SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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 and six months ended June 30, 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 $163,000 in cash and approximately $2,690,000 of negative working capital (including approximately $813,000 of deferred compensation that is not payable until the closing of a Business Combination) at June 30, 2023. Further, if the Company cannot complete a Business Combination before October 1, 2023, or such later date if stockholders approve an extension of such date, 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 receive working capital loans from its Sponsor to the extent necessary and available, complete a Business Combination prior to October 1, 2023, or such later date if stockholders approve an extension of such date, and to work with creditors to defer payments. There is no assurance that the Company’s plans to consummate a Business Combination, work with creditors to defer payments and continue to receive loans, if available, from its Sponsor 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 June 30, 2023 Three months ended Class A Class B Class A Class B Numerator: Basic and diluted net income per share of common stock: Allocation of income – basic and diluted $ 1,823,000 $ 608,000 $ 2,902,000 $ 967,000 Denominator: Basic and diluted weighted average shares of common stock: 34,093,000 11,364,000 34,093,000 11,364,000 Basic and diluted net income per share of common stock $ 0.05 $ 0.05 $ 0.09 $ 0.09 Six months ended June 30, 2023 Six months ended Class A Class B Class A Class B Numerator: Basic and diluted net income per share of common stock: Allocation of income – basic and diluted $ 2,368,000 $ 789,000 $ 7,508,000 $ 2,503,000 Denominator: Basic and diluted weighted average shares of common stock: 34,093,000 11,364,000 34,093,000 11,364,000 Basic and diluted net income per share of common stock $ 0.07 $ 0.07 $ 0.22 $ 0.22 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 June 30, 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 June 30, 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 June 30, 2023 and 2022, the Company recorded income tax expense of approximately $840,000 and $20,000, respectively. During the six months ended June 30, 2023 and 2022, the Company recorded income tax expense of approximately $1,610,000 and $20,000, 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 June 30, 2023 and 2022 was approximately 26% and 1%, respectively, and the Company’s effective tax rate for the six months ended June 30, 2023 and 2022 was approximately 34% and 0% The effective tax rates differ from the expected income tax rate primarily due to substantial non-deductible income 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 June 30, 2023 and December 31, 2022, the Company has a gross deferred tax asset of approximately $1,150,000 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 June 30, 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 June 30, 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. 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 June 30, 2023, the value of Class A common stock that may be redeemed is equal to approximately $10.28 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 June 30, 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 6,089,000 Shares of Class A common stock subject to redemption at June 30, 2023 $ 350,487,000 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 June 30, 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. |