References in this report (the "Quarterly Report") to "we," "us," "Isleworth,"
or the "Company" refer to
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q, including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company's Annual Report on Form 10-K filed with theU.S. Securities and Exchange Commission (the "SEC"). The Company's securities filings can be accessed on the EDGAR section of theSEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated on
We expect to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
We completed the sale of 20,700,000 units (the "Units" and, with respect to the
shares of common stock included in the Units being offered, the "Public Shares")
at
As of
Our management has broad discretion with respect to the specific application of the net proceeds of IPO and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through
For the three months ended
For the six months ended
For the three months ended
For the six months ended
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Liquidity, Capital Resources and Going Concern
As of
For the six months ended
Pursuant to the IPO onMarch 2, 2021 the Company sold 20,700,000 Units (including 2,700,000 Units of over-allotment options that was fully exercised) at a price of$10.00 per Unit. Each Unit consists of one share of common stock and one-half of one warrant ("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. An aggregate of$10.00 per Unit sold in the Initial Public Offering was held in the Trust Account and invested inU.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. As ofJune 30, 2022 , we had cash and investment held in the Trust Account of$207,354,994 . Interest income on the balance in the Trust Account may be used by us to pay taxes. As ofJune 30, 2022 , there was$432,994 interest income earned from the Trust account. OnMarch 1, 2022 we withdrew$78,000 from the Trust account to be used towards payment of franchise taxes.
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest earned on the trust account
(excluding the business combination marketing fees payable to
I-Bankers)
to complete our initial Business Combination. We may withdraw interest to pay
our taxes and liquidation expenses if we are unsuccessful in completing a
Business Combination. We estimate our annual franchise tax obligations to be
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the initial stockholders or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to$1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of$1.00 per warrant at the option of the lender. OnMarch 15, 2022 , the Sponsor agreed to loan the Company an aggregate of up to$300,000 pursuant to a promissory note (the "Convertible Note"). The Convertible Note is non-interest bearing and payable upon consummation of the Company's initial Business Combination. Similarly, onMay 31, 2022 , the Sponsor agreed to loan the Company an aggregate of up to$150,000 pursuant to a promissory note (the "Promissory Note"). The Promissory Note has no convertible features, is non-interest bearing, and payable upon consummation of the Company's initial Business Combination. AtJune 30, 2022 , there was$450,000 of borrowings under both the Convertible Note and the Promissory Note.
The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. These conditions raise substantial doubt about the Company's ability to continue as a going concern for a period of time within one year after the date that the financial statements are issued. If our 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, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
In connection with the Company's assessment of going concern considerations in accordance with ASC Topic 205-40 Presentation of Financial Statements - Going Concern, pursuant to its Amended and Restated Certificate of Incorporation, the Company has untilSeptember 1, 2022 to consummate a Business Combination. If a Business Combination is not consummated by this date, or its stockholders have not approved an extension, there will be a mandatory liquidation and subsequent dissolution of the Company. The Company is holding a special meeting of stockholders onAugust 26, 2022 to seek an extension to consummate a Business Combination fromSeptember 1, 2022 toDecember 1, 2022 , and thereafter for up to three additional months at the election of the Company, ultimately until as late asMarch 1, 2023 . There is no assurance that the Company will be able to obtain the foregoing extension. This, as well as its liquidity condition, raise substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate afterSeptember 1, 2022 (See Note 6 regarding the Company's terminated business combination). 23
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Table of Contents Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as ofJune 30, 2022 , as defined in Item 303(a)(4)(ii) of Regulation S-K. Contractual obligations
As of
We entered into an administrative services agreement pursuant to which we will
pay an affiliate of one of our directors for office space and secretarial and
administrative services provided to members of our management team, in an amount
not to exceed
We have engaged I-Bankers as an advisor in connection with our acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar Business Combination with one or more businesses or entities. We will pay I-Bankers for such services a fee equal to 3.5% of the gross proceeds of the Public Offering.
Critical Accounting Policies and Estimates
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in
Common Stock Subject to Possible Redemption
We account for 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 are 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. Our common stock issued in the IPO contains certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' deficit section of our condensed balance sheets.
We recognize 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. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital (to the extent available) and accumulated deficit.
Derivative Warrant Liabilities and Convertible Promissory Note -
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and
ASC815-15.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed
at the end of each reporting period. The derivative instruments are subject to a number of critical estimates as the significant inputs that drive the changes in fair value are determined by the Monte Carlo Model and not based solely on the observable inputs such as quoted prices for identical instruments in active markets as is the case with Level 1 classified securities.
We account for our 16,490,000 common stock warrants issued in connection with our Initial Public Offering (10,350,000) and Private Placement (6,140,000) as derivative warrant liabilities in accordance with ASC815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject tore-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of Private Placement Warrants issued by the Company in connection with the Public Offering and Private Placement has been estimated usingMonte-Carlo simulations at each measurement date. The fair value of Public Warrants issued with the Public Offering was initially measured usingMonte-Carlo simulations and then measured based trading price once they commenced trading onMarch 29, 2021 . The Company accounts for its Convertible Note under ASC 815, Derivatives and Hedging ("ASC 815"). Under 815-15-25, the election can be at the inception of a financial instrument to account for the instrument under the fair value option under ASC 825. The Company has made such election for its Convertible Note. Using fair value option, the Convertible Note is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the note are recognized as non-cash change in the fair value of the Convertible Note in the statements of operations. The fair value of the option to convert into private warrants was valued utilizing the closed-form model.
Offering Costs Associated with the Initial Public Offering
We allocated offering costs in accordance with the requirements of the ASC
340-10-S99-1
and
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We allocated the offering costs between common stock and public warrants using relative fair value method, the offering costs allocated to the public warrants will be expensed immediately, and offering costs allocated to common stock were charged to temporary equity upon the completion of the IPO.
Net Income per Share of Common Stock
Net income per common stock is computed by dividing net income by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted income per common stock does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of over-allotment and (iii) Private Placement since the exercise price of the warrants is in excess of the average common stock price for the period and therefore the inclusion of such warrants would be anti-dilutive.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's unaudited condensed financial statements.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" under the JOBS Act and are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our unaudited condensed financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm's report providing additional information about the audit and the unaudited condensed financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an "emerging growth company," whichever is earlier.
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