Arrowroot Acquisition (ARRW) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Interim Financial Statements The unaudited statements show reduced assets from redemptions and liquidity issues casting doubt on its going concern status Condensed Consolidated Balance Sheets The balance sheet reflects a sharp decline in assets due to shareholder redemptions and a widening stockholders' deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $639,819 | $145,980 | | Cash and investments held in Trust Account | $46,049,915 | $290,737,917 | | Total Assets | $46,711,401 | $290,960,247 | | Liabilities & Stockholders' Deficit | | | | Total Liabilities | $22,928,294 | $13,119,751 | | Class A common stock subject to possible redemption | $46,049,915 | $290,317,507 | | Total Stockholders' Deficit | ($22,266,808) | ($12,477,011) | Condensed Consolidated Statements of Operations The company shifted from a nine-month net income to a $6.8 million net loss, driven by warrant liability valuation changes Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | General and administrative expenses | $1,638,429 | $355,529 | $3,851,311 | $1,126,963 | | Change in fair value of warrant liabilities | $1,583,750 | $240,000 | ($3,962,500) | $11,081,250 | | Interest earned on Trust Account | $435,890 | $1,229,862 | $3,049,715 | $1,592,222 | | Net income (loss) | $275,535 | $870,289 | ($6,798,321) | $11,280,745 | Condensed Consolidated Statements of Cash Flows Cash flows show significant investing inflows and financing outflows driven by shareholder redemptions from the Trust Account Cash Flow Summary for Nine Months Ended Sep 30 (Unaudited) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,804,811) | ($1,000,520) | | Net cash provided by investing activities | $247,737,718 | $339,214 | | Net cash (used in) provided by financing activities | ($244,439,068) | $750,000 | | Net Change in Cash | $493,839 | $88,694 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the merger agreement, significant redemptions, going concern doubts, and reliance on sponsor financing - The company is a blank check company that entered into a definitive merger agreement with iLearningEngines, Inc on April 27, 2023[20][35] - The deadline to complete a business combination was extended to as late as February 4, 2024, with shareholder redemptions of 24,304,187 shares causing a $247.3 million withdrawal from the Trust Account[22] - Management has determined that the company's liquidity condition and mandatory liquidation deadline raise substantial doubt about its ability to continue as a going concern[50] - The company has issued multiple promissory notes to its Sponsor to fund working capital, with outstanding balances under four separate notes as of September 30, 2023[41][43][44][45] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the impact of redemptions, the nine-month net loss, and substantial doubt about its going concern status - The company is a blank check company formed to effect a business combination and has entered into a merger agreement with iLearningEngines, Inc[155][157] - In connection with extending the business combination deadline, 24,304,187 shares were redeemed, reducing the Trust Account by approximately $247.3 million[156][166] - The net loss of $6.8 million for the first nine months of 2023 was primarily driven by a $4.0 million non-cash loss from the change in fair value of warrant liabilities[163] - Management has concluded that the company's limited liquidity and the approaching mandatory liquidation date raise substantial doubt about its ability to continue as a going concern[182] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, this disclosure is not required - As a smaller reporting company, this disclosure is not required[189] Item 4. Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in accounting for complex financial instruments - Disclosure controls and procedures were concluded to be not effective[190] - The ineffectiveness is due to a material weakness in internal control over financial reporting concerning the accounting for complex financial instruments[190] - Management has begun implementing remediation steps, including enhancing the review process for complex securities and improving access to accounting expertise[191] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no legal proceedings - The company has no legal proceedings to report[194] Item 1A. Risk Factors No material changes to risk factors from the latest Annual Report on Form 10-K are reported - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K[194] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the use of IPO proceeds and unregistered sales of warrants and promissory notes to the Sponsor - Gross proceeds from the IPO and private placement totaled $295.75 million, of which $287.5 million was placed in the Trust Account[195][196][201] - The company sold 8,250,000 Private Placement Warrants to its Sponsor in an unregistered sale, raising $8.25 million[196] - The company issued multiple promissory notes to its Sponsor, which are considered unregistered securities issued under the Section 4(a)(2) exemption of the Securities Act[197][198] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[201] Item 4. Mine Safety Disclosures The company reports no mine safety disclosures - None[201] Item 5. Other Information The company reports no other information - None[201] Item 6. Exhibits This section lists all exhibits filed with the report, including corporate documents and officer certifications - A list of exhibits filed with the report is provided, including corporate governance documents and officer certifications[203][204]