Unaudited Notes to Condensed Financial Statements
NOTE 1 - DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General:
Hennessy Capital Investment Corp. VI (the “Company”)
was incorporated in Delaware on January 22, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the
“Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
At March 31, 2023, the Company had not commenced
any operations. All activity for the period from January 22, 2021 (inception) through March 31, 2023 relates to the Company’s formation
and the initial public offering (“Public Offering”) described below and, subsequent to the Public Offering, identifying and
completing a suitable Business Combination. The Company will not generate any operating revenues until after completion of its initial
Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived
from the Public Offering.
All dollar amounts are rounded to the nearest thousand
dollars.
Sponsor and Financing:
The Company’s sponsor is Hennessy Capital
Partners VI LLC, a Delaware limited liability company (the “Sponsor”). The Company intends to finance a Business Combination
with proceeds from the $340,930,000 Public Offering (Note 3) and a $10,819,000 private placement of warrants (the “Private Placement
Warrants”) to our Sponsor, our Direct Anchor Investors (as defined below) and our Other Anchor Investors (as defined below) (“Private
Placement”), (Note 4). Upon the closing of the Public Offering and the Private Placement (including the underwriters’ over-allotment
option exercise), $340,930,000 was deposited in a trust account (the “Trust Account”).
The Trust Account:
The funds in the Trust Account are invested only
in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain
conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will
remain in the Trust Account until the earlier of (i) the consummation of the initial Business Combination or (ii) the distribution of
the Trust Account as described below. The remaining funds outside the Trust Account may be used to pay for business, legal and accounting
due diligence on prospective acquisition targets and continuing general and administrative expenses.
The Company’s amended and restated certificate
of incorporation provides that, other than the withdrawal of interest to pay tax obligations, if any (less up to $100,000 of interest
to pay dissolution expenses), none of the funds held in trust will be released until the earliest of: (a) the completion of the initial
Business Combination, (b) the redemption of any shares of Class A common stock issued pursuant to the Public Offering (“public shares”)
properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation
(i) to modify the substance or timing of the Company’s obligation to redeem 100% of the public shares if the Company does not complete
the initial Business Combination within 24 months from the closing of the Public Offering (i.e., by October 1, 2023), or (ii) with respect
to any other provision relating to stockholders’ rights or pre-Business Combination activity, and (c) the redemption of the public
shares if the Company is unable to complete the initial Business Combination within 24 months from the closing of the Public Offering,
subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of creditors, if any, which
could have priority over the claims of the Company’s public stockholders.
Business Combination:
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Public Offering and the sale of the Private Placement Warrants, although
substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination
with (or acquisition of) a Target Business. As used herein, “Target Business” is 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 the deferred underwriting commissions and taxes
payable on interest earned) at the time of signing a definitive agreement in connection with the Company’s initial Business Combination.
There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company, after signing a definitive agreement
for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose
in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination,
for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the
consummation of the initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity
to have their shares redeemed by the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount
in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement
of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval
of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its
discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would
otherwise require the Company to seek stockholder approval unless a vote is required by the rules of the Nasdaq Global Market. If the
Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of Class A
and Class B common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its public
shares in an amount that would cause its net tangible assets to be less than $5,000,001 upon consummation of a Business Combination. In
such case, the Company would not proceed with the redemption of its public shares and the related Business Combination, and instead may
search for an alternate Business Combination.
If the Company holds a stockholder vote or there
is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares
for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days
prior to the consummation of the initial Business Combination, including interest but less taxes payable. As a result, such shares of
Class A common stock are recorded at redemption amount and classified as temporary equity, in accordance with the Financial Accounting
Standards Board (“FASB”) ASC 480, “Distinguishing Liabilities from Equity.” The amount in the Trust Account is
initially $10.00 per public share of Class A common stock ($340,930,000 held in the Trust Account divided by 34,092,954 public shares).
The Company has 24 months from the closing date
of the Public Offering, until October 1, 2023, to complete its initial Business Combination. If the Company does not complete a Business
Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably
possible, but not more than ten business days thereafter, redeem the public shares of Class A common stock for a per share pro rata portion
of the Trust Account, including interest, but less taxes payable (less up to $100,000 of such net interest to pay dissolution expenses)
and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Company’s net assets to its
creditors and remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor and the Company’s independent
directors (collectively, the “initial stockholders”) have waived their rights to participate in any redemption with respect
to their Founder Shares (as defined in Note 4); however, if the initial stockholders or any of the Company’s officers, directors
or affiliates acquire shares of Class A common stock in or after the Public Offering, they will be entitled to a pro rata share of the
Trust Account upon the Company’s redemption or liquidation in the event the Company does not complete a Business Combination within
24 months from the closing of the Public Offering.
In the event of such distribution, it is possible
that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than
the price per Unit in the Public Offering.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The accompanying unaudited condensed financial
statements of the Company are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to
Form 10-Q and Article 8 of Regulation S-X promulgated under the Securities Act. Certain information or footnote disclosures normally included
in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of
the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all the information
and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management,
the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are
necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed
with the SEC on March 28, 2023. The interim results for three months ended March 31, 2023 are not necessarily indicative of the results
to be expected for the period ending December 31, 2023 or for any other future periods.
Mandatory Liquidation, Liquidity and Going Concern:
The Company has approximately $340,000 in
cash and approximately $1,364,000 of negative working capital (including approximately $691,000 of deferred compensation that is not
payable until the closing of a Business Combination) at March 31, 2023. Further, if the Company cannot complete a Business
Combination before October 1, 2023, it could be forced to wind up its operations and liquidate unless it receives an extension
approval from its stockholders. These conditions raise substantial doubt about the Company’s ability to continue as a going
concern for a period of time within one year after the date that the unaudited condensed financial statements are issued. The
Company’s plan to deal with this uncertainty is to complete a Business Combination prior to October 1, 2023 and to work with
creditors to defer payments. There is no assurance that the Company’s plans to consummate a Business Combination and work with
creditors to defer payments will be successful or successful within the required timeframe. The condensed financial statements do
not include any adjustments that might result from the outcome of these uncertainties.
Emerging Growth Company:
Section 102(b)(1) of the JOBS Act exempts emerging
growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those
that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not
to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private
companies adopt the new or revised standards. This may make comparison of the Company’s financial statements with another public
company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Net Income or Loss per Share of Common Stock:
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income or loss per share of common stock is computed by dividing
net income or loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the
period plus, to the extent dilutive, the incremental number of shares of common stock to settle Warrants, as calculated using the treasury
stock method.
The Company has not considered the effect of the
Warrants sold in the Public Offering and Private Placement to purchase an aggregate of 18,576,712 shares of Class A common stock in the
calculation of diluted income (loss) per share, since their inclusion would be anti-dilutive under the treasury stock method and are contingent
on future events. As a result, diluted income (loss) per share of Class A common stock is the same as basic income (loss) per share of
common stock for the periods presented.
The Company has two classes of common stock, which
are referred to as shares of Class A common stock and shares of Class B common stock. Income and losses are shared pro rata among the
two classes of common stock. Net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted
average number of shares of common stock outstanding during the respective period. The changes in redemption value that are accreted to
Class A common stock subject to redemption (see below) are representative of fair value and therefore is not factored into the calculation
of earnings per share.
The following table reflects the net income per
share after allocating income between the shares based on outstanding shares:
| | |
Three months ended
March 31, 2023 | | |
Three months ended
March 31, 2022 | |
| | |
Class B | | |
Class A | | |
Class A | | |
Class B | |
| Numerator: | |
| | |
| | |
| | |
| |
| Basic and diluted net income per share of common stock: | |
| | |
| | |
| | |
| |
| Allocation of income – basic and diluted | |
$ | 181,000 | | |
$ | 545,000 | | |
$ | 4,607,000 | | |
$ | 1,535,000 | |
| Denominator: | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted weighted average shares of common stock: | |
| 11,365,000 | | |
| 34,093,000 | | |
| 34,093,000 | | |
| 11,365,000 | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted net income per share of common stock | |
$ | 0.02 | | |
$ | 0.02 | | |
$ | 0.14 | | |
$ | 0.14 | |
Cash and Cash Equivalents:
The Company considers all highly liquid instruments
with original maturities of three months or less when acquired, to be cash equivalents. The Company had no cash equivalents at March 31,
2023 or December 31, 2022.
Concentration of Credit Risk:
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal
Deposit Insurance Corporation coverage of $250,000. Any loss incurred or lack of access to such funds could have a significant adverse
impact on the Company’s financial condition, results of operations and cash flows.
Fair Value of Financial Instruments:
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the balance sheets primarily due to their short-term nature, except for derivative warrant liabilities
(see Note 6).
Fair value is defined as the price that would be
received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement
date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable
inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other
than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments
in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived
from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure
fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is
categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Use of Estimates:
The preparation of the unaudited condensed financial
statements in conformity with U.S. 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 unaudited condensed financial
statements and the reported amounts of 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 as of March 31, 2023 and December 31, 2022, 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.
Offering Costs:
The Company complies with the requirements of FASB
ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A - “Expenses of Offering.” Costs incurred in connection with
preparation for the Public Offering totaled approximately $19,740,000 including Company costs of approximately $990,000 together with
$18,750,000 of underwriters’ discount, have been allocated to equity instruments ($19,018,000) and derivative warrant liabilities
($722,000), based on their relative values, and charged to temporary equity or expense (in the case of the portion allocated to derivative
warrant liabilities) upon completion of the Public Offering.
Income Taxes:
The Company follows the asset and liability method
of accounting for income taxes under FASB ASC, 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the balance sheet carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company’s currently taxable income consists
of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered either
start-up or business combination costs and are not currently deductible. Further, warrant costs and income from change in fair value of
derivative warrant liabilities may not be deductible or includible in taxable income. During the three months ended March 31, 2023 and
2022, the Company recorded income tax expense of approximately $770,000 and $0, respectively. This occurs because, in 2023, there is substantial
taxable interest income earned on the Trust Account, which was partially offset by deductible franchise taxes, so there was income for
tax purposes. In 2022, interest income earned was fully offset by deductible franchise taxes so there was no taxable income. The Company’s
effective tax rate for the three months ended March 31, 2023 and 2022 was approximately 51% and 0%, respectively, which differs from the
expected income tax rate primarily due to substantial non-deductible expenses from warrant fair value adjustments, offset
partially by the start-up costs (discussed above) which are not currently deductible and business combination costs which may not be deductible
or taxable. At March 31, 2023 and December 31, 2022, the Company has a gross deferred tax asset of approximately $700,000 and $500,000,
respectively, primarily related to start-up costs. Management has determined that a full valuation allowance of the deferred tax asset
is appropriate at this time.
FASB 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. There were no unrecognized tax benefits as of March 31, 2023 or December 31, 2022. The Company recognizes accrued interest
and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties
at March 31, 2023 or December 31, 2022. The Company is currently not aware of any issues under review that could result in significant
payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities
since inception.
Redeemable Common Stock:
As discussed in Note 3, all of the 34,092,954 public
shares sold as part of Units in the Public Offering contain a redemption feature which allows for the redemption of public shares if the
Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination. In accordance with FASB
ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent
equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are
excluded from the provisions of FASB ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides
that in no event will it redeem its public shares in an amount that would cause its net tangible assets (i.e., total assets less
intangible assets and liabilities) to be less than $5,000,001 upon the closing of a Business Combination.
While redemptions cannot cause the Company’s
net tangible assets to fall below $5,000,000, all shares of Class A common stock are redeemable and classified as such on the Company’s
balance sheet until such time as a redemption event takes place. At March 31, 2023, the value of Class A common stock that may be redeemed
is equal to approximately $10.18 per share (which is the assumed redemption price) multiplied by 34,092,954 shares of Class A common stock.
The Company recognizes changes immediately as they
occur and adjusts the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount
of redeemable Class A common stock are affected by adjustments to additional paid-in capital. Accordingly, at March 31, 2023 and December
31, 2022, all of the 34,092,954 public shares were classified outside of permanent equity. Class A common stock subject to redemption
consist of:
| Gross proceeds of Public Offering | |
$ | 340,930,000 | |
| Less: Proceeds allocated to Public Warrants | |
| (11,935,000 | ) |
| Offering costs | |
| (19,018,000 | ) |
| Plus: Accretion of carrying value to redemption value in 2021 | |
| 30,953,000 | |
| Subtotal at date of Public Offering and December 31, 2021 | |
| 340,930,000 | |
| Plus: Accretion of carrying value to redemption value in 2022 | |
| 3,468,000 | |
| Subtotal at December 31, 2022 | |
| 344,398,000 | |
| Plus: Accretion of carrying value to redemption value in 2023 | |
| 2,833,000 | |
| Shares of Class A common stock subject to redemption at March 31, 2023 | |
$ | 347,231,000 | |
Derivative Warrant Liabilities
The Company accounts for Warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).
The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the Warrants meet all of the requirements for equity classification under ASC 815, including whether
the Warrants are indexed to the Company’s own shares, 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.
For issued or modified Warrants that meet all
of the criteria for equity classification, the Warrants are required to be recorded as a component of additional paid-in capital at
the time of issuance. For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are
required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of the Warrants are recognized as a non-cash gain or loss on the unaudited condensed statements of operations.
Costs associated with issuing the Warrants accounted for as liabilities are charged to operations when the Warrants are issued. The
fair value of the Warrants as described below in Note 6, is based upon, or derived from, the trading price of our warrants issued
initially as part of the units offered in our initial public offering (the “Public Warrants”) but now trade separately
in an active, open market.
Recent Accounting Pronouncements:
Management does not believe that any recently issued,
but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited
condensed financial statements.
Subsequent Events:
Management has evaluated subsequent events and
transactions occurring after March 31, 2023 (the unaudited condensed balance sheet date), up to the date of the unaudited condensed financial
statements were issued. The Company has concluded that all such events and transactions that would require adjustment or disclosure in
the unaudited condensed financial statements have been recognized or disclosed.
NOTE 3 - PUBLIC OFFERING
In October 2021, the Company consummated the Public
Offering of 34,092,954 units (including the underwriters’ partial exercise of their over-allotment option) at a price of $10.00
per unit (the “Units”). Each Unit consists of one share of the Company’s Class A common stock, $0.0001 par value and
one-third of one redeemable warrant (the “Warrants”). Each whole Warrant offered in the Public Offering is exercisable to
purchase one share of Class A common stock at $11.50 per share, subject to adjustment (Note 6).
The Company granted the underwriters a 45-day option
to purchase up to 4,500,000 additional Units to cover any over-allotments, at the Public Offering price less the underwriting discounts
and commissions. On October 21, 2021, the underwriters’ exercised their option with respect to 4,092,954 Units. The Warrants issued
in connection with 4,092,954 over-allotment Units are identical to the Public Warrants and have no net cash settlement provisions.
The Company paid an underwriting discount of 2.0%
of the per Unit price to the underwriters at the closing of the Public Offering and over-allotment option exercise (an aggregate of approximately
$6,819,000), with an additional fee (the “Deferred Discount”) of 3.5% (an aggregate of approximately $11,933,000) of the gross
offering proceeds payable upon the consummation of the initial Business Combination. The Deferred Discount will become payable to the
underwriters from the amounts held in the Trust Account solely in the event the Company completes its initial Business Combination.
The Company intends to finance a Business Combination
with proceeds of approximately $340,930,000 from the Public Offering and $10,819,000 from the private placement (Note 4), net of expenses
of the offering and amounts allocated to working capital. Upon the closing of the Public Offering, the over-allotment option and the Private
Placement, approximately $340,930,000 was deposited in the Trust Account.
In July and August 2021, the Company entered into
subscription agreements with the Direct Anchor Investors (as defined below) and the Other Anchor Investors (as defined below) to purchase
4,853,177 Private Placement Warrants at $1.50 per Warrant. The Direct Anchor Investors, the Other Anchor Investors and one strategic investment
fund that is focused on end markets similar to those on which the Company intends to concentrate (collectively, the “Anchor Investors”)
also purchased an aggregate of $321.1 million of Units in the Public Offering. The Anchor Investors are also entitled to purchase from
the Sponsor, upon consummation of the initial Business Combination and subject to certain conditions, an aggregate of up to 49% of the
number of Founder Shares outstanding upon closing of the Public Offering, at a purchase price of approximately $0.002 per share.
NOTE 4 - RELATED PARTY TRANSACTIONS
Founder Shares
In January 2021 the Sponsor purchased 4,312,500
shares of Class B common stock (the “Founder Shares”) for $25,000, or approximately $0.006 per share (up to 562,500 of which
were subject to forfeiture to the extent the underwriters’ over-allotment option was not exercised in full). In March and September
2021, the Sponsor transferred an aggregate of 150,000 Founder Shares to the Company’s independent directors. In March 2021, the
Company effected a stock dividend of 0.33333333 of a Founder Share for each outstanding Founder Share, and in September 2021, the Company
effected a second stock dividend of 1 Founder Share for each outstanding Founder Share, which stock dividends resulted in the Sponsor
and the Company’s independent directors holding an aggregate of 11,500,000 Founder Shares (up to 1,500,000 of which were subject
to forfeiture by the Sponsor depending on the extent to which the underwriters’ option to purchase additional Units was exercised).
The share and per share amounts related to the stock dividend have been retroactively restated in the accompanying unaudited condensed
financial statements. The Founder Shares are identical to the Class A common stock included in the Units sold in the Public Offering,
except that the Founder Shares automatically convert into shares of Class A common stock at the time of the initial Business Combination
and are subject to certain transfer restrictions, as described in more detail below. The Sponsor agreed to forfeit up to 1,500,000 Founder
Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The forfeiture was to be adjusted to
the extent that the over-allotment option was not exercised in full by the underwriters so that the initial stockholders would own 25.0%
of the Company’s issued and outstanding shares after the Public Offering. The underwriters’ exercised their over-allotment
in part, and therefore 135,682 Founder Shares were forfeited by the Sponsor.
The Company’s initial stockholders have agreed
not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or (B) subsequent to the Company’s initial Business Combination, if (x) the last reported sale price
of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s
initial Business Combination or (y) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction
after the initial Business Combination that results in all of the Company’s stockholders having the right to exchange their shares
of common stock for cash, securities or other property.
Private Placement Warrants
Simultaneously with the closing of the Public Offering
on October 1, 2021 and the partial exercise of the underwriters’ over-allotment option on October 21, 2021, the Sponsor and certain
funds and accounts managed by subsidiaries of BlackRock, Inc., Arena Capital Advisors, LLC, for and on behalf of the funds and accounts
it manages, D. E. Shaw Valence Investments (Cayman) Limited and D. E. Shaw Valence Portfolios, L.L.C., certain funds managed by affiliates
of Apollo Global Management, Inc., certain funds managed by Highbridge Capital Management, LLC and Antara Capital Total Return SPAC Master
Fund LP (collectively, the “Direct Anchor Investors”), and four other unaffiliated qualified institutional buyers or institutional
accredited investors, on behalf of one or more funds that they advise or manage (collectively, the “Other Anchor Investors”),
purchased from the Company in a private placement an aggregate of 7,212,394 Warrants at a price of $1.50 per warrant (an aggregate purchase
price of approximately $10,819,000) (the “Private Placement Warrants”). The Sponsor purchased 2,359,217 Private Placement
Warrants and the Direct Anchor Investors and Other Anchor Investors purchased an aggregate of 4,853,177 Private Placement Warrants. Each
Private Placement Warrant entitles the holder to purchase one share of Class A common stock at $11.50 per share. A portion of the purchase
price of the Private Placement Warrants was added to the proceeds from the Public Offering and deposited in the Trust Account pending
completion of the Company’s initial Business Combination. The Private Placement Warrants are identical to the Warrants included
in the Units sold as part of the Units in the Public Offering, except that the Private Placement Warrants, so long as they are held by
the Sponsor, the Direct Anchor Investors, the Other Anchor Investors or their respective permitted transferees, (i) will not be redeemable
by the Company (except if the Reference Value is less than $18.00 per share (as adjusted for share splits, share dividends, rights issuances,
subdivisions, reorganizations, recapitalizations and the like), in which case the Private Placement Warrants must also concurrently be
called for redemption on the same terms as the outstanding Warrants), (ii) may not (including the shares of Class A common stock issuable
upon the exercise of such Private Placement Warrants), subject to certain limited exceptions as described in the Registration Statement,
be transferred, assigned or sold until 30 days after the completion of the Company’s initial Business Combination, (iii) may be
exercised on a cashless basis and (iv) the holders thereof (including with respect to the shares of Class A common stock issuable upon
exercise of such Private Placement Warrants) are entitled to registration rights. Otherwise, the Private Placement Warrants have terms
and provisions that are identical to those of the Warrants being sold as part of the Units in the Public Offering and have no net cash
settlement provisions.
If the Company does not complete a Business Combination,
then the proceeds from the sale of the Private Placement Warrants deposited in the Trust Account will be part of the liquidating distribution
to the public stockholders and the Private Placement Warrants issued to the Sponsor, the Direct Anchor Investors and the Other Investors
will expire worthless.
Registration Rights
The Company’s initial stockholders and the
holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement executed on
the date of the prospectus for the Public Offering. These holders are entitled to make up to three demands, excluding short form registration
demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have “piggy-back”
registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses
incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering
the securities under the registration rights agreement.
Related Party Loans
In January 2021, the Sponsor agreed to loan the
Company an aggregate of $500,000 by drawdowns against the issuance of an unsecured promissory note (the “Note”) to cover expenses
related to the Public Offering. The Note was non-interest bearing and payable, as amended in July 2021, on the earlier of December 31,
2021 or the completion of the Public Offering.
Prior to October 1, 2021, the Company had borrowed
$195,000 under the Note in order to pay expenses of the Public Offering. All such amounts borrowed under the Note were paid at the closing
of the Public Offering on October 1, 2021 and there are no amounts available to borrow after that date.
If the Sponsor, an affiliate of the Sponsor or
the Company’s officers and directors make any working capital loans, up to $1,500,000 of such loans may be converted into Warrants,
at the price of $1.50 per warrant, at the option of the lender. Such Warrants would be identical to the Private Placement Warrants. As
of March 31, 2023 and December 31, 2022, none of the Sponsor, affiliates of the Sponsor or the Company’s officers or directors had
made any working capital loans to the Company.
Administrative Support Agreement and Payments to Certain Officers
The Company has agreed to pay $15,000 per month
for office space, utilities and secretarial and administrative support to an affiliate of the Sponsor, Hennessy Capital Group LLC. Services
commenced on September 29, 2021, the date the Company’s securities were first listed on the Nasdaq Global Market, and will terminate
upon the earlier of the consummation by the Company of an initial Business Combination or the liquidation of the Company. Charges to operations
under the agreement for the three months ended March 31, 2023 and 2022 were $45,000 and $45,000, respectively, and there was no amount
payable at March 31, 2023 or December 31, 2022.
Also, commencing on September 29, 2021, the Company
began to compensate each of its President and Chief Operating Officer as well as its Chief Financial Officer $29,000 per month prior to
the consummation of the Company’s initial Business Combination, of which $14,000 per month is payable upon the completion of the
Company’s initial Business Combination and $15,000 per month is payable currently for their services. In addition, in January 2022,
the Company began to compensate a Vice President $25,000 per month, $12,500 of which is payable upon the completion of the Company’s
initial Business Combination and $12,500 of which is payable currently for his services. An aggregate of approximately $249,000 and $249,000,
respectively, was charged to operations for the three months ended March 31, 2023 and 2022, respectively. Deferred compensation - related
parties includes approximately $691,000 and $570,000, respectively, under this obligation at March 31, 2023 and December 31, 2022, respectively.
NOTE 5 - TRUST ACCOUNT AND FAIR VALUE MEASUREMENT
The Company complies with FASB ASC 820, Fair Value
Measurements, 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.
Upon the closing of the Public Offering and the
Private Placement, a total of $340,930,000 was deposited into the Trust Account. The proceeds in the Trust Account may be invested in
either U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
2a-7 under the Investment Company Act of 1940, as amended, and that invest solely in U.S. government treasury obligations.
At March 31, 2023 and December 31, 2022, the balance
in the Trust Account was held in a money market fund meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940,
as amended, and that invest solely in U.S. government treasury obligations. The balance in the Trust Account is presented at fair value.
In March 2023, the Company withdrew approximately $50,000 to fund the payment of 2022 franchise taxes. Subsequent to March 31, 2023, in April 2023, the Company withdrew approximately $340,000 in connection with the payment of income
and franchise taxes.
When it has them, the Company classifies its U.S.
government treasury bills and equivalent securities as held-to-maturity in accordance with FASB ASC 320, “Investments - Debt and
Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until
maturity. Held-to-maturity U.S. government treasury bills are recorded at amortized cost and adjusted for the amortization of discounts.
There are no held-to-maturity securities held by the Company at March 31, 2023 or December 31, 2022.
The following tables present information about
the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 and indicate
the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. Since all of the Company’s
permitted investments at March 31, 2023 and December 31, 2022 consisted of money market funds that invest only in U.S. government treasury
bills, fair values of its investment are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical
assets or liabilities as follows:
| Description at March 31, 2023 | |
Quoted
Price
Prices in
Active
Markets
(Level 1) | |
| Assets: | |
| |
| Money market funds | |
$ | 348,068,000 | |
| Description at December 31, 2022 | |
Quoted
Price
Prices in
Active
Markets
(Level 1) | |
| Assets: | |
| |
| Money market funds | |
$ | 344,463,000 | |
NOTE 6 - WARRANT LIABILITIES
At March 31, 2023 and December 31, 2022, the Company
has 18,576,712 Warrants outstanding, including 11,364,318 Public Warrants and 7,212,394 Private Placement Warrants. The Company is required
to record the Warrants at fair value at each reporting period, with changes in fair value recognized in the unaudited condensed statement
of operations.
The following tables present information about
the Company’s Warrant liabilities that are measured at fair value on a recurring basis at March 31, 2023 (unaudited) and December
31, 2022 and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | |
March 31,
2023 | | |
Quoted Prices
in Active
Markets
(Level 1) | | |
Significant
Other
Observable
Inputs
(Level 2) | | |
Significant
Other
Observable
Inputs
(Level 3) | |
| Warrant Liabilities: | |
| | |
| | |
| | |
| |
| Public Warrants | |
$ | 1,818,000 | | |
$ | 1,818,000 | | |
$ | - | | |
$ | - | |
| Private Placement Warrants | |
| 1,154,000 | | |
| - | | |
| 1,154,000 | | |
| - | |
| Derivative warrant liabilities at March 31, 2023 | |
$ | 2,972,000 | | |
$ | 1,818,000 | | |
$ | 1,154,000 | | |
$ | - | |
| Description | |
December 31,
2022 | | |
Quoted Prices
in Active
Markets
(Level 1) | | |
Significant
Other
Observable
Inputs
(Level 2) | | |
Significant
Other
Unobservable
Inputs
(Level 3) | |
| Warrant Liabilities: | |
| | |
| | |
| | |
| |
| Public Warrants | |
$ | 1,137,000 | | |
$ | 1,137,000 | | |
$ | - | | |
$ | - | |
| Private Placement Warrants | |
| 721,000 | | |
| - | | |
| 721,000 | | |
| - | |
| Derivative warrant liabilities at December 31, 2022 | |
$ | 1,858,000 | | |
$ | 1,137,000 | | |
$ | 721,000 | | |
$ | - | |
There were no transfers between levels during the
three months ended March 31, 2023.
At March 31, 2023 and December 31, 2022, the Company
valued its Public Warrants based on publicly observable inputs (Level 1 inputs) from the trading in the Public Warrants in an active market
($0.16 and $0.10 per warrant on March 31, 2023 and December 31, 2022, respectively). Since the Private Placement Warrants are substantially
similar to the Public Warrants but do not trade, the Company valued them based on the value of the Public Warrants (significant other
observable inputs - Level 2).
The derivative warrant liabilities are not subject
to qualified hedge accounting.
Public Warrants
At March 31, 2023 and December 31, 2022, there
were 11,364,318 Public Warrants outstanding. Each whole Warrant offered in the Public Offering is exercisable to purchase one share of
Class A common stock. Under the terms of the warrant agreement, the Company has agreed to use its reasonable best efforts to file a new
registration statement under the Securities Act, following the completion of the Company’s initial Business Combination. No fractional
Warrants have been or will be issued upon separation of the Units and only whole Warrants trade. Each Warrant will become exercisable
on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Public Offering; provided
in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock
issuable upon exercise of the Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise
their Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed
that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company
will use its reasonable best efforts to file with the SEC and have an effective registration statement covering the shares of Class A
common stock issuable upon exercise of the Warrants and to maintain a current prospectus relating to those shares of Class A common stock
until the Warrants expire or are redeemed. If a registration statement covering the Class A common stock issuable upon exercise of the
Warrants is not effective by the 60th business day after the closing of the initial Business Combination, Warrant holders may,
until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an
effective registration statement, exercise Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities
Act or another exemption. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise
of a Warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under
Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Warrants who exercise their Warrants to do
so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects,
it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will
use its reasonable best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Warrants have an exercise price of $11.50 per
share, subject to adjustments, and expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes
in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share
of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of
directors and, in the case of any such issuance to the Company’s initial stockholders or their affiliates or the Anchor Investors
(as defined below), without taking into account any Founder Shares or Warrants held by the Company’s initial stockholders or such
affiliates, as applicable, or the Anchor Investors, as applicable, prior to such issuance) (the “Newly Issued Price”), (y)
the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available
for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions),
and (z) the volume weighted average trading price of Class A common stock during the 20 trading day period starting on the trading day
prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below
$9.20 per share, the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market
Value and the Newly Issued Price, the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to
180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted
(to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
Redemption of Warrants when the price per share
of Class A common stock equals or exceeds $18.00. Once the Warrants become exercisable, the Company may redeem the outstanding Warrants
for cash (except as described herein with respect to the Private Placement Warrants):
| ● | in whole and not in part; |
| ● | at a price of $0.01 per Warrant; |
| ● | upon a minimum of 30 days’
prior written notice of redemption; and |
| ● | if, and only if, the closing
price of Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company
sends the notice of redemption to the Warrant holders (the “Reference Value”). |
Redemption of Warrants when the price per share
of Class A common stock equals or exceeds $10.00. Once the Warrants become exercisable, the Company may redeem the outstanding Warrants
(except as described with respect to the Private Placement Warrants):
| |
● |
in whole and not in part; |
| |
● |
at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the fair market value of the shares of Class A common stock; |
| |
● |
if, and only if, the closing price of the shares of Class A common stock equals or exceeds $10.00 per public share (as adjusted) on the trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders; and |
| |
● |
if the Reference Value is less than $18.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like), then the Private Placement Warrants must also concurrently be called for redemption on the same terms (except as described herein with respect to a holder’s ability to cashless exercise its Warrants) as the outstanding Warrants. |
In no event will the Company be required to net
cash settle any Warrant. If the Company is unable to complete a Business Combination within the 24-month period to complete the Business
Combination (i.e. by October 1, 2023), and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive
any of such funds with respect to their Warrants, nor will they receive any distribution from the Company’s assets held outside
of the Trust Account with the respect to such Warrants. Accordingly, the Warrants may expire worthless.
Private Placement Warrants
See Note 4 for information about the Company’s
outstanding Private Placement Warrants to purchase 7,212,394 shares of Class A common stock.
NOTE 7 - STOCKHOLDERS’ DEFICIT
Common Stock
The authorized common stock of the Company is 220,000,000
shares, including 200,000,000 shares of Class A common stock, par value $0.0001 per share, and 20,000,000 shares of Class B common stock,
par value $0.0001 per share. Upon completion of the Company’s initial Business Combination, the Company may (depending on the terms
of the Business Combination) be required to increase the authorized number of shares at the same time as its stockholders vote on the
Business Combination to the extent the Company seeks stockholder approval in connection with its initial Business Combination. Holders
of the Company’s Class A and Class B common stock vote together as a single class and are entitled to one vote for each share of
Class A and Class B common stock in connection with the initial Business Combination. In March 2021 and December 31, 2021, the Company
effected a stock dividend of 0.33333333 of Founder Share for each outstanding Founder Share, and the Company effected a second stock dividend
of 1 Founder Share for each outstanding Founder Share in September 2021, which stock dividends resulted in the Sponsor and the Company’s
independent directors holding an aggregate of 11,500,000 shares of Class B common stock (up to 1,500,000 of which were subject to forfeiture
by the Sponsor depending on the extent to which the underwriters’ option to purchase additional Units was exercised). At March 31,
2023 and December 31, 2022, all 34,092,954 shares of Class A common stock issued and outstanding as of such date are reflected as common
stock subject to redemption. Because the underwriters’ exercised their over-allotment in part, 135,682 shares of Class B common
stock were forfeited by the Sponsor leaving 11,364,318 shares of Class B common stock outstanding at March 31, 2023 and December 31, 2022.
Preferred Stock
The Company is authorized to issue 1,000,000 shares
of preferred stock, par value $0.0001, with such designations, voting and other rights and preferences as may be determined from time
to time by the Company’s board of directors. At March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued
or outstanding.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
COVID-19 — Management continues to evaluate
the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the pandemic could have
an effect on the Company’s financial position, results of operations and/or search for a target company and/or a target company’s
financial position and results of its operations, the specific impact is not readily determinable as of the date of these unaudited condensed
financial statements. These unaudited condensed financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
Conflict in Ukraine — In February 2022, the
Russian Federation and Belarus commenced a military action against the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the Russian Federation and Belarus. The impact of this action
and related sanctions on the world economy are not determinable as of the date of these unaudited condensed financial statements.
Certain repurchases of stock (including redemptions) by publicly
traded domestic corporations —
On August 16, 2022, the Inflation Reduction
Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1%
excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations, among others.
The excise tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased. The amount of
the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes
of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against
the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The
IR Act applies to repurchases that occur after December 31, 2022.
Whether and to what extent the Company would be
subject to the excise tax in connection with a business combination, liquidation or partial redemption Warrant Liabilities would depend
on a number of factors.
