Item 1. Interim Financial Statements.
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED BALANCE SHEET
| |
June 30, | | |
December 31, | |
| |
2022 | | |
2021 | |
| |
| | |
| |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash | |
$ | 799,662 | | |
$ | 1,501,391 | |
Prepaid expenses | |
| 211,803 | | |
| 249,171 | |
Total current assets | |
| 1,011,465 | | |
| 1,750,562 | |
| |
| | | |
| | |
Prepaid expense, net of current assets | |
| — | | |
| 41,076 | |
Marketable securities held in Trust Account | |
| 258,970,700 | | |
| 258,802,828 | |
TOTAL ASSETS | |
$ | 259,982,165 | | |
$ | 260,594,466 | |
| |
| | | |
| | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Income tax payable | |
$ | 47,658 | | |
| — | |
Related party payable | |
| 40,000 | | |
| 180,273 | |
Accounts payable and accrued expenses | |
| 2,273,386 | | |
| 1,486,692 | |
Total current liabilities | |
| 2,361,044 | | |
| 1,666,965 | |
| |
| | | |
| | |
Warrant liability | |
| 52,390 | | |
| 233,665 | |
Total Liabilities | |
| 2,413,434 | | |
| 1,900,630 | |
| |
| | | |
| | |
Commitments and Contingencies (See Note 7) | |
| | | |
| | |
Class A common stock subject to possible redemption 25,875,000 shares at redemption value | |
| 258,970,700 | | |
| 258,802,828 | |
| |
| | | |
| | |
Stockholders’ Deficit | |
| | | |
| | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | |
| — | | |
| — | |
Class A common stock, $0.0001 par value; 380,000,000 shares authorized; 200,000 shares issued and outstanding (excluding 25,875,000 shares subject to possible redemption) | |
| 20 | | |
| 20 | |
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 6,468,750 shares issued and outstanding | |
| 647 | | |
| 647 | |
Additional paid-in capital | |
| — | | |
| — | |
Accumulated deficit | |
| (1,402,636 | ) | |
| (109,659 | ) |
Total Stockholders’ Deficit | |
| (1,401,969 | ) | |
| (108,992 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
$ | 259,982,165 | | |
$ | 260,594,466 | |
The accompanying notes are an integral part of
the unaudited condensed financial statements.
INTERPRIVATE III
FINANCIAL PARTNERS INC.
CONDENSED STATEMENT OF OPERATIONS
(unaudited)
| |
Three Months Ended | | |
Six Months Ended | |
| |
June 30, | | |
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Operating and formation costs | |
$ | 903,796 | | |
$ | 1,016,369 | | |
$ | 1,580,634 | | |
$ | 1,284,771 | |
Related party administrative fees | |
| 60,000 | | |
| 60,000 | | |
| 120,000 | | |
| 80,000 | |
Loss from operations | |
| (963,796 | ) | |
| (1,076,369 | ) | |
| (1,700,634 | ) | |
| (1,364,771 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Change in fair value of warrant liabilities | |
| 101,589 | | |
| (62,330 | ) | |
| 181,275 | | |
| (53,330 | ) |
Offering costs attributable to warrant liabilities | |
| — | | |
| — | | |
| — | | |
| (210 | ) |
Interest earned on marketable securities held in Trust Account | |
| 467,260 | | |
| 19,484 | | |
| 470,875 | | |
| 23,981 | |
Unrealized loss on marketable securities held in Trust Account | |
| (28,963 | ) | |
| (7,709 | ) | |
| (28,963 | ) | |
| (3,401 | ) |
Other income (loss), net | |
| 539,886 | | |
| (50,555 | ) | |
| 623,187 | | |
| (32,960 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss before income taxes | |
| (423,910 | ) | |
| (1,126,924 | ) | |
| (1,077,447 | ) | |
| (1,397,731 | ) |
Provision for income taxes | |
| (47,658 | ) | |
| — | | |
| (47,658 | ) | |
| — | |
Net loss | |
$ | (471,568 | ) | |
$ | (1,126,924 | ) | |
$ | (1,125,105 | ) | |
$ | (1,397,731 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Class A common stock subject to redemption | |
| 25,875,000 | | |
| 25,875,000 | | |
| 25,875,000 | | |
| 10,804,945 | |
Basic and diluted net loss per share, Class A common stock subject to redemption | |
$ | (0.01 | ) | |
$ | (0.03 | ) | |
$ | (0.03 | ) | |
$ | (0.08 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | |
| 7,161,270 | | |
| 7,161,270 | | |
| 7,161,270 | | |
| 6,219,667 | |
Basic and diluted net loss per share, Non-redeemable common stock | |
$ | (0.01 | ) | |
$ | (0.03 | ) | |
$ | (0.03 | ) | |
$ | (0.08 | ) |
The accompanying notes are an integral part
of the unaudited condensed financial statements.
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’
EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
2022
| |
Class A | | |
Class B | | |
Additional | | |
| | |
Total | |
| |
Common Stock | | |
Treasury Stock | | |
Paid-in | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Value | | |
Shares | | |
Value | | |
Capital | | |
Deficit | | |
Deficit | |
BALANCE – December 31, 2021 | |
| 200,000 | | |
$ | 20 | | |
| 6,468,750 | | |
$ | 647 | | |
$ | — | | |
$ | (109,659 | ) | |
$ | (108,992 | ) |
Remeasurement of Class A common stock subject to possible redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,615 | ) | |
| (3,615 | ) |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (653,537 | ) | |
| (653,537 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
BALANCE – March 31, 2022 | |
| 200,000 | | |
| 20 | | |
| 6,468,750 | | |
| 647 | | |
| — | | |
| (766,811 | ) | |
| (766,144 | ) |
Remeasurement of Class A common stock subject to possible redemption | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (164,257 | ) | |
| (164,257 | ) |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (471,568 | ) | |
| (471,568 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
BALANCE – June 30, 2022 | |
| 200,000 | | |
$ | 20 | | |
| 6,468,750 | | |
$ | 647 | | |
$ | — | | |
$ | (1,402,636 | ) | |
$ | (1,401,969 | ) |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
|
|
Class A |
|
|
Class B |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders’ |
|
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
Capital |
|
|
Deficit |
|
|
Equity (Deficit) |
|
BALANCE – December 31, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Issuance of Class B common stock to Sponsor |
|
|
— |
|
|
|
— |
|
|
|
6,468,750 |
|
|
|
647 |
|
|
|
24,353 |
|
|
|
— |
|
|
|
25,000 |
|
Issuance costs associated with the sale of Public Units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,843,989 |
) |
|
|
1,141,407 |
|
|
|
(5,702,582 |
) |
Sale of 692,500 Private Placement Warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,924,931 |
|
|
|
— |
|
|
|
6,924,931 |
|
Initial classification of Private Warrants |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(105,295 |
) |
|
|
— |
|
|
|
(105,295 |
) |
Issuance of Representative Shares |
|
|
200,000 |
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20 |
|
Remeasurement
of Class A common stock subject to possible redemption |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,805 |
) |
|
|
(8,805 |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(270,807 |
) |
|
|
(270,807 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE – March 31, 2021 |
|
|
200,000 |
|
|
|
20 |
|
|
|
6,468,750 |
|
|
|
647 |
|
|
|
— |
|
|
|
861,795 |
|
|
|
862,462 |
|
Remeasurement
of Class A common stock subject to possible redemption |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,775 |
) |
|
|
(11,775 |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,126,924 |
) |
|
|
(1,126,924 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE – June 30, 2021 |
|
|
200,000 |
|
|
$ |
20 |
|
|
|
6,468,750 |
|
|
$ |
647 |
|
|
$ |
— |
|
|
$ |
(276,904 |
) |
|
$ |
(276,237 |
) |
The accompanying notes are an integral part of
the unaudited condensed financial statements.
INTERPRIVATE III FINANCIAL PARTNERS INC.
CONDENSED STATEMENT OF CASH FLOWS
(unaudited)
| |
Six Months Ended | |
| |
June 30, | |
| |
2022 | | |
2021 | |
Cash flows from Operating Activities: | |
| | |
| |
Net loss | |
$ | (1,125,105 | ) | |
$ | (1,397,731 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Change in fair value of warrant liabilities | |
| (181,275 | ) | |
| 53,330 | |
Offering costs attributable to warrant liabilities | |
| — | | |
| 210 | |
Interest earned on marketable securities held in Trust Account | |
| (470,875 | ) | |
| (23,981 | ) |
Unrealized loss on marketable securities held in Trust Account | |
| 28,963 | | |
| 3,401 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Income tax payable | |
| 47,658 | | |
| — | |
Prepaid expenses and other current assets | |
| 78,445 | | |
| (429,358 | ) |
Related party payable | |
| (140,273 | ) | |
| — | |
Accrued expenses | |
| 786,694 | | |
| 1,125,685 | |
Net cash used in operating activities | |
| (975,768 | ) | |
| (668,444 | ) |
| |
| | | |
| | |
Cash flows from Investing Activities: | |
| | | |
| | |
Investment of cash in Trust Account | |
| — | | |
| (258,750,000 | ) |
Withdrawals from Trust Account | |
| 274,039 | | |
| — | |
Net provided by (used in) investing activities | |
| 274,039 | | |
| (258,750,000 | ) |
| |
| | | |
| | |
Cash flows from Financing Activities: | |
| | | |
| | |
Proceeds from sale of Units, net of underwriting discounts paid | |
| — | | |
| 253,680,504 | |
Proceeds from sale of Private Placement Warrants | |
| — | | |
| 6,819,495 | |
Proceeds from promissory note – related party | |
| — | | |
| 149,476 | |
Repayment of promissory note – related party | |
| — | | |
| (149,476 | ) |
Payment of offering costs | |
| — | | |
| (502,651 | ) |
Net cash provided by financing activities | |
| — | | |
| 259,997,348 | |
| |
| | | |
| | |
Net Change in Cash | |
| (701,729 | ) | |
| 578,904 | |
Cash – Beginning of period | |
| 1,501,391 | | |
| — | |
| |
| | | |
| | |
Cash – End of period | |
$ | 799,662 | | |
$ | 578,904 | |
| |
| | | |
| | |
Non-Cash investing and financing activities: | |
| | | |
| | |
Initial classification of Common Stock subject to possible redemption | |
$ | — | | |
$ | 258,570,000 | |
Offering costs paid by Sponsor in exchange for issuance of Founder Shares | |
$ | — | | |
$ | 25,000 | |
Issuance of Representative Shares | |
$ | — | | |
$ | 20 | |
Remeasurement of Class A common stock subject to possible redemption | |
$ | 167,872 | | |
$ | 20,580 | |
The accompanying notes are an integral part
of the unaudited condensed financial statements.
INTERPRIVATE III FINANCIAL PARTNERS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS
OPERATIONS
InterPrivate III Financial Partners Inc. (the
“Company”) is a blank check company incorporated in Delaware on September 10, 2020. It was originally incorporated under the
name “InterPrivate II Financial Holdings Corp.”, but the Company changed its name to “InterPrivate III Financial Partners
Inc.” on January 6, 2021. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or other similar business combination with one or more businesses (each, a “Business Combination”).
The Company is not limited to a particular industry
or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such,
the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2022, the Company had not commenced
any operations. All activity through June 30, 2022 relates to the Company’s formation, its initial public offering (the “Initial
Public Offering”), and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company
will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company
will generate non-operating income on cash and cash equivalents in the form of interest income from the proceeds derived from the Initial
Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Initial Public
Offering was declared effective on March 4, 2021. On March 9, 2021, the Company consummated the Initial Public Offering of 25,875,000
units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public
Shares”), which includes the full exercise by the underwriters of their over-allotment option in the amount of 3,375,000 Units,
at $10.00 per Unit, generating gross proceeds of $258,750,000, which is described in Note 3.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 692,500 units (each, a “Private Placement Unit” and, collectively, the
“Private Placement Units”) at a price of $10.00 per Private Placement Unit in a private placement to InterPrivate Acquisition
Management III, LLC (the “Sponsor”) and EarlyBirdCapital, Inc. (“EarlyBirdCapital”), generating gross proceeds
of $6,925,000, which is described in Note 4.
Following the closing of the Initial Public Offering
on March 9, 2021, an amount of $258,750,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering
and the sale of the Private Placement Units was placed in a trust account (the “Trust Account”), and was invested in U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment
Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money
market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of:
(i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s
stockholders, as described below.
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Units,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The New
York Stock Exchange (“NYSE”) rules provide that the Business Combination must be with one or more target businesses that together
have a fair market value equal to at least 80% of the balance in the Trust Account (less any taxes payable on interest earned on the Trust
Account) at the time of the signing of a definitive agreement to enter into a Business Combination. The Company will only complete a Business
Combination if the post-Business Combination 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. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide the holders of the outstanding
Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination
or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account ($10.00 per Public Share, plus any pro rata interest earned
on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption
rights upon the completion of a Business Combination with respect to the Company’s warrants.
If the Company seeks stockholder approval, the
Company will proceed with a Business Combination only if a majority of the shares voted are voted in favor of the Business Combination.
If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons,
the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file
tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is
required by law, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. The Company will
not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. If the Company seeks stockholder
approval in connection with a Business Combination, the Sponsor and EarlyBirdCapital have agreed to vote their Founder Shares (as defined
in Note 5), Private Placement Shares (as defined in Note 4), Representative Shares (as defined in Note 7) and any Public Shares purchased
during or after the Initial Public Offering in favor of approving a Business Combination and not to convert any shares in connection with
a stockholder vote to approve a Business Combination or sell any shares to the Company in a tender offer in connection with a Business
Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against
the proposed transaction or do not vote at all.
Notwithstanding the above, if the Company seeks
stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and
Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The Sponsor and EarlyBirdCapital have agreed (a) to
waive their redemption rights with respect to their Founder Shares, Representative Shares and Public Shares held by them in connection
with the completion of a Business Combination, (b) waive their liquidation rights with respect to the Founder Shares, Private Placement
Shares and Representative Shares if the Company fails to complete a Business Combination and (c) not to propose an amendment to the
Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow
redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the Company does
not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial
business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares
in conjunction with any such amendment. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public
Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination.
The Company will have until March 9, 2023 or any
extended period of time that the Company may have to consummate a Business Combination as a result of an amendment to the Company’s
Amended and Restated Certificate of Incorporation to complete a Business Combination (the “Combination Period”). If the Company
is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for
the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public
Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned
on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest
to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public
stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as
promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the
Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law
to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions
with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within
the Combination Period.
In order to protect the amounts held in the Trust
Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or
products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below (1) $10.00 per Public Share or (2) the actual amount per Public Share
held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in
each case net of the interest which may be withdrawn to pay the Company’s taxes. This liability will not apply with respect to any
claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under
the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to
be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims.
The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by
endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title,
interest or claim of any kind in or to monies held in the Trust Account.
Risks and Uncertainties
Management continues to evaluate the impact of
the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s
financial position and/or search for a target company, the specific impact is not readily determinable as of the date of the financial
statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2. SUMMARY OF 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, the financial statements do not
include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash
flows. In the opinion of management, the accompanying unaudited condensed 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 for the year ended December 31, 2021, as
filed with the SEC on March 31, 2022 (the “Annual Report”). The interim results for the three and six months ended June 30,
2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Liquidity and Financial Condition
As of June 30, 2022 the Company had cash $799,662 and
a working capital deficit of $1,282,210. The Company will need to raise additional capital through loans or additional investments from
its initial stockholders, officers or directors. If the Company is unable to raise additional capital, the Company may be required to
take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending
the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will
be available to the Company on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern through one year and one day from the issuance of this report. The Company has a termination date
of less than one year from the issuance of this report.
Use of Estimates
The preparation of the condensed financial statements
in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Making estimates requires management to exercise
significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances
that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near
term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of June 30, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
At June 30, 2022, substantially all of the assets
held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury securities.
Income Taxes
The Company complies with the accounting and reporting
requirements of ASC Topic 740, “Income Taxes” (“ASC 740”), which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial
statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws
and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and
a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were
no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2022 and December 31, 2021. The Company
is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is subject to income tax examinations by major taxing authorities since inception.
Our effective tax rate was negative 4.5% and 0.00% for the three months ended June 30, 2022 and 2021, respectively, and negative 4.5%
and 0.00% for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of
21% for the three and six months ended June 30, 2022 and 2021, due to changes in fair value in warrant liability and the valuation allowance
on the deferred tax assets.
Net Loss Per Share of Common Stock
The Company
complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share” (“ASC Topic 260”).
Net loss per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period.
Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value
approximates fair value.
The following table reflects the calculation of
basic and diluted net loss per common share (in dollars, except per share amounts):
| |
For the three months ended | | |
For the six months ended | |
| |
June 30, | | |
June 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Class A Common stock subject to possible redemption | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Net loss allocable to Class A common stock subject to possible redemption | |
$ | (369,346 | ) | |
$ | (882,642 | ) | |
$ | (881,216 | ) | |
$ | (887,093 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| 25,875,000 | | |
| 25,875,000 | | |
| 25,875,000 | | |
| 10,804,945 | |
Basic and diluted net loss per share, Class A common stock subject to possible redemption | |
$ | (0.01 | ) | |
$ | (0.03 | ) | |
$ | (0.03 | ) | |
$ | (0.08 | ) |
| |
| | | |
| | | |
| | | |
| | |
Non-redeemable common stock | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (471,568 | ) | |
$ | (1,126,924 | ) | |
$ | (1,125,105 | ) | |
$ | (1,397,731 | ) |
Less: Net loss allocable to Class A common stock subject to possible redemption | |
| (369,346 | ) | |
| 882,642 | | |
| (881,216 | ) | |
| 887,093 | |
Net loss allocable to non-redeemable common stock | |
| (102,222 | ) | |
| (244,282 | ) | |
| (243,889 | ) | |
| (510,638 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, non-redeemable common stock | |
| 7,161,270 | | |
| 7,161,270 | | |
| 7,161,270 | | |
| 6,219,667 | |
Basic and diluted net loss per share, non-redeemable common stock | |
$ | (0.01 | ) | |
| (0.03 | ) | |
| (0.03 | ) | |
| (0.08 | ) |
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal
Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement” (“ASC 820”),
approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
NOTE 3. PUBLIC OFFERING
There have been no changes to the public offering
amounts previously disclosed in the Annual Report. As of June 30, 2022, cash of $799,662 was held outside of the Trust Account and was
available for working capital purposes.
NOTE 4. PRIVATE PLACEMENT
There have been no changes to the private placement amounts previously
disclosed in the Annual Report.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
There have been no changes to the Founder Shares
amounts previously disclosed in the Annual Report.
Administrative Services Agreement
The Company entered into an agreement, commencing
on March 4, 2021, pursuant to which the Company will pay the Sponsor a total of $10,000 per month for office space, administrative and
support services. Upon completion of the Business Combination or the Company’s liquidation, the agreement will terminate, and the
Company will cease paying these monthly fees. For the three months ended June 30, 2022 and 2021, the Company recorded $30,000 and $30,000,
respectively in fees for these services. For the six months ended June 30, 2022 and 2021, the Company recorded $60,000 and $40,000, respectively,
in fees for these services.
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital
Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such
Working Capital Loans may be convertible into units of the post-Business Combination entity at a price of $10.00 per unit. The units would
be identical to the Private Placement Units.
In addition, as the Company incurs operating expenses,
these fees are paid by InterPrivate LLC, and InterPrivate LLC is subsequently reimbursed by the Company for the full amount paid. As of
June 30, 2022 and December 31, 2021, the Company had $40,000 and $180,273 in related party payables outstanding, respectively.
Services Agreement
The Company entered into an agreement, pursuant
to which the Company will pay its Vice President a total of $10,000 per month for assisting the Company in negotiating and consummating
an initial business combination. Upon completion of the Business Combination or the Company’s liquidation, the agreement will terminate,
and the Company will cease paying these monthly fees. For the three months ended June 30, 2022 and 2021, the Company recorded $30,000
and $30,000, respectively in fees for these services. For the six months ended June 30, 2022 and 2021, the Company recorded $60,000 and
$40,000, respectively, in fees for these services.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered
into on March 4, 2021, the holders of the Founder Shares, Representative Shares, Private Placement Units and any units that may be issued
upon conversion of the Working Capital Loans (and all underlying securities) have registration rights requiring the Company to register
a sale of any of the securities held by them prior to the consummation of a Business Combination. The holders of these securities will
be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition,
the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the
completion of a Business Combination. The registration rights agreement does not contain liquidated damages or other cash settlement provisions
resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Business Combination Marketing Agreement
In conjunction with the Initial Public Offering,
the Company entered into a Business Combination Marketing Agreement (the “BCMA”) under which the Company engaged Morgan Stanley
and EarlyBirdCapital as advisors in connection with the Business Combination to assist the Company in holding meetings with its stockholders
to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors
that are interested in purchasing the Company’s securities in connection with the Business Combination, assist the Company in obtaining
stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with
the Business Combination. Under the BCMA, the Company agreed to pay Morgan Stanley and EarlyBirdCapital a cash fee for such services upon
the consummation of a Business Combination in an amount equal to 3.5% of the gross proceeds of the Initial Public Offering, or $9,056,250
(exclusive of any applicable finders’ fees which might become payable).
On February 14, 2022, Morgan Stanley entered into a letter agreement
with the Company and EarlyBirdCapital that amended the BCMA by (i) removing Morgan Stanley as a party to the BCMA and releasing it from
its obligations thereunder; (ii) stating that Morgan Stanley would no longer have any rights, benefits, liabilities or obligations thereunder;
(iii) reducing the fee payable thereunder from 3.5% to 1.75% of the gross proceeds of the Initial Public Offering (such reduced amount
totaling $4,528,125), which becomes payable solely to EarlyBirdCapital on the condition that the Company successfully completes a business
combination transaction; and (iv) obligating the Company to indemnify Morgan Stanley for any claims arising out of the letter agreement
and to continue to indemnify Morgan Stanley as provided under the BCMA. As a result of such letter agreement, Morgan Stanley is no longer
required to perform any services under the BCMA and is not entitled to receive any compensation thereunder. The letter agreement did not amend the provision of the BCMA which provides that the full amount
of the original BCMA Fee (totaling $9,056,250) will be returned to the Public Stockholders upon the Company’s liquidation if the
Company does not consummate a Business Combination within 24 months of the Initial Public Offering (or any extension thereof).
Merger Agreement
On August 18, 2021, the Company entered into an
Agreement and Plan of Merger (as amended and restated, the “Merger Agreement”) with InterPrivate III Merger Sub Inc., a wholly
owned subsidiary of the Company (“Merger Sub”), InterPrivate III Merger Sub II LLC, a wholly owned subsidiary of the Company
(“Merger Sub II”), and Aspiration Partners Inc. (“Aspiration”). Pursuant to the Merger Agreement, Merger Sub will
merge with and into Aspiration, with Aspiration surviving the merger as a wholly owned subsidiary of the Company (the “First Merger”)
and, immediately following the First Merger and as part of the same overall transaction as the First Merger, the surviving corporation
will merge with and into Merger Sub II, with Merger Sub II surviving the merger (the “Second Merger”). The transactions contemplated
by the Merger Agreement are referred to as the “Business Combination.” In addition, in connection with the consummation of
the Business Combination, the Company will be renamed and is referred to herein as “New Aspiration” as of the time following
such change of name.
In connection with the closing of the Business
Combination (the “Closing”), at the effective time of the Business Combination (the “Effective Time”) and by virtue
of the Business Combination, (i) all shares of Aspiration common stock issued and outstanding immediately prior to the Effective Time
will be canceled and converted into the right to receive shares of New Aspiration Class A common stock, (ii) all outstanding Aspiration
options, whether or not then exercisable, will be assumed by New Aspiration and converted into options to purchase New Aspiration Class
A common stock, (iii) each Aspiration stockholder (other than (i) holders of Aspiration Series C-4 preferred stock, (ii) Aspiration Series
X Preferred Stock, (iii) Aspiration common stock issued upon conversion of certain convertible senior notes and (iv) Aspiration common
stock that is subject to forfeiture under earnout arrangements entered into strategic transactions irrespective of the Business Combination)
and each holder of a vested Aspiration option shall also receive a contingent right to receive a pro rata portion of up to 100,000,000
shares of New Aspiration Class A common stock, (iv) all outstanding Aspiration warrants will be either (a) exercised or terminated in
accordance with its terms or (b) assumed by New Aspiration and converted into a warrant of New Aspiration to purchase shares of New Aspiration
Class A common stock and, prior to the Effective Time, (v) each convertible note of Aspiration will be converted into Aspiration capital
stock, paid off in accordance with the terms thereof or remain outstanding as indebtedness of New Aspiration without the right to convert
into capital stock of New Aspiration. The aggregate number of shares of common stock to be issued in the Business Combination will be
equal to $1.75 billion plus the exercise price of all outstanding Aspiration options, divided by $10.00.
The parties to the Merger Agreement have made
customary representations and warranties and have agreed to certain customary covenants for a transaction of this type. The Closing is
subject to certain conditions, including but not limited to the approval of the Company’s stockholders and Aspiration’s stockholders
of the Business Combination Agreement. The Merger Agreement may also be terminated by either party under certain circumstances, including
if the Business Combination has not occurred by December 31, 2022 (or such later date as the parties may mutually agree).
Subscription Agreements
On August 18, 2021, the Company entered into subscription
agreements (the “Subscription Agreements”) with certain accredited investors, pursuant to which, among other things, the Company
agreed to issue and sell, in private placements to close concurrently with the Closing, an aggregate of 20,000,000 shares of the Company’s
Class A common stock at a purchase price of $10.00 per share (the “PIPE Investment”).
Aspiration Support Agreement
In connection with and following the execution
of the Merger Agreement, the Company will enter into support agreements with certain Aspiration stockholders (the “Aspiration Support
Agreements”), pursuant to which such Aspiration stockholders will agree, among other things, to vote in favor of the adoption and
approval of the Business Combination and any of the documents and transactions contemplated by the Merger Agreement. Additionally, such
Aspiration stockholders agreed to not transfer any securities of Aspiration held by such stockholder from the date of execution of the
Aspiration Support Agreement until the earlier of the Effective Time and the termination of the Merger Agreement in accordance with its
terms, subject to certain exceptions, and to not solicit any Company Business Combination (as defined in the Merger Agreement), in each
case, subject to the terms and conditions of the Aspiration Support Agreements.
Sponsor Support Agreement
In connection with the execution of the Merger
Agreement, InterPrivate Acquisition Management III, LLC, a Delaware limited liability company (the “Sponsor”), entered into
a support agreement (the “Sponsor Support Agreement”) with the Company and Aspiration, pursuant to which the Sponsor agreed,
among other things, to vote to adopt and approve the Merger Agreement and all other documents and transactions contemplated thereby, to
vote against any Business Combination proposal other than the Business Combination or other proposals that would impede or frustrate the
Business Combination, to comply with the Merger Agreement’s prohibition on soliciting any alternative Business Combination and to
not transfer the equity interests in the Company that it owns, in each case, subject to the terms and conditions of the Sponsor Support
Agreement.
Amended and Restated Registration Rights
Agreement
At the Closing, New Aspiration, the Sponsor and
certain stockholders of New Aspiration will enter into an Amended and Restated Registration Rights Agreement, pursuant to which, among
other things, the parties thereto will be granted certain customary registration rights with respect to shares of common stock of New
Aspiration.
Stockholders’ Agreement
At the Closing, New Aspiration, Andrei Cherny,
Joseph Sanberg and certain of their respective controlled affiliates will enter into a Stockholders’ Agreement (the “Stockholders’
Agreement”) to provide for certain governance rights and address certain governance matters relating to New Aspiration. The Stockholders’
Agreement will provide each of Mr. Cherny and Mr. Sanberg the right to nominate one individual to the New Aspiration board of directors,
subject to certain qualifications, requirements and exceptions as set forth therein.
Transfer Restrictions
The Sponsor and its directors and executive officers
are subject to certain restrictions on transfer with respect to their shares of New Aspiration common stock pursuant to that certain Letter
Agreement, dated as of March 4, 2021, by and among the Company, the Sponsor, and the other parties signatory thereto. Such restrictions
end on the date that is one year following the Closing, or are subject to an early price-based release with respect to 50% of such shares
if the price per share of New Aspiration Class A common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-day
trading period following the Closing.
Series
X Preferred Stock Purchase Agreement
Concurrently
with the execution of the Merger Agreement, the Company and Aspiration entered into a Series X Preferred Stock Purchase Agreement (the
“Purchase Agreement”) with OCM Aspiration Holdings, LLC (“Oaktree”). Pursuant to the Purchase Agreement, Aspiration
has agreed to issue and sell to Oaktree an aggregate of 27,777,777 shares of a newly designated series of preferred stock designated
as Series X Preferred Stock of Aspiration, par value $0.000003 per share (the “Aspiration Series X Preferred Stock”),
for an aggregate purchase price of $250,000,000, which is net of the original issue discount of 10% (the “Series X Financing”),
with shares of Aspiration Series X Preferred Stock having the powers, designations, preferences and other rights set forth in the Aspiration
Certificate of Designations (as defined below). The closing of the issuance and sale of Aspiration Series X Preferred Stock occurred concurrently
with the execution of the Merger Agreement. The Purchase Agreement also provides that New Aspiration will grant Oaktree registration rights
pursuant to the Registration Rights Agreement (as defined below).
Certificate
of Designations
The shares
of New Aspiration Series X Preferred Stock to be issued in exchange for shares of Aspiration Series X Preferred Stock pursuant to the
Merger Agreement, upon their issuance, will have the powers, designations, preferences, and other rights as set forth in a Certificate
of Designations of the New Aspiration Series X Preferred Stock that the Company will file with the Secretary of State of the State of
Delaware on or prior to the Closing Date (the “New Aspiration Certificate of Designations”). The New Aspiration Series X Preferred
Stock will have, mutatis mutandis, substantially similar powers, designations, preferences, and other rights as set forth
in the Certificate of Designations of the Aspiration Series X Preferred Stock that was filed with the Secretary of State of the State
of Delaware upon the consummation of the transactions contemplated by the Purchase Agreement (the “Aspiration Certificate of Designations”).
Voting
and Consent Rights
The New
Aspiration Series X Preferred Stock will not have any voting rights or rights to convert such preferred shares into shares of New Aspiration
Class A common stock. Holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock will be entitled to elect
(i) one director to the board of directors of New Aspiration after the ninth anniversary of the Closing Date and upon a Medium Event (as
defined below) and (ii) two directors to the board of directors of New Aspiration upon a Major Event (as defined below). New Aspiration
will need to obtain the prior written consent of holders of a majority of the outstanding shares of New Aspiration Series X Preferred
Stock for, among other things: (i) effecting any change of control, liquidation event or merger or consolidation of New Aspiration unless
the entirety of the applicable Series X Redemption Price (as defined below) is paid with respect to all then issued and outstanding shares
of Series X Preferred Stock, (ii) amending Aspiration’s organizational documents to the extent such amendment has an adverse effect
on the holders of Series X Preferred Stock, (iii) increasing or decreasing the number of authorized shares of New Aspiration Series X
Preferred Stock, (iv) creating any class or series of New Aspiration capital stock that is pari passu or senior to the New Aspiration
Series X Preferred Stock, (v) incurring indebtedness, except for indebtedness incurred under Aspiration’s existing secured debt
facilities, debt incurred that allows New Aspiration to satisfy a total net leverage ratio of 3.0x and debt incurred for the redemption
of the New Aspiration Series X Preferred Stock (subject to limited exceptions), (vi) declaring, paying or making certain dividends and
undertaking certain stock repurchases (subject to limited exceptions) and (vii) certain other specified actions.
Dividends
The dividend
rate with respect to the New Aspiration Series X Preferred Stock will be either 8.0% per year in cash or, if not paid in cash, will be
paid “in-kind” by accruing at a rate of 8.0%, 11.0% or 12.0% per year for any dividend period ending on or prior to the second
anniversary of the Closing Date, between the second and third anniversaries of the Closing Date or between the third and fourth anniversaries
of the Closing Date, respectively. New Aspiration may elect either form of dividend payment until the fourth anniversary of the Closing
Date, and dividends must be paid in cash thereafter.
Each of
the dividend rates set forth above will increase by (i) 5.0% per annum (a) if New Aspiration fails to pay any dividend that is required
to be paid in cash if surplus cash is available, (b) if New Aspiration defaults on payment with respect to a Liquidation (as defined below)
or redemption, (c) if New Aspiration is in material breach of certain covenants under the New Aspiration Certificate of Designations,
subject to certain cure periods, (d) if New Aspiration experiences a bankruptcy or insolvency event, whether voluntary or involuntary,
(e) if New Aspiration fails to deliver New Aspiration Class A common stock to a holder of New Aspiration Series X Preferred Stock upon
the valid exercise of the Warrant (the foregoing clauses (a) through (e), a “Major Event”), (f) if New Aspiration fails to
pay any dividend that is required to be paid in cash if surplus cash is unavailable, (g) if New Aspiration is in material breach of certain
other covenants under the New Aspiration Certificate of Designations, subject to certain cure periods, (h) if New Aspiration defaults
on outstanding indebtedness or if outstanding indebtedness is accelerated, in each case, in excess of $50,000,000 or (i) if New Aspiration
fails to pay an applicable final judgment in excess of $25,000,000 (the foregoing clauses (f) through (i), a “Medium Event,”
and together with a Major Event, an “Event of Noncompliance”), or (ii) 3.0% per annum if New Aspiration is in material breach
of certain other covenants under the New Aspiration Certificate of Designations that is not a Major Event or Medium Event, subject to
certain cure periods (the dividend rate as increased in each of the foregoing cases, the “Noncompliance Incremental Rate”).
In addition, if the Company does not have at least $200,000,000 of cash at the Closing (excluding proceeds from the issuance of New Aspiration
Series X Preferred Stock), the dividend rates set forth above will increase by 5.0% per annum (exclusive of any Noncompliance Incremental
Rate then in effect) and will remain in effect until, after the Closing Date, New Aspiration has $200,000,000 of cash (the dividend rate
as increased by this sentence, the “de-SPAC Incremental Rate”). New Aspiration may elect to pay both the Noncompliance Incremental
Rate and the de-SPAC Incremental Rate in cash or “in-kind.”
Springing
Rights
Upon the
occurrence of a Major Event that has continued for 90 days (and upon the occurrence of certain Major Events, and in certain circumstances,
180 days) or upon the occurrence of a Medium Event that has continued for 180 days, subject to certain time extensions, for so long as
such Event of Noncompliance is continuing (the period following termination of the foregoing cure periods, the “Liquidity Period”),
the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock shall have the right to cause New Aspiration
to pursue an issuance of securities, a Liquidation (as defined below), merger, sale of assets or similar transaction or series of transactions,
a leveraged recapitalization or any other transaction or series of transactions (each, a “Liquidity Transaction”) generating
sufficient proceeds available for distribution to holders of New Aspiration Series X Preferred Stock to pay the entirety of the Series
X Redemption Price (as defined below). During the Liquidity Period, New Aspiration shall direct an independent financial advisor, approved
by the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock then outstanding, to establish procedures
to effect a Liquidity Transaction in an orderly manner with the objective of achieving the highest available value for New Aspiration
within a reasonable period of time and the payment of the entire Series X Redemption Price payable in respect of all outstanding shares
of New Aspiration Series X Preferred Stock. However, if a Liquidity Period has commenced and the Event of Noncompliance is cured, New
Aspiration may discontinue and will not be required to pursue a Liquidity Transaction.
Immediately
following the commencement of a Liquidity Transaction, holders of a majority of the outstanding shares of New Aspiration Series X Preferred
Stock may take control of and direct the process of a Liquidity Transaction and cause New Aspiration to consummate, subject to any requisite
stockholder approvals, any Liquidity Transaction in order to redeem the New Aspiration Series X Preferred Stock at the Series X Redemption
Price.
Furthermore,
during a Liquidity Period, unless New Aspiration is able to redeem outstanding New Aspiration Series X Preferred Stock at the then applicable
Series X Redemption Price as a result, New Aspiration will need to obtain the prior written consent of holders of a majority of the outstanding
shares of New Aspiration Series X Preferred Stock to acquire any business, incur any indebtedness, repurchase capital stock or make distributions
(subject to certain exceptions) or fail to redeem outstanding New Aspiration Series X Preferred Stock with surplus cash (subject to applicable
law and the terms of any indebtedness of New Aspiration).
Ranking
and Liquidation Preference
The New
Aspiration Series X Preferred Stock will rank senior to New Aspiration’s common stock with respect to dividend rights and rights
upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of New Aspiration (a “Liquidation”).
Upon a Liquidation, each share of New Aspiration Series X Preferred Stock would be entitled to the applicable Series X Redemption Price.
The liquidation preference of the New Aspiration Series X Preferred Stock will be equal to $10 per share (the “Series X Liquidation
Preference”).
Redemption
Rights and Series X Redemption Price
New Aspiration
will have the right to redeem all or any portion of the New Aspiration Series X Preferred Stock at any time by paying the applicable Series
X Redemption Price; provided, however, that no optional redemption will be permitted that would result in less than 33% of the shares
of New Aspiration Series X Preferred Stock that are issued on the Closing Date to remain outstanding following such redemption unless
all remaining shares of New Aspiration Series X Preferred Stock are redeemed.
Each holder
of New Aspiration Series X Preferred Stock will have the option to require New Aspiration to redeem any portion of the New Aspiration
Series X Preferred Stock at the Series X Redemption Price: (i) at any time after the ninth anniversary of the Closing Date or (ii) upon
the occurrence of a Major Event (following the expiration of the applicable cure period) at the election of the holders of a majority
of the outstanding shares of New Aspiration Series X Preferred Stock. New Aspiration will be required to redeem all of the outstanding
shares of New Aspiration Series X Preferred Stock at the Series X Redemption Price automatically upon the occurrence of a change of control,
a Liquidation or an insolvency event.
The following
table sets forth the “Series X Redemption Price”:
Timing of Redemption |
|
Series X Redemption Price |
Until 30 months after the Closing Date (the “First Optional Call Date”) |
|
Make-Whole Amount (as defined below) |
From the First Optional Call Date until the first anniversary of the First Optional Call Date |
|
106% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends |
From the first anniversary of the First Optional Call Date until 66 months following the First Optional Call Date |
|
103% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends |
From and after the date 66 months after the First Optional Call Date |
|
100% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends |
The “Make-Whole
Amount” with respect to any redemption of any share of New Aspiration Series X Preferred Stock prior to the First Optional Call
Date is defined in the New Aspiration Certificate of Designations as an amount equal to the sum of (A) the remaining dividends that would
accrue on such shares being redeemed from the day immediately following the redemption date to the First Optional Call Date at 8.0%
as may be increased by the de-SPAC Incremental Rate or the Noncompliance Incremental Rate, if applicable, plus (B) the Series X Liquidation
Preference of such shares being redeemed plus (C) the then current amount of accrued in-kind dividends on such shares being redeemed,
assuming that, for purposes of calculating the foregoing, the shares of New Aspiration Series X Preferred Stock being redeemed were to
remain outstanding through the First Optional Call Date.
Series
X Minimum Cash Balance
Pursuant
to the New Aspiration Certificate of Designations, New Aspiration will also be required to maintain a minimum cash balance of $50,000,000
at all times so long as the New Aspiration Series X Preferred Stock remains outstanding. However, if Aspiration and its subsidiaries have
less than $10,000,000 in outstanding indebtedness, the required minimum cash balance is reduced to $30,000,000.
Investor
Rights Agreement
The Company
entered into an Investor Rights Agreement with Oaktree to be effective upon the Closing Date (the “New Aspiration Investor Rights
Agreement”) on substantially similar terms and conditions (while taking into account the consummation of the Business Combination),
as those contained in the Investor Rights Agreement (as defined below) set forth below, such that New Aspiration, upon the Closing, shall
be subject to the New Aspiration Investor Right Agreement.
As a condition
to the closing of the Purchase Agreement, Aspiration and Oaktree entered into an Investor Rights Agreement (the “Investor Rights
Agreement”) pursuant to which, among other things, Aspiration granted Oaktree certain customary registration rights with respect
to the shares of Aspiration common stock underlying the Warrant and certain other securities that may be issued to Oaktree in respect
of the Warrant.
In addition,
pursuant to the Investor Rights Agreement, for so long as shares of the Aspiration Series X Preferred Stock issued on the Series X Closing
Date remain outstanding, Oaktree will have (i) a participation right, subject to certain exceptions, pursuant to which Oaktree may maintain
its ownership percentage of Aspiration common stock in connection with future offerings or sales of Aspiration equity securities and (ii)
a right of first offer with respect to the provision of any future debt or preferred equity financing to Aspiration or its subsidiaries.
The Investor Rights Agreement also provides that, so long as 33% of the Aspiration Series X Preferred Stock issued on the Series
X Closing Date remains outstanding, Oaktree will be entitled to appoint one non-voting observer to the board of directors of Aspiration.
The Investor Rights Agreement further contains a number of other customary covenants and agreements, including certain standstill provisions,
preemptive rights, rights of first refusal with respect to future debt financing transactions and information rights.
The Investor
Rights Agreement provides that Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated
with Oaktree without the prior written consent of Aspiration for one year following the closing of the issuance of Aspiration Series X
Preferred Stock. From and after such date, Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties
unaffiliated with Oaktree without the prior written consent of Aspiration, which consent may not be unreasonably withheld by Aspiration
(other than in the event of a transfer to certain restricted transferees).
Warrant
Pursuant
to the Purchase Agreement, at the Closing Date, New Aspiration will issue to Oaktree a warrant (the “Warrant”) to purchase
a number of shares of New Aspiration common stock equal to 6.0% of the total number of shares of New Aspiration capital stock outstanding
on a fully diluted basis (excluding the shares of New Aspiration Series X Preferred Stock and the Warrant) as of immediately following
the consummation of the Business Combination.
NOTE 7. WARRANTS
There have been no changes to the public warrant
disclosure since the Annual Report.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for
its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1: |
Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
|
Level 2: |
Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
|
Level 3: |
Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following tables present information about
the Company’s assets that are measured at fair value on a recurring basis at June 30, 2022 and December 31, 2021, respectively,
and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| |
| | |
June 30, | |
Description | |
Level | | |
2022 | |
Assets: | |
| | |
| |
Marketable securities held in Trust Account | |
| 1 | | |
$ | 258,970,699 | |
| |
| | | |
| | |
Liabilities: | |
| | | |
| | |
Warrant liability - Private placement warrants | |
| 3 | | |
| 47,332 | |
Warrant liability - Underwriters warrants | |
| 3 | | |
| 5,058 | |
| |
| | |
December 31,
| |
Description | |
Level | | |
2021 | |
Assets: | |
| | |
| |
Marketable securities held in Trust Account | |
| 1 | | |
$ | 258,802,828 | |
| |
| | | |
| | |
Liabilities: | |
| | | |
| | |
Warrant liability - Private placement warrants | |
| 3 | | |
| 202,563 | |
Warrant liability - Underwriters warrants | |
| 3 | | |
| 31,102 | |
The Private Placement Warrants were initially
valued using a Binomial Lattice Model, which is considered to be a Level 3 fair value measurement. The Binomial Lattice Model’s
primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of the
common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’
companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s
own public warrant pricing. A Binomial Lattice Model was used in estimating the fair value of the Private Placement Warrants for periods
where no observable traded price was available.
The key inputs into the Binomial Lattice Model
for the initial measurement of the Private Placement Warrants, and the subsequent measurement of the Private Placement Warrants, are as
follows:
| |
June 30, | | |
December 31,
| |
Term | |
2022 | | |
2021 | |
Risk-free interest rate | |
| 2.98 | % | |
| 1.23 | % |
Market price of public stock | |
$ | 9.80 | | |
$ | 9.91 | |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Implied volatility | |
| 7.20 | % | |
| 21.8 | % |
Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
The above assumptions are based on an expected
close of a de-SPAC transaction on September 30, 2022.
On June 30, 2022 and December 31, 2021 the Private
Placement Warrants were determined to be valued at $0.41 and $1.75 per warrant, respectively. On June 30, 2022 and December 31, 2021,
the Underwriter Warrants were valued at $0.22 and $1.35, respectively.
The following table presents the changes in the
fair value of warrant liabilities:
Term | |
Private
Placement | | |
Underwriters
Warrants | |
Fair value as of December 31, 2021 | |
$ | 202,563 | | |
$ | 31,102 | |
Change in valuation inputs or other assumptions | |
| (155,231 | ) | |
| (26,044 | ) |
Fair value as of June 30, 2022 | |
$ | 47,332 | | |
$ | 5,058 | |
During the three-month period ended June 30, 2022,
there were no transfers out of Level 3.
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred
after the balance sheet date up to the date that the condensed financial statements were issued. The Company did not identify any subsequent
events that would have required adjustment or disclosure in the condensed financial statements.
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
References in this quarterly report on Form 10-Q
(the “Quarterly Report”) to “we,” “us,” “our” or the “Company” are to InterPrivate
III Financial Partners Inc., except where the context requires otherwise. References to our “management” or our “management
team” refer to our officers and directors, and references to the “Sponsor” refer to InterPrivate Acquisition Management
III, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in
conjunction with our financial statements and related notes thereto included elsewhere in this Quarterly Report and the Annual Report.
Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and
uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) that are not historical facts and involve risks and uncertainties that could cause actual
results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this
Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” regarding the completion of the Business Combination (as defined below), the Company’s financial
position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such
as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek”
and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements
relate to future events or future performance, but reflect management’s current beliefs, based on information currently available.
A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed
in the forward-looking statements, including that the conditions of the Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please
refer to the Risk Factors section of the Annual Report. The Company’s securities filings can be accessed on the EDGAR section of
the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention
or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the
laws of the State of Delaware on September 10, 2020 for the purpose of effectuating a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate the Business
Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Units, our capital stock,
debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs
in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Business Combination
Merger Agreement
On August 18, 2021, we entered into an agreement
and plan of merger with Merger Sub, Merger Sub II and Aspiration (as amended and restated, the “Merger Agreement”). Pursuant
to the Merger Agreement, Merger Sub will merge with and into Aspiration with Aspiration surviving such merger as a wholly owned subsidiary
of the Company and, immediately following and as part of the same overall transaction, the surviving corporation will merge with and into
Merger Sub II (the “Second Merger”) with Merger Sub II surviving such merger. The transactions contemplated by the Merger
Agreement are referred to as the “Business Combination.” In addition, in connection with the consummation of the Business
Combination, we will be renamed “Aspiration, Inc.” The combined company following the consummation of the Business Combination
is referred to herein as “New Aspiration.” The Business Combination has been approved by the boards of directors of each of
the Company, Merger Sub, Merger Sub II and Aspiration.
On December 15, 2021, the Company, Merger Sub, Merger Sub
II and Aspiration amended and restated the Merger Agreement in connection with the entry and execution of the Purchase Agreement (as defined
herein). On July 18, 2022, the Company, Merger Sub, Merger Sub II and Aspiration amended the Merger Agreement to extend the Outside Date
(as defined in the Merger Agreement) from July 19, 2022 to July 22, 2022. On July 21, 2022 (the “Second Amendment Date”),
the Company, Merger Sub, Merger Sub II and Aspiration further amended and restated the Merger Agreement to effect, among other things,
(i) an extension of the Outside Date from July 22, 2022 to December 31, 2022, (ii) a change to the procedures for the reservation and
release of Additional Shares (as defined in the Merger Agreement), (iii) the clarification of the treatment of certain warrants to be
issued immediately following the closing, (iv) the inclusion of additional covenants with respect to the preparation and delivery of financial
statements by Aspiration, (v) the modification of certain non-solicitation provisions, (vi) an extension payment by Aspiration to the
Company of $10,000,000, payable in two equal installments on the Second Amendment Date and the 45th day following the Second
Amendment Date, (vii) the addition of certain additional termination rights for the each of the Company and Aspiration and related termination
fees and (viii) mutual releases of certain matters arising prior to the Second Amendment Date.
Under the Merger Agreement, the Company has agreed to acquire
all of the outstanding equity interests of Aspiration in exchange for a number of shares of Class A common stock (valued for this purpose
at $10.00 per share) equal to (subject to certain adjustments as described therein) (i) $1,750,000,000 plus (ii) the Equity Financing
Proceeds (as provided in the Merger Agreement) minus (iii) the number of shares of Class A common stock to underlie the warrant to be
issued immediately following the consummation of the Business Combination pursuant to the Series X Preferred Stock Purchase Agreement,
dated December 15, 2021, by and among the Company, Aspiration and OCM Aspiration Holdings, LLC (prongs (i), (ii) and (iii) collectively,
the “Aggregate Consideration”), $200,000,000 of such Aggregate Consideration (represented by 20,000,000 shares of Class A
common stock) which will initially be held back in connection with private placements entered into with certain accredited investors (the
“PIPE Investors”) to close concurrently with the closing of the Business Combination (the “Closing”), pursuant
to which, among other things, the Company has agreed to issue and sell an aggregate of 20,000,000 shares of the Company Class A common
stock, at a purchase price of $10.00 per share (the “PIPE Investment”) and up to $77,828,400 of which (represented by 7,782,840
shares of Class A common stock) will be initially held back for the benefit of the holders of Aspiration’s convertible senior notes
(such shares to be held back, the “Additional Shares”). The shares of Class A common stock to be held back at the effective
time of the Business Combination (the “Effective Time”) will be released to the Company to the extent the Company is obligated
to issue Additional Shares to the PIPE Investors that are participating in the PIPE Investment or the convertible note holders, as applicable,
and, otherwise, to the holders of capital stock of Aspiration as of immediately prior to the Effective Time.
Each Aspiration stockholder (other than (i) holders of
Aspiration Series C-4 preferred stock, (ii) Aspiration Series X Preferred Stock, (iii) Aspiration common stock issued upon conversion
of certain convertible senior notes and (iv) Aspiration common stock that is subject to forfeiture under earnout arrangements entered
into strategic transactions irrespective of the Business Combination) and each holder of a vested Aspiration option (as defined below)
shall also receive a contingent right to receive a pro rata portion of up to 100,000,000 shares of Class A common stock of New Aspiration
(the “Contingent Consideration”). The Contingent Consideration may be earned in five equal tranches of 20,000,000 shares of
New Aspiration Class A common stock (a) when the closing price of New Aspiration Class A common stock equals or exceeds (i) $12.50 per
share prior to the 18-month anniversary of the Effective Time, (ii) $15.00 per share prior to the 36-month anniversary of the Effective
Time, (iii) $17.50 per share prior to the 36-month anniversary of the Effective Time, (iv) $20.00 per share prior to the 48-month anniversary
of the Effective Time and (v) $25.00 per share prior to the 60-month anniversary of the Effective Time, in each case, as measured over
any 20 trading days within any 30-day trading period prior to the end of the relevant time period applicable to each such earn out tranche
or (b) when New Aspiration consummates a change of control transaction that entitles its stockholders to receive a per share consideration
of at least $12.50, $15.00, $17.50, $20.00 and $25.00, as applicable. Any right to Contingent Consideration that remains unvested on the
first business day after five years from Effective Time will be forfeited without any further consideration.
Pursuant to the Merger Agreement, at the Effective Time,
the consideration to be issued to the holders of Aspiration capital stock (other than holders of Aspiration Series X Preferred Stock)
will be in the form of Class A common stock of New Aspiration (valued at $10.00 per share). Additionally, each option to purchase shares
of Aspiration common stock (an “Aspiration option”) that is outstanding and unexercised, whether or not then vested or exercisable,
will be assumed by New Aspiration and converted into an option to acquire shares of Class A common stock of New Aspiration with the same
terms and conditions as applied to such Aspiration option immediately prior to the Effective Time; provided that the number of shares
underlying such New Aspiration option will be determined by multiplying the number of shares of Aspiration common stock subject to such
option immediately prior to the Effective Time by the ratio determined by dividing the per share merger consideration value by $10.00
(the quotient being the “option exchange ratio”), which product shall be rounded down to the nearest whole number of shares,
and the per share exercise price of such New Aspiration option will be determined by dividing the per share exercise price immediately
prior to the Effective Time by the option exchange ratio, which quotient shall be rounded up to the nearest whole cent.
Pursuant to the Merger Agreement, (a) immediately prior
to the Effective Time, each warrant to purchase shares of Aspiration common stock that is issued and outstanding prior to the Effective
Time will be either (i) exercised or terminated in accordance with its terms or (ii) assumed by New Aspiration and converted into a warrant
of New Aspiration to purchase shares of New Aspiration Class A common stock and prior to the Effective Time, each convertible note of
Aspiration will be converted into Aspiration capital stock, paid off in accordance with the terms thereof or remain outstanding as indebtedness
of New Aspiration without the right to convert into capital stock of New Aspiration. If any indebtedness of Aspiration (including with
respect to convertible notes of Aspiration that remain outstanding) is not paid off at the Closing, it will be assumed by New Aspiration.
The parties to the Merger Agreement have made
customary representations and warranties and have agreed to certain customary covenants for a transaction of this type. The Closing is
subject to certain conditions, including but not limited to the adoption by our stockholders and Aspiration’s stockholders of the
Merger Agreement. The Merger Agreement may also be terminated by either party under certain circumstances, including if the Business Combination
has not occurred by the Outside Date (or such later date as the parties may mutually agree).
Subscription Agreements
In connection with the Business Combination, we
entered into subscription agreements with the Base PIPE Investors (the “Base Subscription Agreements”), pursuant to which,
among other things, we agreed to issue and sell, immediately prior to the Closing, an aggregate of 20,000,000 shares of our Class A common
stock (the “PIPE Committed Shares”) at a purchase price of $10.00 per share for an aggregate consideration of $200,000,000,
and we entered into subscription agreements (the “Subsequent Subscription Agreements”) with certain other investors (the “Subsequent
PIPE Investors” and, together with the Base PIPE Investors, the “PIPE Investors”), pursuant to which, among other things,
we agreed to issue and sell, immediately prior to the Closing, an aggregate of 1,363,636 shares of our Class A common stock at a purchase
price of $11.00 per share for an aggregate consideration of $15,000,000. We refer to the Base Subscription Agreements and the Subsequent
Subscription Agreements collectively as the “Subscription Agreements.”
Pursuant to the terms of the Base Subscription
Agreements and the Conversion Stockholder Side Letters (as defined below), if during the last 10 trading days of the 60-day period following
the effectiveness of the re-sale registration statement that New Aspiration has agreed to file with the SEC pursuant to the Subscription
Agreements (the “Adjustment Period”), the volume weighted average price of one share of New Aspiration Class A common stock
(as reported on the New York Stock Exchange) (the “Adjustment Period VWAP”) is less than $10.00 per share, each Base PIPE
Investor and former Conversion Stockholder, as applicable, will be entitled to receive from New Aspiration, for no additional consideration,
a number of additional shares of New Aspiration Class A common stock (the “Additional Shares”) equal to the product of (x)
(i) with respect to each Base PIPE Investor, the number of PIPE Committed Shares issued to such Base PIPE Investor at the Closing that
such Base PIPE Investor holds through the last day of the Adjustment Period or (ii) with respect to the former Conversion Stockholders,
the number of shares of Aspiration capital stock issued upon conversion of such former Conversion Stockholder’s Convertible Notes
(“Conversion Stock”) and any Convertible Notes which such former Conversion Stockholder continues to hold through the last
day of the Adjustment Period, in each case, multiplied by (y) a fraction, (A) the numerator of which is $10.00 minus the Adjustment Period
VWAP and (B) the denominator of which is the Adjustment Period VWAP; provided that, with respect to the Base PIPE Investors, in no event
shall the number of Additional Shares exceed the lesser of (i) the number of PIPE Committed Shares and (ii) such Base PIPE Investor’s
pro rata portion of 20,000,000 shares of New Aspiration Class A common stock; provided further that, with respect to the former Conversion
Stockholders, in no event shall the number of Additional Shares issuable in respect of Conversion Stock exceed 7,782,840 shares of New
Aspiration Class A common stock. If the Additional Shares are issued to the Base PIPE Investors and the former Conversion Stockholders,
as applicable, there will be a corresponding adjustment to the portion of the aggregate consideration held in escrow to be released to
the prior holders of Aspiration common stock (other than, for the avoidance of doubt, the prior holders of Aspiration Series X preferred
stock and the Conversion Stockholders) as of immediately prior to the First Effective Time such that the number of issued and outstanding
shares of New Aspiration Class A common stock will not change.
Conversion Stockholder Side Letters
On December 15, 2021, we and each of the Conversion
Stockholders entered into amendments to certain side letter agreements (the “Conversion Stockholder Side Letters”), pursuant
to which, among other things, in the event that the Adjustment Period VWAP is less than $10.00 per share of New Aspiration Class A common
stock, each former Conversion Stockholder will be entitled to receive from New Aspiration, for no additional consideration, a number of
shares of New Aspiration Class A common stock equal to the product of (x) the number of shares of New Aspiration Class A common stock
issued to such Conversion Stockholder at the Closing pursuant to the terms of the Merger Agreement (the “Conversion Stockholder
Committed Shares”) that such former Conversion Stockholder holds through the Adjustment Period (as defined below), multiplied by
(y) a fraction, (A) the numerator of which is $10.00 minus the Adjustment Period VWAP, and (B) the denominator of which is the Adjustment
Period VWAP (such additional shares, the “Conversion Stockholder Additional Shares”); provided that in no event shall the
number of Conversion Stockholder Additional Shares exceed the product of 1.00 multiplied by the number of Conversion Stockholder Committed
Shares of which such former Conversion Stockholder continues to be the record and beneficial owner through the Adjustment Period or 7,782,840
shares of New Aspiration Class A common stock in the aggregate.
Pursuant to the Conversion Stockholder Side Letters,
in the event that the former Conversion Stockholders are issued Conversion Stockholder Additional Shares, each former Conversion Stockholder
will have the same registration rights with respect to the Conversion Stockholder Additional Shares as the PIPE Investors have with respect
to the resale of the Additional Shares. If a former Conversion Stockholder, in good faith and on the advice of its counsel, determines
that it is an “affiliate” (as defined in Rule 144 under the Securities Act) of either us or New Aspiration either at the Closing
or at the time the transactions contemplated by the Merger Agreement are submitted for a vote or consent, such former Conversion Stockholder
will have the same registration rights with respect to the Conversion Stockholder Committed Shares as the PIPE Investors have with respect
to the PIPE Committed Shares (as described above).
Furthermore, we and the PIPE Investors may not
amend an existing Subscription Agreement or enter into Subsequent Subscription Agreements which provide for materially different rights,
benefits and obligations with respect to the PIPE Investor party thereto without first amending the Conversion Stockholder Side Letters
to ensure that the rights, benefits and obligations of the former Conversion Stockholders are consistent with those of the PIPE Investors.
A Base PIPE Investor or former Conversion Stockholder
will automatically forfeit any right to receive any Additional Shares if (i) at any time from the Closing through the Adjustment Period,
such Base PIPE Investor or former Conversion Stockholder is not the record and beneficial owner of the PIPE Committed Shares or Conversion
Stockholder Committed Shares, as applicable, or such Base PIPE Investor or former Conversion Stockholder otherwise transfers its PIPE
Committed Shares or Conversion Stockholder Committed Shares, as applicable, from New Aspiration’s transfer agent’s custody
to a brokerage or other account not controlled by New Aspiration’s transfer agent on behalf of such Base PIPE Investor or former
Conversion Stockholder or (ii) at any time prior to the last day of the Adjustment Period, such Base PIPE Investor or former Conversion
Stockholder or any person acting on its behalf or pursuant to any understanding with such Base PIPE Investor or former Conversion Stockholder,
as applicable, directly or indirectly, engages in a Hedging Transaction (as defined in the Merger Agreement).
Aspiration Support Agreement
In connection with and following the execution
of the Merger Agreement, we will enter into support agreements with certain Aspiration stockholders (the “Aspiration Support Agreements”),
pursuant to which such Aspiration stockholders will agree, among other things, to vote in favor of the adoption and approval of the Business
Combination and any of the documents and transactions contemplated by the Merger Agreement. Additionally, such Aspiration stockholders
agreed to not transfer any securities of Aspiration held by such stockholder from the date of execution of the Aspiration Support Agreement
until the earlier of the Effective Time and the termination of the Merger Agreement in accordance with its terms, subject to certain exceptions
and to not solicit any Company Business Combination (as defined in the Merger Agreement), in each case, subject to the terms and conditions
of the Aspiration Support Agreements.
Sponsor Support Agreement
In connection with the execution of the Merger
Agreement, the Sponsor entered into a support agreement (the “Sponsor Support Agreement”) with us and Aspiration, pursuant
to which the Sponsor agreed, among other things, to vote to adopt and approve the Merger Agreement and all other documents and transactions
contemplated thereby, to vote against any Business Combination proposal other than the Business Combination or other proposals that would
impede or frustrate the Business Combination, to comply with the Merger Agreement’s prohibition on soliciting any alternative Business
Combination and to not transfer the equity interests in us that it owns, in each case, subject to the terms and conditions of the Sponsor
Support Agreement.
Amended and Restated Registration Rights Agreement
At the Closing, New Aspiration, the Sponsor and
certain stockholders of New Aspiration will enter into an Amended and Restated Registration Rights Agreement, pursuant to which, among
other things, the parties thereto will be granted certain customary registration rights with respect to shares of common stock of New
Aspiration.
Stockholders’ Agreement
At the Closing, New Aspiration, Andrei Cherny,
Joseph Sanberg and certain of their respective controlled affiliates will enter into a Stockholders’ Agreement (the “Stockholders’
Agreement”) to provide for certain governance rights and address certain governance matters relating to New Aspiration. The Stockholders’
Agreement will provide each of Mr. Cherny and Mr. Sanberg the right to nominate one individual to the New Aspiration board of directors,
subject to certain qualifications, requirements and exceptions as set forth therein.
Transfer Restrictions
The Sponsor and its directors and executive officers
are subject to certain restrictions on transfer with respect to their shares of New Aspiration common stock pursuant to that certain Letter
Agreement, dated as of March 4, 2021, by and among us, the Sponsor, and the other parties signatory thereto. Such restrictions end on
the date that is one year following the Closing, or are subject to an early price-based release with respect to 50% of such shares if
the price per share of New Aspiration Class A common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-day
trading period following the Closing.
Series
X Preferred Stock Purchase Agreement
Concurrently
with the execution of the Merger Agreement, we and Aspiration entered into a Series X Preferred Stock Purchase Agreement (the “Purchase
Agreement”) with OCM Aspiration Holdings, LLC (“Oaktree”). Pursuant to the Purchase Agreement, Aspiration has agreed
to issue and sell to Oaktree an aggregate of 27,777,777 shares of a newly designated series of preferred stock designated as
Series X Preferred Stock of Aspiration, par value $0.000003 per share (the “Aspiration Series X Preferred Stock”), for
an aggregate purchase price of $250,000,000, which is net of the original issue discount of 10% (the “Series X Financing”),
with shares of Aspiration Series X Preferred Stock having the powers, designations, preferences and other rights set forth in the Aspiration
Certificate of Designations (as defined below). The closing of the issuance and sale of Aspiration Series X Preferred Stock occurred concurrently
with the execution of the Merger Agreement. The Purchase Agreement also provides that New Aspiration will grant Oaktree registration rights
pursuant to the Registration Rights Agreement (as defined below).
Certificate
of Designations
The shares
of New Aspiration Series X Preferred Stock to be issued in exchange for shares of Aspiration Series X Preferred Stock pursuant to the
Merger Agreement, upon their issuance, will have the powers, designations, preferences, and other rights as set forth in a Certificate
of Designations of the New Aspiration Series X Preferred Stock that we will file with the Secretary of State of the State of Delaware
on or prior to the Closing Date (the “New Aspiration Certificate of Designations”). The New Aspiration Series X Preferred
Stock will have, mutatis mutandis, substantially similar powers, designations, preferences, and other rights as set forth
in the Certificate of Designations of the Aspiration Series X Preferred Stock that was filed with the Secretary of State of the State
of Delaware upon the consummation of the transactions contemplated by the Purchase Agreement (the “Aspiration Certificate of Designations”).
Voting
and Consent Rights
The New
Aspiration Series X Preferred Stock will not have any voting rights or rights to convert such preferred shares into shares of New Aspiration
Class A common stock. Holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock will be entitled to elect
(i) one director to the board of directors of New Aspiration after the ninth anniversary of the Closing Date and upon a Medium Event (as
defined below) and (ii) two directors to the board of directors of New Aspiration upon a Major Event (as defined below). New Aspiration
will need to obtain the prior written consent of holders of a majority of the outstanding shares of New Aspiration Series X Preferred
Stock for, among other things: (i) effecting any change of control, liquidation event or merger or consolidation of New Aspiration unless
the entirety of the applicable Series X Redemption Price (as defined below) is paid with respect to all then issued and outstanding shares
of Series X Preferred Stock, (ii) amending Aspiration’s organizational documents to the extent such amendment has an adverse effect
on the holders of Series X Preferred Stock, (iii) increasing or decreasing the number of authorized shares of New Aspiration Series X
Preferred Stock, (iv) creating any class or series of New Aspiration capital stock that is pari passu or senior to the New Aspiration
Series X Preferred Stock, (v) incurring indebtedness, except for indebtedness incurred under Aspiration’s existing secured debt
facilities, debt incurred that allows New Aspiration to satisfy a total net leverage ratio of 3.0x and debt incurred for the redemption
of the New Aspiration Series X Preferred Stock (subject to limited exceptions), (vi) declaring, paying or making certain dividends and
undertaking certain stock repurchases (subject to limited exceptions) and (vii) certain other specified actions.
Dividends
The dividend
rate with respect to the New Aspiration Series X Preferred Stock will be either 8.0% per year in cash or, if not paid in cash, will be
paid “in-kind” by accruing at a rate of 8.0%, 11.0% or 12.0% per year for any dividend period ending on or prior to the second
anniversary of the Closing Date, between the second and third anniversaries of the Closing Date or between the third and fourth anniversaries
of the Closing Date, respectively. New Aspiration may elect either form of dividend payment until the fourth anniversary of the Closing
Date, and dividends must be paid in cash thereafter.
Each of
the dividend rates set forth above will increase by (i) 5.0% per annum (a) if New Aspiration fails to pay any dividend that is required
to be paid in cash if surplus cash is available, (b) if New Aspiration defaults on payment with respect to a Liquidation (as defined below)
or redemption, (c) if New Aspiration is in material breach of certain covenants under the New Aspiration Certificate of Designations,
subject to certain cure periods, (d) if New Aspiration experiences a bankruptcy or insolvency event, whether voluntary or involuntary,
(e) if New Aspiration fails to deliver New Aspiration Class A common stock to a holder of New Aspiration Series X Preferred Stock upon
the valid exercise of the Warrant (the foregoing clauses (a) through (e), a “Major Event”), (f) if New Aspiration fails to
pay any dividend that is required to be paid in cash if surplus cash is unavailable, (g) if New Aspiration is in material breach of certain
other covenants under the New Aspiration Certificate of Designations, subject to certain cure periods, (h) if New Aspiration defaults
on outstanding indebtedness or if outstanding indebtedness is accelerated, in each case, in excess of $50,000,000 or (i) if New Aspiration
fails to pay an applicable final judgment in excess of $25,000,000 (the foregoing clauses (f) through (i), a “Medium Event,”
and together with a Major Event, an “Event of Noncompliance”), or (ii) 3.0% per annum if New Aspiration is in material breach
of certain other covenants under the New Aspiration Certificate of Designations that is not a Major Event or Medium Event, subject to
certain cure periods (the dividend rate as increased in each of the foregoing cases, the “Noncompliance Incremental Rate”).
In addition, if we do not have at least $200,000,000 of cash at the Closing (excluding proceeds from the issuance of New Aspiration Series
X Preferred Stock), the dividend rates set forth above will increase by 5.0% per annum (exclusive of any Noncompliance Incremental Rate
then in effect) and will remain in effect until, after the Closing Date, New Aspiration has $200,000,000 of cash (the dividend rate as
increased by this sentence, the “de-SPAC Incremental Rate”). New Aspiration may elect to pay both the Noncompliance Incremental
Rate and the de-SPAC Incremental Rate in cash or “in-kind.”
Springing
Rights
Upon the
occurrence of a Major Event that has continued for 90 days (and upon the occurrence of certain Major Events, and in certain circumstances,
180 days) or upon the occurrence of a Medium Event that has continued for 180 days, subject to certain time extensions, for so long as
such Event of Noncompliance is continuing (the period following termination of the foregoing cure periods, the “Liquidity Period”),
the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock shall have the right to cause New Aspiration
to pursue an issuance of securities, a Liquidation (as defined below), merger, sale of assets or similar transaction or series of transactions,
a leveraged recapitalization or any other transaction or series of transactions (each, a “Liquidity Transaction”) generating
sufficient proceeds available for distribution to holders of New Aspiration Series X Preferred Stock to pay the entirety of the Series
X Redemption Price (as defined below). During the Liquidity Period, New Aspiration shall direct an independent financial advisor, approved
by the holders of a majority of the outstanding shares of New Aspiration Series X Preferred Stock then outstanding, to establish procedures
to effect a Liquidity Transaction in an orderly manner with the objective of achieving the highest available value for New Aspiration
within a reasonable period of time and the payment of the entire Series X Redemption Price payable in respect of all outstanding shares
of New Aspiration Series X Preferred Stock. However, if a Liquidity Period has commenced and the Event of Noncompliance is cured, New
Aspiration may discontinue and will not be required to pursue a Liquidity Transaction.
Immediately
following the commencement of a Liquidity Transaction, holders of a majority of the outstanding shares of New Aspiration Series X Preferred
Stock may take control of and direct the process of a Liquidity Transaction and cause New Aspiration to consummate, subject to any requisite
stockholder approvals, any Liquidity Transaction in order to redeem the New Aspiration Series X Preferred Stock at the Series X Redemption
Price.
Furthermore,
during a Liquidity Period, unless New Aspiration is able to redeem outstanding New Aspiration Series X Preferred Stock at the then applicable
Series X Redemption Price as a result, New Aspiration will need to obtain the prior written consent of holders of a majority of the outstanding
shares of New Aspiration Series X Preferred Stock to acquire any business, incur any indebtedness, repurchase capital stock or make distributions
(subject to certain exceptions) or fail to redeem outstanding New Aspiration Series X Preferred Stock with surplus cash (subject to applicable
law and the terms of any indebtedness of New Aspiration).
Ranking
and Liquidation Preference
The New
Aspiration Series X Preferred Stock will rank senior to New Aspiration’s common stock with respect to dividend rights and rights
upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of New Aspiration (a “Liquidation”).
Upon a Liquidation, each share of New Aspiration Series X Preferred Stock would be entitled to the applicable Series X Redemption Price.
The liquidation preference of the New Aspiration Series X Preferred Stock will be equal to $10 per share (the “Series X Liquidation
Preference”).
Redemption
Rights and Series X Redemption Price
New Aspiration
will have the right to redeem all or any portion of the New Aspiration Series X Preferred Stock at any time by paying the applicable Series
X Redemption Price; provided, however, that no optional redemption will be permitted that would result in less than 33% of the shares
of New Aspiration Series X Preferred Stock that are issued on the Closing Date to remain outstanding following such redemption unless
all remaining shares of New Aspiration Series X Preferred Stock are redeemed.
Each holder
of New Aspiration Series X Preferred Stock will have the option to require New Aspiration to redeem any portion of the New Aspiration
Series X Preferred Stock at the Series X Redemption Price: (i) at any time after the ninth anniversary of the Closing Date or (ii) upon
the occurrence of a Major Event (following the expiration of the applicable cure period) at the election of the holders of a majority
of the outstanding shares of New Aspiration Series X Preferred Stock. New Aspiration will be required to redeem all of the outstanding
shares of New Aspiration Series X Preferred Stock at the Series X Redemption Price automatically upon the occurrence of a change of control,
a Liquidation or an insolvency event.
The following
table sets forth the “Series X Redemption Price”:
Timing of Redemption |
|
Series X Redemption Price |
Until 30 months after the Closing Date (the “First Optional Call Date”) |
|
Make-Whole Amount (as defined below) |
From the First Optional Call Date until the first anniversary of the First Optional Call Date |
|
106% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends |
From the first anniversary of the First Optional Call Date until 66 months following the First Optional Call Date |
|
103% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends |
From and after the date 66 months after the First Optional Call Date |
|
100% of the sum of the Series X Liquidation Preference and accrued but unpaid dividends |
The “Make-Whole
Amount” with respect to any redemption of any share of New Aspiration Series X Preferred Stock prior to the First Optional Call
Date is defined in the New Aspiration Certificate of Designations as an amount equal to the sum of (A) the remaining dividends that would
accrue on such shares being redeemed from the day immediately following the redemption date to the First Optional Call Date at 8.0%
as may be increased by the de-SPAC Incremental Rate or the Noncompliance Incremental Rate, if applicable, plus (B) the Series X Liquidation
Preference of such shares being redeemed plus (C) the then current amount of accrued in-kind dividends on such shares being redeemed,
assuming that, for purposes of calculating the foregoing, the shares of New Aspiration Series X Preferred Stock being redeemed were to
remain outstanding through the First Optional Call Date.
Series
X Minimum Cash Balance
Pursuant
to the New Aspiration Certificate of Designations, New Aspiration will also be required to maintain a minimum cash balance of $50,000,000
at all times so long as the New Aspiration Series X Preferred Stock remains outstanding. However, if Aspiration and its subsidiaries have
less than $10,000,000 in outstanding indebtedness, the required minimum cash balance is reduced to $30,000,000.
Investor Rights Agreement
We entered into an Investor Rights Agreement with
Oaktree to be effective upon the Closing Date (the “New Aspiration Investor Rights Agreement”) on substantially similar terms
and conditions (while taking into account the consummation of the Business Combination), as those contained in the Investor Rights Agreement
(as defined below) set forth below, such that New Aspiration, upon the Closing, shall be subject to the New Aspiration Investor Right
Agreement.
As a condition to the closing of the Purchase
Agreement, Aspiration and Oaktree entered into an Investor Rights Agreement (the “Investor Rights Agreement”) pursuant to
which, among other things, Aspiration granted Oaktree certain customary registration rights with respect to the shares of Aspiration common
stock underlying the Warrant and certain other securities that may be issued to Oaktree in respect of the Warrant.
In addition, pursuant to the Investor Rights Agreement,
for so long as shares of the Aspiration Series X Preferred Stock issued on the Series X Closing Date remain outstanding, Oaktree will
have (i) a participation right, subject to certain exceptions, pursuant to which Oaktree may maintain its ownership percentage of Aspiration
common stock in connection with future offerings or sales of Aspiration equity securities and (ii) a right of first offer with respect
to the provision of any future debt or preferred equity financing to Aspiration or its subsidiaries. The Investor Rights Agreement also
provides that, so long as 33% of the Aspiration Series X Preferred Stock issued on the Series X Closing Date remains outstanding, Oaktree
will be entitled to appoint one non-voting observer to the board of directors of Aspiration. The Investor Rights Agreement further contains
a number of other customary covenants and agreements, including certain standstill provisions, preemptive rights, rights of first refusal
with respect to future debt financing transactions and information rights.
The Investor Rights Agreement provides that Oaktree
will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated with Oaktree without the prior written
consent of Aspiration for one year following the closing of the issuance of Aspiration Series X Preferred Stock. From and after such date,
Oaktree will be restricted from transferring the Aspiration Series X Preferred Stock to parties unaffiliated with Oaktree without the
prior written consent of Aspiration, which consent may not be unreasonably withheld by Aspiration (other than in the event of a transfer
to certain restricted transferees).
Warrant
Pursuant to the Purchase Agreement, at the Closing
Date, New Aspiration will issue to Oaktree a warrant (the “Warrant”) to purchase a number of shares of New Aspiration common
stock equal to 6.0% of the total number of shares of New Aspiration capital stock outstanding on a fully diluted basis (excluding the
shares of New Aspiration Series X Preferred Stock and the Warrant) as of immediately following the consummation of the Business Combination.
Results of Operations
We have neither engaged in any operations nor
generated any revenues to date. Our only activities through June 30, 2022 were organizational activities, those necessary to prepare for
the Initial Public Offering, described below, and identifying a target company for a business combination. We do not expect to generate
any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest
income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as for due diligence expenses.
The three months ended June 30, 2022 compared
to the three months ended June 30, 2021
For the three months ended June 30, 2022 and 2021, we
had net losses of $471,568 and $1,126,924, respectively, a change of $655,356. The period to period change consists of an increase in
operating costs of $112,573, and an offset of $163,919 for changes in fair value of warrant liability and $447,776 related to changes
in interest earned on the Trust. We recorded income for the change in fair value of warrant liabilities of $101,589 for the three months
ended June 30, 2022 compared to expense of $62,330 for the three months ended June 30, 2021. The change in fair value of warrant liabilities
is due to the decrease in warrant values from an ending balance of $158,835 as of June 30, 2021 to $52,390 as of June 30, 2022 as a result
of current market conditions.
The six months ended June 30, 2022 compared
to the six months ended June 30, 2021
For the six months ended June 30, 2022 and 2021, we had
net losses of $1,125,105 and $1,397,731, respectively, a change of $272,626. The period to period change consists of a decrease in operating
costs of $335,863, and an offset of $234,605 for changes in fair value of warrant liability and $446,894 related to changes in interest
earned on the Trust. There were no warrant transaction costs for the six months ended June 30, 2022 compared to $210 for the six months
ended June 30, 2021. We recorded income for the change in fair value of warrant liabilities of $181,275 for the six months ended June
30, 2022 compared to expense of $53,330 for the six months ended June 30, 2021.
Liquidity and Capital Resources
On March 9, 2021, we consummated the Initial Public
Offering of 25,875,000 Units which includes the full exercise by the underwriters of their over-allotment option in the amount of 3,375,000
Units, at $10.00 per Unit, generating gross proceeds of $258,750,000. Simultaneously with the closing of the Initial Public Offering,
we consummated the sale of 692,500 Private Placement Units at a price of $10.00 per Private Placement Unit in a private placement to the
Sponsor and EarlyBirdCapital, generating gross proceeds of $6,925,000.
For the six months ended June 30, 2022, cash used in operating
activities was $975,768. Net loss of $1,125,105 was affected by the change in fair value of warrant liabilities of $181,275, interest
earned on marketable securities held in the Trust Account of $470,875, and an unrealized loss on marketable securities held in the Trust
Account of $28,963. Changes in operating assets and liabilities used $772,524 of cash for operating activities.
As of June 30, 2022, we had marketable securities
held in the Trust Account of $258,970,699 including interest income of $470,875 and unrealized losses of $28,963 consisting of money market
funds which are invested primarily in U.S. Treasury securities. Interest income on the balance in the Trust Account may be used by us
to pay taxes. Through June 30, 2022, we have withdrawn $274,039 from the Trust Account related to payments for Delaware franchise taxes.
We intend to use substantially all of the funds
held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete
the Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete the
Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the
target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2022, we had cash of $799,662 held
outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a business combination.
In order to fund working capital deficiencies
or finance transaction costs in connection with a business combination, the Sponsor, or certain of our officers and directors or their
affiliates may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we would repay such
loaned amounts. In the event that a business combination does not close, we may use a portion of the working capital held outside the
Trust Account to repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $1,500,000 of
such loans may be convertible into units at a price of $10.00 per unit, at the option of the lender. The units would be identical to the
Private Placement Units.
We will need to raise additional capital through
loans or additional investments from our initial stockholders, officers or directors. If we are unable to raise additional capital, we
may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing
operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new
financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability
to continue as a going concern through one year and one day from the issuance of this report.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities
that would be considered off-balance sheet arrangements as of June 30, 2022. We do not participate in transactions that create relationships
with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established
for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000
for office space, administrative and support services. We began incurring these fees on March 4, 2021 and will continue to incur these
fees monthly until the earlier of the completion of the Business Combination and our liquidation.
We have entered into an agreement, pursuant to
which we will pay the Vice President a total of $10,000 per month for assisting us in negotiating and consummating an initial business
combination. Upon completion of the Business Combination or the Company’s liquidation, the agreement will terminate and the Company
will cease paying these monthly fees.
We engaged EarlyBirdCapital as our advisor in
connection with the Business Combination to assist us in holding meetings with our stockholders to discuss the Business Combination and
the Aspiration’s attributes, introduce us to potential investors that are interested in purchasing our securities in connection
with the Business Combination, assist us in obtaining stockholder approval for the Business Combination and assist us with its press
releases and public filings in connection with the Business Combination. On February 14, 2022, the BCMA was amended, and as a result
Morgan Stanley is no longer required to perform any services under the BCMA and is not entitled to receive any compensation thereunder.
We will pay EarlyBirdCapital a cash fee for such services upon the consummation of the Business Combination in an amount equal to 1.75%
of the gross proceeds of the Initial Public Offering (exclusive of any applicable finders’ fees which might become payable).
We have issued to EarlyBirdCapital, and/or its
designees, 200,000 representative shares (the “representative shares”) for nominal consideration. The holders of the representative
shares have agreed not to transfer, assign or sell any such shares without our prior consent until the completion of our initial business
combination. In addition, the holders of the representative shares have agreed (i) to waive their conversion rights (or right to participate
in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive
their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete our initial business
combination within 24 months from the closing of the Initial Public Offering.
The representative shares have been deemed compensation
by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of the Registration
Statement on Form S-1 pursuant to Rule 5110(e)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(e)(1), these securities will not be
sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative,
put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately
following the effective date of the Registration Statement on Form S-1 or commencement of sales of the Initial Public Offering, except
to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, provided that all securities
so transferred remain subject to the lockup restriction above for the remainder of the time period.
We have granted the holders of these shares and
the private placement units registration rights. EarlyBirdCapital may not exercise its demand and “piggy-back” registration
rights more than five and seven years, respectively, after the effective date of our Registration Statement on Form S-1 and may not exercise
its demand rights on more than one occasion in accordance with FINRA Rule 5110(g)(8).
Critical Accounting Policies
The preparation of condensed financial statements
and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting
policies:
Warrant Classification
We account for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing
Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).
The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company’s own shares of common stock and whether the warrant holders could potentially require “net
cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly
period end date while the warrants are outstanding. As of June 30, 2022 and December 31, 2021, the Private Placement Warrants were accounted
for as liabilities, and the Public Warrants were accounted for as temporary equity.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject
to possible redemption in accordance with the guidance in ASC 480. Shares of Class A common stock subject to mandatory redemption are
classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features
redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity.
Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence
of uncertain future events. Accordingly, at June 30, 2022, the entire amount of Class A common stock subject to possible redemption is
presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheet.
Net Loss Per Share of Common Stock
The Company’s statement of operations includes
a presentation of loss per share of common stock in a manner similar to the two-class method of loss per share.
Net loss per share of common stock, basic and
diluted, for our Class A common stock subject to possible redemption is calculated by dividing (i) its allocable share of net loss by
(ii) the weighted average number of shares of our Class A common stock subject to possible redemption outstanding during the period.
Net loss per share of common stock, basic and
diluted, for our non-redeemable Class A common stock is calculated by dividing (i) its allocable share of net loss by (ii) the weighted
average number of shares of our non-redeemable Class A common stock outstanding during the period.
The Company has not considered the effect of the
Public Warrants and the Private Placement Warrants to purchase shares of our Class A common stock in the calculation of diluted net loss
per share, since the exercise of such warrants into shares of our Class A common stock is contingent upon the occurrence of future events
and their inclusion would be anti-dilutive. As a result, diluted net loss per common stock is the same as basic net loss per common stock
for the periods presented.
Non-redeemable Class A common stock includes the
Founder Shares and other shares of Class A common stock that do not have redemption features.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.