falseQ20001837997--12-31P15Y 0001837997 2021-12-31 0001837997 2022-06-30 0001837997 2021-01-01 2021-06-30 0001837997 2022-01-01 2022-06-30 0001837997 2021-04-01 2021-06-30 0001837997 2022-04-01 2022-06-30 0001837997 2021-01-01 2021-03-31 0001837997 2022-08-12 0001837997 2021-03-01 2021-03-01 0001837997 2021-03-01 0001837997 2021-03-02 0001837997 2021-03-02 2021-03-02 0001837997 2022-01-01 2022-03-31 0001837997 2021-01-01 2021-12-31 0001837997 2021-02-24 2021-06-30 0001837997 2020-12-31 0001837997 2022-03-31 0001837997 2021-06-30 0001837997 2021-03-31 0001837997 us-gaap:PrivatePlacementMember 2022-06-30 0001837997 isle:IBankersMember us-gaap:OverAllotmentOptionMember 2022-06-30 0001837997 isle:SponsorMember us-gaap:OverAllotmentOptionMember 2022-06-30 0001837997 isle:PrivatePlacementWarrantsMember 2022-06-30 0001837997 us-gaap:CommonStockMember 2022-06-30 0001837997 us-gaap:USTreasurySecuritiesMember 2022-06-30 0001837997 isle:TrustAccountMember 2022-06-30 0001837997 us-gaap:IPOMember 2022-06-30 0001837997 us-gaap:OverAllotmentOptionMember us-gaap:CommonStockMember 2022-06-30 0001837997 us-gaap:WarrantMember 2022-06-30 0001837997 isle:SharePriceEqualOrExceedsEighteenRupeesPerDollarMember us-gaap:CommonStockMember 2022-06-30 0001837997 isle:SharePriceEqualOrLessNinePointTwoRupeesPerDollarMember 2022-06-30 0001837997 isle:SharePriceEqualOrExceedsEighteenRupeesPerDollarMember 2022-06-30 0001837997 us-gaap:MeasurementInputExercisePriceMember us-gaap:FairValueInputsLevel3Member 2022-06-30 0001837997 us-gaap:FairValueInputsLevel3Member us-gaap:MeasurementInputSharePriceMember 2022-06-30 0001837997 isle:VolatilityMember us-gaap:FairValueInputsLevel3Member 2022-06-30 0001837997 us-gaap:MeasurementInputExpectedTermMember us-gaap:FairValueInputsLevel3Member 2022-06-30 0001837997 us-gaap:FairValueInputsLevel3Member us-gaap:MeasurementInputRiskFreeInterestRateMember 2022-06-30 0001837997 us-gaap:FairValueInputsLevel3Member us-gaap:MeasurementInputExpectedDividendRateMember 2022-06-30 0001837997 isle:MeasurementInputLikelihoodOfCompletingABusinessCombinationMember us-gaap:FairValueInputsLevel3Member 2022-06-30 0001837997 isle:PublicWarrantsMember 2022-06-30 0001837997 us-gaap:FairValueInputsLevel1Member isle:PublicWarrantsMember 2022-06-30 0001837997 us-gaap:FairValueInputsLevel3Member isle:PrivatePlacementWarrantsMember 2022-06-30 0001837997 us-gaap:FairValueInputsLevel1Member 2022-06-30 0001837997 us-gaap:FairValueInputsLevel3Member 2022-06-30 0001837997 us-gaap:CommonClassAMember srt:MinimumMember 2022-06-30 0001837997 isle:U.s.MoneyMarketMember 2022-06-30 0001837997 isle:U.s.TreasurySecuritiesMember 2022-06-30 0001837997 isle:SponsorMember isle:PromissoryNoteMember isle:RelatedPartyDebtMember 2022-06-30 0001837997 isle:ClassAOrdinarySharesSubjectToRedemptionMember 2022-06-30 0001837997 isle:ConvertiblePromissoryNoteMember 2022-06-30 0001837997 isle:ConvertiblePromissoryNoteMember us-gaap:FairValueInputsLevel3Member 2022-06-30 0001837997 us-gaap:MeasurementInputRiskFreeInterestRateMember isle:ConvertiblePromissoryNoteMember 2022-06-30 0001837997 us-gaap:MeasurementInputMaturityMember isle:ConvertiblePromissoryNoteMember 2022-06-30 0001837997 us-gaap:MeasurementInputPriceVolatilityMember isle:ConvertiblePromissoryNoteMember 2022-06-30 0001837997 us-gaap:MeasurementInputExercisePriceMember isle:ConvertiblePromissoryNoteMember 2022-06-30 0001837997 us-gaap:MeasurementInputExpectedDividendRateMember isle:ConvertiblePromissoryNoteMember 2022-06-30 0001837997 us-gaap:MeasurementInputSharePriceMember isle:ConvertiblePromissoryNoteMember 2022-06-30 0001837997 isle:MeasurementInputsProbabilityOfTransactionMember isle:ConvertiblePromissoryNoteMember 2022-06-30 0001837997 isle:ConvertibleNoteMember 2022-06-30 0001837997 us-gaap:CommonStockMember 2021-12-31 0001837997 us-gaap:USTreasurySecuritiesMember 2021-12-31 0001837997 isle:TrustAccountMember 2021-12-31 0001837997 us-gaap:MeasurementInputExercisePriceMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001837997 us-gaap:MeasurementInputSharePriceMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001837997 us-gaap:FairValueInputsLevel3Member isle:VolatilityMember 2021-12-31 0001837997 us-gaap:MeasurementInputExpectedTermMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001837997 us-gaap:MeasurementInputRiskFreeInterestRateMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001837997 us-gaap:MeasurementInputExpectedDividendRateMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001837997 isle:MeasurementInputLikelihoodOfCompletingABusinessCombinationMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0001837997 isle:PublicWarrantsMember 2021-12-31 0001837997 isle:PublicWarrantsMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0001837997 isle:PrivatePlacementWarrantsMember 2021-12-31 0001837997 us-gaap:FairValueInputsLevel3Member isle:PrivatePlacementWarrantsMember 2021-12-31 0001837997 us-gaap:FairValueInputsLevel1Member 2021-12-31 0001837997 us-gaap:FairValueInputsLevel3Member 2021-12-31 0001837997 isle:U.s.MoneyMarketMember 2021-12-31 0001837997 isle:U.s.TreasurySecuritiesMember 2021-12-31 0001837997 isle:ClassAOrdinarySharesSubjectToRedemptionMember 2021-12-31 0001837997 isle:SponsorMember isle:AdministrativeSupportAgreementMember 2022-04-01 2022-06-30 0001837997 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001837997 isle:RedeemableCommonStockMember 2022-04-01 2022-06-30 0001837997 isle:NonRedeemableCommonStockMember 2022-04-01 2022-06-30 0001837997 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001837997 isle:RedeemableCommonStockMember 2021-04-01 2021-06-30 0001837997 isle:NonRedeemableCommonStockMember 2021-04-01 2021-06-30 0001837997 us-gaap:WarrantMember 2022-01-01 2022-06-30 0001837997 us-gaap:CommonClassAMember us-gaap:IPOMember 2022-01-01 2022-06-30 0001837997 isle:SponsorMember isle:AdministrativeSupportAgreementMember 2022-01-01 2022-06-30 0001837997 us-gaap:IPOMember 2022-01-01 2022-06-30 0001837997 us-gaap:MoneyMarketFundsMember 2022-01-01 2022-06-30 0001837997 us-gaap:IPOMember us-gaap:WarrantMember 2022-01-01 2022-06-30 0001837997 isle:SharePriceEqualOrExceedsEighteenRupeesPerDollarMember us-gaap:CommonStockMember 2022-01-01 2022-06-30 0001837997 isle:FounderSharesMember 2022-01-01 2022-06-30 0001837997 isle:ConvertibleNoteMember 2022-01-01 2022-06-30 0001837997 isle:SponsorMember 2022-01-01 2022-06-30 0001837997 isle:IsleworthHealthcareSponsorMember isle:PrivatePlacementWarrantsMember 2022-01-01 2022-06-30 0001837997 isle:U.s.TreasurySecuritiesMember 2022-01-01 2022-06-30 0001837997 isle:U.s.MoneyMarketMember 2022-01-01 2022-06-30 0001837997 isle:RedeemableCommonStockMember 2022-01-01 2022-06-30 0001837997 isle:NonRedeemableCommonStockMember 2022-01-01 2022-06-30 0001837997 isle:ConvertiblePromissoryNoteMember 2022-01-01 2022-06-30 0001837997 isle:RedeemableCommonStockMember 2021-01-01 2021-06-30 0001837997 isle:NonRedeemableCommonStockMember 2021-01-01 2021-06-30 0001837997 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001837997 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001837997 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001837997 us-gaap:OverAllotmentOptionMember 2021-01-01 2021-03-31 0001837997 us-gaap:CommonStockMember us-gaap:IPOMember 2021-03-01 2021-03-01 0001837997 us-gaap:OverAllotmentOptionMember isle:UnderwritersCommitmentMember 2021-03-01 2021-03-01 0001837997 isle:RepresentativesWarrantsMember isle:IbankersMember 2021-03-01 2021-03-01 0001837997 isle:RepresentativeSharesMember exch:FINR 2021-03-01 2021-03-01 0001837997 exch:FINR isle:RepresentativesWarrantsMember 2021-03-01 2021-03-01 0001837997 us-gaap:IPOMember us-gaap:CommonStockMember 2021-03-01 0001837997 isle:IbankersMember isle:RepresentativesWarrantsMember 2021-03-01 0001837997 isle:SponsorMember isle:FounderSharesMember 2021-03-02 2021-03-02 0001837997 us-gaap:OverAllotmentOptionMember 2021-03-02 2021-03-02 0001837997 isle:PublicWarrantsMember 2021-03-02 0001837997 us-gaap:OverAllotmentOptionMember 2021-03-02 0001837997 isle:SponsorMember isle:PrivatePlacementWarrantsMember 2021-03-02 0001837997 isle:IBankersMember isle:PrivatePlacementWarrantsMember 2021-03-02 0001837997 isle:U.s.TreasurySecuritiesMember 2021-01-01 2021-12-31 0001837997 isle:U.s.MoneyMarketMember 2021-01-01 2021-12-31 0001837997 isle:SponsorMember isle:FounderSharesMember 2020-01-01 2020-12-31 0001837997 isle:SponsorMember isle:FounderSharesMember 2020-12-31 0001837997 isle:FounderSharesMember isle:DirectorOneMember 2021-01-01 2021-01-31 0001837997 isle:DirectorSharesMember 2021-01-01 2021-01-31 0001837997 isle:FounderSharesMember isle:SponsorMember 2021-02-24 2021-02-24 0001837997 isle:RepresentativeSharesMember exch:FINR us-gaap:IPOMember 2021-02-24 2021-02-24 0001837997 exch:FINR isle:RepresentativesWarrantsMember us-gaap:IPOMember 2021-02-24 2021-02-24 0001837997 isle:OfficeSpaceUtilitiesSecretarialSupportAndOtherAdministrativeAndConsultingServicesMember 2021-02-24 2021-02-24 0001837997 isle:FounderSharesMember isle:SponsorMember 2021-02-24 0001837997 isle:SponsorMember isle:RelatedPartyDebtMember isle:PromissoryNoteMember 2020-12-29 0001837997 isle:ConvertibleNoteMember 2022-03-15 0001837997 isle:IbankersMember isle:RepresentativeSharesMember 2021-03-01 2021-03-31 0001837997 isle:UnderwritersCommitmentMember us-gaap:OverAllotmentOptionMember 2021-03-01 2021-03-31 0001837997 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001837997 us-gaap:RetainedEarningsMember 2022-06-30 0001837997 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001837997 us-gaap:RetainedEarningsMember 2021-06-30 0001837997 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001837997 us-gaap:CommonStockMember 2021-06-30 0001837997 us-gaap:RetainedEarningsMember 2020-12-31 0001837997 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001837997 us-gaap:CommonStockMember 2020-12-31 0001837997 us-gaap:CommonStockMember 2021-03-31 0001837997 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001837997 us-gaap:RetainedEarningsMember 2021-03-31 0001837997 us-gaap:RetainedEarningsMember 2021-12-31 0001837997 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001837997 us-gaap:RetainedEarningsMember 2022-03-31 0001837997 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001837997 us-gaap:CommonStockMember 2022-03-31 iso4217:USD xbrli:shares utr:Day xbrli:pure utr:Month utr:Year iso4217:USD xbrli:shares utr:Y
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission File
No. 001-40104
 
 
ISLEWORTH HEALTHCARE ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
  
86-1216057
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
   
360 Central Avenue, First Central Tower, Suite 800,
St. Petersburg, Florida
  
33716
(Address of principal executive offices)
  
(Zip Code)
(727)245-0146
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading
Symbol(s)
  
Name of each exchange
on which registered
Common Stock, $0.0001 par value per share
  
ISLE
  
The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50 per whole share
  
ISLEW
  
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer
  
☐
   
Accelerated filer
  
☐
       
Non-accelerated filer
  
☒
   
Smaller reporting company
  
☒
       
        
Emerging growth company
  
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes  ☒    No  ☐
As of August 12, 2022
, there were 26,191,249 shares of common stock, $0.0001 par value outstanding.
 
 
 
ISLEWORTH HEALTHCARE ACQUISITION CORP.
FORM
10-Q
FOR THE QUARTER ENDED JUNE 30, 2022
TABLE OF CONTENTS
 
    
Page
  
     3  
     3  
     3  
     4  
     5  
     6  
     7  
     21  
     25  
     25  
     27  
     27  
     27  
     27  
     28  
     28  
     28  
     28  
     29  
 
2
Part I. Financial Information
Item 1. Financial Statements
ISLEWORTH HEALTHCARE ACQUISITION CORP.
CONDENSED BALANCE SHEETS
 
    
June 30,
2022
    
December 31,
2021
  
    
(Unaudited)
        
Assets
                 
Current Assets
                 
Cash
    $ 107,774     $ 465,819  
Prepaid expenses
      252,213       316,703  
Due from related party
      —         77,345  
    
 
 
    
 
 
  
Total current assets
      359,987       859,867  
Prepaid expenses,
Non-current
      —         46,667  
Cash and securities held in Trust Account
      207,354,994       207,060,533  
    
 
 
    
 
 
  
Total Assets
    $ 207,714,981     $ 207,967,067  
    
 
 
    
 
 
  
     
Liabilities and Stockholders’ Deficit:
                 
Current liabilities:
                 
Accounts payable and accrued expenses
    $ 131,864     $ 277,476  
Income taxes payable
      30,314       —    
Promissory note—related party
      150,000       —    
Convertible promissory note—related party, at fair value
      300,000       —    
    
 
 
    
 
 
  
Total current liabilities
      612,178       277,476  
Warrant liability
      561,577       8,312,879  
    
 
 
    
 
 
  
Total liabilities
      1,173,755       8,590,355  
Commitments and Contingencies (Note 6)
                 
Common stock subject to possible redemption, 20,700,000 shares at redemption value of $10.01 at June 30, 2022 and December 31, 2021
      207,157,520       207,000,000  
Stockholders’ Deficit:
                 
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
      —         —    
Common stock, $0.0001 par value; 100,000,000 shares authorized; 5,491,249 issued and outstanding at June 30, 2022 and December 31, 2021
      550       550  
Additional paid-in capital
      —         —    
Accumulated deficit
      (616,844 )      (7,623,838 ) 
    
 
 
    
 
 
  
Total Stockholders’ Deficit
      (616,294 )      (7,623,288 ) 
    
 
 
    
 
 
  
Total Liabilities and Stockholders’ Deficit
   
$
207,714,981
 
  
$
207,967,067
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
3
ISLEWORTH HEALTHCARE ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
 
    
Three Months Ended

June 30,
    
Six Months Ended

June 30,
  
    
2022
    
2021
    
2022
    
2021
  
Operating expenses:
                                 
General and administrative costs
    $ 337,688     $ 235,522     $ 928,935     $ 392,836  
    
 
 
    
 
 
    
 
 
    
 
 
  
Loss from operations
   
 
(337,688
) 
  
 
(235,522
) 
  
 
(928,935
) 
  
 
(392,836
) 
         
Other income (expense):
                                 
Interest earned on cash and securities held in Trust Account
      299,880       21,236       372,461       21,242  
Warrant issuance costs
      —         —         —         (351,043 ) 
Change in fair value of warrants
      2,195,278       (4,013,287 )      7,751,302       2,227,616  
    
 
 
    
 
 
    
 
 
    
 
 
  
Total other income (expense), net
      2,495,158       (3,992,051 )      8,123,763       1,897,815  
         
Income before provision for income taxes
      2,157,470       (4,227,573 )      7,194,828       1,504,979  
Provision for income taxes
      (30,314 )      —         (30,314 )      —    
    
 
 
    
 
 
    
 
 
    
 
 
  
Net income (loss)
   
$
2,127,156
 
  
$
(4,227,573
) 
  
$
7,164,514
 
  
$
1,504,979
 
    
 
 
    
 
 
    
 
 
    
 
 
  
         
Basic and diluted weighted average Common Stock subject to redemption
      20,700,000       20,700,000       20,700,000       13,823,204  
    
 
 
    
 
 
    
 
 
    
 
 
  
Basic and diluted net income (loss) per common stock subject to redemption
   
$
0.08
 
  
$
(0.16
) 
  
$
0.27
 
  
$
0.08
 
    
 
 
    
 
 
    
 
 
    
 
 
  
         
Basic and diluted weighted average Common Stock
      5,491,249       5,491,250       5,491,249       5,158,805  
    
 
 
    
 
 
    
 
 
    
 
 
  
Basic and diluted net income (loss) per common stock
   
$
0.08
 
  
$
(0.16
) 
  
$
0.27
 
  
$
0.08
 
    
 
 
    
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
4
ISLEWORTH HEALTHCARE ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
 
    
Common Stock
     
Additional
Paid-in

Capital
     
Accumulated
Deficit
    
Total
Stockholders’
Deficit
  
    
Shares
     
Amount
                      
Balance as of January 1, 2022
   
 
5,491,249
 
   
$
550
 
   
$
—  
     
$
(7,623,838
) 
  
$
(7,623,288
) 
           
Net income
      —          —          —          5,037,358       5,037,358  
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of March 31, 2022
   
 
5,491,249
 
   
$
550
 
   
$
—  
     
$
(2,586,480
) 
  
$
(2,585,930
) 
           
Remeasurement of Class A Common Stock subject to possible redemption
      —          —          —          (157,520 )      (157,520 ) 
Net income
      —          —          —          2,127,156       2,127,156  
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of June 30, 2022
   
 
5,491,249
 
   
$
550
 
   
$
—  
     
$
(616,844
) 
  
$
(616,294
) 
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
 
    
Common Stock
     
Additional
Paid-in

Capital
    
Accumulated
Deficit
    
Total
Stockholders’
Deficit
  
    
Shares
     
Amount
                     
Balance as of January 1, 2021
   
 
5,175,000
 
   
$
518
 
   
$
24,482
 
  
$
(1,419
) 
  
$
23,581
 
           
Sale of 6,140,000 Private Placement Warrants on March 1, 2021 and March 2, 2021 through public offering and over-allotment, net of fair value of warrant liability
      —          —          765,116       —         765,116  
           
Issuance of representative shares
      316,249        32        3,026,406       —         3,026,438  
           
Issuance of representative warrants
      —          —          434,882       —         434,882  
           
Subsequent remeasurement
underASC480-10-S99,
restated
      —          —          (4,250,886 )      (12,463,273 )      (16,714,159 ) 
           
Net Income
      —          —          —         5,732,552       5,732,552  
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance as of March 31, 2021
   
 
5,491,249
 
   
 
550
 
   
$
—  
 
  
 
(6,732,140
) 
  
 
(6,731,590
) 
Net loss
      —          —          —         (4,227,573 )      (4,227,573 ) 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
Balance as of June 30, 2021
   
 
5,491,249
 
   
$
550
 
   
$
—  
 
  
$
(10,959,713
) 
  
$
(10,959,163
) 
    
 
 
     
 
 
     
 
 
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
5
ISLEWORTH HEALTHCARE ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
 
    
For the six months ended
June 30,
  
    
2022
    
2021
  
Cash flows from Operating Activities:
                 
Net income
    $ 7,164,514     $ 1,504,979  
Adjustments to reconcile net income to net cash used in operating activities:
                 
Operating expenses paid by sponsor
      —         1,500  
Interest earned on cash and securities held in Trust account
      (372,461 )      (21,242 ) 
Warrant issuance costs
      —         351,043  
Change in fair value of warrants
      (7,751,302 )      (2,227,616 ) 
Changes in current assets and current liabilities:
                 
Prepaid expenses
      111,157       (534,856 ) 
Due from related party
      77,345       —    
Accounts payable and accrued expenses
      (145,612 )      114,619  
Income taxes payable
      30,314       —    
    
 
 
    
 
 
  
Net cash used in operating activities
   
 
(886,045
) 
  
 
(811,573
) 
    
 
 
    
 
 
  
Cash Flows from Investing Activities:
                 
Investment held in Trust Account
      —         (207,000,000 ) 
Interest withdrawn from Trust account
      78,000       —    
    
 
 
    
 
 
  
Net cash provided by (used in) investing activities
   
 
78,000
 
  
 
(207,000,000
) 
    
 
 
    
 
 
  
Cash flows from Financing Activities:
                 
Proceeds from initial public offering, net of underwriting discounts paid
      —         202,860,000  
Proceeds from private placement
      —         6,140,000  
Proceeds from issuance of convertible promissory note – related party
      300,000       —    
Proceeds from issuance of promissory note – related party
      150,000          
Repayment of promissory note to related party
      —         (250,000 ) 
Payments of offering costs
      —         (362,846 ) 
    
 
 
    
 
 
  
Net cash provided by financing activities
   
 
450,000
 
  
 
208,387,154
 
    
 
 
    
 
 
  
Net change in cash
   
 
(358,045
) 
  
 
575,581
 
Cash, beginning of the period
      465,819       —    
    
 
 
    
 
 
  
Cash, end of the period
   
$
107,774
 
  
$
575,581
 
    
 
 
    
 
 
  
     
Supplemental disclosure of noncash investing and financing activities:
                 
Remeasurement of Class A common stock subject to possible redemption
      157,520       —    
    
 
 
    
 
 
  
Fair value of representative shares
    $ —       $ 3,026,438  
    
 
 
    
 
 
  
Fair value of representative warrants
    $ —       $ 434,882  
    
 
 
    
 
 
  
Initial value of common stock subject to possible redemption, including over-allotment as restated
    $ —       $ 189,139,827  
    
 
 
    
 
 
  
Initial fair value of warrant liability, as restated
    $ —       $ 14,280,762  
    
 
 
    
 
 
  
Offering costs paid by Sponsor under promissory note
    $ —       $ 140,156  
    
 
 
    
 
 
  
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
6
ISLEWORTH HEALTHCARE ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operation
Isleworth Healthcare Acquisition Corp. (the “Company”) is a blank check company formed under the laws of the State of Delaware on December 15, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses (the “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 June 30, 2022, the Company had not commenced any operations. All activity for the period from December 15, 2020 (inception) through June 30, 2022 relates to the Company’s formation and the initial public offering (“IPO”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate
non-operating
income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO. The Company has selected December 31 as its fiscal year end.
The Company’s Sponsor is Isleworth Healthcare Sponsor I, LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement for the Company’s IPO was declared effective on February 24, 2021 (the “Effective Date”). On March 1, 2021, the Company consummated the IPO of 18,000,000 units (the “Units” and, with respect to the shares of common stock included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $180,000,000, which is discussed in Note 3.
Simultaneously with the closing of the IPO, pursuant to certain private placement warrant purchase agreements (the “Warrant Purchase Agreements”) the Company consummated the sale of 5,600,000 Private Placement Warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor and
I-Bankers
Securities, Inc.
(“I-Bankers”),
generating total gross proceeds of $5,600,000.
In connection with the IPO, the underwriters were granted a
30-day
option from the date of the prospectus to purchase up to 2,700,000 additional units to cover over-allotment, if any. On March 2, 2021, the underwriters fully exercised the over-allotment option. The units were sold at an offering price of $10.00 per Unit, generating additional gross proceeds of $27,000,000 to the Company. Simultaneously with the closing of the over-allotment option, pursuant to certain Warrant Purchase Agreements, the Company completed the private sale of an aggregate of an additional 540,000 Private Placement Warrants to the Sponsor and
I-Bankers
at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $540,000.
Transaction costs of the IPO amounted to $8,159,324, consisting of $4,140,000 of cash underwriting fees, the fair value of the representative’s warrants of $434,882, the fair value of representative shares of $3,026,438 and $558,004 of other cash offering costs (Note 7).
As of June 30, 2022, $107,774 of cash was held outside of the Trust Account (as defined below) and is available for working capital purposes. Following the closing of the IPO and the over-allotment option, which was fully exercised, on March 1, 2021 and March 2, 2021, $207,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants has been held in a Trust Account (“Trust Account”), and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under
Rule 2a-7
promulgated under the Investment Company Act which will invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes if any, the proceeds from the IPO will not be released from the Trust Account until the earliest of (i) the completion of the initial Business Combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to redeem 100% of the public shares if the Company does not complete the initial Business Combination within 18 months from the closing of the IPO (the “Combination Period”), or (B) with respect to any other provision relating to stockholders’ rights or
pre-Business
Combination activity, and (iii) the redemption of all of the Company’s public shares if the Company is unable to complete its Business Combination within the Combination Period, subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of our public stockholders.
 
7
The shares of Common Stock subject to redemption were recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
The Company will have 18 months from the closing of the IPO to complete the initial Business Combination (the “Combination Period”). However, if the Company is unable to complete the initial Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up and (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at aper-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and its 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 its Business Combination within the Combination Period.
The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial 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 it will seek stockholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Company will provide its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business Combination at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the Trust Account was initially $10.00 per public share. The per share amount the Company will distribute to investors who properly redeem their shares will not be reduced by the fee payable to underwriters pursuant to the Business Combination marketing agreement.
The Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their Founder Shares and public shares in connection with the completion of the initial Business Combination, (ii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if the Company fails to complete its initial Business Combination within the Combination Period (although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete its Business Combination within the Combination Period), and (iii) vote their Founder Shares and any public shares purchased during or after the IPO in favor of the initial Business Combination.
The Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to it, or a prospective target business with which it has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be released to the Company to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under indemnity of the underwriters of the IPO against certain liabilities, including liabilities under 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.
 
8
The Company has not asked the Sponsor to reserve for such indemnification obligations, and the Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure you that the Sponsor would be able to satisfy those obligations. The Company believes the likelihood of the Sponsor having to indemnify the Trust Account is limited because the Company will endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with it waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, cash flows and/or search for a target company, the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed financial statements.
Liquidity, Capital Resources and Going Concern
As of June 30, 2022, the Company had $107,774 in its operating bank account, and working capital deficit of $252,191.
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 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 our 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 our 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 our obligations.
Subsequent to the consummation of the Initial Public Offering and Private Placement, the Company’s liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account in addition to proceeds from issuance of convertible promissory note - related party.
The Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
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 until September 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 on August 26, 2022 to seek an extension to consummate a Business Combination from September 1, 2022 to December 1, 2022, and thereafter for up to three additional months at the election of the Company, ultimately until as late as March 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 after September 1, 2022 (See Note 6 regarding the Company’s terminated business combination).
 
9
Note 2— Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future interim periods.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on
Form10-K
filed by the Company with the SEC on March 29, 2022 which contains the audited financial statements as of December 31, 2021 and notes thereto.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (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 auditor 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 financial statements 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.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with US GAAP requires 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 unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. One of the more significant accounting estimates included in these unaudited condensed financial statements is the determination of the fair value of the warrant liabilities as well as the fair value of the convertible note. Such estimates may be subject to change as more current information becomes available and 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 had sweep account funds of $682 and $363 included in the Trust Account as of June 30, 2022 and December 31, 2021, respectively.
 
10
Investment Held in Trust Account
As of June 30, 2022 and December 31, 2021, investment in the Company’s Trust Account consisted of $682 and $363 in money market fund and $207,354,312 and $207,060,170 in U.S. Treasury Securities, respectively. All of the U.S. Treasury Securities will mature on September 1, 2022. The Company classifies its United States Treasury securities as
held-to-maturity in accordance
with FASB ASC Topic 320 “Investments—Debt and Equity Securities.”
Held-to-maturity
securities are those securities which the Company has the ability and intent to hold until maturity.
Held-to-maturity
treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts. The carrying value approximates the fair value due to its short-term maturity. The carrying value, excluding gross unrealized holding gain and fair value of held to maturity securities on June 30, 2022 and December 31, 2021 are as follows:
 
    
Amortized Cost
and Carrying
Value
     
Gross
Unrealized
Gains
     
Gross
Unrealized
Losses
     
Fair Value as of
June 30,
2022
  
U.S. Money Market
    $ 682      $ —        $ —        $ 682  
U.S. Treasury Securities
      207,354,312        —          (140,638 )       207,213,674  
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ 207,354,994      $ —        $ (140,638 )     $ 207,214,356  
         
    
Amortized
Cost
and Carrying
Value
     
Gross
Unrealized
Gains
     
Gross
Unrealized
Losses
     
Fair Value as of
December 31,
2021
  
U.S. Money Market
    $ 363      $        $ —        $ 363  
U.S. Treasury Securities
      207,060,170        1,264        —          207,061,434  
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ 207,060,533      $ 1,264      $ —        $ 207,061,797  
A decline in the market value
of held-to-maturity securities
below cost that is deemed to be other than temporary, results in an impairment that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the impairment, changes in value subsequent
to year-end, forecasted
performance of the investee, and the general market condition in the geographic area or industry the investee operates in.
Premiums and discounts are amortized or accreted over the life of the
related held-to-maturity security
as an adjustment to yield using the effective-interest method. Such amortization and accretion is included in the “interest income” line item in the statements of operations. Interest income is recognized when earned.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At June 30, 2022 and December 31, 2021, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature 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) are classified as temporary equity. At all other times, common stock are classified as stockholders’ equity. The Company’s common stock issued in the IPO contains certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events.
Accordingly, 20,700,000 shares of common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s 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. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
 
11
Offering
Costs associated with the Initial Public Offering
The Company complies with the requirements of the ASC
340-10-S99-1
and SEC Staff Accounting Bulletin (“SAB”) Topic 5A—“Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. The Company allocates 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 associated with equity components will be charged to temporary equity. Accordingly, the Company incurred offering costs in the aggregate of $8,159,324 of which $7,808,281 have been charged to temporary equity and $351,043 was allocated to the public warrants and was expensed immediately.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
 
  •  
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
 
  •  
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
 
  •  
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Convertible Promissory Note
The Company accounts for its convertible promissory 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 promissory note. Using fair value option, the convertible promissory 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 promissory note in the condensed statements of operations. The fair value of the option to convert into private warrants was valued utilizing the closed-form model.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its 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
ASC 815-15. 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.
Derivative assets and liabilities are classified on the balance sheet as current or
non-current
based on whether or not
net-cash
settlement or conversion of the instrument is required within 12 months of the balance sheet date. The Company has determined that both the private and public warrants are a derivative instrument.
 
12
Net Income (Loss) Per Common Share
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 (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, and (iv) any warrants that could be acquired through conversion of convertible debt. The warrants are exercisable to purchase 17,059,250 shares of common stock in the aggregate.
 
    
Redeemable
Common Stock
     
Non-Redeemable

Common Stock
  
For the three months ended June 30, 2022
                  
Allocation of net income including common stock subject to redemption outstanding
    $ 1,681,177      $ 445,979  
Weighted Average Common Stock
      20,700,000        5,491,249  
Basic and Diluted net income per share
    $ 0.08      $ 0.08  
     
For the six months ended June 30, 2022
                  
Allocation of net income including common stock subject to redemption outstanding
    $ 5,662,404      $ 1,502,110  
Weighted Average Common Stock
      20,700,000        5,491,249  
Basic and Diluted net income per share
    $ 0.27      $ 0.27  
     
For the three months ended June 30, 2021
                  
Allocation of net loss including common stock subject to possible redemption
    $ (3,341,221 )     $ (886,352 ) 
Weighted Average Common Stock
      20,700,000        5,491,250  
Basic and Diluted net loss per share
    $ (0.16 )     $ (0.16 ) 
     
For the six months ended June 30, 2021
                  
Allocation of net income including common stock subject to possible redemption
    $ 1,095,966      $ 409,013  
Weighted Average Common Stock
      13,823,204        5,158,805  
Basic and Diluted net income per share
    $ 0.08      $ 0.08  
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 June 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective tax rate was 1.41% and 0.0% for the three months ended June 30, 2022 and 2021, respectively, and 0.42% and 0.0% for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and six months ended June 30, 2022 and 2021, 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 June 30, 2022 and December 31, 2021. 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 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.
Recent Accounting Pronouncements
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.
 
13
Note 3 — Initial Public Offering
On March 1, 2021, the Company sold 18,000,000 Units, at a purchase price of $10.00 per Unit. On March 2, 2021, the underwriters purchased an additional 2,700,000 Units to exercise its over-allotment option in full at a purchase price of $10.00 per warrant, generating gross proceeds of $27,000,000. Each Unit consists of one share of common stock
and one-half of
one warrant to purchase one share of common stock. 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.
All of the 20,700,000 shares of common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in
ASC480-10-S99,
redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Given that common stock was issued with other freestanding instruments (i.e., public warrants), the initial carrying value of common stock classified as temporary equity is the allocated proceeds based on the guidance in ASC
470-20.
The common stock is subject to SEC and its staff’s guidance on redeemable equity instruments, which has been codified in
ASC480-10-S99.
If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value (see Note 2). The change in the carrying value of redeemable common stock resulted in charges against additional
paid-in
capital (to the extent available) and accumulated deficit.
As of June 30, 2022 and December 31, 2021, the common stock subject to redemption reflected on the balance sheet are reconciled in the following table:
 
Gross proceeds from public issuance
    $ 207,000,000  
Less:
         
Proceeds allocated to public warrants
      (8,905,878 ) 
Redeemable common stock issuance costs
      (7,808,281 ) 
Plus:
         
Accretion of carrying value to redemption value
      16,714,159  
    
 
 
  
Contingently redeemable common stock, December 31, 2021
    $ 207,000,000  
Plus:
         
Accretion of carrying value to redemption value
      157,520  
    
 
 
  
Contingently redeemable common stock, June 30, 2022
    $ 207,157,520  
    
 
 
  
Note 4 — Private Placement
Simultaneously with the closing of the
IPO, the Sponsor and I-Bankers Securities, Inc. (“I-Bankers”) purchased an
aggregate of 5,600,000 warrants at a price of $1.00 per warrant ($5,600,000 in the aggregate) in a private placement. Of such amount, 4,480,000 Private Placement Warrants were be purchased by the Sponsor and 1,120,000 Private Placement Warrants
were purchased by I-Bankers.
Simultaneously with the closing of the over-allotment option, pursuant to certain Warrant Purchase Agreements, the Company completed the private sale of an aggregate of an additional 540,000 Private Placement Warrants to the Sponsor and
I-Bankers
at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company of $540,000. Of such amount, 432,000 Private Placement Warrants were purchased by the Sponsor and 108,000 Private Placement Warrants were purchase by
I-Bankers.
The Private Placement Warrants are identical to the warrants included in the Units sold in the IPO, except that the Private Placement Warrants: (i) will not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, as described in the IPO, in each case so long as they are held by the initial purchasers or any of their permitted transferees. If the Private Placement Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units being sold in the IPO.
 
14
Note 5 — Related Party Transactions
Founder Shares
On December 31, 2020, the Sponsor paid $25,000, or approximately $0.006 per share, to cover certain offering costs in consideration for 4,312,500 shares of Common Stock, par value $0.0001 (the “Founder Shares”). In January 2021, the Company granted 30,000 founder shares each to three independent directors and increased to 36,000 each after a
1.2-for-1
stock dividend (see below) or a total of 108,000 Founder Shares (the “Director Shares”). The Director Shares are identical to the Founder Shares. The Company accounted for the Director Shares in accordance with ASC 718, Stock-based Compensation.
On February 24, 2021, as part of an upsizing of the IPO, the Company effected a
1.2-for-1
stock dividend resulting in the Sponsor holding 5,175,000 Founder Shares. Up to 675,000 Founder Shares were subject to forfeiture by the Sponsor depending on the extent to which the underwriters’ over-allotment option is exercised. On March 2, 2021, the underwriter exercised its over-allotment option in full, hence, the 675,000 Founder Shares are no longer subject to forfeiture since then.
With certain limited exceptions, the Founder Shares are not transferable, assignable or salable (except to the Company’s officers and directors and other persons or entities affiliated with the Company’s initial stockholders, each of whom will be subject to the same transfer restrictions) until the earlier of one year after the completion of our initial Business Combination or earlier if, (x) subsequent to the initial Business Combination, the last sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within
any 30-trading
day period commencing at least 150 days after the initial Business Combination, or (y) the date following the completion of the initial Business Combination on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of its public stockholders having the right to exchange their shares of Common Stock for cash, securities or other property (the
“lock-up”).
Promissory Note — Related Party
On December 29, 2020, the Sponsor agreed to loan the Company up to $600,000 to be used for a portion of the expenses of the IPO. These loans were
non-interest
bearing, unsecured and were due at the earlier of March 31, 2021, or the closing of the IPO. As of March 1, 2021, the Company had incurred an aggregate of $250,000 of offering expenses from the IPO under the promissory note. The Company repaid the note in full on March 2, 2021.
On May 31, 2022, the Sponsor agreed to loan the Company $150,000 pursuant to a new promissory note (the “Promissory Note”). The Promissory Note is
non-interest
bearing and payable upon consummation of the Company’s initial Business Combination. As of June 30, 2022, there was $150,000 outstanding under the Promissory Note.
Convertible Promissory Note – Related Party and Related Party Loans
In order to finance transaction costs in connection with an intended initial Business Combination, the Company’s initial stockholders or an affiliate of the initial stockholders or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). If the Company completes an initial Business Combination, it would repay such loaned amounts. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such Working Capital Loans but no proceeds from the Trust Account would be used for such repayment. Up to $1,500,000 of Working Capital Loans may be, at the option of the lender, convertible into warrants at a price of $1.00 per warrant of the post Business Combination entity. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. The terms of the Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Company does not expect to seek loans from parties other than the initial stockholders or an affiliate of the initial stockholders or certain officers and directors as it does not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account.
On March 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. At the Sponsor’s discretion, the Convertible Note may be converted into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. At June 30, 2022, there was $300,000 of borrowings under the Convertible Note. The Convertible Note was valued using the fair value method. The fair value of the note as of June 30, 2022, was $300,000, which resulted in no change in the fair value of the convertible promissory note
On March 15, 2022, the Company received the $77,345 due from the Related Party that was outstanding on December 31, 2021.
 
15
Administrative Service Fee
On February 24, 2021, the Company entered into an Administrative Services Agreement pursuant to which the Company will pay an affiliate of one of the Company’s officers a total of $5,000 per month for office space, utilities, secretarial support, and other administrative and consulting services. Upon completion of the initial Business Combination or liquidation, the Company will cease paying these monthly fees. For the three and six months ended June 30, 2022, the Company incurred and paid $15,000 and $30,000 of fees for these services, respectively. The Company incurred $20,000 and $15,000 in expenses in connection with such services for the period from February 24, 2021, to June 30, 2021, and for the three months ended June 30, 2021, respectively.
Note 6 — Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, the Private Placement Warrants (and underlying securities) and Private Placement Warrants that may be issued upon conversion of Working Capital Loans (and any underlying securities) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the closing date of the IPO requiring the Company to register such securities for resale.
The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed after the completion of the initial Business Combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination
of the applicable lock-up period described above.
The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
The underwriters
had a 30-day option beginning March 1,
2021 to purchase up to an additional 2,700,000 units to cover over-allotments, if any, at the IPO price less the underwriting discounts. On March 1, 2021, the Company paid an underwriting discount of $3,600,000.
On March 2, 2021, the underwriters purchased an additional 2,700,000 units to exercise its over-allotment option in full. The proceeds of $27,000,000 from the over-allotment was deposited in the Trust Account. On March 2, 2021, the Company paid additional underwriting discount of $540,000.
Business Combination Marketing Agreement
The
Company has engaged I-Bankers as an advisor
in connection with the Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with the initial Business Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination.
The
Company will pay I-Bankers a cash fee
for such services upon the consummation of its initial Business Combination in an amount equal to 3.5% of the gross proceeds of the IPO, including any proceeds from the full or partial exercise of the underwriters’ over-allotment option.
Representative Shares
Upon closing of the IPO and exercise of over-allotment in full, the Company issued to
I-Bankers
an aggregate of 316,249 shares of common stock (the “Representative Shares”). The fair value of the Representative Shares was estimated to be $3,026,438 and were treated as underwriters’ compensation. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares without the Company’s prior consent until the completion of the initial Business Combination. In addition, the holders of the Representative Shares 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 the initial 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 its initial Business Combination within the Combination Period.
 
16
The Representative Shares have been deemed compensation by FINRA and are therefore
subject to a lock-up for a period
of 180 days immediately following the date of the effectiveness of the registration statement pursuant to Rule 5110(g)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following February 24, 2021 or commencement of sales of the public offering, except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, provided that all securities so transferred remain
subject to the lock-up restriction above for
the remainder of the time period.
Representative Warrants
Upon closing of the IPO and exercise of over-allotment in full, the Company agreed to grant to
I-Bankers
(and/or its designees) an aggregate of 569,250 warrants exercisable at $12.00 per share for an aggregate exercise price of $6,831,000, exercisable at any time during the period commencing on the later of the first anniversary of the February 24, 2021 and the closing of the Company’s initial business combination and terminating on the fifth anniversary of such effectiveness date. Notwithstanding anything to
the contrary, I-Bankers has agreed
that neither it nor its designees will be permitted to exercise the warrants after the five-year anniversary of the effective date of the registration statement.
The warrants may be exercised for cash or on a cashless basis, at the holder’s option, at any time during the period commencing on the later of the first anniversary of February 24, 2021, and the closing of initial business combination and terminating on the fifth anniversary of such effectiveness date.
The warrants and such shares purchased pursuant to the warrants have been deemed compensation by FINRA and are therefore subject
to a lock-up for a
period of 180 days immediately following the date of the effectiveness of the registration statement. Pursuant to FINRA Rule 5110(e)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following February 24, 2021 except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners. The warrants may be cashless exercised and grant to holder’s demand and “piggy back” rights for periods of five and seven years, respectively, from February 24, 2021 with respect to the registration under the Securities Act of the shares issuable upon exercise of the warrants. The Company will have no obligation to net cash settle the exercise of the warrants. The holder of the warrants will not be entitled to exercise the warrants for cash unless a registration statement covering the securities underlying the warrants is effective or an exemption from registration is available.
Merger Agreement
On April 26, 2022, the Company entered into an Merger Agreement and Plan of Reorganization (the “Merger Agreement”), by and among Isleworth, IHAC First Merger Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Isleworth (“First Merger Sub”), IHAC Second Merger Sub LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of Isleworth (“Second Merger Sub”), Cytovia Holdings, Inc. a Delaware corporation (“Cytovia”), and Isleworth Healthcare Sponsor I, LLC, a Delaware limited liability company (the “Sponsor”).
On June 7, 2022, Isleworth, Cytovia, First Merger Sub, Second Merger Sub and Sponsor (together, the “Parties”), entered into the First Amendment (the “First Amendment”) to Merger Agreement and Plan of Reorganization, dated April 26, 2022, by and among the Parties.
On June 30, 2022, Isleworth and Cytovia entered into a Mutual Termination Agreement (the “Termination Agreement”) which terminated the Merger Agreement, effective immediately. The Termination Agreement contained customary mutual releases and covenants not to sue.
The Company is currently assessing whether it should extend its life and the life of the trust maintained for the benefit of its public holders of Common Stock and seek an alternative business combination.
Note 7 — Warrant Liability
The Company has outstanding warrants to purchase an aggregate of 16,490,000 shares of the Company’s common stock issued in connection with the Initial Public Offering and the Private Placement (including warrants issued in connection with the consummation of the Over-allotment).
Each whole warrant entitles the holder to purchase one Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time on the later of 30 days after the completion of an initial Business Combination or 12 months from the closing of the IPO. The warrants will expire on the fifth anniversary of the completion of an initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of the initial Business Combination, it will use its reasonable best efforts to file, and within 60 business days after the closing of the initial Business Combination, to have declared effective, a registration statement relating to the shares of Common Stock issuable upon exercise of the warrants 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. Notwithstanding the above, if the Company’s Common
 
17
Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but will use its best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Company may call the warrants for redemption:
 
  •  
in whole and not in part;
 
  •  
at a price of $0.01 per warrant;
 
  •  
upon not less than 30 days’ prior written notice
of redemption (the “30-day redemption period”) to
each warrant holder; and
 
  •  
if, and only if, the reported last sale price of the Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within
a 30-trading
day period ending on the third trading day prior to the date the Company sends to the notice of redemption to the warrant holders.
In addition, if (x) the Company issues additional shares of Common Stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per 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, initial stockholders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance), (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 the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of our Common Stock 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 described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The warrant agreement contains an Alternative Issuance provision that if less than 70% of the consideration receivable by the holders of the ordinary shares in the Business Combination is payable in the form of common equity in the successor entity, and if the holders of the warrants properly exercises the warrants within thirty days following the public disclosure of the consummation of Business Combination by the Company, the warrant price shall be reduced by an amount equal to the difference (but in no event less than zero) of (i) the warrant price in effect prior to such reduction minus (ii) (A) the Per Share Consideration (as defined below) minus (B) the Black-Scholes Warrant Value (as defined below). The “Black-Scholes Warrant Value” means the value of a Warrant immediately prior to the consummation of the Business Combination based on the Black-Scholes Warrant Model for a Capped American Call on Bloomberg Financial Markets. “Per Share Consideration” means (i) if the consideration paid to holders of the ordinary shares consists exclusively of cash, the amount of such cash per ordinary shares, and (ii) in all other cases, the volume weighted average price of the ordinary shares as reported during
the ten-trading day
period ending on the trading day prior to the effective date of the Business Combination.
The Company believes that the Alternative Issuance provision and the adjustments to the exercise price of the warrants is based on a variable that is not an input to the fair value of
a “fixed-for-fixed” option
as defined under FASB ASC Topic No. 815 – 40, and thus the warrants are not eligible for an exception from derivative accounting.
The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the IPO. Accordingly, the Company has classified each warrant as a liability at its fair value and the warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value determined by the Monte Carlo simulation. This liability is subject
to re-measurement at
each balance sheet date. With each
such re-measurement, the
warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations.
The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification. As such, the Company recorded $14,280,762 of warrant liability upon issuance as of March 1, 2021 as adjusted for the closing of the Underwriters’ fully exercised over-allotment option.
For the three and six months ended June 30, 2022, the Company recorded a change in the fair value of the warrant liabilities in the amount of approximately $2,195,278 and $7,751,302, on the statements of operations, respectively, resulting in warrant liabilities of $561,577 as of June 30, 2022 on the balance sheet.
For the year ended December 31, 2021, the Company recorded a change in the fair value of the warrant liabilities in the amount of approximately $5,967,883, on the statements of operations, resulting in warrant liabilities of $8,312,879 as of December 31, 2021 on the balance sheet.
 
18
The change in fair value of the warrant liabilities is summarized as follows:
 
Warrant liability at December 31, 2021
    $ 8,312,879  
Change in fair value of warrant liabilities
      (5,556,024 ) 
    
 
 
  
Warrant liabilities at March 31, 2022
      2,756,855  
Change in fair value of warrant liabilities
      (2,195,278 ) 
    
 
 
  
Warrant liabilities at June 30, 2022
    $ 561,577  
The warrants were initially valued as Level 3 on the Initial Public Offering date using a Monte Carlo simulation. Inherent in a Monte Carlo options pricing model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on projected volatility of comparable public companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S.
Treasury zero-coupon yield
curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is based on management assumptions regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The Underwriter warrants were not determined to be derivative liabilities and only valued at issuance.
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The fair value of the Public Warrants transferred from a Level 3 fair value measurement to a Level 1 fair value measurement on March 25, 2022 was $4,828,275, which was determined based on the public trading price. The Private Warrants were valued with Level 3 fair value measurement inputs as of June 30, 2022.
The following table provides quantitative information regarding Level 3 fair value measurements as of June 30, 2022 and December 31, 2021:
 
    
June 30,
2022
    
December 31,
2021
  
Exercise price
    $ 11.50     $ 11.50  
Share price
    $ 9.96     $ 9.84  
Volatility
      1.0 %      9.0 % 
Expected life of the options to convert
      5.65       5.48  
Risk-free rate
      3.02 %      1.31 % 
Dividend yield
      — %      — % 
Likelihood of completing a business combination
      50 %      95 % 
Note 8 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured on a recurring basis as of June 30, 2022 and December 31, 2021, indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
 
    
June 30,
2022
     
Quoted
Prices In
Active
Markets
(Level 1)
     
Significant
Other
Observable
Inputs
(Level 2)
     
Significant
Other
Unobservable
Inputs
(Level 3)
  
Liabilities:
                                    
Warrant liability - Public Warrants
    $ 342,585      $ 342,585      $ —        $ —    
Warrant liability - Private Warrants
      218,992        —          —          218,992  
Convertible promissory note – related party
      300,000        —          —          300,000  
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ 861,577      $ 342,585      $ —        $ 518,992  
    
 
 
     
 
 
     
 
 
     
 
 
  
 
    
December 31,
2021
     
Quoted
Prices In
Active
Markets
(Level 1)
     
Significant
Other
Observable
Inputs
(Level 2)
     
Significant
Other
Unobservable
Inputs
(Level 3)
  
Liabilities:
                                    
Warrant liability - Public Warrants
    $ 5,148,090      $ 5,148,090      $ —        $ —    
Warrant liability - Private Warrants
      3,164,789        —          —          3,164,789  
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ 8,312,879      $ 5,148,090      $ —        $ 3,164,789  
    
 
 
     
 
 
     
 
 
     
 
 
  
 
19
The fair value of the Convertible Promissory Note was based on the following significant inputs:
 
 
  
June 30, 2022
 
Risk-free interest rate
    $ 3.02 % 
Time to Expiration (in years)
    $ 5.67  
Expected volatility
      1.0 % 
Exercise price
    $ 11.50  
Dividend yield
      0.00 % 
Stock Price
    $ 9.96  
Probability of transaction
      50 % 
Note 9 — Stockholder’s Equity
Preferred Stock
 — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 and 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 June 30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Common Stock
 — The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share. As of June 30, 2022 and December 31, 2021, there were 26,191,249 shares of common stock issued and outstanding. Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Common stockholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
 
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us,” “Isleworth,” or the “Company” refer to Isleworth Healthcare Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Isleworth Healthcare Sponsor I, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
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 the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’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 December 15, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). We consummated our Public Offering (as defined below) on March 2, 2021 and are currently in the process of locating suitable targets for our business combination. We intend to use the cash proceeds from our Public Offering and the Private Placement described below as well as additional issuances, if any, of our capital stock, debt or a combination of cash, stock and debt to complete the Business Combination.
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 $10.00 per Unit on March 2, 2021. Simultaneous with the closing of the Public Offering, we completed the sale of 5,600,000 Private Warrants (the “Private Warrants”) at a price of $1.00 per Private Warrant in a private placement to the Sponsor and
I-Bankers.
As of June 30, 2022, a total of $207,000,000 of the net proceeds from the IPO (including the full exercise of the over-allotment option) and the Private Placements were in a trust account established for the benefit of the Company’s public stockholders. The trust fund account is invested in interest-bearing U.S. government securities and the income earned on those investments is also for the benefit of our public stockholders.
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.
 
21
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through June 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, after our Initial Public Offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate
non-operating
income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. As of June 30, 2022, there was $432,994 interest earned from the Trust account.
For the three months ended June 30, 2022, we had a net income of $2,127,156 which consisted of interest income of $299,880 and change in fair value of warrants of $2,195,278, offset by general and administrative costs of $337,688, and the provision for income taxes of $30,314.
For the six months ended June 30, 2022, we had net income of $7,164,514 which consisted of interest income of $372,461 and change in fair value of warrants of $7,751,302, offset by general and administrative costs of $928,935, and the provision for income taxes of $30,314.
For the three months ended June 30, 2021, we had a net loss of $4,227,573 which consisted of general and administrative costs of $235,522 and change in fair value of warrants of 4,013,287, offset by interest income of $21,236.
For the six months ended June 30, 2021, we had net income of $1,504,979 which consisted of interest income of $21,242 and change in the fair value of warrants of $2,227,616, offset by general and administrative costs of $392,836 and warrant issuance cost of $351,043
 
22
Liquidity, Capital Resources and Going Concern
As of June 30, 2022, we had cash outside our trust account of $107,774, available for working capital needs. All remaining cash was held in the trust account and is generally unavailable for our use, prior to an initial business combination.
For the six months ended June 30, 2022, cash used in operating activities was $886,045; we used $78,000 from our interest earned on Trust assets to pay Delaware Franchise Taxes, in accordance with the Trust agreement.
Pursuant to the IPO on March 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 in U.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 of June 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 of June 30, 2022, there was $432,994 interest income earned from the Trust account. On March 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 $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from the Public Offering held outside of the trust account or from interest earned on the funds held in the trust account and released to us for this purpose. Our 2021 franchise tax was calculated using a partial year proration and amounted to $170,520. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account reduced by our operating expense and franchise taxes. We expect the interest earned on the amount in the trust account will be insufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
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. On March 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, on May 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. At June 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 until September 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 on August 26, 2022 to seek an extension to consummate a Business Combination from September 1, 2022 to December 1, 2022, and thereafter for up to three additional months at the election of the Company, ultimately until as late as March 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 after September 1, 2022 (See Note 6 regarding the Company’s terminated business combination).
 
23
Off-Balance
Sheet Arrangements
We did not have any
off-balance
sheet arrangements as of June 30, 2022, as defined in Item 303(a)(4)(ii) of Regulation
S-K.
Contractual obligations
As of June 30, 2022, we did not have any long-term debt, capital or operating lease obligations.
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 $5,000 per month.
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 the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
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 – Related Party
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 using Monte-Carlo simulations at each measurement date. The fair value of Public Warrants issued with the Public Offering was initially measured using Monte-Carlo simulations and then measured based trading price once they commenced trading on March 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 SEC Staff Accounting Bulletin (“SAB”) Topic 5A— “Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering.
 
24
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2022, we were not subject to any material market or interest rate risk. Following the consummation of our Public Offering, the net proceeds of the Public Offering and the Private Placement, including amounts in the Trust Account, were invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under
Rule2a-7
under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there was no associated material exposure to interest rate risk.
We have not engaged in any hedging activities since our inception. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by
Rules 13a-15
and
15d-15
under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2022, due to the previous material weakness in our internal control over financial reporting described in Item 4. Controls and Procedures included in our Quarterly Report on
Form 10-Q
as filed with the SEC on June 8, 2021, and due to the restatements of our March 1, 2021, March 31, 2021, and June 30, 2021 financial statements (the “restatements”) regarding the classification of redeemable common stock, as described below, which combined, constitutes a material weakness in our internal control over financial reporting. The material weakness was caused by the misapplication of accounting guidance for complex financial instruments. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on
Form 10-Q
present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
 
25
Regarding the restatements to the March 31, 2021 and June 30, 2021 quarterly financial statements included in the Company’s
Form 10-Qs,
as filed with the SEC on June 8, 2021 and August 24, 2021, respectively, as well as the Company’s balance sheet included on the Company’s
Form 8-K,
as filed with the SEC on March 5, 2021, and restated on the
Form 10-Q
filed with the SEC on June 8, 2021, certain redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of the common stock in permanent equity. The Company restated its financial statements to classify all common stock as temporary equity and any related impact, as the threshold in its charter would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent equity.
It is noted that the
non-cash
adjustments to the financial statement do not impact the amounts previously reported for our cash and cash equivalents or total assets. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our unaudited interim financial statements were prepared in accordance with U.S. generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in
Rules 13a-15(f)
and
15d-15(f)
of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In light of the restatements of our financial statements for the periods ended March 31, 2021 and June 30, 2021, we continue to enhance our processes and procedures to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans for enhancement continue to include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
 
26
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form10-Kfiled with the SEC on March 29, 2022. As of the date of this Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form
10-K
filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 1, 2021, we consummated our Initial Public Offering of 18,000,000 Units, generating gross proceeds of $180,000,000. In connection with the Initial Public Offering, the underwriters were granted a
30-day
option from the date of the prospectus to purchase up to 2,700,000 additional Units to cover over-allotment, if any. On March 2, 2021, the underwriters fully exercised the over-allotment option. The units were sold at an offering price of $10.00 per Unit, generating additional gross proceeds of $27,000,000.
I-Bankers
Securities, Inc. acted as sole book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on a registration statement on
Form S-1
(Nos. 333-252308
and
333-253478).
The Securities and Exchange Commission declared the registration statement effective on February 24, 2021.
Simultaneous with the consummation of the Initial Public Offering, we consummated the private placement of an aggregate of 6,140,000 Private Placement Warrants to the Sponsor and
I-Bankers
at a price of $1.00 per Private Placement Warrant, generating total proceeds of $6,140,000.
 
27
The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants may be exercised on a cashless basis and are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.
Of the gross proceeds received from the Initial Public Offering, including the full exercise of the underwriters’ over-allotment option, and the Private Placement Warrants, $207,000,000 was placed in the Trust Account.
We paid a total of $4,140,000 in underwriting discounts and commissions and $558,004 for other cash offering costs and expenses related to the Initial Public Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this
Form10-Q.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on
Form10-Q.
 
No.
   
Description of Exhibit
   
    2.1+    Merger Agreement and Plan of Reorganization, dated as of April 26, 2022, by and among Isleworth Healthcare Acquisition Corp., IHAC First Merger Sub Inc., IHAC Second Merger Sub LLC, Cytovia Holdings, Inc., and Isleworth Healthcare Sponsor I, LLC (incorporated by reference to exhibit 2.1 of the Form 8-K filed with the Securities and Exchange Commission on April 26, 2022)
   
    2.2    First Amendment to Merger Agreement and Plan of Reorganization dated as of June 7, 2022, by and among Isleworth Healthcare Acquisition Corp., IHAC First Merger Sub Inc., IHAC Second Merger Sub LLC, Cytovia Holdings, Inc., and Isleworth Healthcare Sponsor I, LLC (incorporated by reference to exhibit 2.2 of the Form 8-K filed with the Securities and Exchange Commission on June 10, 2022)
   
  10.1    Mutual Termination Agreement, dated June 30, 2022 (incorporated by reference to exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission on June 30, 2022)
   
  31.1*    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
  31.2*    Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
  32.1*    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes—Oxley Act of 2002
   
  32.2*    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
   
101.INS    Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
   
101.SCH    Inline XBRL Taxonomy Extension Schema Document
   
101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB    Inline XBRL Taxonomy Extension Labels Linkbase Document
   
101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase Document
   
104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
*
These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
+
Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation
S-K
Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request.
 
28
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
       
ISLEWORTH HEALTHCARE ACQUISITION CORP.
       
Date: August 12
, 2022
      
By:
  
/s/ Robert Whitehead
       
Name:
  
Robert Whitehead
       
Title:
  
Chief Executive Officer
       
       
By:
  
/s/ Dan Halvorson
       
Name:
  
Dan Halvorson
       
Title:
  
Chief Financial Officer
 
29
Isleworth Healthcare Acq... (NASDAQ:ISLE)
Historical Stock Chart
From Mar 2024 to Apr 2024 Click Here for more Isleworth Healthcare Acq... Charts.
Isleworth Healthcare Acq... (NASDAQ:ISLE)
Historical Stock Chart
From Apr 2023 to Apr 2024 Click Here for more Isleworth Healthcare Acq... Charts.