SEC Form 10-Q filed by Monterey Innovation Acquisition Corp.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (less any Marketing Fee (as defined below) and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account ($10.10 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s public warrants.

The Company will proceed with a Business Combination if the Company seeks stockholder approval and a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its amended and restated certificate of incorporation, as amended (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC containing substantially the same information as would be included in a proxy statement prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders have agreed (A) to vote their Founder Shares and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination, (B) not to propose, or vote in favor of, prior to and unrelated to the initial Business Combination, an amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s redemption obligation to redeem all public shares if the Company cannot complete the initial Business Combination within the Combination Period (as defined below) unless the Company provides public stockholders the opportunity to redeem their Public Shares in conjunction with any such amendment, (C) not to redeem any shares (including their Founder Shares) in connection with a stockholder vote to approve the proposed Business Combination or sell any shares back to the Company in a tender offer in connection with the initial Business Combination, and (D), that the Founder Shares shall not participate in any liquidating distribution upon winding up if the Business Combination is not consummated.

The initial stockholders have agreed (a) to waive their redemption rights with respect to the Founder Shares and Public Shares held by them in connection with the completion of a Business Combination, including their Founder Shares and Public Shares that they have purchased during or after the Initial Public Offering, if any and (b) to waive their rights to liquidating distributions with respect to their Founder Shares if the Company fails to consummate the initial Business Combination within the Combination Period. The initial stockholders who have acquired Public Shares in or after the Initial Public Offering are entitled to receive liquidating distributions with respect to such Public Shares if the Company fails to consummate the initial Business Combination within the Combination Period.

On September 29, 2022, the Company’s stockholders approved an amendment to the Amended and Restated Certificate of Incorporation (the “First Extension”) to extend the deadline to consummate a Business Combination from October 5, 2022 to January 5, 2023. In the event that the Company had not consummated a Business Combination by January 5, 2023, the Company may have, by resolution of the Company’s board of directors (the “Board”) if requested by the Company’s insiders or their affiliates, extended the period of time to consummate a Business Combination up to six (6) times by an additional month each time (or up to July 5, 2023); provided that, pursuant to the trust agreement entered into between the Corporation and Continental Stock Transfer & Trust Company on September 30, 2021, as amended (the “Trust Agreement”), the only way to extend the time available for the Company to consummate its Business Combination was for the Company’s insiders or their affiliates or designees, upon five days’ advance notice prior to each applicable deadline, to deposit into the Trust Account $120,000 (or an aggregate of $720,000 if the time to consummate a Business Combination is extended to July 5, 2023), on or prior to the date of the applicable deadline (the “Combination Period”).

During the period ended June 30, 2023 the Company deposited an aggregate of $720,000 into the Trust Account, extending the Combination Period (defined below) to July 5, 2023.

As described in Note 7, on July 3, 2023, the Company’s stockholders approved a second amendment to the Amended and Restated Certificate of Incorporation (the “Second Extension”) to further extend the Combination Period from July 5, 2023 to up to nine (9) times by an additional month each time (or up to April 5, 2024) (as extended, the “Extended Date”) by depositing into the Trust Account $100,000 for each additional month extension. From the date of the First Extension to the date of this filing, the Company has deposited an aggregate of $1,310,000 into the Trust Account to extend the Combination Period to September 5, 2023.

If the Company is unable to complete a Business Combination the Extended Date, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), 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 Board, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s Private Warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

In connection with the First Extension, the Company stockholders had the right to redeem their shares of common stock. The holders of 9,480,616 shares of common stock elected to redeem their shares at a per share redemption price of $10.13. As a result, approximately $96.1 million was removed from the Trust Account on October 3, 2022 to pay such holders, leaving approximately $20.5 million in the Trust Account.

Additionally, as discussed in Note 7, in connection with the Second Extension, the holders of 558,454 shares of common stock of the Company properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.835 per share, for an aggregate redemption amount of $6,050,967, leaving approximately $15.8 million in the Trust Account.

The Company’s placing of funds in the Trust Account may not protect those funds from third-party claims against the Company. Although, the Company will seek to have all vendors, service providers (excluding the independent registered public accounting firm), prospective target businesses and other entities with which the Company does business execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements, they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against the Company’s assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, the Company’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if the Company’s management believes that such third-party’s engagement would be significantly more beneficial to the Company than any alternative. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts, or agreements with the Company and will not seek recourse against the Trust Account for any reason. Upon redemption of the Public Shares, if the Company was unable to consummate the initial Business Combination within the Combination Period, or upon the exercise of the redemption right in connection with the Business Combination, the Company will be required to provide for payment of claims of creditors that were not waived that may be brought against the Company within the ten years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.10 per Public Share initially held in the Trust Account, due to claims of such creditors.

The co-Sponsors have agreed to be liable to the Company if and to the extent any claims by a third-party (excluding the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.10 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the co-Sponsors will not be responsible to the extent of any liability for such third-party claims.

On June 30, 2023, the co-Sponsors agreed to pay any Delaware franchise taxes currently owed by the Company or that may become due after such date (the “Delaware Franchise Tax Obligations”). As a result, the Company confirmed that interest earned on the proceeds placed in the Trust Account will not be used to pay for Delaware Franchise Tax Obligations.

At June 30, 2023, an excess of $44,380 was withdrawn from the interest earned in the Trust Account for the payment of taxes, as the Company had inadvertently overpaid such amount in taxes.

Risks and Uncertainties

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States and the world. As of the date the financial statements were issued, there was considerable uncertainty around the expected duration of this pandemic. The Company has concluded that while it is reasonably possible that COVID-19 could have a negative effect on identifying a target company for a Business Combination, the specific impact is not readily determinable as of the date of this condensed financial statement. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.

On June 30, 2023, the Company confirmed that it will not use the proceeds placed in the Trust Account and the interest earned thereon to pay any excise taxes or any other similar fees or taxes in nature that may be imposed on the Company pursuant to any current, pending or future rules or laws, including without limitation any excise tax due imposed under the Inflation Reduction Act of 2022 (the “IR Act”) on any redemptions or stock buybacks by the Company. The Co-Sponsors agreed to promptly either directly pay such tax or fee on behalf of the Company or advance to the Company such funds as necessary and appropriate to allow the Company to pay such tax or fee timely with respect to any future redemptions that occur prior to or in connection with a business combination or the Company’s liquidation. The Co-Sponsors also agreed not to seek recourse for such expenses from the Trust Account.

Going Concern

As of June 30, 2023, the Company had $539,786 in its operating bank accounts and $21,865,397 in marketable securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem stock in connection therewith and working capital deficit of $2,351,338 (excluding taxes payable from the Trust Account).

Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.

In March 2022, the Sponsors committed to provide the Company $500,000 in loans in connection with the Working Capital Loans as described in Note 3. The co-Sponsors issued unsecured promissory notes on October 7, 2022 to evidence the Working Capital Loans for an aggregate principal balance of $700,000. On March 10, 2023, the Company issued promissory notes to the co-Sponsors pursuant to which the Company may borrow up to an aggregate principal amount of $893,036, respectively. The promissory notes are non-interest bearing and payable upon consummation of the initial Business Combination. At the option of each co-Sponsor, the respective promissory notes may be converted into warrants at a price of $1.00 per warrant. The warrants would be identical to the private warrants (See Note 3). The Company may raise additional capital through loans or additional investments from the Sponsors or its stockholders, officers, directors, or third parties. The Company’s officers and directors and the Sponsors may, but are not obligated to (except as described above), loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. At June 30, 2023 and December 31, 2022, $1,919,559 and $700,000 was due to the Company under the Working Capital Loans.

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” the Company has until September 5, 2023 (as extended) to consummate a Business Combination. The Company has the option to extend the date for mandatory liquidation if the Company’s insiders or their affiliates deposit into the Trust Account $100,000 for each month extension up to April 5, 2024. The Company intends to complete a Business Combination before the mandatory liquidation date or its extended liquidation date if applicable. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an extension is not requested by the Company’s insiders or their affiliates, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Company’s insiders or their affiliates, and potential subsequent dissolution, raise substantial doubts about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after September 5, 2023 (as may be extended).

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All of the Insider Shares issued and outstanding prior to the date of the Initial Public Offering were placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, until (1) with respect to 50% of the Insider Shares, the earlier of six months or after the date of the consummation of Initial Business Combination and the date on which the closing price of the common stock equals or exceeds $12.50 per share for any 20 trading days within any 30-trading period commencing after the Initial Business Combination, and (2) with respect to the remaining 50% of the Insider Shares, six months after the date of the consummation of Initial Business Combination, or earlier, in either case, if subsequent to the Initial Business Combination, the Company consummates a liquidation, merger, share exchange or other similar transaction which will result in all of the stockholders having the right to exchange their shares for cash, securities, or other property.

During the escrow period, the holders of these shares will not be able to sell or transfer their securities except (1) to any persons (including their affiliates and stockholders) participating in the private placement of the private warrants, officers, directors, stockholders, employees and members of the co-Sponsors and their affiliates, (2) amongst initial stockholders or to Company’s officers, directors and employees, (3) if a holder is an entity, as a distribution to its partners, stockholders or members upon its liquidation, (4) by bona fide gift to a member of the holder’s immediate family or to a trust, the beneficiary of which is a holder or a member of a holder’s immediate family, for estate planning purposes, (5) by virtue of the laws of descent and distribution upon death, (6) pursuant to a qualified domestic relations order, (7) by certain pledges to secure obligations incurred in connection with purchases of our securities, (8) by private sales at prices no greater than the price at which the shares were originally purchased.

The sale of the Founder Shares to the Company’s Chief Executive Officer, directors and director nominees is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Company has hired a valuation firm to assess using the lattice model, the fair value associated with the Founder Shares granted. The fair value of the 325,000 Founder Shares granted to the Company’s Chief Executive Officer, directors and director nominees was $1,901,250 or $5.85 per share. The Founder Shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founder Shares is recognized only when the performance condition is probable of occurrence under the applicable accounting literature in this circumstance. As of June 30, 2023, the Company determined the performance conditions are not considered probable, and, therefore, no stock-based compensation expense has been recognized. Stock-based compensation would be recognized at the date the performance conditions are considered probable (i.e., upon consummation of a Business Combination) in an amount equal to the number of Founder Shares vested times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founder Shares.

Administrative Services Agreement

The Company entered into an administrative services agreement (the “Administrative Services Agreement”), commencing on September 30, 2021 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay NorthStar a total of $10,000 per month for office space, utilities and secretarial and administrative support. On March 9, 2023, NorthStar has assigned all amounts payable under the Administrative Services Agreement to Chardan Monterey. For the three and six months ended June 30, 2023 and 2022, the Company incurred $30,000 and $60,000 fees for these services, of which such amounts are recorded as accrued expenses in the condensed balance sheets, respectively.

Related Party Loans

In order to finance transaction costs in connection with an intended initial Business Combination, the Company’s initial stockholders, officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Each loan would be evidenced by a promissory note. The notes would be paid upon consummation of a Business Combination, without interest, or, at the lender’s discretion up to $1,500,000 of the notes may be converted upon consummation of a Business Combination into additional Private Warrants to purchase shares of common stock at a conversion price of $1.00 per Private Warrant. Such Private Warrants are identical to the Public Warrants issued at the closing of the Initial Public Offering.

On October 7, 2022, the Company issued an unsecured promissory note in the amount of up to $175,000 to Chardan Monterey to evidence a Working Capital Loan. On March 9, 2023, the Company issued an unsecured promissory note in the amount of up to $331,563 to Chardan Monterey to evidence a Working Capital Loan. The notes bear no interest and are payable on the date on which the Company consummates an initial Business Combination. The notes are convertible into private warrants as described above.

On October 7, 2022, the Company issued an unsecured promissory note in the amount of up to $525,000 to NorthStar to evidence a Working Capital Loan. On March 9, 2023, the Company issued an unsecured promissory note in the amount of up to $561,473 to NorthStar to evidence a Working Capital Loan. The notes bear no interest and are payable on the date on which the Company consummates an initial Business Combination. The notes are convertible into private warrants as described above.

On March 10, 2023, the Company issued a promissory note to each of Northstar and Chardan Monterey pursuant to which the Company may borrow up to an aggregate principal amount of $561,473 and $331,563, respectively. The promissory notes are non-interest bearing and payable upon consummation of the Company’s initial business combination. At the option of NorthStar or Chardan Monterey, the respective promissory note may be converted into warrants at a price of $1.00 per warrant. The warrants would be identical to the private warrants described above.

On June 30, 2023, the Company issued a promissory note to each of Northstar and Chardan Monterey pursuant to which the Company may borrow up to an aggregate principal amount of $221,060 and $128,940, respectively. The promissory notes are non-interest bearing and payable upon consummation of the Company’s initial business combination. At the option of NorthStar or Chardan Monterey, the respective promissory note may be converted into warrants at a price of $1.00 per warrant. The warrants would be identical to the private warrants described above.

At June 30, 2023 and December 31, 2022 there was $1,919,559 and $700,000 outstanding under the promissory notes, respectively

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Contingent Fee Arrangements

The Company entered into a consulting agreement dated as of September 14, 2021, as amended, with a consultant to assist the Company in facilitating a Business Combination with one or more targets, subject to certain conditions. The consultant will receive a success fee of (i) $100,000 or (ii) in the event the Company’s successful Business Combination is consummated with an entity or target first introduced to the Company by the consultant, $150,000, in either case, subject to, and payable upon, the Company’s successful consummation of an initial Business Combination, provided that the consulting agreement is not terminated prior to such date. Additionally, the Company will reimburse the Consultant for any out-of-pocket expenses and pre-approved travel-related expenses incurred in connection with the provision of services under the consulting agreement.

The Company has incurred legal expenses that are contingent upon the consummation of a Business Combination. At June 30, 2023 and December 31, 2022, the amount due under this arrangement was approximately $560,000 and 550,000, respectively.

The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of the warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.

The redemption criteria for the warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result of the Company’s redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.

If the Company calls the warrants for redemption as described above, its management will have the option to require all holders that wish to exercise the warrants to do so on a “cashless basis”. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” by (y) the fair market value. The “fair market value” shall mean the average reported last sales price of shares of common stock for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of the warrants. Whether the Company will exercise its option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including the price of shares of common stock at the time the warrants are called for redemption, the Company’s cash needs at such time, and concerns regarding dilutive shares issuances.

The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend, recapitalization, reorganization, merger, or consolidation. In addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issued price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the Market Value is below $9.50 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $16.50 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 165% of the higher of the Market Value and the Newly Issued Price.

The Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that each Private Warrant is exercisable for one share of common stock at an exercise price of $11.50 per share. The Private Warrants and any shares of common stock issued upon exercise thereof are subject to transfer restrictions pursuant to lock-up provision in a letter agreement with the Company to be entered into by the co-Sponsors, officers, directors, and Chardan. Those lock-up provisions provide that such securities are not transferable or salable until 30 days after the completion of the Initial Business Combination, except to conditions as set forth in the agreement.

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:

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

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