,031,564       (991,278 ) 
Income (loss) before provision for income taxes
      703,344       (1,277,484 ) 
Provision for income taxes
      (252,284 )      —    
    
 
 
    
 
 
  
Net income (loss)
   
$
451,060
 
  
$
(1,277,484
) 
    
 
 
    
 
 
  
Basic and diluted weighted average shares outstanding, common stock subject to redemption
      11,500,000       11,500,000  
    
 
 
    
 
 
  
Basic and diluted net income (loss) per common stock subject to redemption
   
$
0.03
 
  
$
(0.07
) 
    
 
 
    
 
 
  
Basic and diluted weighted average shares outstanding,
non-redeemable
common stock
      2,875,000       2,875,000  
    
 
 
    
 
 
  
Basic and diluted net income (loss) per
non-redeemable
common stock
   
$
0.03
 
  
$
(0.07
) 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
F-2
INTEGRAL ACQUISITION CORPORATION 1
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2023
 
    
Common stock
     
Additional
Paid-in
     
Accumulated
    
Total
Stockholders’
  
    
Shares
     
Amount
     
Capital
     
Deficit
    
Deficit
  
Balance as of December 31, 2022
   
 
2,875,000
 
   
$
288
 
   
$
—  
     
$
(7,961,811
) 
  
$
(7,961,523
) 
Accretion of Class A shares to redemption amount
      —          —          —          (949,072 )      (949,072 ) 
Net income
      —          —          —          451,060       451,060  
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of March 31, 2023 (unaudited)
   
 
2,875,000
 
   
$
288
 
   
$
—  
     
$
(8,459,823
) 
  
$
(8,459,535
) 
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
FOR THE THREE MONTHS ENDED MARCH 31, 2022
 
                  
Additional
           
Total
  
    
Common stock
     
Paid-in
     
Accumulated
    
Stockholders’
  
    
Shares
     
Amount
     
Capital
     
Deficit
    
Deficit
  
Balance as of December 31, 2021
   
 
2,875,000
 
   
$
288
 
   
$
—  
     
$
(5,506,832
) 
  
$
(5,506,544
) 
Net loss
      —          —          —          (1,277,484 )      (1,277,484 ) 
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of March 31, 2022 (unaudited)
   
 
2,875,000
 
   
$
288
 
   
$
—  
     
$
(6,784,316
) 
  
$
(6,784,028
) 
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
F-3
INTEGRAL ACQUISITION CORPORATION 1
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
    
For the Three Months
Ended March 31,
  
    
2023
    
2022
  
Cash flows from Operating Activities:
                 
Net income (loss)
    $ 451,060     $ (1,277,484 ) 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                 
Unrealized gain on Trust Account
      (451,512 )      —    
Unrealized loss on change in fair value of Forward Purchase Agreement liability
      219,842       1,005,557  
Interest earned on investments held in Trust Account
      (799,894 )      (14,279 ) 
Changes in current assets and current liabilities:
                 
Prepaid expenses
      70,954       20,759  
Accrued expenses
      49,570       31,487  
Due to related party
      —         (124,845 ) 
Income taxes payable
      (17,716 )      —    
Franchise taxes payable
      (10,164 )      —    
    
 
 
    
 
 
  
Net cash used in operating activities
   
 
(487,860
) 
  
 
(358,805
) 
    
 
 
    
 
 
  
Cash flows from Investing Activities:
                 
Withdrawal of funds from trust
      330,214       —    
    
 
 
    
 
 
  
Net cash provided by investing activities
   
 
330,214
 
  
 
—  
 
    
 
 
    
 
 
  
Net change in cash
   
 
(157,646
) 
  
 
(358,805
) 
Cash, beginning of the period
      601,088       1,309,165  
    
 
 
    
 
 
  
Cash, end of the period
   
$
443,442
 
  
$
950,360
 
    
 
 
    
 
 
  
Supplemental disclosure of noncash investing and financing activities:
                 
Income Tax Paid
    $ 270,000     $ —    
    
 
 
    
 
 
  
Accretion of Class A shares to redemption amount
    $ 949,072     $ —    
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
F-4
INTEGRAL ACQUISITION CORPORATION 1
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
Note 1 — Organization, Business Operations and Liquidity
Organization and General
Integral Acquisition Corporation 1 (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on
February 16, 2021
. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company has not yet selected a specific Business Combination target.
As of March 31, 2023, the Company has neither engaged in any operations nor generated any revenues. All activity for the period from February 16, 2021 (inception) through March 31, 2023 relates to the Company’s formation and the initial public offering (“IPO”) described below, and since the closing of the IPO the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate
non-operating
income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
Sponsor and Financing
The Company’s sponsor is Integral Sponsor, LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s IPO was declared effective on November 2, 2021 (the “Effective Date”). On November 5, 2021, the Company, consummated its IPO of 11,500,000 units, including 1,500,000 units issued upon exercise in full by the underwriter of its option to purchase additional units (the “Units”). Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (the “Class A Common stock”), and
one-half
of one redeemable warrant of the Company (a “Warrant”), with each whole Warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $115,000,000 which is discussed in Note 3.
Simultaneously with the closing of the IPO the Company completed the private sale of an aggregate of 4,950,000 warrants, including 90,000 warrants issued in connection with the exercise in full by the underwriter of its option to purchase additional Units (the “Private Placement Warrants”) to the Sponsor at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $4,950,000. No underwriting discounts or commissions were paid with respect to such sale. The issuance of the Private Placement Warrant was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended.
Upon the closing of the IPO and the private placement, $116,725,000 has been placed in a trust account (the “Trust Account”), representing the redemption value of the Class A common stock sold in the IPO, at their redemption value of $10.15 per share.
The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the value of the assets held in the Trust Account (as defined below) (excluding the amount of deferred underwriting discounts held in trust and taxes payable on the income earned on the Trust Account) at the time of the signing a definitive agreement in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to complete a Business Combination successfully.
Founder Shares
The initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares and any Class A common stock issuable upon conversion thereof until the earlier to occur of: (A) one year after the completion of the initial Business Combination and (B) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction after the Company’s initial Business Combination that results in all of the Company’s stockholders having the right to exchange their Class A common stock for cash, securities or other property; except to certain permitted transferees and under certain circumstances (the
“Lock-up”).
Any permitted transferees will be subject to the same restrictions and other agreements of the Company’s initial stockholders with respect to any Founder Shares. Notwithstanding the foregoing, the Founder Shares will be released from the
Lock-up
if the closing price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the Company’s initial Business Combination.
Trust Account
Currently, the funds in the trust account are invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule
2a-7
under the Investment Company Act which invest only in direct U.S. government obligations. Funds will remain in the trust account until the earlier of (i) the consummation of its first Business Combination and (ii) the distribution of the trust account as described below. The remaining proceeds outside the trust account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. In order to mitigate he risk that the Company might be deemed to be an investment company for purposes of the Investment Company Act of 1940, as amended, the Company may, at any time, instruct the trustee to liquidate the investments held in the trust account and instead to hold the funds in the trust account in an interest bearing demand deposit account until the earlier of the consummation of our initial Business Combination or our liquidation.
Initial Business Combination
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 Business Combination or (ii) without a stockholder vote by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem all or a portion of their public shares upon
 
F-5
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 calculated 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 (which interest shall be net of taxes payable), divided by the number of then outstanding public shares, subject to the limitations and on the conditions described herein. The amount in the trust account is initially anticipated to be $10.15 per public share. The per share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the representative of the underwriters.
The shares of common stock subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity”. In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
Following the IPO, the Company initially had only 18 months from the closing of the IPO to complete the initial Business Combination, which period, as further discussed below, was extended an approximate six months to November 3, 2023 in connection with the Extension (the “Combination Period”), which period may be further extended. 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, 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 (which interest shall be net of 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 stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, liquidate and dissolve, subject, in each case, to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Sponsor, officers and directors 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, (iii) waive their rights to liquidating distributions from the trust account with respect to any Founder Shares they hold if the Company fails to complete the initial Business Combination within the Combination Period, and (iv) vote their Founder Shares and any public shares purchased during or after the IPO in favor of the initial Business Combination.
The Sponsor has 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) $10.15 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.15 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and the Company believes that the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that the Sponsor would be able to satisfy those obligations. None of the Company’s officers or directors will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Special Meeting of the Stockholders to Extend Business Combination Deadline
On March 24, 2023, the Company filed a preliminary proxy statement with the U.S. Securities and Exchange Commission for a special meeting of the Company’s stockholders. The purpose of the meeting is to consider and vote upon a proposal to amend the Company’s amended and restated certificate of incorporation (the “Charter”) to extend the date by which the Company must consummate a Business Combination from May 5, 2023 to November 3,
2023, or such earlier date as determined by the Company’s board of directors in its sole discretion (the “Extended Date”) (the “Extension Amendment
Proposal”). In connection with the approval of the Extension Amendment Proposal, the Sponsor or its designee has agreed to contribute $105,000 into the trust account for each calendar month (
commencing
on May 8, 2023 and ending on the 5
th
day of each subsequent month), or portion thereof, that is needed by the Company to complete a Business Combination.
In connection with the approval of the Extension Amendment Proposal, public stockholders holding 8,470,059 Public Shares properly exercised their right to redeem such shares at a redemption price of approximately $10.37 per share, for an aggregate redemption amount of approximately $87,843,748 to be disbursed out of the trust account. Following the approval of the Extension Amendment Proposal, the remaining holders of Public Shares retain their right to redeem their Public Shares when a Business Combination is submitted to the stockholders, subject to any limitations set forth in the Company’s Charter, as amended by the Extension. In addition, public stockholders who do not make the election to have their Public Shares redeemed would be entitled to have their Public Shares redeemed for cash if the Company has not completed a Business Combination by the Extended Date.

F-6
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
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.
Liquidity, Capital Resources and Going Concern
As of March 31, 2023, the Company had $443,442 in its operating bank account and working capital of $521,695.
Prior to the completion of the IPO the Company’s liquidity needs had been satisfied through a loan under an unsecured promissory note with the Sponsor totaling $252,950 and the issuance of 2,875,000 Class B common stock at approximately $0.009 per share for gross proceeds of $25,000. There is no balance outstanding under the promissory note as of March 31, 2023. Subsequent to the consummation of the initial public offering the Company’s liquidity needs have been satisfied through the issuance of the Private Placement Warrants which generated gross proceeds of $4,950,000.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards
Update(“ASU”)
 
2014-15,
“Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the 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. The Company has until November 3, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after November 3, 2023.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed 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, they 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 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 financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K
as filed with the SEC on March 31, 2023. The interim results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future interim periods.
 
F-7
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by 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 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 US 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. Making estimates requires management to exercise significant judgement. 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 unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, actual results could differ from those estimates.
Deferred Offering Costs
The Company complies with the requirements of the
ASC340-10-S99-1
“Other Assets and Deferred Costs”. Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the IPO. Offering costs are allocated to the separable financial instruments to be issued in the IPO based on a relative fair value basis, compared to total proceeds received.
Investment Held in Trust Account
As of March 31, 2023 and December 31, 2022, investments in the Company’s trust account primarily consisted of U.S money market funds. The U.S. money market funds are classified as trading securities carried at fair value and the fair values of these investments is determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets. In order to mitigate he risk that the Company might be deemed to be an investment company for purposes of the Investment Company Act of 1940, as amended, the Company may, at any time, instruct the trustee to liquidate the investments held in the trust account and instead to hold the funds in the trust account in an interest bearing demand deposit account until the earlier of the consummation of our initial Business Combination or our liquidation.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets, primarily due to its short-term nature.
The Company follows the guidance in ASC 820 for its financial assets and liabilities that arere-measured and reported at fair value at each reporting period, and
non-financial
assets and liabilities that arere-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:
 
F-8
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.
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”. Derivative instruments are initially recorded at fair value on the grant date and
re-valued
at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and 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.
Forward Purchase Agreement liability
The Company accounts for the 3,000,000 forward purchase shares (as described in Note 6) issued pursuant to the Forward Purchase Agreements (the “FPA”) in accordance with the guidance contained in
ASC815-40.
Such guidance provides that because the FPA shares do not meet the criteria for equity treatment thereunder, each FPA share must be recorded as a liability. Accordingly, the Company classifies each FPA share as a liability at its fair value. This liability is subject to
re-measurement
at each balance sheet date. With each such
re-measurement,
the FPA liability will be adjusted to fair value, with the change in fair value recognized in the statement of operations.
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. While ASC 740 identifies usage of an effective annual tax rate for purposes of an interim provision, it does allow for estimating individual elements in the current period if they are significant, unusual or infrequent. Computing the effective tax rate for the Company is complicated due to the potential impact of the Company’s change in fair value of warrants (or any other change in fair value of a complex financial instrument), the timing of any potential business combination expenses and the actual interest income that will be recognized during the year. The Company has taken a position as to the calculation of income tax expense in a current period based on ASC 740-270-25-3 which states, “If an entity is unable to estimate a part of its ordinary income or loss or the related tax provision or benefit but is otherwise able to make a reasonable estimate, the tax provision or benefit applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported.” The Company believes its calculation to be a reliable estimate and allows it to properly take into account the usual elements that can impact its annualized book income and its impact on the effective tax rate. As such, the Company is computing its taxable income or loss and associated income tax provision or benefit based on actual results through March 31, 2023.

As of March 31, 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 21% for the three months and three months ended March 31, 2023 and 2022, due to changes in fair value of the forward purchase agreement and the valuation allowance on the deferred tax assets. The Company’s effective tax rate was 35.9% and 0.0% for the three months ended March 31, 2023 and 2022, respectively.
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 an 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 March 31, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since its 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.
Common Stock Subject to Possible Redemption
All of the 11,500,000 common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC
480-10-S99,
redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all shares of Class A common stock have been classified outside of permanent equity.
 
F-9
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
The Class A common stock subject to possible redemption reflected on the condensed balance sheets as of March 31, 2023 and December 31, 2022 is reconciled in the following table:
 
Class A common stock subject to possible redemption, December 31, 2022
   
$
117,737,665
 
Plus:
         
Remeasurement of carrying value to redemption value
      949,072  
    
 
 
  
Class A common stock subject to possible redemption, March 31, 2023
   
$
118,686,737
 
    
 
 
  
Net Income (Loss) Per Common Share
The Company complies with the accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period, excluding common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 375,000 shares of common stock that were subject to forfeiture if the over-allotment option was not exercised by the underwriter. At March 31, 2023 and 2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income (loss) per common share is the same as basic Income (loss) per common share for the periods presented.
The Company’s condensed statement of operations applies the
two-class
method in calculating net income (loss) per share. Basic and diluted net income (loss) per common share for Class A common stock and Class B common stock is calculated by dividing net income (loss) attributable to the Company by the weighted average number of shares of Class A common stock and Class B common stock outstanding, allocated proportionally to each class of common stock.
 
    
For the Three Months Ended March 31,
  
    
2023
     
2022
  
    
Class A
     
Class B
     
Class A
     
Class B
  
Basic and diluted net income (loss) per share
                                    
Numerator:
                                    
Allocation of net income (loss), as adjusted
    $ 360,848      $ 90,212      $ (1,064,570 )     $ (212,914 ) 
Denominator:
                                    
Basic and diluted weighted average shares outstanding
      11,500,000        2,875,000        14,375,000        2,875,000  
Basic and diluted net income (loss) per share
    $ 0.03      $ 0.03      $ (0.07 )     $ (0.07 ) 
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Note 3 — Related Party Transactions
Related Party Loans
In order to finance transaction costs in connection with an intended Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required on anon-interest basis (“Working Capital Loans”). If the Company completes the initial Business Combination, it will repay the Working Capital Loans. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the trust account to repay the Working Capital Loans but no proceeds from the trust account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants. Except as set forth above, the terms of Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of March 31, 2023 and December 31, 2022, the Company had no borrowings under the Working Capital Loans.
Administrative Fees
The Company has agreed to pay the Sponsor a total of $20,000 per month for office space, utilities, and secretarial and administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. Total administrative fee for the three months ended March 31, 2023 and 2022 is $60,000 and $40,000, respectively. At March 31, 2023 and December 31, 2022, $0 is reported on the balance sheet as due to Sponsor for the administrative fees due.
 
F-10
Engagement of Services
On May 28, 2021, the Company entered into a letter agreement with J.V.B. Financial Group, LLC (“J.V.B.”) pursuant to which the Company engaged Cohen & Company Capital Markets, a division of J.V.B., to provide consulting and advisory services in connection with the IPO in return for a transaction fee to be paid to J.V.B. in an amount equal to 10.0% of the aggregate underwriting discount and commissions earned by the underwriters in connection with the IPO to be paid simultaneously with the actual payment of such underwriting discount and commissions to the underwriters upon (i) the closing of the IPO and (ii) the completion of the Company’s initial Business Combination. J.V.B. was one of the Company’s Anchor Investors that purchased Units in the IPO and became a member of the Company’s Sponsor at the closing of our IPO to hold an indirect interest in a specified number of the Founder Shares held by the Sponsor.
On November 4, 2021, the Company paid J.V.B. $85,000 in cash from funds outside of the trust account. Funds due to J.V.B. upon the completion of the Company’s initial Business Combination ($605,000 in the aggregate) will be paid by the underwriters.
Note 4 — Commitments and Contingencies
Registration and Stockholder Rights
The holders of the (i) Founder Shares, which were issued in a private placement prior to the closing of this offering, (ii) Private Placement Warrants, which will be issued in a private placement simultaneously with the closing of this offering and the shares of Class A common stock underlying such private placement warrants, (iii) private placement warrants that may be issued upon conversion of working capital loans and (iv) the forward purchase shares that may be purchased pursuant to the related forward purchase agreements will have registration rights to require us to register a sale of any of our securities held by them prior to the consummation of our initial business combination pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriter Agreement
The underwriters are entitled to deferred underwriting commissions of $0.50 on the first 10,000,000 Units sold in the IPO and $0.70 per unit per Unit sold thereafter, or $6,050,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination, subject to the terms of the underwriting agreement for the offering.
Anchor Investment
Certain qualified institutional buyers or institutional accredited investors (none of which are affiliated with any member of the Company’s management team, the Sponsor or any other anchor investor) (the “Anchor Investors”), have purchased an aggregate of approximately $60.8 million of the units in the IPO at the public offering price. There can be no assurance that the Anchor Investors will retain their Units prior to or upon the consummation of the initial Business Combination. In addition, none of the Anchor Investors has any obligation to vote any of their public shares in favor of the initial Business Combination.
The anchor investors have not been granted any stockholder or other rights that are in addition to those granted to our other public stockholders and will only be issued equity interests in our Sponsor, with no right to control our Sponsor or vote or dispose of any securities held by our Sponsor. Further, unlike some anchor investor arrangements of other blank check companies, the anchor investors are not required to (i) hold any units, Class A common stock or warrants they may purchase in this offering or thereafter for any amount of time, (ii) vote any shares of Class A common stock they may own at the applicable time in favor of our initial business combination or (iii) refrain from exercising their right to redeem their public shares at the time of our initial business combination. The anchor investors will have the same rights to the funds held in the trust account with respect to the Class A common stock underlying the units they may purchase in the IPO as the rights afforded to the Company’s other public stockholders.
Forward Purchase Shares
Crescent Park, which is one of the Company’s Anchor Investors, and Carnegie Park have agreed, as the forward purchasers pursuant to their respective forward purchase agreements entered into with the Company, to purchase up to 2,500,000 shares of Class A common stock in the case of Crescent Park and up to 500,000 shares of Class A common stock in the case of Carnegie Park (referred to herein as the forward purchase shares) at $10.00 per share (as such price per share may be reduced to $9.20 per share or further reduced to below $9.20 per share with respect to all or part of the forward purchase shares that are purchased in the manner described below) for gross proceeds up to $30,000,000 in the aggregate if all of the forward purchase shares are purchased at $10.00 per share (or up to $27,600,000 in the aggregate if all of the forward purchase shares are purchased at $9.20 per share or up to a lower amount in the aggregate if all of the forward purchase shares are purchased at less than $9.20 per share) in private placements that occurred concurrently with the consummation of the initial Business Combination.
 
F-11
The price to be paid for forward purchase shares will be reduced to or below $
9.20
per share in the following circumstances:
 
  •  
to $
9.20
if the aggregate purchase price paid by the forward purchaser at $
10.00
per share would exceed the lesser of (i) a specified dollar amount and (ii) a specified percentage of the aggregate purchase price paid by the purchasers of the SPAC’s Class A common stock in private placements that occur on or prior to the date of the SPAC’s initial business combination (“PIPEs”);
 
  •  
and to below $
9.20
if the price per share in any PIPE is less than $
9.20
(in which case the price per share paid by the forward purchaser will be at an
8
% discount from the price per share in such PIPE).
One of the forward purchasers and/or its affiliates is expected to purchase the Company’s public units. If such forward purchaser and/or any of its affiliates sell more than
50
% of the aggregate number of the public units purchased in the IPO or, following the separate trading of the public shares and the public warrants, the public shares that are a component of the public units that are purchased by the forward purchaser or any of its affiliates in the IPO, in sales that are consummated on or prior to the initial Business Combination, then the price per share for the forward purchase shares will remain at $
10.00
per share for forward purchase shares in an aggregate number equal to the number of public units and public shares sold by the forward purchaser and/or its affiliates in such manner.
The following assumptions were utilized in the determination of fair value for the FPA liability:
 
  •  
Each forward purchase share is one share of the Company’s Class A common stock. No payment is due from the forward purchaser until immediately before the initial business combination. The purchase price is $
10.00
per forward purchase share, subject to the discounted purchase price. The discounted purchase price is either at $
9.20
per share or at an 8% discount to the PIPE price if the PIPE is priced below $
9.20
.
 
  •  
The conditions upon obtaining a $
9.20
purchase price are within the control of the holder of the forward purchase share (the “FPA holder”) because the FPA holder will control the aggregate purchase price of the forward purchase shares to be purchased by the FPA holder and, in the case of the forward purchaser that is expected to purchase public units, such forward purchaser and its affiliates will control whether such forward purchaser and its affiliates sell or redeem more than 50% of the public units (or, following the separate trading of the public shares and the public warrants, the public shares) on or prior to the initial business combination. The FPA holder that is expected to purchase public units is assumed to have no negative economic impact from not selling or redeeming more than
50
% of the public units (or, following the separate trading of the public shares and the public warrants) on or prior to the initial business combination since such forward purchaser would be selling at market price, without knowledge of future pricing, so that not selling or redeeming and realizing the
8
% discount to market price on its future purchase is actually a positive feature to such FPA holder. Therefore, the Company’s management assumed that the likelihood of the FPA holder to have a $
10.00
purchase price is de minimus.
 
  •  
Management assumed a PIPE would be priced below $
9.20
per share only 5% of the time and would be priced at $9.00 per share when it is priced below $
9.20
per share.
The purchase of forward purchase shares by Crescent Park and Carnegie Park as the forward purchasers pursuant to their respective forward purchase agreements will be subject to their respective internal approval processes and the other closing conditions set forth in their respective forward purchase agreements. Since the decision whether or not to purchase the forward purchase shares will be in the sole discretion of the forward purchasers, there can be no assurance that such purchases will be consummated.
Each of the forward purchasers has the right to transfer all or a portion of its rights and obligation to purchase the forward purchase shares to one or more transferees who are affiliates of the forward purchaser (the “forward transferees”), subject to compliance with applicable securities laws. Any such forward transferee will be subject to the same terms and conditions under the relevant forward purchase agreement. The forward purchase shares will be identical to the shares of Class A common stock underlying the units being sold in the IPO, except that they will be subject to certain registration rights and transfer restrictions. The funds from the sale of the forward purchase shares will be used as part of the consideration to the sellers in the initial Business Combination and any excess funds will be used for working capital in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their public shares and is intended to provide the Company with a minimum funding level for the initial Business Combination.
Note 5 — Stockholders’ Deficit
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.
Class A Common Stock
The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. As of March 31, 2023 and December 31, 2022, there were no shares of Class A common stock issued or outstanding, excluding 11,500,000 shares subject to possible redemption.
 
F-12
Class B Common Stock
The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of the Company’s Class B common stock are entitled to one vote for each common share. At March 31, 2023 and December 31, 2022, there were 2,875,000 shares of Class B common stock issued and outstanding.
The Class B common stock will automatically convert into shares of Class A common stock concurrently with or immediately following the consummation of the initial Business Combination on a
one-for-one
basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with the initial Business Combination including, without limitation, the forward purchase shares issued pursuant to the forward purchase agreement, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an
as-converted
basis, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial business combination and any private placement warrants issued to the Sponsor, officers or directors upon conversion of working capital loans, provided that such conversion of founder shares will never occur on a less than
one-for-one
basis.
Warrants
—Each whole warrant entitles the registered holder to purchase one share of the Class A common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of the initial Business Combination. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A common stock. This means that only a whole warrant may be exercised at any given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. The warrants will expire
five years
after the completion of the Company’s initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of its initial Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in 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 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. Notwithstanding the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation 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 shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), provided that such exemption is available. Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00.
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
 
  •  
In whole and not in part;
 
  •  
at a price of $0.01 per warrant;
 
  •  
upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable (the
“30-day
redemption period”) to each warrant holder; and
 
  •  
if, and only if, the reported last sale price of the Class A 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 commencing once the warrants become exercisable and ending three business days before we send the notice of redemption to the warrant holders.
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 the initial Business Combination (other than any forward purchase shares) at a Newly Issued Price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any founder shares held by the Sponsor or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the greater of the Market Value and the Newly Issued Price.
 
F-13
The Company accounts for the 10,700,000 warrants issued in connection with the IPO (comprised of 5,750,000 Public Warrants and 4,950,000 Private Placement Warrants) in accordance with the guidance contained in ASC
815-40.
Such guidance provides that the warrants described above are not precluded from equity classification. Equity-classified contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.
Note 6 — Fair Value Measurements
As of March 31, 2023 and December 31, 2022, investments in the Company’s trust account consisted of U.S money market funds. The U.S. money market funds are carried at fair value and the fair values of these investments are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.
Recurring Fair Value Measurements
Under the guidance in
ASC815-40
the FPA does not meet the criteria for equity classification. As such, the FPA must be recorded on the balance sheet at fair value. This valuation is subject to
re-measurement
at each balance sheet date. With each
re-measurement,
the valuations will be adjusted to fair value, with the change in fair value recognized in the Company’s statements of operations.
The following table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value on a recurring basis at March 31, 2023 and December 31, 2022:
March 31, 2023
 
    
Level 1
     
Level 2
     
Level 3
  
Assets
                           
Investments held in Trust Account
    $ 118,985,547      $ —        $ —    
Liabilities
                           
FPA
    $ —        $ —        $ 2,928,559  
December 31, 2022
 
    
Level 1
     
Level 2
     
Level 3
  
Assets
                           
Investments held in Trust Account
    $ 118,064,355      $ —        $ —    
Liabilities
                           
FPA
    $ —        $ —        $ 2,708,717  
Measurement
On March 31, 2023 and December 31, 2022, the Company used a Probability Weighted Expected Return (PWER) model to value the FPA liability.
The key inputs into the modified PWER model for the FPA liability were as follows:
 
Input
   
March 31,
2023
    
December 31,
2022
  
Probability of successful business combination
      85 %      85 % 
Likelihood by 04/30/2023
      —   %      15 % 
Likelihood by 06/30/2023
      5 %      15 % 
Likelihood by 8/31/2023
      15 %      —   % 
Likelihood by 10/31/2023
      80 %      70 % 
Risk-free rate
      4.91 %      4.75 % 
Stock price
    $ 10.27     $ 10.11  
Estimated term remaining (years)
      0.54       0.71  
The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the FPA liability classified as Level 3 for the year ended March 31, 2023 and December 31, 2022:
 
Fair Value at December 31, 2022
      2,708,717  
Change in fair value
      219,842  
    
 
 
  
Fair Value at March 31, 2023
    $ 2,928,559  
 
F-14
Note 7 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based on the Company’s review, except as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On May 3, 2023, the Company’s stockholders approved the Extension Amendment Proposal, which extended the date by which the Company must consummate its initial Business Combination from May 5, 2023 to November 3, 2023 (or such earlier date as determined by the board of directors). If the Company’s initial Business Combination is not completed by the Extended Date, then the Company’s existence will terminate, and the Company will distribute the amounts in the trust account as provided in the Company’s amended and restated certificate of incorporation, as amended. In connection with the Extension, the Company’s stockholders holding 8,470,059 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result, approximately $87,843,748 (approximately $10.37 per share) was removed from the trust account to pay such stockholders.

On May 8, 2023, the Company issued a promissory note to our sponsor in an amount of up to $630,000 to be deposited into the trust account ($105,000 per month following the 5
th
of each month through the Extended Date) for the benefit of the public stockholders who did not redeem their Public Shares. The promissory note bears no interest and is due and payable upon the earlier to occur of (i) the date on which the Company consummates a Business Combination and (ii) the date of the liquidation of the Company.
 
F-15

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Company,” “our,” “us” or “we” refer to Integral Acquisition Corporation 1. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this Report.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Report including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

Overview

We are a newly organized blank check company incorporated on February 16, 2021 as a Delaware corporation and formed for the purpose of effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

Our sponsor is Integral Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our initial public offering was declared effective on November 2, 2021. On November 5, 2021, we consummated our initial public offering (the “Initial Public Offering”) of 11,500,000 Units, including the full exercise of the underwriters’ over-allotment option to purchase 1,500,000 units, at a purchase price of $10.00 per Unit. Offering costs amounted to $10,757,787 consisting of $2,000,000 of underwriting commissions, $6,050,000 of deferred underwriting commissions, an excess of fair value of the Founder Shares acquired by the Anchor Investors of $3,386,739, and $556,048 of other offering costs (before $1,235,000 of offering costs reimbursed by the underwriter). Of the total offering costs, $10,247,056 was charged to temporary equity and the remaining $510,731 is included in equity.

Simultaneously with the closing of the IPO, we completed the private sale of an aggregate of 4,950,000 warrants, including 90,000 warrants issued in connection with the exercise in full by the underwriter of its option to purchase additional Units (the “Private Placement Warrants”) to the Sponsor at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $4,950,000.

Upon the closing of the IPO, management has agreed that an amount equal to at least $10.15 per Unit sold in the IPO, including the proceeds of the private placement warrants, will be held in a trust account, located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and will invest only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of 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 the Investment Company Act which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay taxes, if any, the proceeds from the IPO and the sale of the private placement warrants will not be released from the Trust Account until the earliest of (i) the completion of initial Business Combination, (ii) the redemption of the Company’s public shares if we are unable to complete an initial Business Combination within 18 months from the closing of the IPO, subject to applicable law, or (iii) the redemption of the Company’s public shares properly submitted in connection with a stockholder vote to amend its amended and restated certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of its public shares if the Company has not consummated an initial Business Combination within 18 months from the closing of the IPO or with respect to any other material provisions relating to stockholders’ rights or pre-initial Business Combination activity. The proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.

We will have only 18 months from the closing of the IPO to complete the initial Business Combination (the “Combination Period”). However, if we are unable to complete the initial Business Combination within 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 (which interest shall be net of 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 stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, liquidate and dissolve, subject, in each case, to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

 

16

Table of Contents

Liquidity, Capital Resources and Going Concern

As of March 31, 2023, we had approximately $0.4 million in our operating bank account and working capital of approximately $0.5 million.

Prior to the completion of the initial public offering, our liquidity needs had been satisfied through a loan under an unsecured promissory note with the Sponsor totaling $252,950 and the issuance of 2,875,000 shares of Class B common stock at approximately $0.009 per share for gross proceeds of $25,000. There is no balance outstanding under the promissory note as of March 31, 2023. Subsequent to the consummation of the initial public offering, our liquidity needs have been satisfied through the issuance of the private placement warrants, which generated gross proceeds of $4,950,000. In connection with our assessment of going concern considerations in accordance with FASB’s ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the mandatory liquidation and subsequent dissolution, should we be unable to complete a Business Combination, raises substantial doubt about our ability to continue as a going concern. We have until November 3, 2023 to consummate a Business Combination. It is uncertain that we will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution, unless the deadline is further extended. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after November 3, 2023.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our 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 unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

Any redemption or other repurchase that occurs after December 31, 2023, in connection with a Business Combination, extension vote (including redemptions made in connection with the Extension) 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.

Results of Operations

As of March 31, 2023, we had not commenced any operations. All activity for the period from February 16, 2021 (inception) through March 31, 2023 relates to our formation and the IPO and since the closing of the IPO, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering and held in out Trust Account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended March 31, 2023, we had net income of $451,060, which consisted of trust interest income of $799,894 and unrealized gain on trust account of $451,512, offset by operating costs of $328,220, an unrealized loss on the change in the fair value of the FPA liability of $219,842 and provision from income tax of $252,284.

For the three months ended March 31, 2022, we had net loss of $1,277,484, which consisted of operating costs of $286,206 and an unrealized loss on the change in the fair value of the FPA liability of $1,005,557, partially offset by trust interest income of $14,279.

 

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Contractual Obligations

We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.

Administrative Services Agreement

Commencing on the date the Units are first listed on the Nasdaq, we have agreed to pay the Sponsor a total of $20,000 per month for office space, utilities, and secretarial and administrative support. Upon completion of the Initial Business Combination or its liquidation, we will cease paying these monthly fees. Total administrative fees for the three months ended March 31, 2023 and 2022 are $60,000 and $40,000, respectively. At March 31, 2023 and December 31, 2022, $0 is reported on the balance sheet as due to Sponsor for the administrative fees due.

Registration and Stockholder Rights

The holders of the (i) Founder Shares, which were issued in a private placement prior to the closing of this offering, (ii) Private Placement Warrants, which will be issued in a private placement simultaneously with the closing of this offering and the shares of Class A common stock underlying such private placement warrants, (iii) private placement warrants that may be issued upon conversion of working capital loans and (iv) the forward purchase shares that may be purchased pursuant to the related forward purchase agreements will have registration rights to require us to register a sale of any of our securities held by them prior to the consummation of our initial Business Combination pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial Business Combination. We will bear the expenses incurred in connection with the filing of any such registration statements.

Engagement of Services

On May 28, 2021, the Company entered into a letter agreement with J.V.B. Financial Group, LLC (“J.V.B.”) pursuant to which the Company engaged Cohen & Company Capital Markets, a division of J.V.B., to provide consulting and advisory services in connection with the IPO in return for a transaction fee to be paid to J.V.B. in an amount equal to 10.0% of the aggregate underwriting discount and commissions earned by the underwriters in connection with the IPO to be paid simultaneously with the actual payment of such underwriting discount and commissions to the underwriters upon (i) the closing of the IPO and (ii) the completion of the Company’s initial Business Combination. J.V.B. was one of the Company’s Anchor Investors that purchased Units in the IPO and became a member of the Company’s Sponsor at the closing of our IPO to hold an indirect interest in a specified number of the Founder Shares held by the Sponsor.

On November 4, 2021, the Company paid J.V.B. $85,000 in cash from funds outside of the Trust Account. Funds due to J.V.B. upon the completion of the Company’s initial Business Combination ($605,000 in the aggregate) will be paid by the underwriters.

Underwriter Agreement

The underwriters are entitled to deferred underwriting commissions of $0.50 on the first 10,000,000 Units sold in the IPO and $0.70 per unit per Unit sold thereafter, or $6,050,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete an Initial Business Combination, subject to the terms of the underwriting agreement for the offering.

Anchor Investment

Certain qualified institutional buyers or institutional accredited investors (none of which are affiliated with any member of the Company’s management team, the Sponsor or any other anchor investor) (the “Anchor Investors”), have purchased an aggregate of approximately $60.8 million of the units in the IPO at the public offering price. There can be no assurance that the Anchor Investors will retain their Units prior to or upon the consummation of the initial Business Combination. In addition, none of the Anchor Investors has any obligation to vote any of their public shares in favor of the initial Business Combination.

The anchor investors have not been granted any stockholder or other rights that are in addition to those granted to our other public stockholders, and will only be issued equity interests in our Sponsor, with no right to control our Sponsor or vote or dispose of any securities held by our Sponsor. Further, unlike some anchor investor arrangements of other blank check companies, the anchor investors are not required to (i) hold any units, Class A common stock or warrants they may purchase in this offering or thereafter for any amount of time, (ii) vote any shares of Class A common stock they may own at the applicable time in favor of our initial Business Combination or (iii) refrain from exercising their right to redeem their public shares at the time of our initial Business Combination. The anchor investors will have the same rights to the funds held in the trust account with respect to the Class A common stock underlying the units they may purchase in the IPO as the rights afforded to the Company’s other public stockholders.

 

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Forward Purchase Shares

Crescent Park, which is one of the Company’s Anchor Investors, and Carnegie Park have agreed, as the forward purchasers pursuant to their respective forward purchase agreements entered into with the Company, to purchase up to 2,500,000 shares of Class A common stock in the case of Crescent Park and up to 500,000 shares of Class A common stock in the case of Carnegie Park (referred to herein as the forward purchase shares) at $10.00 per share (as such price per share may be reduced to $9.20 per share or further reduced to below $9.20 per share with respect to all or part of the forward purchase shares that are purchased in the manner described below) for gross proceeds up to $30,000,000 in the aggregate if all of the forward purchase shares are purchased at $10.00 per share (or up to $27,600,000 in the aggregate if all of the forward purchase shares are purchased at $9.20 per share or up to a lower amount in the aggregate if all of the forward purchase shares are purchased at less than $9.20 per share) in private placements that occurred concurrently with the consummation of the initial Business Combination.

The price to be paid for forward purchase shares will be reduced to or below $9.20 per share in the following circumstances:

 

  •  

to $9.20 if the aggregate purchase price paid by the forward purchaser at $10.00 per share would exceed the lesser of (i) a specified dollar amount and (ii) a specified percentage of the aggregate purchase price paid by the purchasers of the SPAC’s Class A common stock in private placements that occur on or prior to the date of the SPAC’s initial business combination (“PIPEs”);

 

  •  

and to below $9.20 if the price per share in any PIPE is less than $9.20 (in which case the price per share paid by the forward purchaser will be at an 8% discount from the price per share in such PIPE).

One of the forward purchasers and/or its affiliates is expected to purchase the Company’s public units. If such forward purchaser and/or any of its affiliates sell more than 50% of the aggregate number of the public units purchased in the IPO or, following the separate trading of the public shares and the public warrants, the public shares that are a component of the public units that are purchased by the forward purchaser or any of its affiliates in the IPO, in sales that are consummated on or prior to the initial Business Combination, then the price per share for the forward purchase shares will remain at $10.00 per share for forward purchase shares in an aggregate number equal to the number of public units and public shares sold by the forward purchaser and/or its affiliates in such manner.

The following assumptions were utilized in the determination of fair value for the FPA liability:

 

  •  

Each forward purchase share is one share of the Company’s Class A common stock. No payment is due from the forward purchaser until immediately before the initial Business Combination. The purchase price is $10.00 per forward purchase share, subject to the discounted purchase price. The discounted purchase price is either at $9.20 per share or at an 8% discount to the PIPE price if the PIPE is priced below $9.20.

 

  •  

The conditions upon obtaining a $9.20 purchase price are within the control of the holder of the forward purchase share (the “FPA holder”) because the FPA holder will control the aggregate purchase price of the forward purchase shares to be purchased by the FPA holder and, in the case of the forward purchaser that is expected to purchase public units, such forward purchaser and its affiliates will control whether such forward purchaser and its affiliates sell or redeem more than 50% of the public units (or, following the separate trading of the public shares and the public warrants, the public shares) on or prior to the initial Business Combination. The FPA holder that is expected to purchase public units is assumed to have no negative economic impact from not selling or redeeming more than 50% of the public units (or, following the separate trading of the public shares and the public warrants) on or prior to the initial Business Combination since such forward purchaser would be selling at market price, without knowledge of future pricing, so that not selling or redeeming and realizing the 8% discount to market price on its future purchase is actually a positive feature to such FPA holder. Therefore, the Company’s management assumed that the likelihood of the FPA holder to have a $10.00 purchase price is de minimus.

 

  •  

Management assumed a PIPE would be priced below $9.20 per share only 5% of the time and would be priced at $9.00 per share when it is priced below $9.20 per share.

 

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The purchase of forward purchase shares by Crescent Park and Carnegie Park as the forward purchasers pursuant to their respective forward purchase agreements will be subject to their respective internal approval processes and the other closing conditions set forth in their respective forward purchase agreements. Since the decision whether or not to purchase the forward purchase shares will be in the sole discretion of the forward purchasers, there can be no assurance that such purchases will be consummated.

Each of the forward purchasers has the right to transfer all or a portion of its rights and obligation to purchase the forward purchase shares to one or more transferees who are affiliates of the forward purchaser (the “forward transferees”), subject to compliance with applicable securities laws. Any such forward transferee will be subject to the same terms and conditions under the relevant forward purchase agreement. The forward purchase shares will be identical to the shares of Class A common stock underlying the units being sold in the IPO, except that they will be subject to certain registration rights and transfer restrictions. The funds from the sale of the forward purchase shares will be used as part of the consideration to the sellers in the initial Business Combination and any excess funds will be used for working capital in the post-transaction company. This commitment is independent of the percentage of stockholders electing to redeem their public shares and is intended to provide the Company with a minimum funding level for the initial Business Combination.

Critical Accounting Policies

Forward Purchase Agreement liability

We account for the 3,000,000 forward purchase shares (as described in Note 4) issued pursuant to the Forward Purchase Agreements (the “FPA”) in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the FPA shares do not meet the criteria for equity treatment thereunder, each FPA share must be recorded as a liability. Accordingly, we classify each FPA share as a liability at its fair value. This liability is subject tore-measurement at each balance sheet date. With each such re-measurement, the FPA liability will be adjusted to fair value, with the change in fair value recognized in the statement of operations.

Common Stock Subject to Possible Redemption

All of the 11,500,000 common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all shares of Class A common stock have been classified outside of permanent equity.

We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.

 

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Net Income (Loss) Per Common Share

Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding during the period, excluding common stock subject to forfeiture by the Sponsor. Weighted average shares were reduced for the effect of an aggregate of 375,000 common stock that are subject to forfeiture if the over-allotment option is not exercised by the underwriters. At March 31, 2023, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the period presented.

Warrants

We account for the 10,700,000 warrants issued in connection with the IPO (comprised of 5,750,000 Public Warrants and 4,950,000 Private Placement Warrants) in accordance with the guidance contained in ASC 815-40. Such guidance provides that the warrants described are not precluded from equity classification. Equity-classified contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.

Recent Accounting Pronouncements

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.

Factors That May Adversely Affect our Results of Operations

Our results of operations and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in Ukraine. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial Business Combination.

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.

 

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective due to identified material weaknesses related to errors in fair value calculation of certain financial instruments and unrecorded liabilities. Management plans to enhance internal controls and procedures, including enhancing access to accounting literature, identification and consideration of third-party professionals with whom to consult regarding complex accounting applications and implementing additional layers of reviews in the financial close process.

In light of these material weaknesses, we have enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements including making greater use of third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. We believe our efforts will enhance our controls relating to accounting for complex financial transactions, but we can offer no assurance that our controls will not require additional review and modification in the future as industry accounting practice may evolve over time.

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

Other than as discussed above, there was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2023 covered by this Report 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

To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property

 

ITEM 1A.

RISK FACTORS

As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, as of the date of this Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our (i) Registration Statement, (ii) our Annual Report on Form 10-K for the years ended December 31, 2021 and December 31, 2022, as filed with the SEC on April 1, 2022 and March 31, 2023, respectively, (iii) our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022, as filed with the SEC on May 16, 2022, August 15, 2022, and November 14, 2022, respectively; and (iv) our Definitive Proxy Statement, as filed with SEC on April 13, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial Business Combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

Recent increases in inflation and interest rates in the United States and elsewhere could make it more difficult for us to consummate an initial business combination.

Recent increases in inflation and interest rates in the United States and elsewhere may lead to increased price volatility for publicly traded securities, including ours, and may lead to other national, regional and international economic disruptions, any of which could make it more difficult for us to consummate an initial business combination.

Market conditions, economic uncertainty or downturns could adversely affect our business, financial condition, operating results and our ability to consummate a business combination.

In recent years, the United States and other markets have experienced cyclical or episodic downturns, and worldwide economic conditions remain uncertain, including as a result of the COVID-19 pandemic, supply chain disruptions, the Ukraine-Russia conflict, instability in the U.S. and global banking systems, rising fuel prices, increasing interest rates or foreign exchange rates and high inflation and the possibility of a recession. A significant downturn in economic conditions may make it more difficult for us to consummate a business combination.

We cannot predict the timing, strength, or duration of any future economic slowdown or any subsequent recovery generally, or in any industry. If the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, operating results and our ability to consummate a business combination could be adversely affected. For example, in January 2023, the outstanding national debt of the U.S. government reached its statutory limit. The U.S. Department of the Treasury has announced that, since then, it has been using extraordinary measures to prevent the U.S. government’s default on its payment obligations, and to extend the time that the U.S. government has to raise its statutory debt limit or otherwise resolve its funding situation. The failure by Congress to raise the federal debt ceiling could have severe repercussions within the U.S. and to global credit and financial markets. If Congress does not raise the debt ceiling, the U.S. government could default on its payment obligations, or experience delays in making payments when due. A payment default or delay by the U.S. government, or continued uncertainty surrounding the U.S. debt ceiling, could result in a variety of adverse effects for financial markets, market participants and U.S. and global economic conditions. In addition, U.S. debt ceiling and budget deficit concerns have increased the possibility a downgrade in the credit rating of the U.S. government and could result in economic slowdowns or a recession in the U.S. Although U.S. lawmakers have passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States as a result of disputes over the debt ceiling. The impact of a potential downgrade to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect economic conditions, as well as our business, financial condition, operating results and our ability to consummate a business combination.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

 

ITEM 5.

OTHER INFORMATION

None.

 

ITEM 6.

EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

Exhibit

Number

    Description
31.1    Certification of Principal Executive Officer required by Rules 13a-14(a) and 15(d)-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2    Certification of Principal Financial Officer required by Rules 13a-14(a) and 15(d)-14(a), under the Securities Exchange Act of 1934, 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. **
32.2    Certification of Principal Financial 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.

**

Furnished herewith.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    INTEGRAL ACQUISITION CORPORATION 1
Date: May 15, 2023    

/s/ Enrique Klix

    Name:   Enrique Klix
    Title:   Chief Executive Officer
      (Principal Executive Officer)
Date: May 15, 2023    

/s/ Brittany Lincoln

    Name:   Brittany Lincoln
    Title:   Chief Financial Officer
      (Principal Financial and Accounting Officer)

 

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