The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
The accompanying notes are an integral part of
the unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND LIQUIDITY
Springwater Special Situations Corp. (the “Company”)
is a blank check company incorporated as a Delaware company on October 2, 2020. The Company was formed for the purpose of effecting a
merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses
or entities (a “Business Combination”).
The Company is not limited to a particular industry
or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such,
the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2023, the Company had not commenced
any operations. All activity for the period from October 2, 2020 (inception) through March 31, 2023, relates to the Company’s formation,
the initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering,
and seeking to identify a target company for a Business Combination. The Company will not generate any operating revenues until after
the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income
from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s
Initial Public Offering was declared effective on August 25, 2021. On August 30, 2021, the Company consummated the Initial Public Offering
of 15,000,000 units (the “Units” and, with respect to the shares of common stock included in the Units sold, the “Public
Shares”), at $10.00 per Unit, generating gross proceeds of $150,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of 645,000 units (the “Private Units”) at a price of $10.00 per Private
Unit in a private placement to Springwater Promote LL (the “Sponsor”) and EarlyBirdCapital, Inc., the representative of the
underwriters in the Initial Public Offering, generating gross proceeds of $6,450,000, which is described in Note 4.
On September 3, 2021, the underwriters notified
the Company of their intention to partially exercise their over-allotment option and would forfeit the remaining balance. On September
7, 2021, the Company consummated the sale of an additional 2,118,624 Units, at $10.00 per Unit, and the sale of an additional 63,559 Private
Placement Units, at $10.00 per Private Placement Unit, generating total gross proceeds of $21,821,830. A total of $21,398,105 was deposited
into the Trust Account, bringing the aggregate gross proceeds held in the Trust Account to $172,898,105.
Transaction costs amounted to $18,538,231 consisting
of $3,423,725 of underwriting fees, $13,783,973 for the excess fair value of the Founder Shares attributable to the Anchor Investors (see
Note 5), $880,485 for the excess fair value of the EBC Founder Shares (see Note 6) and $450,048 of other offering costs.
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 Units, although
substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The stock exchange
listing rules require that the Business Combination must be with one or more operating businesses or assets with a fair market value equal
to at least 80% of the assets held in the Trust Account (as defined below) (less taxes payable on the interest earned on the Trust Account).
The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the issued
and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it
not to be required to register as an investment company under the Investment Company Act.
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
The Company will provide the holders of the Public
Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion
of the 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,
equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the
Business Combination (initially anticipated to be $10.10 per Public Share without taking into account any interest), including interest
(which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public shares, subject to certain
limitations as described in the prospectus. Additionally, each Public Stockholder may elect to redeem their Public Shares, without voting,
and if they do vote, irrespective of whether they vote for or against the proposed Business Combination. There will be no redemption rights
upon the completion of a Business Combination with respect to the Company’s warrants.
If a stockholder vote is not required by applicable
law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the
Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “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 prior to completing a Business Combination. If, however, stockholder approval of the transaction is required
by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other
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 Sponsor has agreed
to vote its Founder Shares (as defined in Note 6), shares included in the Private Placement Units and any Public Shares it holds in favor
of approving a Business Combination.
The Sponsor has agreed (a) to waive Its redemption
rights with respect to the Founder Shares and any Public Shares held by it in connection with the completion of a Business Combination,
(b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within
the time period required by the Certificate of Incorporation and (c) not to propose an amendment to the Certificate of Incorporation (i)
to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or
to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined
below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless
the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
However, if the Sponsor acquires Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account
if the Company fails to complete a Business Combination within the Combination Period.
The Company will have until August 28, 2023, to
complete a Business Combination (the “Combination Period”). If the Company has not completed a Business Combination within
the Combination Period and such time period is not extended by stockholders, 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 pay taxes (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), 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. There will be no redemption rights or liquidating distributions with respect to the Company’s
warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
On February 27, 2023, the Company held a special meeting of its stockholders
to consider a proposal, among others, to extend the date the Company had to consummate an initial business combination from February 28,
2023 to August 28, 2023. Stockholders approved the proposals and in connection therewith, holders of an aggregate of 15,142,910 public
shares exercised their right to redeem their shares for an aggregate of $155,904,552 in cash. In connection with the special meeting,
the Company’s board of directors approved a dividend of rights (“Rights”) to holders of public shares who did not seek
redemption of their Public Shares in connection with the stockholder vote in connection with the extension. Each Right will entitle the
holder to receive one-twelve-and-a-half (1/12.5) of a share of Common Stock upon consummation of the Company’s initial business
combination. The Company issued 1,975,714 Rights entitling the holders to receive an aggregate of up to 158,057 shares of common stock.
Under ASC 505-20-30-3 (Rights Agreement Memorandum) this was accounted for as a Deemed Dividend. Because the dividend is expected to be
paid within one year of the declaration date, the “Deemed dividend” payable will be classified as a current liability.
The Deemed Dividend Liability was recorded at the fair value on the
declaration date on March 2, 2023. The fair value of the shares on March 2, 2023 was $0.11, which was determined using market approach
methodology and the key inputs to the method are summarized below.
| Stock Price as of Measurement Date | |
$ | 10.27 | |
| Probability of Acquisition | |
| 13.9 | % |
The Sponsor has agreed to waive their rights to
liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the Sponsor or any of their respective affiliates acquire Public Shares, such Public Shares
will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the
Combination Period. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution
will be less than the Initial Public Offering price per Unit ($10.10).
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
In order to protect the amounts held in the Trust
Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party 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 public 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 monies held in the Trust Account 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 Sponsor will not be responsible to the extent of any liability for such third-party claims.
The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by
endeavoring to have all vendors, service providers (except for the Company’s 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 monies held in the Trust Account.
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 condensed financial statement was 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 statement does not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
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.
On February 27, 2023, the Company’s stockholders
redeemed 15,142,910 shares for a total of $155,904,552. The Company evaluated the classification and accounting of the stock redemption
under ASC 450, “Contingencies”. ASC 450 states that when a loss contingency exists the likelihood that the future event will
confirm the loss or impairment of an asset or the incurrence of a liability can range from probable to remote. A contingent liability
must be reviewed at each reporting period to determine appropriate treatment. The Company evaluated the current status and probability
of completing a Business Combination as of March 31, 2023 and concluded that it is probable that a contingent liability should be recorded.
As of March 31, 2023, the Company recorded $1,559,046 of excise tax liability calculated as 1% of the shares redeemed . As indicated below,
there is no assurance that this will be the actual amount of tax that the Company will be required to pay.
Any redemption or other repurchase 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. As a result, the above-referenced
excise tax liability recorded as of March 31, 2023 may be more or less than such amount depending on factors that occur in the future.
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.
Liquidity and Going Concern
As of March 31, 2023, the Company had $20,517 in its operating bank
account and working capital deficit of $1,744,000 (after adding back $14,500 in franchise tax payable as that liability, which is included
in accrued expenses in the accompanying balance sheet, is allowed to be settled using earnings from the Trust Account, $255,570 of
franchises taxes paid out of operating cash account not yet reimbursed from the Trust Account and $754,553 in income tax payable
which is allowed to be settled using earnings from the Trust Account), which excludes $3,601,319 of interest earned on the Trust Account
that is available to pay franchise and income taxes payable. If the estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have
insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional
financing or draw on the Working Capital Loans (as defined below) either to complete a Business Combination or because it becomes obligated
to redeem a significant number of the Public Shares upon consummation of a Business Combination, in which case the Company may issue additional
securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, the Company
would only complete such financing simultaneously with the completion of our Business Combination. If the Company is unable to complete
the Business Combination because it does not have sufficient funds available, the Company will be forced to cease operations and liquidate
the Trust Account. In addition, following the Business combination, if cash on hand is insufficient, the Company may need to obtain additional
financing in order to meet its obligations.
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
In connection with the Company’s assessment
of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB’s”) Accounting
Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that if the Company is unable to complete a Business Combination by August 28, 2023, then the
Company will cease all operations except for the purpose of liquidating.
In connection with the Company’s assessment
of going concern considerations in accordance with FASB Accounting Standards Codification Subtopic 205-40, “Presentation of Financial
Statements – Going Concern,” management has determined that the liquidity conditions raise substantial doubt about the Company’s
ability to continue as a going concern through approximately one year from the date these financial statements are issued. The financial
statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that
might be necessary should the Company be unable to continue as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
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 (“SEC”). Certain information or footnote disclosures normally included in financial
statements prepared in accordance with U.S. 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 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 financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended December 31, 2022, as
filed with the SEC on April 10, 2023. The interim results for the three months ended March 31, 2023, are not necessarily indicative of
the results to be expected for the year ending December 31, 2023 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of 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 condensed financial statement with another public company which is neither an emerging growth company nor an emerging
growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting standards used.
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
Use of Estimates
The preparation of the condensed financial statements
in conformity with U.S. 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 did not have any cash equivalents
as of March 31, 2023, and December 31, 2022.
Marketable Securities Held in Trust Account
At March 31, 2023 and December 31, 2022, substantially
all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury Bills. All of
the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the
balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments
held in the Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed
statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject
to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at
fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is 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 common stock features
certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future
events. In connection with the special meeting of stockholders, holders of an aggregate of 15,142,910 public shares exercised their right
to redeem their shares for an aggregate of $155,858,752 in cash. Accordingly, the 1,975,714 and 17,118,624 shares of common stock subject
to possible redemption at $10.10 and $10.20 redemption value as of March 31, 2023 and December 31, 2022, respectively, are presented as
temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets.
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting
period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption
amount value. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid
in capital and accumulated deficit.
At March 31, 2023 and December 31, 2022, the common
stock reflected in the balance sheets are reconciled in the following table:
| Gross proceeds | |
$ | 171,186,240 | |
| Less: | |
| | |
| Proceeds allocated to Public Warrants | |
| (4,194,063 | ) |
| Common stock issuance costs | |
| (18,066,509 | ) |
| Plus: | |
| | |
| Accretion of carrying value to redemption value | |
| 23,972,437 | |
| Common stock subject to possible redemption, December 31, 2021 | |
| 172,898,105 | |
| Plus: | |
| | |
| Accretion of carrying value to redemption value | |
| 1,736,872 | |
| Common stock subject to possible redemption, December 31, 2022 | |
| 174,634,977 | |
| Less: | |
| | |
| Share Redemption March 8, 2023 | |
| (155,904,552 | ) |
| Plus | |
| | |
| Accretion of carrying value to redemption value | |
| 1,224,289 | |
| Common stock subject to possible redemption, March 31, 2023 | |
$ | 19,954,714 | |
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
Warrant Classification
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers
whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480,
and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed
to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants
are outstanding.
For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the
time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required
to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company’s has analyzed
the warrants issued in the Initial Public Offering (“Public Warrants”) and warrants included in the Private Placement Units
(the “Private Warrants”) and determined they are considered to be freestanding instruments and do not exhibit any of the characteristics
in ASC 480 and therefore are not classified as liabilities under ASC 480. The warrants meet all of the requirements for equity classification
under ASC 815 and therefore are classified in equity.
Income Taxes
The Company accounts for income taxes under ASC 740, “Income
Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences
between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to
be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it
is more likely than not that all or a portion of deferred tax assets will not be realized. As of March 31, 2023 and December 31, 2022,
the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective tax rate was 32.30% and 0% for
the three months ended March 31, 2023 and 2022, respectively. The effective tax rate differs from the statutory tax rate of 21% for the
three months ended March 31, 2023 and 2022, due to changes in fair value in warrant liability and the valuation allowance on the deferred
tax assets.
ASC 740 also clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest
and penalties as of March 31, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
The Company has identified the United States as
its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception.
These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and
compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits
will materially change over the next twelve months.
Net Income (Loss) per Common Share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, Earnings Per Share. Net income (loss) per share is computed by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Accretion associated with the redeemable shares of common stock is excluded
from earnings per share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share
does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, (ii) the private placement, and
(iii) the shares under the Rights Agreement since the exercise of the warrants is contingent upon the occurrence of future events. As
of March 31, 2023 and 2022, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised
or converted into common stock and then share in the earnings of the Company. As a result, diluted net income (loss) per common stock
is the same as basic net income (loss) per common stock for the periods presented.
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
The following table reflects the calculation of
basic and diluted net income (loss) per common share (in dollars, except per share amounts):
| | |
Three Months Ended
March 31, 2023 | | |
Three Months Ended
March 31, 2022 | |
| | |
Redeemable | | |
Non-
redeemable | | |
Redeemable | | |
Non-
redeemable | |
| Basic and diluted net income (loss) per common stock | |
| | |
| | |
| | |
| |
| Numerator: | |
| | |
| | |
| | |
| |
| Allocation of net income (loss), as adjusted | |
$ | 432,011 | | |
$ | 177,131 | | |
$ | (158,059 | ) | |
$ | (49,519 | ) |
| Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average common stock outstanding | |
| 13,080,515 | | |
| 5,363,215 | | |
| 17,118,624 | | |
| 5,363,215 | |
Basic and diluted net income (loss) per common stock | |
$ | 0.03 | | |
$ | 0.03 | | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal
Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying
amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the FASB 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 U.S 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 adopted ASU 2020-06 effective as
of January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s condensed financial statements.
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed
financial statements.
NOTE 3. PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company
sold 15,000,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of common stock and one-half of one Public Warrant.
Each whole Public Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment
(see Note 7).
On September 3, 2021, the underwriters notified
the Company of their intention to partially exercise their over-allotment option and forfeited the remaining balance. On September 7,
2021, the Company consummated the sale of an additional 2,118,624 Units pursuant to the partial exercise of the underwriters’ over-allotment
option.
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor and EarlyBirdCapital, Inc. purchased an aggregate of 645,000 Private Placement Units at a price of $10.00
per Private Placement Unit, for an aggregate purchase price of $6,450,000. On September 7, 2021, the Company consummated the sale of an
additional 63,559 Private Placement Units, at $10.00 per Private Placement Unit. The proceeds from the Private Placement Units were added
to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within
the Combination Period, the proceeds from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares
(subject to the requirements of applicable law) and the Private Placement Units will expire worthless. There will be no redemption rights
or liquidating distributions from the Trust Account with respect to the Private Placement Units and underlying securities.
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In October 2020, the Sponsor paid $25,000 to cover
certain offering costs of the Company in consideration for 2,875,000 of the Company’s common stock (the “Founder Shares”).
As of February 16, 2021, the Company effected a dividend of 0.5 shares for each outstanding share of common stock, resulting in there
being an aggregate of 4,312,500 Founder Shares outstanding. The Founder Shares included an aggregate of up to 562,500 shares that were
subject to forfeiture depending on the extent to which the underwriters’ over-allotment option was exercised, so that the number
of Founder Shares would equal 20% of the Company’s issued and outstanding common stock after the Initial Public Offering (assuming
the Sponsor did not purchase any Public Shares in the Initial Public Offering and excluding the EBC founder shares) (see Note 6). As a
result of the underwriters’ election to partially exercise their over-allotment option, a total of 529,656 Founder Shares are no
longer subject to forfeiture. Accordingly, 32,844 Founder Shares were forfeited by the Sponsor.
The Sponsor has agreed, subject to certain limited
exceptions, not to transfer, assign or sell any of the Founder Shares until, with respect to 50% of the Founder Shares, the earlier of
one year after the consummation of a Business Combination and the date on which the closing price of the common stock equals or exceeds
$12.50 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days
within a 30-trading day period commencing after a Business Combination and, with respect to the remaining 50% of the Founder Shares, until
the one year after the consummation of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the
Company completes a liquidation, merger, share exchange or other similar transaction which results in all of the Company’s stockholders
having the right to exchange their common stock for cash, securities or other property.
In connection with the Initial Public Offering,
each anchor investor acquired from the Sponsor an indirect economic interest in the Founder Shares a total of 2,163,889 Founder Shares.
The Company estimated the aggregate fair value of the Founder Shares attributable to the Anchor Investors to be $13,783,973, or $6.37
per share. The excess of the fair value of the Founder Shares over the amount paid was determined to be a contribution to the Company
from the founders in accordance with Staff Accounting Bulletin (SAB) Topic 5T and an offering cost in accordance with SAB Topic 5A. Accordingly,
the offering cost were recorded against additional paid in capital in accordance with the accounting of other offering costs.
Administrative Services Agreement
The Company entered into an agreement, commencing
on August 30, 2021. Until completion of the Business Combination or the Company’s liquidation, Graubard Miller shall make available
to the Company certain office space and administrative and support services as may be required by the Company from time to time, situated
at 405 Lexington Avenue, New York, New York 10174 (or any successor location) free of charge.
Promissory Note — Related Party
On December 17, 2020, the Company issued an unsecured
promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company could borrow up to an aggregate principal
amount of $150,000. The Promissory Note was non-interest bearing and, as of March 31, 2023 and December 31, 2022, there was no outstanding
balance.
During the quarter ended March 31, 2023, the Company
issued a promissory note (the “Promissory Note”) to IME Spain General Partner S.L., pursuant to which the Company can borrow
up to an aggregate principal amount of $41,121. The Promissory Note is non-interest bearing and, as of March 31, 2023, the balance due
is $41,121.
Related Party Loans
In order to finance transaction costs in connection
with a 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 as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would 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 a 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 a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such
Working Capital Loans may be convertible into units of the post-Business Combination entity at a price of $10.00 per unit. The units would
be identical to the Private Placement Units. At March 31, 2023 and December 31, 2022, there are no Working capital Loans outstanding.
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
NOTE 6. COMMITMENTS
Registration Rights
The holders of the Founder Shares, EBC founder
shares, Private Placement Units and underlying securities and any securities issued upon conversion of Working Capital Loans are entitled
to registration rights pursuant to an agreement signed on the effective date of the Initial Public Offering (“Effective Date”).
The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities. The holders
of the majority of the Founders’ Shares can elect to exercise these registration rights at any time commencing three months prior
to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the EBC founder shares,
Private Placement Units and units issued to the Sponsor, officers, directors or their affiliates in payment of Working Capital Loans made
to the Company (or underlying securities) can elect to exercise these registration rights at any time after the consummation of a Business
Combination. Notwithstanding anything to the contrary, the holders of the EBC founder shares may only make a demand on one occasion and
only during the five-year period beginning on the Effective Date. In addition, the holders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to the consummation of a Business Combination; provided, however, that
the holders of the EBC founder shares may participate in a “piggy-back” registration only during the seven-year period beginning
on the Effective Date. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting
from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of
any such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day
option to purchase up to 2,250,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting
discounts and commissions (see Note 7).
The underwriters were entitled to a cash underwriting
discount of $0.20 per Unit, or $3,000,000 in the aggregate paid upon the closing of the Initial Public Offering and $423,723 upon exercise
of the over-allotment option. Pursuant to the underwriting agreement, the Company granted to EarlyBirdCapital, Inc., for a period of three
years from the commencement of sales of the Initial Public Offering, the right to act as co-underwriter for the next U.S. registered public
offering of securities undertaken by any of the Company’s officers for the purpose of raising capital and placing 90% or more of
the proceeds in a trust or escrow account to be used to acquire one or more operating businesses that have not been identified at the
time of such public offering. The terms of such offering shall be mutually determined in good faith by the applicable insider(s) and the
representative and will be based on the prevailing market for similar offerings.
Business Combination Marketing Agreement
The Company engaged EarlyBirdCapital as an advisor
in connection with its Business Combination to assist in holding meetings with the shareholders to discuss the potential Business Combination
and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing securities in
connection with the Initial Business Combination and assist the Company with press releases and public filings in connection with the
Business Combination. The Company will pay EarlyBirdCapital a cash fee for such services upon the consummation a Business Combination
in an aggregate amount equal to 3.5% of the gross proceeds of the Initial Public Offering. Additionally, the Company will pay EarlyBirdCapital
a cash fee equal to 1.0% of the total consideration payable in the Business Combination if it introduces the Company to the target business
with which it completes a Business Combination.
EBC founder shares
In December 2020 and July 2021, the Company issued
to the designees of EarlyBirdCapital 225,000 and 150,000 shares of common stock (the “EBC founder shares”), respectively.
The Company accounted for the excess fair value over the price paid for the EBC founder shares as an offering cost of the Initial Public
Offering, with a corresponding credit to stockholders’ equity. The issuance of these shares presented in the Company’s financial
statements were revised to reflect the shares issued in December 2020 and July 2021. The excess fair value over the amount paid of the
EBC founder shares was $880,485 as of July 15, 2021. The holders of the EBC founder shares have agreed not to transfer, assign or sell
any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their conversion rights
(or right to participate in any tender offer) with respect to such shares in connection with the completion of a Business Combination
and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to
complete a Business Combination within the Combination Period.
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company
is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share, with such designations, voting and other
rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2023 and December
31, 2022, there were no preferred stock issued or outstanding.
Common Stock — The Company
is authorized to issue 50,000,000 shares of common stock, with a par value of $0.0001 per share. Holders of the common stock are entitled
to one vote for each share. At March 31, 2023 and December 31, 2022, there were 5,363,215 shares of common stock issued and outstanding,
excluding 1,975,714 shares and 17,118,624 shares of common stock subject to possible redemption, which are presented as temporary equity.
Warrants — Public Warrants
may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public
Warrants will become exercisable 30 days after the completion of a Business Combination. The Public Warrants will expire five years from
the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any
shares of common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise
unless a registration statement under the Securities Act covering the issuance of the shares of common stock issuable upon exercise of
the warrants is then effective and a current prospectus relating thereto is available, subject to the Company satisfying its obligations
with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless
basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of
the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption
is available.
The Company has agreed that as soon as practicable
after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement covering the issuance,
under the Securities Act, of the shares of common stock issuable upon exercise of the warrants, and the Company will use its best efforts
to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating
thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement.
Once the warrants become exercisable, the Company
may redeem the outstanding Public Warrants:
| ● | in
whole and not in part; |
| ● | at
a price of $0.01 per Public Warrant; |
| ● | upon
not less than 30 days’ prior written notice of redemption to each warrant holder and |
| ● | if,
and only if, the last reported sale price of the common stock for any 20 trading days within a 30 trading day period ending on the third
trading day prior to the date on which the Company sends the notice of redemption to warrant holders equals or exceeds $18.00 per share
(as adjusted for dividends, share capitalizations, reorganizations, recapitalizations and the like). |
The exercise price and number of common shares
issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary
dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not
be adjusted for issuances of common shares at a price below its exercise price. Additionally, in no event will the Company be required
to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and
the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect
to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with
respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
SPRINGWATER SPECIAL SITUATIONS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
In addition, if (x) the Company issues additional
Class A common shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination
at an issue price or effective issue price of less than $9.20 per Class A common share (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 a Business Combination on the date of the consummation of a Business Combination (net of redemptions),
and (z) the volume weighted average trading price of its Class A common shares during the 20 trading day period starting on the trading
day prior to the day on which the Company consummates its Business Combination (such price, the “Market Value”) is below $9.20
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 $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 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. Management concluded that the Public Warrants and Private Warrants
to be issued pursuant to the warrant agreement qualify for equity accounting.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for
its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
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 presents information about
the Company’s assets that are measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022, and indicates
the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | |
Level | | |
March
31,
2023 | | |
December 31,
2022 | |
| Assets: | |
| | |
| | |
| |
| Marketable securities held in Trust Account | |
| 1 | | |
$ | 20,594,872 | | |
$ | 175,167,573 | |
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review,
the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.