Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

Related Party Transactions
3 Months Ended
Mar. 31, 2023
Related Party Transactions [Abstract]  
Related Party Transactions
Note 5—Related Party Transactions
Founder Shares
The Company’s Sponsor acquired 6,900,000 shares of Founder Shares prior to the Initial Public Offering.
In connection with the Initial Public Offering, the Sponsor forfeited a total of 90,000 Founder Shares for no consideration, and 30,000 Founder Shares were purchased from the Company by each of the Company’s independent directors, Mel G. Riggs, Charles W. Yates and Stephen Straty, at their original purchase price (approximately $0.004 per share) or a total of $360. The excess of the fair value of the Founder Shares transferred ($515,340) over the original issuance price ($360) will be accounted for as director’s compensation expense upon the Initial Business Combination. The purchased shares shall vest upon the Company consummating an Initial Business Combination (the “Vesting Date”). If prior to the Vesting Date, the Director is removed from office or ceases to be a Director, the Director will forfeit their Founder Shares to the Company. The Directors have agreed, (1) the shares may not be sold or transferred, until six months after the consummation of a business combination, (2) the shares will not be entitled to redemption from the funds held in the Trust Account, or any liquidating distributions. The Company has until June 18, 2023 to consummate a business combination (subject to the Company’s options to extend pursuant to the Amended Charter), and if a business combination is not consummated, the Company will liquidate, and the shares will become worthless.
The fair value of the Founder Shares at the grant dates was determined using an internal model using the issuance price of the Units in the Initial Public Offering as a proxy adjusting for the value of the warrants included in the Units, for the probability the Company will consummate an Initial Business Combination and for holding costs and no rights of redemption. Valuation of the 90,000 Founder Shares granted to the directors is estimated to be $486,000 or $5.40 per share. The Company will record the fair value of the transferred shares in excess of the amount paid as director compensation expense upon consummation of an Initial Business Combination, in accordance with the guidance in FASB ASC 718, Compensation-Stock Compensation (“ASC 718”), which requires deferral of the expense recognition until after the performance condition becomes probable of being achieved. If the performance condition is a business combination or similar liquidity event, the performance condition is not deemed to be probable until it is achieved.
The holders of the Founder Shares agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (i) 180 days after the completion of the Initial Business Combination or (ii) subsequent to the Initial Business Combination, the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Working Capital Loans
In order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds on a
bearing basis as may be required (“Working Capital Loans”). If the Company completes an Initial Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that an Initial Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of an Initial Business Combination or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Initial Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. To date, the Company had no borrowings under the Working Capital Loans.
Administrative Support Agreement and Other
The Company has agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. For the three months ended March 31, 2023 and 2022, the Company has incurred $30,000 of administrative service fees.
Related parties paid certain operating expenses on the Company’s behalf. At March 31, 2023 and December 31, 2022, $10,000 and $7,744, respectively, is recorded in Due to Related Party on the accompanying balance sheets.