Abacus Life(ABL) - 2022 Q4 - Annual Report

PART I Item 1. Business. The company is a SPAC focused on the North American energy industry that completed its IPO in 2020 and has entered into a merger agreement - East Resources Acquisition Company is a blank check company (SPAC) incorporated on May 22, 2020, with the purpose of effecting a business combination, primarily in the energy industry in North America[12] Initial Public Offering and Private Placement Details | Item | Date | Details | | :--- | :--- | :--- | | Initial Public Offering (IPO) | July 27, 2020 | 30,000,000 units at $10.00/unit, generating $300,000,000. Each unit consists of one Class A common stock and one-half warrant | | Over-allotment Option Exercise | August 25, 2020 | 4,500,000 additional units, generating $45,000,000 | | Private Placement Warrants | July 27, 2020 & August 25, 2020 | 8,900,000 warrants sold to Sponsor at $1.00/warrant, generating $8,900,000 | | Total Proceeds to Trust Account | Post-IPO & Over-allotment | $345,000,000 deposited into a trust account | - The company's business strategy focuses on identifying, acquiring, and growing companies in the North American energy industry, leveraging management's extensive experience and network[19][23][24] - On August 30, 2022, the company entered into a Merger Agreement to combine with Longevity Market Assets, LLC and Abacus Settlements, LLC, with an aggregate merger consideration of approximately $531.8 million[16][17] Extension Amendments and Redemptions | Extension | Approval Date | New Deadline | Shares Redeemed | Funds Removed from Trust Account | Sponsor Loan/Deposit | | :--- | :--- | :--- | :--- | :--- | :--- | | First Extension | July 25, 2022 | January 27, 2023 | 24,781,028 Class A shares | $248,087,256 ($10.01/share) | Sponsor loaned up to $1,924,356 and deposited $320,726 monthly into trust account | | Second Extension | January 20, 2023 | July 27, 2023 | 6,862,925 Class A shares | $70,070,464 ($10.21/share) | Sponsor loaned up to $565,497 and will deposit $94,250 monthly into trust account | Item 1A. Risk Factors. The company faces significant risks related to completing a business combination, potential conflicts of interest, stockholder redemptions, and regulatory changes - Key risks include the ability to select and complete an appropriate target business, the impact of the COVID-19 pandemic and economic volatility, potential conflicts of interest of officers and directors, and the ability to obtain additional financing[103] - Failure to complete an initial business combination by July 27, 2023, would result in the company ceasing operations, redeeming public shares, and warrants expiring worthless[120][121] - The company's financial condition may be unattractive to potential targets due to public stockholders' redemption rights, which could reduce available cash and hinder meeting closing conditions[112][113] - The company's focus on the North American energy industry subjects it to specific risks, including price volatility, regulatory changes, exploration risks, and global supply/demand shifts[195] - New SEC proposed rules for SPACs and the 1% U.S. federal excise tax on stock repurchases may materially adversely affect the ability to complete a business combination and increase costs[173][175][178][179] - The company has identified a material weakness in its internal control over financial reporting as of December 31, 2022, related to improper accounting for accruals and complex financial instruments[289][290][292] Item 1B. Unresolved Staff Comments. The company has no unresolved staff comments from the SEC Item 2. Properties. The company does not own material properties and considers its executive office in Boca Raton, Florida, adequate for current operations - The company does not own any real estate or other physical properties materially important to its operation[294] Item 3. Legal Proceedings. The company is not currently involved in any legal proceedings - The company has no legal proceedings[294] Item 4. Mine Safety Disclosures. Mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable[294] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The company's securities trade on NASDAQ with a small number of record holders, and it has no equity compensation plans - The company's units, Class A common stock, and warrants are listed on NASDAQ under the symbols ERESU, ERES, and ERESW, respectively[297] Holders of Record (April 17, 2023) | Security Type | Number of Holders | | :--- | :--- | | Units | 1 | | Class A Common Stock | 1 | | Class B Common Stock | 2 | | Warrants | 3 | - The company has no equity compensation plans[298] Proceeds from Registered Offerings and Private Placements | Event | Date | Gross Proceeds | Details | | :--- | :--- | :--- | :--- | | Private Placement Warrants (Initial) | July 27, 2020 | $8,000,000 | 8,000,000 warrants at $1.00/warrant to Sponsor | | Private Placement Warrants (Over-allotment) | August 25, 2020 | $900,000 | 900,000 additional warrants at $1.00/warrant to Sponsor | | Initial Public Offering (IPO) | July 27, 2020 | $300,000,000 | 30,000,000 units at $10.00/unit | | Over-allotment Option Exercise | August 25, 2020 | $45,000,000 | 4,500,000 additional units at $10.00/unit | | Net Proceeds to Trust Account | Post-IPO & Over-allotment | $345,000,000 | After deducting underwriting discounts and offering costs. Deferred underwriting fees of $12,075,000 were waived by Wells Fargo Securities, LLC | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The company reported a net loss in 2022, faces a significant working capital deficiency, and has substantial doubt about its ability to continue as a going concern - The company is a blank check company with no operating revenues to date, focused on organizational activities and identifying a target for a business combination[305] Net Income (Loss) and Key Financial Changes | Item | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net Income (Loss) | $(643,564) | $15,839,365 | | Operating Costs | $11,722,287 | $1,382,681 | | Change in Fair Value of Warrant Liability | $9,335,550 | $15,899,200 | | Change in Fair Value of Forward Purchase Agreement Liability | $600,000 | $1,300,000 | | Gain on Deferred Underwriting Fee Waiver | $513,188 | $0 | | Interest Earned on Marketable Securities in Trust Account | $672,439 | $22,784 | | Income Tax Expense | $52,485 | $0 | Liquidity and Capital Resources (as of Dec 31) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Cash and Marketable Securities in Trust Account | $99,222,704 | $345,048,888 | | Cash Outside Trust Account | $86,572 | $853,130 | | Working Capital Deficiency | $(14,052,873) | N/A (not explicitly stated as deficiency) | | Note Payable to Related Party | $4,924,356 | $1,500,000 | | Cash Used in Operating Activities | $(2,602,281) | $(1,236,555) | - The company's liquidity conditions, including a significant working capital deficiency and the need to complete a business combination by July 27, 2023, raise substantial doubt about its ability to continue as a going concern[317][483][484] - The company has no off-balance sheet arrangements[318] - Key accounting policies include the treatment of derivative financial instruments, Class A common stock subject to possible redemption, and the two-class method for net income (loss) per common share[328][329][330][494][497][498][502][503] Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The company was not subject to material market or interest rate risk as of December 31, 2022, with trust account assets held in cash - As of December 31, 2022, the company was not subject to any material market or interest rate risk[334] - Prior to June 2022, trust account funds were invested in short-term U.S. government securities or money market funds, limiting interest rate risk; after June 2022, these assets were held in cash[334] Item 8. Consolidated Financial Statements and Supplementary Data. This section refers to the consolidated financial statements and supplementary data included elsewhere in the report - The consolidated financial statements and supplementary data are included following Item 15 of this report[335] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[335] Item 9A. Controls and Procedures. Disclosure controls were deemed not effective due to material weaknesses in internal control over financial reporting related to accounting for accruals and complex instruments - As of December 31, 2022, the company's disclosure controls and procedures were deemed not effective due to material weaknesses in internal control over financial reporting[336] - The material weaknesses relate to improper accounting for accruals and complex financial instruments in accordance with U.S. GAAP[290][336] - Remediation efforts include enhancing access to accounting literature and increasing communication among personnel and third-party professionals[337][342] - The company is an 'emerging growth company' and is not required to comply with the independent registered public accounting firm attestation requirement on internal control over financial reporting[341] Item 9B. Other Information. There is no other information to report in this section - There is no other information to report[343] PART III Item 10. Directors, Executive Officers and Corporate Governance. This section details the company's management team, board structure, governance practices, and potential conflicts of interest Officers and Directors | Name | Age | Position | | :--- | :--- | :--- | | Terrence M. Pegula | 71 | Chairman, Chief Executive Officer and President | | Gary L. Hagerman, Jr. | 44 | Chief Financial Officer and Treasurer | | John P. Sieminski | 64 | General Counsel and Secretary | | Adam Gusky | 48 | Chief Investment Officer | | Jacob Long | 35 | Vice President, Operations | | James S. Morrow | 51 | Director | | William A. Fustos | 65 | Director | | Thomas W. Corbett, Jr. | 73 | Director | | Thomas A. Lopus | 63 | Director | - The Board is divided into three classes, with founder shares holders having the right to elect all directors prior to the initial business combination[361][362] - William A. Fustos, Thomas A. Lopus, and Thomas W. Corbett, Jr. are identified as independent directors[366] - No cash compensation is paid to officers or directors for services rendered prior to or in connection with the completion of the initial business combination; however, out-of-pocket expenses are reimbursed[367][405] - The company has an audit committee and a compensation committee, operating under approved charters[370][371][374] - Conflicts of interest may arise due to officers' and directors' affiliations with other entities, such as JKLM Energy, which operates in the same industry[386][387][391][392] Item 11. Executive Compensation. No cash compensation has been paid to officers or directors, though out-of-pocket expenses are reimbursed - No cash compensation has been paid to officers or directors for services rendered to the company[405] - Out-of-pocket expenses incurred by officers and directors for company activities are reimbursed[405] - Post-business combination, directors or management team members who remain with the company may receive consulting or management fees, which will be fully disclosed to stockholders[406] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The Sponsor and its affiliates beneficially own approximately 75% of the company's outstanding common stock, giving them substantial influence Beneficial Ownership of Common Stock (April 17, 2023) | Name and Address of Beneficial Owner | Class A Common Stock (Number of Shares Beneficially Owned) | Approximate Percentage of Class A | Class B Common Stock (Number of Shares Beneficially Owned) | Approximate Percentage of Class B | Approximate Percentage of Outstanding Common Stock | | :--- | :--- | :--- | :--- | :--- | :--- | | Terrence M. Pegula | — | — | 8,615,000 | 99.88% | 75% | | Gary L. Hagerman, Jr. | 1,000 | * | — | — | * | | John P. Sieminski | 2,500 | * | — | — | * | | James S. Morrow | — | — | — | — | — | | William A. Fustos | 22,000 | * | — | — | * | | Thomas W. Corbett, Jr. | — | — | 10,000 | * | * | | Benjamin Wingard | 4,000 | * | — | — | * | | Jacob Long | 5,000 | * | — | — | * | | Adam Gusky | 2,452 | * | — | — | * | | All officers and directors as a group (10 individuals) | 36,952 | 1.29% | 8,625,000 | 100% | 75% | | East Sponsor, LLC | — | — | 8,615,000 | 99.88% | 75% | * less than 1% - East Sponsor, LLC is the record holder of the Class B shares, and Terrence M. Pegula and Kim S. Pegula are managing members of East Asset Management, LLC, which manages East Sponsor, LLC, giving them beneficial ownership[411] - There have been no changes in control[412] Item 13. Certain Relationships and Related Transactions, and Director Independence. This section details transactions with related parties, primarily the Sponsor, including share purchases, loans, and support agreements - The Sponsor acquired 8,625,000 founder shares for $25,000 in June 2020, representing 20% of outstanding shares post-IPO[413][415][521] - The Sponsor purchased 8,900,000 private placement warrants for $8,900,000[415] - The company pays two affiliates of the Sponsor $10,000 each per month for office space and administrative support, totaling $240,000 annually[319][526] Related Party Loans from Sponsor | Loan Type | Amount (as of April 17, 2023) | Interest | Repayment Condition | Conversion Option | | :--- | :--- | :--- | :--- | :--- | | Working Capital Loans | $3,000,000 | No | Upon Business Combination (forgiven if not completed) | Up to $2,000,000 convertible into warrants at $1.50/warrant | | First Extension Note | $1,924,356 | No | Upon Business Combination or liquidation | Up to $1,500,000 convertible into warrants at $1.50/warrant | | Second Extension Note | $565,497 | No | Upon Business Combination or liquidation | Up to $500,000 convertible into warrants at $1.50/warrant | - The forward purchase agreement with East Asset Management, an affiliate of the Sponsor, for up to 5,000,000 units ($50,000,000) was terminated on December 2, 2022[320][321][540] - The company has a written policy for the audit committee to review and approve or ratify all related person transactions[426][428] Item 14. Principal Accountant Fees and Services. This section outlines the fees paid to Marcum LLP for audit services, which are pre-approved by the audit committee Fees Paid to Marcum LLP | Fee Type | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Audit Fees | $171,866 | $62,110 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | - The audit committee pre-approves all auditing services and permitted non-audit services[435] PART IV Item 15. Exhibits, Financial Statement Schedules. This section lists all exhibits and financial statement schedules filed as part of the Form 10-K - The section includes a list of exhibits and financial statement schedules filed as part of the Form 10-K[437] - Financial statements include the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Deficit, Statements of Cash Flows, and Notes to Consolidated Financial Statements[437][446] Item 16. Form 10-K Summary This section indicates that there is no Form 10-K Summary provided - No Form 10-K Summary is provided[437] Financial Statements INDEX TO FINANCIAL STATEMENTS This index lists the components of the financial statements included in the report - The index outlines the included financial statements: Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Stockholders' Deficit, Consolidated Statements of Cash Flows, and Notes to Financial Statements[446] Report of Independent Registered Public Accounting Firm The independent auditor issued an unqualified opinion but highlighted a going concern uncertainty due to a working capital deficiency and impending deadlines - Marcum LLP issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2022 and 2021[448] - An explanatory paragraph highlights substantial doubt about the company's ability to continue as a going concern due to a significant working capital deficiency and the deadline for completing a business combination[449] Consolidated Balance Sheets The balance sheets show a significant decrease in trust account assets due to redemptions and a stockholders' deficit of $(18.4) million in 2022 Consolidated Balance Sheet Highlights (as of December 31) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Total Assets | $99,374,190 | $345,993,643 | | Cash and securities held in Trust Account | $99,222,704 | $345,048,888 | | Total Liabilities | $18,780,609 | $29,231,054 | | Accrued expenses | $9,227,518 | $144,254 | | Note payable to related party | $4,924,356 | $1,500,000 | | Deferred underwriting fee payable | $0 | $12,075,000 | | Forward purchase agreement liability | $0 | $1,600,000 | | Warrant liability | $4,576,250 | $13,911,800 | | Class A common stock subject to possible redemption | $98,983,437 | $345,000,000 | | Total Stockholders' Deficit | $(18,389,856) | $(28,237,411) | Consolidated Statements of Operations The company reported a net loss of $643,564 in 2022, a significant decline from a net income of $15.8 million in 2021 Consolidated Statements of Operations Highlights (Year Ended December 31) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Net Income (Loss) | $(643,564) | $15,839,365 | | Formation and operating costs | $11,722,287 | $1,382,681 | | Change in fair value of warrant liability | $9,335,550 | $15,899,200 | | Change in fair value of forward purchase agreement liability | $600,000 | $1,300,000 | | Gain on deferred underwriting fees waiver | $513,188 | $0 | | Interest earned on marketable securities held in Trust Account | $672,439 | $22,784 | | Income tax expense | $52,485 | $0 | | Basic and diluted net loss per share, Class A common stock subject to possible redemption | $(0.02) | $0.37 | | Basic and diluted net income per share, Non-redeemable common stock | $(0.02) | $0.37 | Consolidated Statements of Changes in Stockholders' Deficit The total stockholders' deficit improved from $(28.2) million in 2021 to $(18.4) million in 2022, driven by a deferred underwriting fees waiver Consolidated Statements of Changes in Stockholders' Deficit Highlights (Year Ended December 31) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Balance – January 1 | $(28,237,411) | $(44,076,776) | | Net income (loss) | $(643,564) | $15,839,365 | | Deferred underwriting fees waiver | $11,561,812 | $0 | | Termination of forward purchase agreement | $1,000,000 | $0 | | Remeasurement of Class A common stock to redemption value | $(2,070,693) | $0 | | Balance – December 31 | $(18,389,856) | $(28,237,411) | Consolidated Statements of Cash Flows Cash flows show significant cash provided by investing and used in financing activities in 2022, primarily due to stock redemptions Consolidated Statements of Cash Flows Highlights (Year Ended December 31) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,602,281) | $(1,236,555) | | Net cash provided by investing activities | $246,498,623 | $0 | | Trust Account withdrawal for redemption of Class A shares | $248,087,256 | $0 | | Payment into Trust Account | $(1,924,356) | $0 | | Trust Account withdrawal for payment of taxes | $335,723 | $0 | | Net cash provided by (used in) financing activities | $(244,662,900) | $1,500,000 | | Redemption of Class A Common Stock | $(248,087,256) | $0 | | Proceeds from note payable - Related Party | $3,424,356 | $1,500,000 | | Net Change in Cash | $(766,558) | $263,445 | | Cash — Ending | $86,572 | $853,130 | Notes to Financial Statements The notes detail the company's SPAC nature, merger agreement, accounting policies, related party transactions, and going concern status NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS This note describes the company as a SPAC focused on the energy industry, detailing its IPO, merger agreement, and going concern uncertainties - The company is a blank check company (SPAC) formed in May 2020 to effect a business combination, primarily in the North American energy industry[463] - The IPO and private placement raised $345,000,000, which was deposited into a trust account; investments were liquidated to cash in June 2022[465][466][467] - The company has until July 27, 2023, to complete a business combination, after which it will liquidate if unsuccessful[473] - The Sponsor has waived redemption rights for founder shares and liquidation rights from the trust account if a business combination is not completed[473][474] - The Sponsor is liable for claims by third parties that reduce the trust account below $10.00 per public share, with certain exceptions[475] - The company's working capital deficiency of $14,052,873 and the business combination deadline raise substantial doubt about its ability to continue as a going concern[481][483][484] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines key accounting policies, including its emerging growth company status, treatment of redeemable stock, and derivative instruments - The financial statements are prepared in accordance with GAAP and SEC rules for interim financial reporting[485] - The company is an 'emerging growth company' and has irrevocably opted out of the extended transition period for complying with new or revised accounting standards[486][488] - Key accounting policies include the use of estimates, classification of cash, and the treatment of Class A common stock subject to possible redemption as temporary equity[489][490][491][494] - Warrants and forward purchase agreements are accounted for as derivative financial instruments, measured at fair value with changes reported in the Statement of Operations[497] - The company follows the asset and liability method for income taxes (ASC 740), establishing valuation allowances for deferred tax assets when realization is uncertain[498][500] - The Inflation Reduction Act of 2022 imposes a new 1% U.S. federal excise tax on stock repurchases after December 31, 2022[501] - Net income (loss) per common share is computed using the two-class method, with separate presentations for redeemable and non-redeemable common stock[502][503] NOTE 3. PUBLIC OFFERING This note details the company's IPO, where 34,500,000 units were sold at $10.00 per unit - The company sold 34,500,000 units in its IPO, including the over-allotment option, at $10.00 per unit[517] - Each unit consists of one share of Class A common stock and one-half of one redeemable public warrant[517] NOTE 4. PRIVATE PLACEMENT This note describes the private placement of 8,900,000 warrants to the Sponsor for $8.9 million - The Sponsor purchased 8,900,000 private placement warrants at $1.00 per warrant, totaling $8,900,000[520] - Proceeds from the private placement warrants were added to the trust account[520] - Each private placement warrant is exercisable for one share of Class A common stock at $11.50 per share[520] - These warrants will expire worthless if the company does not complete a business combination within the Combination Period[520] NOTE 5. RELATED PARTY TRANSACTIONS This note details transactions with the Sponsor, including founder share purchases, support agreements, and various non-interest-bearing loans - The Sponsor purchased 8,625,000 founder shares for $25,000, which automatically convert to Class A common stock upon a business combination[521] - Founder shares are subject to transfer restrictions until one year after a business combination or earlier under specific conditions[522] - The company pays two affiliates of the Sponsor $10,000 each per month for office space and administrative support, totaling $240,000 annually[526] Related Party Loans from Sponsor (as of December 31, 2022) | Loan Type | Outstanding Balance | Interest | Repayment Condition | Conversion Option | | :--- | :--- | :--- | :--- | :--- | | Working Capital Loans | $1,500,000 | No | Upon Business Combination (forgiven if not completed) | Option to convert up to $1,500,000 into warrants at $1.50/warrant | | First Extension Note | $1,924,356 | No | Upon Business Combination or liquidation | Option to convert up to $1,500,000 into warrants at $1.50/warrant | | Separate Loan for Business Combination Expenses | $1,500,000 | No | Upon Business Combination (not repaid if not completed) | None | NOTE 6. COMMITMENTS This note details commitments including registration rights, the waiver of deferred underwriting fees, and the termination of the forward purchase agreement - The company has granted registration rights to holders of founder shares, private placement warrants, and warrants from working capital loans[535] - Wells Fargo Securities, LLC waived its entitlement to the $12,075,000 deferred underwriting fee in November 2022[537] - The forward purchase agreement with East Asset Management for up to 5,000,000 units ($50,000,000) was terminated on December 2, 2022[540] - The company's deadline for a business combination was extended to January 27, 2023, and then to July 27, 2023, with the Sponsor making contributions to the trust account[541] - The company entered into a Merger Agreement on August 30, 2022, to combine with Longevity Market Assets, LLC and Abacus Settlements, LLC, with an aggregate merger consideration of approximately $531.8 million[542] - Accrued legal and advisory fees for the business combination totaled approximately $3.1 million and $4.8 million, respectively, as of December 31, 2022[544] NOTE 7. STOCKHOLDERS' EQUITY This note details the company's authorized and outstanding capital stock, including Class A and Class B common stock - The company is authorized to issue 1,000,000 shares of preferred stock, with none issued or outstanding[545] - The company is authorized to issue 200,000,000 shares of Class A common stock; 9,718,972 shares were subject to possible redemption as of December 31, 2022, down from 34,500,000 in 2021[546] - The company is authorized to issue 20,000,000 shares of Class B common stock, with 8,625,000 shares issued and outstanding[546] - Common stockholders of record are entitled to one vote per share, with Class A and Class B voting together as a single class[547] - Class B common stock is subject to transfer restrictions and converts to Class A common stock on a one-for-one basis upon a business combination[548][549] NOTE 8. WARRANT LIABILITY This note details the terms and accounting for public and private placement warrants, including exercisability and redemption conditions - Public Warrants become exercisable on the later of 30 days after a business combination or 12 months from the IPO closing, and expire five years from the completion of a business combination[552] - The company is not obligated to deliver shares upon warrant exercise unless a registration statement for the underlying Class A common stock is effective[553][554] - Public Warrants can be redeemed for cash at $0.01 per warrant if Class A common stock price equals or exceeds $18.00 for 20 trading days within a 30-day period[555] - Public Warrants can be redeemed for Class A common stock if the Class A common stock price equals or exceeds $10.00 on the trading day prior to notice[558] - Private Placement Warrants are identical to Public Warrants but are non-redeemable and exercisable on a cashless basis while held by initial purchasers or permitted transferees[561] - The exercise price and redemption trigger prices of warrants may be adjusted if the company issues additional equity at a price less than $9.20 per share under certain conditions[560] NOTE 9. INCOME TAX This note details the company's income tax provision and deferred tax assets, which are fully offset by a valuation allowance Deferred Tax Assets (as of December 31) | Description | 2022 | 2021 | | :--- | :--- | :--- | | Net operating loss carryforward | $0 | $57,440 | | Startup and organizational expenses | $753,230 | $322,752 | | Total deferred tax assets | $753,230 | $380,192 | | Valuation Allowance | $(753,230) | $(380,192) | | Deferred tax assets, net of allowance | $0 | $0 | Income Tax Provision (Year Ended December 31) | Description | 2022 | 2021 | | :--- | :--- | :--- | | Federal Current | $41,592 | $0 | | Federal Deferred | $(243,908) | $(380,192) | | State and Local Current | $10,893 | $0 | | State and Local Deferred | $(129,130) | $0 | | Change in valuation allowance | $373,038 | $380,192 | | Income tax provision | $52,485 | $0 | - As of December 31, 2022, the company had no U.S. federal net operating loss carryovers[567] - A full valuation allowance has been established against deferred tax assets due to significant uncertainty regarding future realization[568] NOTE 10. FAIR VALUE MEASUREMENTS This note details the fair value measurements of financial assets and liabilities, categorized into a three-level hierarchy Fair Value Measurements (as of December 31) | Description | Level | 2022 | Level | 2021 | | :--- | :--- | :--- | :--- | :--- | | Assets: | | | | | | Marketable securities held in Trust Account | 1 | $99,222,704 | 1 | $345,048,888 | | Liabilities: | | | | | | Warrant Liability – Public Warrants | 1 | $3,018,750 | 1 | $9,177,000 | | Warrant Liability – Private Placement Warrants | 2 | $1,557,500 | 2 | $4,734,800 | | Forward Purchase Agreement Liability | 3 | $0 | 3 | $1,600,000 | - Public Warrants are classified as Level 1 due to observable market quotes; Private Placement Warrants are classified as Level 2[576] - The forward purchase agreement liability, previously a Level 3 measurement, was terminated on December 2, 2022[576][579] Changes in Fair Value of Warrant Liabilities (Year Ended December 31) | Item | Private Placement Warrants | Public Warrants | Total Warrant Liabilities | | :--- | :--- | :--- | :--- | | Balance as of December 31, 2021 | $4,734,800 | $9,177,000 | $13,911,800 | | Change in valuation inputs or other assumptions | $(3,177,300) | $(6,158,250) | $(9,335,550) | | Balance as of December 31, 2022 | $1,557,500 | $3,018,750 | $4,576,250 | NOTE 11. SUBSEQUENT EVENTS This note reports the extension of the business combination deadline to July 27, 2023, and the related stockholder redemptions - On January 20, 2023, the Second Extension Amendment Proposal was approved, extending the business combination deadline to July 27, 2023[583] - In connection with the second extension, 6,862,925 Class A common shares were redeemed for approximately $70.1 million (~$10.21 per share)[583] - The Sponsor issued a Second Extension Note for up to $565,497 and will deposit an additional $94,250 monthly into the Trust Account until July 27, 2023[583][584]