UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of | (I.R.S. Employer |
(Address of principal executive offices)
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(Issuer’s telephone number)
N/A
(Former name, former address and former fiscal year, if changed since the last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading |
| Name of Each Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
☒ | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 17, 2023, there were
BANYAN ACQUISITION CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2023
TABLE OF CONTENTS
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PART I—FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
BANYAN ACQUISITION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, |
| December 31, | |||
2023 | 2022 | |||||
| (unaudited) |
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Assets |
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Current assets: |
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Cash | $ | | $ | | ||
Prepaid expenses - current |
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Total Current Assets |
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Noncurrent assets: |
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Treasury securities held in trust account |
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Prepaid expenses - noncurrent |
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Total Noncurrent Assets |
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Total Assets | $ | | $ | | ||
Liabilities, Redeemable Class A Common Stock and Stockholders’ Deficit |
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Current liabilities: |
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Accrued expenses | $ | | $ | — | ||
Income tax payable | | | ||||
Accrued franchise tax expense | | | ||||
Excise tax liability | | — | ||||
Promissory notes – related parties | | — | ||||
Accounts payable |
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Total Current Liabilities |
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Noncurrent liabilities: |
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Warrant liability |
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Deferred underwriter’s fee payable |
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Total Noncurrent Liabilities |
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Total Liabilities |
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Commitments and Contingencies (Note 8) |
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Redeemable Class A Common Stock |
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Class A common stock, $ |
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Stockholders’ Deficit: |
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Preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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Total Liabilities, Redeemable Class A Common Stock and Stockholders’ Deficit | $ | | $ | |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
BANYAN ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the | For the | |||||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
Operating expenses: |
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Warrant issuance expense | $ | — | $ | — | $ | — | $ | | ||||
Exchange listing fees |
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Legal fees |
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General, administrative, and other expenses |
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Total operating expenses |
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Loss from operations |
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Other income (expenses): |
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Change in fair value of warrant liability |
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Interest income on cash held in bank account | | — | | — | ||||||||
Interest income on treasury securities held in Trust Account | | | | | ||||||||
Unrealized (loss) gain on treasury securities held in Trust Account |
| ( | ( | ( |
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Other income |
| ( | | ( |
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Income (loss) before provision for income taxes | ( | | ( | | ||||||||
Provision for income taxes | ( | ( | ( | ( | ||||||||
Net (loss) income | $ | ( | $ | | $ | ( | $ | | ||||
Basic and diluted weighted average shares outstanding, Class A common stock |
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Basic and diluted net (loss) income per share, Redeemable Class A common stock | $ | ( | $ | | $ | ( | $ | | ||||
Basic and diluted weighted average shares outstanding, Non-redeemable Class A and Class B common stock |
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Basic and diluted net (loss) income per share, Non-redeemable Class A and Class B common stock | $ | ( | $ | | $ | ( | $ | |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
BANYAN ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 | ||||||||||||||||||||||||||
Class A Common Stock | ||||||||||||||||||||||||||
Subject to | Class A | Class B | Additional | Total | ||||||||||||||||||||||
Possible Redemption | Common Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||
| Shares |
| Amount |
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| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||||||
Balance – December 31, 2022 | | $ | | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||||||
Remeasurement of Class A common stock to redemption value | — |
| | — |
| — | — |
| — | — |
| ( |
| ( | ||||||||||||
Net income | — |
| — | — |
| — | — |
| — | — |
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Balance – March 31, 2023 (unaudited) | | | — | — | | | — | ( | ( | |||||||||||||||||
Redemption of Class A common stock | ( | ( | — | — | — | — | — | — | — | |||||||||||||||||
Sponsor capital contribution for non-redemption agreements | — | — | — | — | — | — | | — | | |||||||||||||||||
Non-redemption agreements | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||
Conversion of Class B common stock to Class A common stock | — | — | | | ( | ( | — | — | — | |||||||||||||||||
Excise tax | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||
Remeasurement of Class A common stock to redemption value | — | | — | — | — | — | — | ( | ( | |||||||||||||||||
Reduction of Deferred Underwriter Fee Payable | — | — | — | — | — | — | — | | | |||||||||||||||||
Net loss | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||
Balance – June 30, 2023 (unaudited) | | $ | | | $ | | | $ | | $ | — | $ | ( | $ | ( |
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 | ||||||||||||||||||||||||||
Class A Common Stock | ||||||||||||||||||||||||||
Subject to | Class A | Class B | Additional | Total | ||||||||||||||||||||||
Possible Redemption | Common Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||
| Shares |
| Amount |
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| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | ||||||||
Balance – December 31, 2021 |
| | $ | |
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| | $ | | $ | | $ | ( | $ | | ||||||||
Issuance of Units in IPO | | | — | — | — | — | — | — | — | |||||||||||||||||
Deemed capital contribution from issuance of private warrants | — | — | — | — | — | — | | — | | |||||||||||||||||
Remeasurement of Class A common stock to redemption value at IPO | — | | — | — | — | — | ( | ( | ( | |||||||||||||||||
Remeasurement of Class A common stock to redemption value | — | | — | — | — | — | — | ( | ( | |||||||||||||||||
Net income | — | — | — | — | — | — | — | | | |||||||||||||||||
Balance – March 31, 2022 (unaudited) | | $ | | — | — | | $ | | $ | — | $ | ( | $ | ( | ||||||||||||
Remeasurement of Class A common stock to redemption value | — | | — | — | — | — | — | ( | ( | |||||||||||||||||
Net income | — | — | — | — | — | — | — | | | |||||||||||||||||
Balance – June 30, 2022 (unaudited) |
| | $ | |
| — | $ | — |
| | $ | | $ | — | $ | ( | $ | ( |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
BANYAN ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended | ||||||
June 30, | ||||||
| 2023 |
| 2022 | |||
Cash Flows from Operating Activities: |
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Net (loss) income | $ | ( | $ | | ||
Adjustments to reconcile net income to net cash used in operating activities: |
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Interest income on treasury securities held in Trust Account | ( | ( | ||||
Unrealized loss on short-term investments held in Trust Account |
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Change in fair value of warrant liability |
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Warrant issuance expense |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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Accrued expenses |
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Income tax payable | ( | | ||||
Accounts payable |
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Accrued offering costs | — | ( | ||||
Accrued franchise tax |
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Net cash used in operating activities |
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Cash Flows from Investing Activities: |
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Investment of cash in Trust Account |
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Proceeds from sale of investments | | — | ||||
Withdrawal from Trust Account for taxes | | — | ||||
Net cash provided by (used in) investing activities |
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Cash Flows from Financing Activities: |
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Proceeds from issuance of Units in IPO, net of underwriting fee |
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Proceeds from sale of private placement warrants |
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Payment of Class A common stock redemptions | ( | — | ||||
Payment of promissory note – related party |
| — |
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Proceeds from promissory note - related party | | — | ||||
Deferred offering costs |
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Net cash (used in) provided by financing activities |
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Net Change in Cash |
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Cash – Beginning |
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Cash – Ending | $ | | $ | | ||
Non-Cash Investing and Financing Activities: |
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Initial fair value of Class A common stock subject to possible redemption | $ | — | $ | | ||
Remeasurement of Class A common stock subject to possible redemption | $ | | $ | | ||
Deferred underwriter fee payable | $ | — | $ | | ||
Initial measurement of warrant liability | $ | — | $ | | ||
Reduction of Deferred Underwriter’s Fee Payable | $ | ( | $ | — | ||
Excise tax liability | $ | | $ | — |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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BANYAN ACQUISITION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Banyan Acquisition Corporation (the “Company”) is a blank check company incorporated in Delaware on March 10, 2021. The Company was incorporated for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
As of June 30, 2023, the Company had not commenced any operations. All activity for the period from March 10, 2021 (inception) through June 30, 2023, relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and pursuit of an Initial Business Combination. The Company will not generate any operating revenues until after the completion of an Initial Business Combination, at the earliest. The Company will generate non-operating income in the form of unrealized gains and interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end. Panther Merger Sub Inc. is a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”) with no activity.
Financing
The registration statement for the Company’s Initial Public Offering was declared effective on January 19, 2022. On January 24, 2022, the Company consummated its Initial Public Offering of
Following the closing of the Initial Public Offering on January 24, 2022, $
At a reconvened special meeting of stockholders held on April 21, 2023 (the “Special Meeting”), the Company’s stockholders approved, and the Company subsequently adopted, (x) an amendment to the Company’s amended and restated certificate of incorporation (the “Charter Amendment”) which provided that (i) the Company shall have the option to extend the period by which it must complete an Initial Business Combination by
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In connection with the stockholders’ vote at the Special Meeting, holders of
The Charter Amendment and the Trust Amendment received the requisite votes at the Special Meeting and were subsequently adopted by the Company. On April 21, 2023, the Company filed the Charter Amendment with the Secretary of State for the State of Delaware. On April 21, 2023, the Company exercised the Extension Option, extending the time allotted to complete an Initial Business Combination by
On April 21, 2023, pursuant to the terms of the Charter Amendment, the Sponsor converted
Risks and Uncertainties
In February 2022, the Russian Federation and Belarus commenced a military action with 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. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
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 and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its stockholders from whom shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of the excise tax. The IR Act applies only to repurchases that occur after December 31, 2022.
On April 21, 2023, the Company’s stockholders redeemed
The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Liquidity, Capital Resources and Going Concern
As of June 30, 2023, the Company had $
The Company’s liquidity needs up to June 30, 2023, had been satisfied through a payment from the Sponsor of $
The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. Although no formal agreement exists, the Sponsor has agreed to extend Working
8
Capital Loans as needed (defined in Note 5 below). Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction and reducing overhead expenses. The Company cannot provide any assurance that (i) new financing will be available to it on commercially acceptable terms, if at all, or (ii) its plans to consummate an Initial Business Combination will be successful. In addition, management is currently evaluating the impact of the Russia/Ukraine war and its effect on the Company’s financial position, results of its operations and/or search for a target company.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern through the end of the Combination Period on December 24, 2023. 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 consolidated financial statement is prepared in conformity 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 Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated 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 consolidated financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering, as filed with the SEC on January 24, 2022, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on March 10, 2022 and the Company’s Annual Report filed on Form 10-K as filed with the SEC on March 31, 2023. The interim results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or for any future periods.
The Company’s condensed financial statements are presented on a consolidated basis with Merger Sub as it is a wholly owned subsidiary. Merger Sub does not have activity as of June 30, 2023.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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Use of Estimates
The preparation of 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 had $
Offering Costs
The Company complies with the requirements of the Accounting Standards Codification (“ASC”) 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A— “Expenses of Offering.” Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs are charged to stockholders’ equity or the statement of operations based on the relative value of the Public Warrants (as defined below) and the Private Placement Warrants to the proceeds received from the Units sold upon the completion of the Initial Public Offering. Accordingly, on January 24, 2022, offering costs totaled $
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed federally insured limits. Exposure to cash and cash equivalents credit risk is reduced by placing such deposits with major financial institutions and monitoring their credit ratings. At June 30, 2023, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, Derivatives and Hedging. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Warrant Liability
The Company expects to account for warrants for the Company’s common stock that are not indexed to its own shares as liabilities at fair value on the balance sheet once issued. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the statement of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the common stock warrants. At that time, the portion of the warrant liability related to the common stock warrants will be reclassified to additional paid-in capital.
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Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Fair Value Measurements
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 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) will be classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock includes certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. On April 21, 2023, the Company’s stockholders redeemed
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable shares of common stock to equal the redemption value at the end of each reporting period. Such changes are reflected in additional paid-in capital, or in the absence of additional capital, in accumulated deficit. On January 24, 2022, the Company recorded an accretion amount of $
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Class A common stock subject to possible redemption is reflected on the condensed consolidated balance sheet at June 30, 2023 and December 31, 2022, as follows:
Gross proceeds from initial public offering |
| $ | |
Less: | |||
Fair value allocated to public warrants |
| ( | |
Offering costs allocated to Class A common stock subject to possible redemption |
| ( | |
Plus: |
|
| |
Remeasurement on Class A common stock subject to possible redemption | | ||
Class A common stock subject to possible redemption, December 31, 2022 | $ | | |
Remeasurement on Class A common stock subject to possible redemption | | ||
Class A common stock subject to possible redemption, March 31, 2023 | | ||
Redemption of Class A common stock | ( | ||
Remeasurement on Class A common stock subject to possible redemption | | ||
Class A common stock subject to possible redemption, June 30, 2023 | $ | |
Income Taxes
The Company accounts for income taxes in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under the asset and liability method, as required by this accounting standard, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities in the financial statements and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to the period when assets are realized or liability is settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in the operation of statement in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. There were
Net Income (Loss) Per Share of Common Stock
Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Shares of common stock subject to possible redemption at June 30, 2023, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net income (loss) per common stock since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not included the Public Warrants and the Private Placement Warrants in the calculation of diluted income (loss) per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. As a result, diluted net income (loss) per share of common stock is the same as basic net income (loss) per share of common stock for the periods presented.
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The Company’s statement of operations includes a presentation of net income (loss) per share of common stock subject to possible redemption and allocates the net income (loss) into the two classes of shares in calculating net income (loss) per common stock, basic and diluted. For redeemable Class A 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 Class A common stock subject to possible redemption outstanding since original issuance. For non-redeemable Class A and Class B common stock, net income (loss) per share is calculated by dividing the net income (loss) by the weighted average number of shares of non-redeemable Class A and Class B common stock outstanding for the period. Non-redeemable Class A common stock includes
The following table reflects the calculation of basic and diluted net loss per share of common stock (in dollars, except per share amounts):
| For the Three Months Ended | |||||
June 30, | ||||||
| 2023 |
| 2022 | |||
Class A common stock subject to possible redemption |
|
| ||||
Numerator: (Loss) income attributable to Class A common stock subject to possible redemption |
|
|
|
| ||
Net (loss) income | $ | ( | $ | | ||
Denominator: Weighted average Class A common stock subject to possible redemption |
| ( |
| | ||
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption |
| |
| | ||
Basic and diluted net (loss) income per share, Class A common stock subject to possible redemption | $ | ( | $ | | ||
Non-Redeemable Class A and Class B common stock |
|
|
|
| ||
Numerator: Net (loss) income |
|
|
|
| ||
Net (loss) income | $ | ( | $ | | ||
Denominator: Weighted average non-redeemable Class A and Class B common stock |
| ( |
| | ||
Basic and diluted weighted average shares outstanding, non-redeemable Class A and Class B common stock |
| |
| | ||
Basic and diluted net (loss) income per share, non-redeemable Class A and Class B common stock | $ | ( | $ | |
For the Six Months Ended | ||||||
June 30, | ||||||
| 2023 |
| 2022 | |||
Class A common stock subject to possible redemption | ||||||
Numerator: Income attributable to Class A common stock subject to possible redemption |
|
| ||||
Net (loss) income | $ | ( | $ | | ||
Denominator: Weighted average Class A common stock subject to possible redemption | ( |
| | |||
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | |
| | |||
Basic and diluted net (loss) income per share, Class A common stock subject to possible redemption | $ | ( | $ | | ||
Non-Redeemable Class A and Class B common stock |
|
| ||||
Numerator: Net (loss) income |
|
| ||||
Net (loss) income | $ | ( | $ | | ||
Denominator: Weighted average non-redeemable Class A and Class B common stock | ( |
| | |||
Basic and diluted weighted average shares outstanding, non-redeemable Class A and Class B common stock | |
| | |||
Basic and diluted net (loss) income per share, non-redeemable Class A and Class B common stock | $ | ( | $ | |
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Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. We are currently assessing the impact, if any, that ASU 2020-06 would have on our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering on January 24, 2022, the Company sold
An aggregate of $
NOTE 4 — PRIVATE PLACEMENT
The Company entered into an agreement with the Sponsor and the underwriters pursuant to which the Sponsor and underwriters purchased an aggregate of
NOTE 5 — RELATED PARTY TRANSACTIONS
Founder Shares
In March 2021, the Sponsor purchased
The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (A)
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reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property.
Promissory Note — Related Party
In March 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $
Convertible Promissory Notes – Related Parties
On June 1, 2023, the Company entered into promissory note agreements with certain related parties (the “Related Party Promissory Notes”), pursuant to which the Company could borrow up to an aggregate principal amount of $
Related Party Loans
In addition, in order to finance transaction costs in connection with an Initial Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). The Working Capital Loans would either be repaid upon consummation of an Initial Business Combination, without interest, or, at the lender’s discretion, up to $
Support Services Agreement
Commencing on the listing date, the Company agreed to pay the Sponsor pursuant to a support services agreement a total of $
NOTE 6 — STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred stock — The Company is authorized to issue
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Class A common stock — The Company is authorized to issue
Class B common stock — The Company is authorized to issue
With respect to any other matter submitted to a vote of our stockholders, including any vote in connection with our Initial Business Combination, except as required by law, holders of our Founder Shares and holders of our public shares will vote together as a single class, with each share entitling the holder to
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of an Initial Business Combination on a
NOTE 7 — WARRANT LIABILITY
The Company accounts for the
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. Accordingly, unless a unit holder purchases at least two Units, they will not be able to receive or trade a whole warrant. The Public Warrants will become exercisable on the later of (a)
The Company is not obligated to deliver any shares of Class A common stock pursuant to the exercise of a Public Warrant and has no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act with respect to the shares of
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Class A common stock underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No Public Warrant is exercisable, and the Company is not obligated to issue any shares of Class A common stock upon exercise of a Public Warrant unless the share of Class A common stock issuable upon such Public Warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Public Warrants.
The Company has agreed that as soon as practicable, but in no event later than
The redemption of the warrants is as follows:
Redemption of warrants when the price per Class A common stock equals or exceeds $
● | in whole and not in part; |
● | at a price of $ |
● | upon not less than |
● | if, and only if, the closing price of the Class A common stock equals or exceeds $ |
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class A common stock equals or exceeds $
● | in whole and not in part; |
● | at $ |
● | upon a minimum of |
● | if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ |
● | if the closing price of the Class A common stock for any |
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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 an Initial Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants will be identical to the Public Warrants included in the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the shares of Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until
NOTE 8 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the Initial Public Offering, requiring the Company to register such securities for resale. The holders will have the right to require us to register for resale these securities pursuant to a shelf registration under Rule 415 under the Securities Act. The holders of a majority of these securities will also be entitled to make up to
Underwriter Agreement
The Company granted the underwriters a
On June 22, 2023, the Company and the underwriter entered into an agreement to reduce the deferred underwriter commission payable upon consummation of the initial business combination from $
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equals $
Placement Agent Agreement
On June 19, 2023, the Company engaged William Blair & Company, L.L.C. (“William Blair”) as co-placement agent with BTIG, LLC (“BTIG”) (together, the “Placement Agents”) in connection with the Company’s Initial Business Combination. If the Initial Business Combination is consummated, William Blair will be paid a success fee of $
Business Combination Agreement
On June 23, 2023 the Company announced that the Company, Merger Sub and Pinstripes, Inc., a Delaware corporation (“Pinstripes”) had entered into a Business Combination Agreement, dated as of June 22, 2023 (the “Pinstripes Agreement”). Pinstripes, Merger Sub and the Company are collectively referred to herein as the “Parties.” Pinstripes is an experiential dining and entertainment brand combining bistro, bowling, bocce and private event space.
Pursuant to the Pinstripes Agreement, it is anticipated that (a) Merger Sub shall merge with and into Pinstripes (the “Merger”), with Pinstripes being the surviving corporation of the Merger (Pinstripes, in its capacity as the surviving company of the Merger, the “Post-Business Combination Surviving Company”), and as a result of which the Post-Business Combination Surviving Company will become a wholly owned subsidiary of the Company. The Merger and the other transactions contemplated by the Pinstripes Agreement are hereinafter referred to as the “Business Combination”. The Company also announced that it intends to file a Registration Statement on Form S-4 as promptly as reasonably practicable with respect to the Business Combination and that it is currently anticipated that the Business Combination will close in the fourth quarter of 2023, following the receipt of the required approval by the Company’s stockholders and the fulfillment or waiver of other closing conditions.
In accordance with the terms and subject to the conditions of the Pinstripes Agreement, at the effective time of the Merger, each outstanding share of common stock, par value $
Bridge Financing
On June 22, 2023, concurrently with the execution of the Pinstripes Agreement, affiliates of the Sponsor entered into a securities purchase agreement with Pinstripes to provide $
Sponsor Letter Agreement
On June 22, 2023, concurrently with the execution of the Pinstripes Agreement, the Company, the Sponsor, George Courtot, Bruce Lubin, Otis Carter, Kimberley Annette Rimsza, Matt Jaffee and Brett Biggs amended that certain letter agreement, dated as of January 19, 2022, by and among the Company and the parties thereto, and Pinstripes joined as a party to such letter agreement (the "Amended
19
Sponsor Letter Agreement"), to take into account entry into the Pinstripes Agreement. The Amended Letter Agreement is included as Exhibit 10.1 hereto.
Registration Rights Agreement
At the closing of the Business Combination, it is anticipated that the Company, the Sponsor Parties and certain equityholders of Pinstripes will enter into an Amended and Restated Registration Rights Agreement, pursuant to which, among other things, the parties thereto will be granted customary registration rights with respect to shares of the post-Business Combination company.
Security Holder Support Agreement
On June 22, 2023, concurrently with the execution of the Pinstripes Agreement, the Company, Pinstripes and certain security holders of Pinstripes entered into security holder support agreements with respect to the Business Combination (the "Security Holder Support Agreement"). The Security Holder Support Agreement is included as Exhibit 10.2 hereto.
Lockup Agreement
On June 22, 2023, concurrently with the execution of the Pinstripes Agreement, the Company, Pinstripes and certain security holders of Pinstripes (the “Pinstripes Security Holders”) entered into a lockup agreement with respect to the Business Combination (the “Lockup Agreement”). The Lockup Agreement is included as Exhibit 10.3 hereto.
Director Designation Agreement
At the closing of the Business Combination, it is anticipated that the Company and Mr. Dale Schwartz will enter into Director Designation Agreement (the “Director Designation Agreement”). The form of the Director Designation Agreement is included as Exhibit 10.4 hereto.
Non-Redemption Agreements
The Company and the Sponsor entered into certain non-redemption agreements with certain unaffiliated third parties, pursuant to which the Sponsor agreed to transfer an aggregate of
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NOTE 9 — FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
At June 30, 2023, the Company’s warrant liability was valued at $
The following table presents fair value information as of June 30, 2023, of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. The Company’s warrant liability is based on a valuation model utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the private warrant liability is classified within Level 3 of the fair value hierarchy. The Company transferred the fair value of Public Warrants from a Level 3 measurement to a Level 1 measurement as a result of the Public Warrants detaching from the Units and becoming separately tradable:
| Public |
| Private Placement |
| Total Level 3 | ||||
| Warrants |
| Warrants |
| Financial Instruments | ||||
Derivative warrant liabilities at December 31, 2022 | $ | — | $ | | $ | | |||
Change in fair value |
| — |
| |
| | |||
Level 3 derivative warrant liabilities at March 31, 2023 |
| — |
| |
| | |||
Change in fair value |
| — |
| |
| | |||
Level 3 derivative warrant liabilities at June 30, 2023 | $ | — | $ | | $ | |
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 table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value on a recurring basis at June 30, 2023:
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Assets |
|
|
|
|
|
| |||
Treasury securities held in trust account | $ | | $ | — | $ | — | |||
Liabilities |
|
|
|
|
|
| |||
Public Warrants | $ | | $ | — | $ | — | |||
Private Placement Warrants | $ | — | $ | — | $ | |
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The following table presents the changes in the fair value of derivative warrant liabilities for the three and six months ended June 30, 2023:
Private | |||||||||
Public | Placement | Warrant | |||||||
| Warrants |
| Warrants |
| Liability | ||||
Derivative warrant liabilities as of December 31, 2022 | $ | | $ | | $ | | |||
Change in fair value |
| |
| |
| | |||
Derivative warrant liabilities as of March 31, 2023 | | | | ||||||
Change in fair value |
| |
| |
| | |||
Derivative warrant liabilities as of June 30, 2023 | $ | | $ | | $ | |
Measurement
The Company established the initial fair value for the warrants on January 24, 2022, the date of the consummation of the Company’s Initial Public Offering. The Company used a Monte Carlo simulation model to value the warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of
The key inputs into the Monte Carlo simulation model formula were as follows at June 30, 2023:
Class B |
| |||
Input |
| Common Stock |
| |
Common stock price | $ | | ||
Exercise price | $ | | ||
Risk-free rate of interest |
| | % | |
Volatility |
| | % | |
Term |
| | ||
Value of one warrant | $ | | ||
Dividend yield |
| | % |
On March 10, 2022, the Public Warrants detached from the Units and are separately tradable (NYSE: BYN.WS). As such, the fair value of the Public Warrants as of June 30, 2023, is based on the price of the Public Warrants at market close.
The key inputs into the Monte Carlo simulation model formula were as follows at January 24, 2022:
January 24, 2022 |
| ||||||
Public | Private |
| |||||
Input |
| Warrants |
| Warrants |
| ||
Common stock price |
| $ | | $ | | ||
Exercise price |
| $ | | $ | | ||
Risk-free rate of interest |
|
| | % | | % | |
Volatility | | % | | % | |||
Term |
| | | ||||
Value of one warrant |
| $ | |
| $ | | |
Dividend yield |
|
| | % | | % |
22
Non-recurring Fair Value Measurements
In April 2023, the Company entered into non-redemption agreements with certain unaffiliated third parties (see Note 8). The Company accounts for the excess fair value of the Class B shares that will be transferred from the Sponsor to the unaffiliated third parties upon the consummation of the Initial Business Combination as an offering cost and a capital contribution by the Sponsor in accordance with SAB Topic 5A. The Company estimated the fair value of the
The fair value of the Class B shares was determined by multiplying the underlying stock price of the Company’s Class A common stock by the estimated probability of the Initial Business Combination and applying a discount for lack of marketability (“DLOM”). The Company utilized April 12, 2023 as the measurement date which reflects the execution date of the majority of non-redemption agreements.
The following are the key inputs into the calculation at the measurement date:
Private |
| |||
Input |
| Warrants |
| |
Common stock price | $ | | ||
Estimated probability of the Initial Business Combination |
| | % | |
Volatility |
| | % | |
Risk-free rate |
| | % | |
Time to expiration |
| |
NOTE 10 — INCOME TAX
During the three and six months ended June 30, 2023, the Company recorded an income tax provision of
The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which primarily consist of net operating loss carryforwards. The Company considered the history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies, and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. As such, the Company recorded a full valuation allowance against net deferred tax assets as of June 30, 2023 and December 31, 2022.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to Banyan Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Banyan Acquisition Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly 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 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 Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Initial 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. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. 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 Initial 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 Company’s Annual Report filed on Form 10-K as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2023. 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 laws, 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 incorporated as a Delaware corporation on March 10, 2021, and 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. We intend to effectuate our Initial Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, the proceeds of the sale of our shares in connection with our Initial Business Combination (pursuant to forward purchase agreements or backstop agreements we may enter into or otherwise), shares issued to the owners of the target, debt issued to banks or other lenders or the owners of the target, or a combination of the foregoing or other sources.
As indicated in the accompanying financial statements, at June 30, 2023 we had $358,560 in cash and a working capital deficit of $5,024,457. Further, we expect to continue to incur significant costs in the pursuit of our Initial Business Combination plans. We cannot assure our stockholders that our plans to complete an Initial Business Combination will be successful.
Business Combination Agreement
On June 23, 2023 the Company announced that the Company, Panther Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”) and Pinstripes, Inc., a Delaware corporation (“Pinstripes”) had entered into a Business Combination Agreement, dated as of June 22, 2023 (the “Pinstripes Agreement”). Pinstripes, Merger Sub and the Company are collectively referred to herein as the “Parties.”
Pursuant to the Pinstripes Agreement, it is anticipated that (a) Merger Sub shall merge with and into Pinstripes (the “Merger”), with Pinstripes being the surviving corporation of the Merger (Pinstripes, in its capacity as the surviving company of the Merger, the “Post-Business Combination Surviving Company”), and as a result of which the Post-Business Combination Surviving Company will become a wholly owned subsidiary of the Company. The Merger and the other transactions contemplated by the Pinstripes Agreement are
24
hereinafter referred to as the “Business Combination”. The Company also announced that it intends to file a Registration Statement on Form S-4 as promptly as reasonably practicable with respect to the Business Combination and that it is currently anticipated that the Business Combination will close in the fourth quarter of 2023, following the receipt of the required approval by the Company’s stockholders and the fulfillment or waiver of other closing conditions.
In accordance with the terms and subject to the conditions of the Pinstripes Agreement, at the effective time of the Merger, each outstanding share of common stock, par value $0.01 of Pinstripes (the “Pinstripes Common Stock”) (including shares of Pinstripes Common Stock resulting from the conversion of preferred stock of Pinstripes and excluding Dissenting Shares (as defined in the Pinstripes Agreement), treasury shares and Series I Convertible Preferred Stock (as defined in the Pinstripes Agreement)) will be cancelled and extinguished and converted into the right to receive the number of shares of common stock, par value $0.0001 per share of the Company (the “Company Common Stock”) determined in accordance with the Pinstripes Agreement based on a pre-money equity value of Pinstripes of $429,000,000 and a price of $10 per share of Company Common Stock. The Series I Convertible Preferred Stock of Pinstripes will be converted into Pinstripes Common Stock immediately prior to the closing of the Business Combination (the “Closing”) and, at the effective time of the Merger, such resulting shares of Pinstripes Common Stock will be cancelled and extinguished and converted into the right to receive the number of shares of Company Common Stock determined in accordance with the Pinstripes Agreement based on an exchange ratio of 2.5 shares of Company Common Stock for each share of Pinstripes Common Stock resulting from the conversion of the Series I Preferred Stock of Pinstripes immediately prior to the Closing.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from March 10, 2021 (inception) through June 30, 2023, were organizational activities and those related to our intent to effectuate an Initial Business Combination. We do not expect to generate any operating revenues until after completion of our Initial Business Combination. We will generate non-operating income in the form of interest income on the cash and cash equivalents held in the trust account established in connection with the Company’s initial public offering (the “Trust Account”). No material adverse change has occurred since the date of our audited financial statements. We expect to continue to 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 in connection with searching for, and completing, an Initial Business Combination.
For the three months ended June 30, 2023, we had net loss of $6,582,267, which consisted of $3,207,927 in expenses, a $4,224,105 loss on the change in the fair value of warrant liabilities, a $91,323 unrealized loss on short-term investments held in the Trust Account and a $236,909 provision for income taxes, offset by $1,177,997 of interest income.
For the six months ended June 30, 2023, we had net loss of $5,263,131, which consisted of $3,586,157 in expenses, a $4,676,625 loss on the change in the fair value of warrant liabilities, a $107,187 unrealized loss on short-term investments held in the Trust Account and a $799,505 provision for income taxes, offset by $3,906,343 of interest income.
For the three months ended June 30, 2022, we had net income of $1,450,175, which consisted of $254,963 in expenses, a $38,227 unrealized loss on short-term investments held in the Trust Account, and a $108,421 provision for income taxes, offset by a $1,459,707 gain on the change in the fair value of warrant liabilities and $392,079 of interest income.
For the six months ended June 30, 2022, we had net income of $10,892,813, which consisted of $1,178,478 in expenses, a $38,227 unrealized loss on short-term investments held in the Trust Account, and a $108,421 provision for income taxes, offset by a $11,760,463 gain on the change in the fair value of warrant liabilities and $457,476 of interest income.
Liquidity and Capital Resources
As of June 30, 2023, we had cash of $358,560. Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of common stock by the Sponsor and loans from our Sponsor.
On January 24, 2022, we consummated our Initial Public Offering of 24,150,000 Units, including the issuance of 3,150,000 Units as a result of the underwriters’ exercise of their over-allotment option in full. Each Unit sold consisted of one share of Class A common stock and one-half of one redeemable Warrant, with each whole Warrant entitling the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $241,500,000 which is further described in Note 3 of the financial statements accompanying this Annual
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Report. Simultaneously with the closing of our Initial Public Offering, we completed the private placement of 11,910,000 Private Placement Warrants to the Sponsor, BTIG and I-Bankers, including 1,260,000 Private Placement Warrants as a result of the underwriters’ exercise of their over-allotment option in full, at a purchase price of $1.00 per Private Placement Warrant, generating total proceeds to us of $11,910,000, which is further described in Note 4 of the financial statements accompanying this Annual Report.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $246,330,000 was placed in the Trust Account, comprised of $237,720,000 of the proceeds from the Initial Public Offering (which amount includes $9,660,000 of the deferred underwriting discount payable upon consummation of our Initial Business Combination) and $8,610,000 of the proceeds of the sale of the Private Placement Warrants.
As of June 30, 2023, we had treasury securities held in the Trust Account of $42,190,562 (including approximately $1,173,738 and $3,891,253 of interest income and $91,323 and $107,187 of unrealized loss on U.S. Treasury Bills with a maturity of 185 days or less for the three and six months ended June 30, 2023, respectively). Interest earned on the balance in the Trust Account may be used by us to pay taxes. Through June 30, 2023, we have withdrawn $1,888,546 of interest earned from the Trust Account to pay 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 (which interest shall be net of taxes payable thereon and excluding deferred underwriting commissions) to complete our Initial Business Combination. We may withdraw interest to pay taxes, and we expect the only taxes payable by us out of the funds in the Trust Account will be related to income and franchise taxes, which we expect the interest earned on the amount in the Trust Account will be sufficient to pay. To the extent that shares of our common stock or debt is used, in whole or in part, as consideration to complete our Initial 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, 2023, we had available to us $358,560 of cash held outside the Trust Account. We intend to use these funds 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, structure and negotiate and complete an Initial Business Combination and to pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay our taxes.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our Initial Business Combination, other than any funds available from loans from our Sponsor, its affiliates or members of our management team. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an Initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Initial Business Combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended Initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our directors and officers may, but are not obligated to, loan us funds as may be required. If we complete our Initial Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. Otherwise, such loans may be repaid only out of funds held outside the Trust Account. In the event that our Initial 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 our Trust Account would be used to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into Warrants at a price of $1.00 per Warrant at the option of the lender. The Warrants would be identical to the Private Placement Warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our Initial Business Combination, we do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
Additionally, we may need to obtain additional financing either to complete our Initial Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our Initial Business Combination, in which case we may issue additional securities or incur debt in connection with such business combination. If we have not consummated our Initial Business Combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account.
At a reconvened special meeting of stockholders held on April 21, 2023 (the “Special Meeting”), the Company’s stockholders approved, and the Company subsequently adopted, (x) an amendment to the Company’s amended and restated certificate of incorporation (the “Charter Amendment”) which provided that (i) the Company shall have the option to extend the period by which it must complete an Initial Business Combination by eight months, from April 24, 2023 to December 24, 2023 (the “Extension Option”) and (ii) that each
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of the holders of shares of the Company’s Class B common stock shall have the right at any time to convert any and all of their shares of the Company’s Class B common stock to shares of the Company’s Class A common stock on a one-for-one basis prior to the closing of an Initial Business Combination, at the election of such holder and (y) an amendment to the Investment Management Trust Agreement (the “Trust Amendment”), which provided that the Company shall have the right to extend the period by which it must complete an Initial Business Combination by eight months, from April 24, 2023 to December 24, 2023, without having to make any payment to the Trust Account. Additionally, in connection with the Special Meeting, the Company and the Sponsor entered into certain non-redemption agreements with certain unaffiliated third parties, pursuant to which the Sponsor agreed to transfer an aggregate of 1,018,750 shares of Class B common stock to such third parties immediately following consummation of an Initial Business Combination if such third parties continued to hold certain amounts of Class A common stock through the closing of the Special Meeting and assuming the Charter Amendment and the Trust Amendment were adopted.
In connection with the stockholders’ vote at the Special Meeting, holders of 20,151,313 shares of Class A common stock exercised their right to redeem their shares for cash at an approximate price of $10.42 per share, which resulted in an aggregate payment to such redeeming holders of $210,031,815.49. As of June 30, 2023 (and inclusive of the payment referenced in the preceding sentence), the Trust Account balance was $42,190,562.
On April 21, 2023, pursuant to the terms of the Charter Amendment, the Sponsor converted 2,000,000 shares of Class B common stock held by it on a one-for-one basis into shares of Class A common stock with immediate effect. Following such conversion and taking into account the redemptions described above, there are 5,998,687 shares of Class A common stock issued and outstanding and 5,245,000 shares of Class B common stock issued and outstanding as of the date hereof. For more information on the Special Meeting, please refer to Item 1. Note 1 “Description of Organization and Business Operations.”
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2023. 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 an affiliate of our Sponsor a monthly fee of $10,000 for office space, operational support and secretarial and administrative services. We became contractually obligated to pay these fees on January 19, 2022, and will continue to be contractually obligated to pay these fees monthly until the earlier of the completion of the Initial Business Combination and our liquidation. For the three and six months ended June 30, 2023, the Sponsor permanently waived its right to receive such fees from the Company. The Sponsor expects to continue to permanently waive its rights to receive such fees in future periods.
The underwriters are entitled to a deferred fee of $0.40 per Unit, or $9,660,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete an Initial Business Combination and certain other conditions are met. On June 22, 2023, the Company and the underwriter entered into an agreement to reduce the deferred underwriter commission payable upon consummation of the initial business combination from $9,660,000 to $3,622,500. As such, the Company has reduced the deferred underwriter fee payable on its condensed consolidated balance sheets to $3,622,500 as of June 30, 2023.
On June 19, 2023, the Company engaged William Blair & Company, L.L.C. (“William Blair”) as co-placement agent with BTIG, LLC (“BTIG”) (together, the “Placement Agents”) in connection with the Company’s Initial Business Combination. If the Initial Business Combination is consummated, William Blair will be paid a success fee of $4,000,000. In the event a securities offering is consummated, the Company will pay the Placement Agents an aggregate placement fee of 5.00% of the total transaction consideration. No amounts have been accrued for as of June 30, 2023 as they are contingent on the consummation of the Initial Business Combination and securities offering.
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Critical Accounting Estimates
The preparation of condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 not identified any critical accounting estimates.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. We are currently assessing the impact, if any, that ASU 2020-06 would have on our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current principal executive officer and principal financial and accounting officer, the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2023, pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this Quarterly Report, our disclosure controls and procedures were not effective as a result of a material weakness identified as of June 30, 2023, related to the fact that we had not yet designed and maintained effective controls relating to the accrual of legal fees.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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Remediation Plan
Our principal executive officer or principal financial and accounting officer will obtain confirmation of billed and unbilled legal fees directly from our legal counsels through the end of each reporting period. There can be no assurance that our efforts will be successful or avoid potential future material weaknesses. In addition, until the remediation plan has been completed and operated for a sufficient period of time, and subsequent evaluation of its effectiveness is completed, the material weakness described above will continue to exist. We cannot assure you that the measure we plan to implement will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended June 30, 2023, except as disclosed above, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form 10-K filed with the SEC on March 31, 2023 (our “Annual Report”) and in our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2023 (our “Quarterly Report”). Except as described below, as of the date of this report, there have been no material changes to the risk factors disclosed in our Annual Report or Quarterly Report. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. The information presented below updates, and should be read in conjunction with, the risk factors disclosed in our Annual Report and our Quarterly Report and other reports we file with, or furnish to, the SEC. There have been no material changes in our risk factors since such filings, except for the following:
We cannot assure you that we will be able to complete the proposed Business Combination or complete an alternative Initial Business Combination by December 24, 2023, the date by which we are required to complete our Initial Business Combination or be forced to liquidate.
If we are not able to complete the Business Combination with Pinstripes or complete an alternative Initial Business Combination by December 24, 2023, or such earlier date as our board of directors may determine in its sole discretion, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes, 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), subject to applicable law, 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. In such case, the public stockholders would only receive the applicable per-share price described above in connection with redeeming their shares and the public warrants would expire worthless.
The proposed Business Combination with Pinstripes may not be completed on the anticipated terms and there are uncertainties and risks related to consummating the proposed Business Combination with Pinstripes.
The Closing may not be completed on the anticipated terms and there are uncertainties and risks related to consummating the proposed Business Combination. Even if the Pinstripes Agreement is approved by the stockholders of the Company, specified conditions must be satisfied or waived before the parties to Pinstripes Agreement are obligated to complete the Business Combination. The Company does not control the satisfaction of all of such conditions. The Company and Pinstripes may not satisfy all of the closing conditions in the Pinstripes Agreement. If the closing conditions are not satisfied or waived, the Business Combination will not occur, or will be delayed pending later satisfaction or waiver, and such delay may cause the Company and Pinstripes to each lose some or all of the intended benefits of the Business Combination.
Subsequent to the Closing of our proposed Business Combination, the Post-Business Combination Surviving Company may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition and its share price, which could cause you to lose some or all of your investment.
Although the Company has conducted due diligence on Pinstripes, it cannot assure you that this diligence has identified all material issues that may be present within Pinstripes, that it is possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Pinstripes’s and outside of the Company’s or the Post-Business Combination Surviving Company’s control will not later arise. As a result of these factors, the Post-Business Combination Surviving Company may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in it reporting losses. Even if due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the Company’s preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on the Post-Business Combination Surviving Company’s liquidity, the fact that the Post-Business Combination Surviving
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Company reports charges of this nature could contribute to negative market perceptions about the Post-Business Combination Surviving Company or its securities. Accordingly, any of the Company’s public stockholders who choose to remain stockholders of the Post-Business Combination Surviving Company following the Business Combination could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation relating to the Business Combination contained an actionable material misstatement or material omission.
An active, liquid trading market for the Post-Business Combination Surviving Company’s securities may not develop, which may limit your ability to sell such securities.
Although we intend to apply to list the Post-Business Combination Surviving Company’s common stock on the NYSE or Nasdaq, an active trading market for such securities may never develop or be sustained following the Closing. A public trading market having the desirable characteristics of depth, liquidity and orderliness depends upon the existence of willing buyers and sellers at any given time, such existence being dependent upon the individual decisions of buyers and sellers over which neither we nor any market maker has control. The failure of an active and liquid trading market to develop and continue would likely have a material adverse effect on the value of the Post-Business Combination Surviving Company’s common stock. The market price of the Post-Business Combination Surviving Company’s common stock may decline, and you may not be able to sell your Post-Business Combination Surviving Company common stock at all. An inactive market may also impair our ability to raise capital to continue to fund operations by issuing Post-Business Combination Surviving Company common stock.
During the pendency of the proposed Business Combination, the Company will not be able to enter into a business combination with another party because of restrictions in the Pinstripes Agreement. Furthermore, certain provisions of the Pinstripes Agreement will discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Pinstripes Agreement.
Covenants in the Pinstripes Agreement impede the ability of the Company to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Business Combination. As a result, the Company may be at a disadvantage to its competitors during that period. While the Pinstripes Agreement is in effect, neither the Company nor Pinstripes nor any of their respective affiliates, subsidiaries or representatives may (a) solicit or initiate any competing transaction or take any action to knowingly facilitate or encourage any person or group of persons other than the parties and their respective affiliates, representatives and agents (a “Competing Party”), to enter into any agreement in principle, letter of intent, term sheet or definitive agreement, or make any filing with the SEC (including the filing of any registration statement) or other governmental entity, with respect to a competing transaction; (b) enter into, participate in or continue or otherwise engage in any discussions or negotiations with any Competing Party regarding a competing transaction; (c) furnish (including through any virtual data room) any information relating to any party or subsidiary thereof or any of their respective assets or businesses, or afford access to the assets, business, properties, books or records of any party or any subsidiary thereof to a Competing Party, in all cases, for the purpose of assisting with or facilitating a competing transaction; (d) approve, endorse or recommend any competing transaction; or (e) enter into a competing transaction or any agreement, arrangement or understanding (including any letter of intent or term sheet) relating to a competing transaction or publicly announce an intention to do so. If the Business Combination is not completed, these provisions will make it more difficult to complete an alternative business combination following the termination of the Pinstripes Agreement due to the passage of time during which these provisions have remained in effect.
We and Pinstripes will incur significant transaction and transition costs in connection with the proposed Business Combination.
We and Pinstripes expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the Business Combination. We and Pinstripes may also incur additional costs to retain key employees. We will incur and be responsible for the expenses and fees as set forth in, and in connection with, the Pinstripes Agreement. There can be no assurance that such fees and expenses will not be greater than expected or that there will be no unexpected costs related to the Business Combination.
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Some of our executive officers and directors may have conflicts of interest that may influence or have influenced them to support or approve the Business Combination without regard to your interests or in determining whether Pinstripes is an appropriate target for our Initial Business Combination.
Our Sponsor and independent directors currently hold an aggregate of 5,095,375 shares of Class B Common Stock. Pursuant to the Sponsor Support Agreement, our Sponsor and George Courtot, Bruce Lubin, Otis Carter, Kimberley Annette Rimsza, Matt Jaffee and Brett Biggs (collectively, the “Sponsor Parties”) have agreed that two-thirds of the Class B Shares (or Class A common stock of the Company if converted) held by the Sponsor Parties (excluding up to 1,000,000 shares that will be transferred by the Sponsor to investors pursuant to certain non-redemption agreements entered into by the Sponsor and up to 2,000,000 shares that may be transferred by the Sponsor to investors in the Bridge Financing and the PIPE Investment (as defined in the Sponsor Letter Agreement), the “Vesting Shares”) shall be subject to vesting conditions and forfeiture as follows: 50% of the Vesting Shares shall vest and no longer be subject to forfeiture if the volume weighted average share price of the Company Common Stock equals or exceeds $12.00 per share for any 20 trading days within any consecutive 30-trading day period commencing five months after the Closing; and (ii) 100% of the Vesting Shares shall vest and no longer be subject to forfeiture if the volume weighted average share price of the Company Common Stock equals or exceeds $14.00 per share for any 20 trading days within any consecutive 30-trading day period commencing five months after the Closing. Any Vesting Shares that remain unvested upon the five-year anniversary of the Closing will be forfeited by the Sponsor Parties. The personal and financial interests of our Sponsor, Sponsor Parties, executive officers and directors may influence or have influenced their motivation in identifying and selecting a target for our Initial Business Combination, their support for completing the proposed Business Combination and the operation of the Post-Business Combination Surviving Company following the consummation of the proposed Business Combination.
Certain officers and members of our board of directors may also participate in arrangements that may provide them with other interests in the proposed Business Combination that are different from yours, including, among others, arrangements for their continued service as directors of the Post-Business Combination Surviving Company.
Further, our Sponsor and Sponsor Parties have agreed to (i) vote in favor of all SPAC Stockholder Voting Matters (as such term is defined in the Pinstripes Agreement) and the transactions contemplated thereby, (ii) waive the anti-dilution or similar protections with respect to the shares of Class B Common Stock held by the Sponsor Parties, (iii) not redeem any of their shares in connection with the vote to approve the Business Combination and (iv) not further amend or modify the letter agreement, dated as of January 19, 2022, by and among the Company, the Sponsor and other parties thereto.
These interests, among others, may influence or have influenced our Sponsor, Sponsor Parties and the executive officers and members of our board of directors to support or approve the proposed Business Combination.
The exercise of the Company’s directors’ and executive officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in the Company’s stockholders’ best interests.
In the period leading up to the Closing, events may occur that, pursuant to the Pinstripes Agreement, would require the Company to consider agreeing to amend the Pinstripes Agreement, to consent to certain actions taken by Pinstripes or to waiving rights to which the Company is entitled under the Pinstripes Agreement. Such events could arise because of changes in the course of Pinstripes’s business or a request by Pinstripes to undertake actions that would otherwise be prohibited by the terms of the Pinstripes Agreement. In any of such circumstances, it would be at the Company’s discretion, acting through board of directors of the Company, to grant its consent or waive those rights. The existence of financial and personal interests of one or more of the directors described in the preceding risk factors may result in a conflict of interest on the part of such director(s) between what such director may believe is best for the Company and its stockholders and what such director may believe is best for themselves in determining whether or not to take the requested action. The Company does not believe there will be any changes or waivers that the Company’s directors and executive officers would be likely to make after stockholder approval of the Business Combination proposal has been obtained.
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If we are deemed to be an investment company for purposes of the Investment Company Act, we may be forced to abandon our efforts to complete an Initial Business Combination and instead be required to liquidate the Company. To mitigate the risk of that result, on or prior to the 24-month anniversary of the effective date of the registration statement relating to our IPO, we may instruct Continental Stock Transfer & Trust Company to liquidate the securities held in the Trust Account and instead hold all funds in the Trust Account in cash. As a result, following such change, we will likely receive minimal, if any, interest, on the funds held in the Trust Account, which would reduce the dollar amount that our public stockholders would have otherwise received upon any redemption or liquidation of the Company if the assets in the Trust Account had remained in U.S. government securities or money market funds.
On March 30, 2022, the SEC issued proposed rules (the “SPAC Rule Proposals”), relating, among other things, to circumstances in which special purpose acquisition companies (“SPACs”) such as us could potentially be subject to the Investment Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria. To comply with the duration limitation of the proposed safe harbor, a SPAC would have a limited time period to announce and complete a de-SPAC transaction. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a report on Form 8-K announcing that it has entered into an agreement with a target company for an Initial Business Combination no later than 18 months after the effective date of the registration statement for its initial public offering. The company would then be required to complete its Initial Business Combination no later than 24 months after the effective date of the registration statement for its initial public offering. We understand that the SEC has recently been taking informal positions regarding the Investment Company Act consistent with the SPAC Rule Proposals.
There is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC, including a company like ours, that does not complete its Initial Business Combination within the proposed time frame set forth in the proposed safe harbor rule. As indicated above, we completed our IPO on January 24, 2022 and have operated as a blank check company searching for a target business with which to consummate an Initial Business Combination since such time. On June 22, 2023, or approximately 17 months after the effective date of the registration statement the Company entered into the Pinstripes Agreement and filed a Form 8-K with the SEC announcing the entry into the Pinstripes Agreement. However, despite entering into the Pinstripes Agreement, we still may be unable to complete the Business Combination within 24 months after the effective date of the registration statement for our IPO, or at all. If we were deemed to be an investment company for purposes of the Investment Company Act, we might be forced to abandon our efforts to complete an Initial Business Combination and instead be required to liquidate the Company. If we are required to liquidate the Company, our investors would not be able to realize the benefits of owning shares in a successor operating business, including the potential appreciation in the value of our shares and warrants following such a transaction, and our warrants would expire worthless.
The funds in the Trust Account have, since our IPO, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. As of June 30, 2022, amounts held in Trust Account included approximately $3,891,253 of accrued interest. To mitigate the risk of us being deemed to have been operating as an unregistered investment company under the Investment Company Act, we may, on or prior to the 24-month anniversary of the effective date of the registration statement relating to our IPO, or January 19, 2024, instruct Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in cash (i.e., in one or more bank accounts) until the earlier of the consummation of an Initial Business Combination or our liquidation. Following such liquidation of the assets in our Trust Account, we will likely receive minimal interest, if any, on the funds held in the Trust Account, which would reduce the dollar amount our public stockholders would have otherwise received upon any redemption or liquidation of the Company if the assets in the Trust Account had remained in U.S. government securities or money market funds. This means that the amount available for redemption would not increase in the future.
In addition, even prior to the 24-month anniversary of the effective date of the registration statement relating to our IPO, we may be deemed to be an investment company. The longer that the funds in the Trust Account are held in short-term U.S. government securities or in money market funds invested exclusively in such securities, even prior to the 24-month anniversary, there is a greater risk that we may be considered an unregistered investment company, in which case we may be required to liquidate. Accordingly, we may determine, in our discretion, to liquidate the securities held in the Trust Account at any time, even prior to the 24-month anniversary, and instead hold all funds in the Trust Account in cash, which would further reduce the dollar amount our public stockholders would receive upon any redemption or our liquidation.
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We identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future, or fail to maintain an effective system of internal control over financial reporting, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.
In connection with the review of our financial statements as of and for the three and six months ended June 30, 2023, we identified a material weakness in our internal control over financial reporting related to the accrual of legal fees. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Management, with oversight from the board of directors and the audit committee of the board of directors will implement a remediation plan for this material weakness, including, our principal executive officer or principal financial and accounting officer obtaining confirmation of billed and unbilled legal fees directly from our legal counsels through the end of each reporting period. We cannot be certain as to the timing of completion of our evaluation, testing, and remediation actions or their effect on our operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
All recent unregistered sales of securities have been previously reported.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the three months ended June 30, 2023, none of our directors or officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
No. |
| Description of Exhibit |
2.1 | ||
3.1 | ||
3.2 | ||
3.3 | ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 | ||
10.7 | ||
10.8 | Support Services Agreement, dated January 19, 2022, by and between the Company and the Sponsor.(2) | |
10.9 | ||
10.10 | ||
10.11 | ||
10.12 | ||
10.13 | ||
10.14 | ||
31.1* | ||
31.2* | ||
32** | ||
101.INS* | XBRL Instance Document. | |
101.SCH* | XBRL Taxonomy Extension Schema Document. | |
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101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document. | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. |
* | Filed herewith. |
** | Furnished. |
(4) | Previously filed as an exhibit to the Company’s Pre-Effective Amendment No. 4 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-258599) filed on January 10, 2022, and incorporated by reference herein. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BANYAN ACQUISITION CORPORATION | ||
Date: August 17, 2023 | By: | /s/ Keith Jaffee |
Name: | Keith Jaffee | |
Title: | Chief Executive Officer and Director | |
(Principal Executive Officer) | ||
Date: August 17, 2023 | By: | /s/ George Courtot |
Name: | George Courtot | |
Title: | Chief Financial Officer |
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