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 March 31, 2023
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 Number: 001-41128

Jackson Acquisition Company
(Exact name of registrant as specified in its charter)

Delaware
  
86-2494888
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
     
2655 Northwinds Parkway
Alpharetta, GA
  
30009
(Zip Code)
(Address of principal executive offices)
    

(678) 690-1079
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Units, each consisting of one share of Class A Common Stock and one-half of one redeemable warrant
RJAC.U
The New York Stock Exchange
Class A Common Stock, par value $0.0001 per share
RJAC
The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
Redeemable warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50

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, a non-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 ☐
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
As of May 9, 2023, there were 22,250,000 shares of Class A Common Stock and 5,562,500 shares of Class B Common Stock, par value $0.0001 per share, of the registrant issued and outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE

None.
 
TABLE OF CONTENTS
 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10‑Q, or Quarterly Report, contains forward-looking statements that involve substantial risks and uncertainties. All statements contained in this Quarterly Report, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate, “around” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The forward-looking statements in this report include, among other things, statements about:
 
•
our ability to select an appropriate target business or businesses;
 
•
our ability to complete our initial business combination;
 
•
our expectations around the performance of a prospective target business or businesses;
 
•
our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
 
•
our directors and officers allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;
 
•
our potential ability to obtain additional financing to complete our initial business combination;
 
•
our pool of prospective target businesses and our target industries;
 
•
the impact of the global economic and political developments on our business, including rising inflation and capital market disruptions, the current conflict in Ukraine, economic sanctions and economic slowdowns or recessions that may result from such developments which could harm our ability to consummate our initial business combination;

•
our ability to consummate an initial business combination due to the uncertainty resulting from the COVID-19 pandemic;
 
•
the ability of our directors and officers to generate a number of potential business combination opportunities;
 
•
our public securities’ liquidity and trading;
 
•
the market for our securities;
 
•
the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;
 
•
the trust account not being subject to claims of third parties;
 
•
our financial performance; or
 
•
other risks and uncertainties, including those described in the ‘‘Risk Factors’’ section of this Quarterly Report and our Annual Report on Form 10-K.
 
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make.
 
You should refer to the “Risk Factors” section of this Quarterly Report and of our Annual Report on Form 10-K, for a discussion of important factors that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future mergers, dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements, except as required by applicable law.
 
PART I - FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS
 
JACKSON ACQUISITION COMPANY
INDEX TO FINANCIAL STATEMENTS

F-1
JACKSON ACQUISITION COMPANY
CONDENSED BALANCE SHEETS

   
March 31,
2023
(unaudited)
    
December 31,
2022
  
ASSETS
            
Current Assets:
            
Cash
  
$
134,226
    
$
305,115
  
Prepaid expenses and other current assets
    
290,210
      
368,383
  
Total Current Assets
    
424,436
      
673,498
  
                 
Investments held in the Trust Account
    
231,021,253
      
228,961,837
  
                 
Total Assets
  
$
231,445,689
    
$
229,635,335
  
                 
LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT
                
Current Liabilities:
                
Accounts payable and accrued expenses
  
$
563,941
    
$
417,659
  
Accrued offering costs
    
399,000
      
399,000
  
Income taxes payable
     621,410       452,773  
Total Current Liabilities
    
1,584,351
      
1,269,432
  
                 
Deferred tax liability
    184,003       153,453  
Derivative warrant liabilities
    
214,725
      
214,725
  
Deferred underwriting commission
    
7,787,500
      
7,787,500
  
Total liabilities
    
9,770,579
      
9,425,110
  
                 
COMMITMENTS AND CONTINGENCIES (Note 6)
            
                 
Class A common stock subject to possible redemption; 22,250,000 shares at March 31, 2023 and December 31, 2022 (at redemption value of $10.32 and $10.25 per share, respectively)
    
229,532,636
      
228,122,408
  
                 
Stockholders’ deficit:
                
Preferred Stock, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding
    
-
      
-
  
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 0 shares issued and outstanding (excluding 22,250,000 at March 31, 2023 and December 31, 2022. subject to possible redemption)
    
-
      
-
  
Class B common stock, $0.0001 par value, 50,000,000 shares authorized, 5,562,500 shares issued and outstanding at March 31, 2023 and December 31, 2022
    
556
      
556
  
Additional paid-in capital
    
-
      
-
  
Accumulated deficit
    
(7,858,082
)
    
(7,912,739
)
Total Stockholders’ Deficit
    
(7,857,526
)
    
(7,912,183
)
Total Liabilities, Common Stock Subject to Possible Redemption and Stockholders’ Deficit
  
$
231,445,689
    
$
229,635,335
  

F-2
JACKSON ACQUISITION COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

   
For the
Three Months Ended
March 31,
    For the
Three Months Ended
March 31,
 
    2023     2022  
EXPENSES
            
Administration fee - related party
   $ 30,000     $ 30,000  
General and administrative
     433,008       521,793  
TOTAL EXPENSES
     463,008       551,793  
                 
OTHER INCOME (EXPENSE)
                
Income earned on Investments held in Trust Account
     2,427,082       21,452  
Transaction costs allocable to derivative warrant liabilities
     -       (25,112 )
Change in fair value of derivative liabilities
     -       6,227,025  
TOTAL OTHER INCOME
     2,427,082       6,223,365  
                 
Income before provision for income taxes
     1,964,074       5,671,572  
 
                
Provision for income taxes
     (499,187 )     -  
                 
Net income
  $ 1,464,887     $ 5,671,572  
                 
Weighted average number of shares of Class A common stock outstanding, basic and diluted
     22,250,000       22,100,000  
Basic and diluted net income per share of Class A common stock
   $ 0.05     $ 0.21  
                 
Weighted average number of shares of Class B common stock outstanding, basic and diluted
     5,562,500       5,525,000  
Basic and diluted net income  per share of Class B common stock
   $ 0.05     $ 0.21  


F-3
JACKSON ACQUISITION COMPANY
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)

 
Class B
Common Stock
                  
    Shares     Amount    
Additional
Paid-In
Capital
    
Accumulated
Deficit
    
Stockholders’
Deficit
  
Balance as of January 1, 2023
    
5,562,500
    
$
556
    
$
-
    
$
(7,912,739
)
  
$
(7,912,183
)
                                         
Remeasurement of Class A common stock to redemption value
    
-
      
-
      
-
      
(1,410,230
)
    
(1,410,230
)
                                         
Net income
    
-
      
-
      
-
      
1,464,887
      
1,464,887
  
Balance as of March 31 , 2023
    
5,562,500
    
$
556
    
$
-
    
$
(7,858,082
)
  
$
(7,857,526
)


 
Class B
Common Stock
                  
   
Shares
    
Amount
    
Additional
Paid-In
Capital
    
Accumulated
Deficit
    
Stockholders’
Deficit
  
Balance as of January 1, 2022
    
5,750,000
    
$
575
    
$
-
    
$
(15,738,425
)
  
$
(15,737,850
)
                                         
Forfeiture of Class B common stock
    (187,500 )     (19 )     19       -       -  
                                         
Proceeds in excess of fair value of Private Placement Warrants
    -       -       401,625       -       401,625  
                                         
Remeasurement of Class A common stock to redemption value
    -       -       (401,644 )     1,373,663       (1,775,307 )
                                         
Net income
    
-
      
-
      
-
      
5,671,572
      
5,671,572
  
Balance as of March 31, 2022
    
5,562,500
    
$
556
    
$
-
    
$
(11,440,516
)
  
$
(11,439,960
)


F-4
JACKSON ACQUISITION COMPANY
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
   
For the Three
Months Ended
March 31,
2023
    
For the Three
Months
Ended
March 31,
2022
  
Cash Flows From Operating Activities:
            
Net income
 
$
1,464,887
    
$
5,671,572
  
Adjustments to reconcile net income to net cash used in operating activities:
                
Income earned on Investments held in Trust Account
    
(2,427,082
)
    
(21,452
)
Transaction costs allocable to derivative warrant liabilities
    
-
      
25,112
  
Change in fair value of derivative warrant liabilities
    
-
      
(6,227,025
)
Changes in operating assets and liabilities:
                
Prepaid expenses and other current assets
    
78,173
      
9,216
  
Other assets
    
-
      
93,690
  
Accounts payable and accrued expenses
    
146,282
      
(585,654
)
Deferred taxes
    30,550       -  
Income taxes payable
     168,637       -  
Net Cash Used In Operating Activities
    
(538,553
)
    
(1,034,541
)
                 
Cash Flows From Investing Activities:
                
Cash deposited into Trust Account
    
-
      
(22,837,500
)
Interest released from Trust Account for tax payments
     367,664       -  
Net Cash Used In Investing Activities
    
367,664
      
(22,837,500
)
                 
Cash Flows From Financing Activities:
                
Proceeds from sale of Units in exercise of underwriter over-allotment option, net of underwriting fee
    
-
      
22,050,000
  
Proceeds from sale of Private Placement Warrants
    
-
      
787,500
  
Payment of offering costs
    
-
      
(11,768
)
Net Cash Provided By Financing Activities
    
-
      
22,825,732
  
                 
Net change in cash
    
(170,889
)
    
(1,046,309
)
                 
Cash at beginning of period
    
305,115
      
1,923,321
  
Cash at end of period
  
$
134,226
    
$
877,012
  
                 
Supplemental disclosure of non-cash financing activities:
                
                 
Deferred underwriters’ commissions
  
$
-
    
$
787,500
  
Initial classification of fair value of Public and Private warrants
  
$
-
    
$
937,125
  
Initial classification of common stock subject to redemption
  
$
-
    
$
22,837,500
  
Remeasurement of Class A common stock to redemption value   $ 1,410,230     $ 1,373,663  

F-5
JACKSON ACQUISITION COMPANY
 
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Jackson Acquisition Company (the “Company”) was incorporated in Delaware on March 5, 2021. 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 not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of March 31, 2023, the Company had not commenced any operations. All activity for the period from March 5, 2021 (inception) through March 31, 2023 relates to the Company’s formation, the initial public offering (“Initial Public Offering”) and search for a target for an initial business combination, which is described below. The Company will not generate any operating revenues until after the completion of an initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.

The registration statement for the Company’s Initial Public Offering was declared effective on December 8, 2021. On December 13, 2021, the Company consummated the Initial Public Offering of 20,000,000 units (“Units” and, with respect to the common stock included in the Units being offered, the “Public Shares”), generating gross proceeds of $200,000,000, which is described in Note 3. The Company granted the underwriter a 45-day option from the date of Initial Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On January 6, 2022, the over-allotment option was partially exercised by the underwriter, and the Company sold an additional 2,250,000 units generating gross proceeds of $22,500,000.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an aggregate of 9,560,000 warrants (the “Private Placement Warrants”) to RJ Healthcare SPAC, LLC (the “Sponsor”) at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company in the amount of $9,560,000. To the extent that the underwriter exercised its 45-day option, the Sponsor would purchase up to an additional 1,050,000 Private Placement Warrants at a purchase price of $1.00 per warrant. On January 6, 2022, the underwriter option was partially exercised by the underwriter and the Company sold an additional 787,500 private placement warrants generating proceeds of $787,500.

Transaction costs amounted to $13,255,861 consisting of $4,450,000 of underwriting fees, $7,787,500 of deferred underwriting fees payable (which are held in a trust account with Continental Stock Transfer & Trust Company acting as trustee (the “Trust Account”) and $1,018,361 of other offering costs related to the Initial Public Offering. Cash of $134,226 was held outside of the Trust Account on March 31, 2023 and was available for working capital purposes. As described in Note 6, the $7,787,500 deferred underwriting fees are contingent upon the consummation of the Business Combination within 18 months (or 21 months if extended) from the closing of the Initial Public Offering.

Following the closing of the Initial Public Offering on December 13, 2021 and the partial exercise of the over-allotment option, an amount of $225,837,500 ($10.15 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement was placed in the Trust Account which may be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account, as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The stock exchange listing rules require that the Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the assets held in the Trust Account (as defined below) (excluding the amount of deferred underwriting commissions and taxes payable on the income earned on the Trust Account). The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
 
F-6
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.15 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption were recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (ASC 480).

All of the Public Shares 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 Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares were issued with other freestanding instruments (i.e., public warrants), the initial carrying value of the Class A common stock classified as temporary equity is the allocated proceeds determined in accordance with ASC 470-20. The shares of the Class A common stock are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) 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 (ii) 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 has elected to recognize the changes immediately. The Public Shares are redeemable and will be classified outside of permanent equity as such on the balance sheet until such date that a redemption event takes place. Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s Business Combination.

If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.

Notwithstanding the foregoing, if the Company seeks stockholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares without the Company’s prior written consent.

F-7
The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares upon approval of any such amendment.

If the Company has not completed a Business Combination within 18 months from the closing of the Initial Public Offering (the ‘Combination Period”) (or 21 months from the closing of the Initial Public Offering if the period of time to consummate a business combination is extended), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned and not previously released to the Company to pay its taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish the rights of the Public Stockholders as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining Public Stockholders and its Board of Directors, liquidate and dissolve, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).

In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.15 per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.15 per Public Share, due to reductions in the value of trust assets, in each case net of the interest that may be withdrawn to pay taxes. This liability will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

F-8
Going Concern Consideration

At March 31, 2023, the Company had cash outside of trust of $134,226 and a working capital deficit of $1,159,915. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that these liquidity risks, as well as if the Company is unsuccessful in consummating an initial business combination within 18 months (or up to 21 months if the Company extends the period of time to consummate a business combination) from the closing of the IPO, the requirement that the Company cease all operations, redeem the public shares and thereafter liquidate and dissolve, raises substantial doubt about the ability to continue as a going concern. As a result of the subsequent event disclosed in NOTE 10, these financial statements have been adjusted as disclosed.

Risks and Uncertainties

Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the pandemic could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the balance sheet. The condensed balance sheet does 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 condensed 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 condensed financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
 
The accompanying condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC.
 
Certain information and note disclosures normally included in the condensed financial statements prepared in accordance with US GAAP have been condensed. As such, the information included in these condensed financial statements should be read in conjunction with the audited financial statements as of December 31, 2022 filed with the SEC on Form 10-K. In the opinion of the Company’s management, these condensed financial statements include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the Company’s financial position as of March 31, 2023 and the Company’s results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) 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.

F-9
Use of Estimates

The preparation of the condensed financial statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed balance sheet.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the balance sheet, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liabilities. 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 cash of $134,226 and $305,115 as of March 31, 2023 and December 31, 2022, respectively. The Company did not have any cash equivalents as of March 31, 2023 and December 31, 2022.

Investments held in Trust Account

At March 31, 2023 and December 31, 2022, the Company had $231.0 million and $229.0 million in investments in treasury securities held in the Trust Account, respectively.

Offering Costs associated with the Initial Public Offering

The Company complies with the requirements of the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A, “Expenses of Offering.” Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering. Upon completion of the Initial Public Offering, offering costs associated with warrant liabilities are expensed as incurred. Offering costs associated with the Units were allocated between temporary equity and the Public Warrants by the relative fair value method. Offering costs of $1,018,361 consisted principally of costs incurred in connection with preparation for the Initial Public Offering. These offering costs, together with the underwriter fees of $12,237,500 (or $4,450,000 paid in cash upon the closing of the Initial Public Offering and partial exercise of the over-allotment option and a deferred fee of $7,787,500), were allocated between temporary equity, the Public Warrants and the Private Placement Warrants in a relative fair value method upon completion of the Initial Public Offering. Of these costs, $836,603 were allocated to the Public Warrants and to the Private Placement Warrants and were charged to the statement of operations at December 31, 2021. Upon close of the partial exercise of the over-allotment option, $25,112 of costs were charged to the accompanying condensed statement of operations.

Class A Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance enumerated in ASC 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. The Company’s Class A common stock features certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at March 31, 2023 and December 31, 2022, the 22,250,000 shares of Class A common stock subject to possible redemption in the amount of $229,532,636 and $228,122,408, respectively, is presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized a measurement adjustment from initial book value to redemption amount value. The change in the carrying value of redeemable Class A common stock resulted in charges against additional paid-in capital and accumulated deficit.

F-10
At March 31, 2023, the Class A common stock reflected in the condensed balance sheets is reconciled in the following table:

Class A common stock subject to possible redemption at December 31, 2022
  $ 228,122,408  
Remeasurement of carrying value to redemption value
     1,410,228  
Class A common stock subject to possible redemption at March 31, 2023
  
$
229,532,636
  

At December 31, 2022, the Class A common stock reflected in the balance sheets is reconciled in the following table:

Class A common stock subject to possible redemption at December 31, 2021
   $ 203,000,000  
Gross proceeds of overallotment option partial exercise on January 6, 2022
    
22,500,000
  
Less:
        
Transaction costs allocated to Class A common stock
    
(1,307,317
)
Proceeds allocated to Public Warrants
    
(551,250
)
     
(1,858,567
)
         
Plus:
        
Expiration of overallotment liability
     420,760  
Remeasurement of carrying value to redemption value
    
4,060,215
  
      4,480,975  
Class A common stock subject to possible redemption at December 31, 2022
  
$
228,122,408
  

Net income per share

Net income loss per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. The Company applies the two-class method in calculating earnings per share. Earnings and losses are shared pro rata between the two classes of shares. The calculation of diluted income per share of common stock does not consider the effect of the warrants issued in connection with the (i) Public Offering and (ii) Private Placement, because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted earnings (per common share is the same as basic earnings per common share for the periods presented. As of March 31, 2023, the Public Warrants and Private Warrants are exercisable to purchase an aggregate of 11,125,000 and 10,347,500 shares of Class A common stock, respectively.

F-11
The following table reflects the calculation of basic and diluted net income per common share (in dollars, except per share amounts):


  
Three Months Ended
March 31, 2023
    
Three Months Ended
March 31, 2022
  
             
Class A Redeemable common stock
            
Numerator: Income allocable to Class A common stock
  
$
1,171,910
     $ 4,537,258  
Denominator: Basic and diluted weighted average shares outstanding
    
22,250,000
       22,100,000  
Basic and diluted net income per share, Class A Common Stock
  
$
0.05
     $ 0.21  
                 
Class B Non-redeemable common stock
                
Numerator: Income allocable to Class B common stock
  
$
292,977
    
$
1,134,314
  
Denominator: Basic and diluted weighted average shares outstanding
    
5,562,500
      
5,525,000
  
Basic and diluted net income per share, Class B Common Stock
  
$
0.05
    
$
0.21
  

Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2023 and December 31, 2022. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

As of March 31, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it. The Company’s effective tax rate was 25.4% for the three months ended March 31, 2023, and 0% for the three months ended March 31, 2022. The effective tax rate differs from the statutory tax rate of 21.0% for the three months ended March 31, 2023, due to changes in accrued investment income and the valuation allowance on the deferred tax assets.

The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city 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.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception.

New Law and Changes

On August 16, 2022, the Inflation Reduction (the IR) Act was signed into law, which, beginning in 2023, will impose a 1% excise tax on public company stock buybacks. The company is assessing the potential impact of the Act.

F-12
The IR Act imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market value of newly issued shares during the taxable year. Redemption rights are ubiquitous to nearly all SPACs. Shareholders have the ability to require the SPAC to repurchase their shares prior to the merger in what is known as a redemption right, essentially getting their money back. There are two possible scenarios in which redemption rights come into play. First, they can be exercised by the shareholders themselves because they are exiting the transaction, or second, they can be triggered because the SPAC did not find a target with which to merge. There will certainly need to be more clarity from the Internal Revenue Service on the application of the excise tax to SPAC redemptions. Until there is further guidance from the IRS, the Company will continue to assess the potential impact of the IR Act. The Company is still analyzing the impact of the IR Act on the financial statements.

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. The Company has not experienced losses on this account.

Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid to 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.

See Note 9 for additional information regarding liabilities measured at fair value.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” The Company’s derivative instruments were recorded at fair value as of the closing date of the Initial Public Offering (December 13, 2021) and are re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company accounts for the 21,472,500 warrants issued in connection with the Initial Public Offering and Private Placement and the exercise of the over-allotment option in accordance with the guidance contained in FASB ASC 815-40. Such guidance provides that, because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. 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 could be required within 12 months of the balance sheet date. The Company has determined the Public Warrants, the Private Placement Warrants and the over-allotment option are derivative instruments. As the Public Warrants and the Private Placement Warrants meet the definition of a derivative, the Public Warrants, the Private Placement Warrants and the over-allotment option are measured at fair value at issuance and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statement of operations in the period of change. The over-allotment option expired in January 2022 and is no longer subject to fair value measurements.

F-13
Warrant Instruments

The Company accounts for the Public Warrants and the Private Placement Warrants issued in connection with the Initial Public Offering and the Private Placement in accordance with the guidance contained in FASB ASC 815, “Derivatives and Hedging” whereby under that provision, the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the warrant instrument as a liability at fair value and adjusts the instrument to fair value at each reporting period. This liability will be re-measured at each balance sheet date until the Public Warrants and the Private Placement Warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statement of operations. The fair value at issuance was calculated using a Monte Carlo simulation model to value the Public Warrants and the Private Placement Warrants. On March 31, 2023, the Public Warrants were valued using the publicly available price. The valuation models utilize inputs and other assumptions and may not be reflective of the price at which they can be settled. Such warrant classification is also subject to re-evaluation at each reporting period. Upon issuance of the Private Placement Warrants at the close of the Initial Public Offering, the Company recorded a charge to the statement of operations at December 31, 2021 of $3,059,200 for the excess fair value of private warrant liabilities over the proceeds received. Upon issuance of the Private Placement Warrants at the close of the partial exercise of the over-allotment option, the Company recorded $401,625 to additional paid in capital for the excess proceeds received over fair value of private warrant liabilities.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed balance sheets.

NOTE 3 - INITIAL PUBLIC OFFERING

Pursuant to the Initial Public Offering, the Company sold 20,000,000 Units at a purchase price of $10.00 per Unit generating gross proceeds to the Company in the amount of $200,000,000. Each Unit consists of one share of the Company’s Class A common stock, par value $0.0001 per share, and one-half of one redeemable warrant of the Company, with each whole warrant entitling the holder thereof to purchase one whole share of Class A common stock at a price of $11.50 per share, subject to adjustment. See Note 8. On January 6, 2022, the over-allotment option was partially exercised by the underwriter, and the Company sold an additional 2,250,000 units generating gross proceeds of $22,500,000.

NOTE 4 - PRIVATE PLACEMENTS

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of an aggregate of 9,560,000 Private Placement Warrants at a purchase price of $1.00 per Private Placement Warrant, generating gross proceeds to the Company in the amount of $9,560,000. On January 6, 2022, the underwriter option was partially exercised by the underwriter and the Company sold an additional 787,500 private placement warrants generating gross proceeds of $787,500.

A portion of the proceeds from the Private Placement Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will be worthless.

The Private Placement Warrants (including the shares of Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of an Initial Business Combination, subject to certain exceptions.

NOTE 5 - RELATED PARTIES

Founder Shares

During the period ended March 31, 2021, the Sponsor purchased 8,625,000 shares of the Company’s Class B common stock (the “Founder Shares”) for an aggregate purchase price of $25,000. In March 2021, the Sponsor transferred 115,000 Founder Shares to the Company’s director nominees and one of its officers, resulting in the Sponsor holding 8,510,000 Founder Shares. On November 22, 2021, the Sponsor forfeited 2,875,000 Founder Shares, resulting in there being an aggregate of 5,750,000 Founder Shares outstanding, of which 750,000 were subject to forfeiture by the Sponsor depending on the extent to which the underwriter’s over-allotment option was exercised , so that the number of Founder Shares will equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding shares of common stock after the partial exercise of the underwriter’s over-allotment option. Upon the partial exercise of the over-allotment option by the underwriters, 187,500 shares of Class B common stock were forfeited and 5,562,500 were outstanding at March 31, 2023.

F-14
The holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.

General and Administrative Services

Commencing on the date the Units were first listed on the New York Stock Exchange, the Company has agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. During the three months ended March 31, 2023 and 2022, the Company recorded $30,000 in management fees . As of March 31, 2023 and December 31, 2022, $5,806 was outstanding.

Promissory Note - Related Party

On March 8, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) December 31, 2021 or (ii) the consummation of the Initial Public Offering. As of March 31, 2023 and December 31, 2022, no amounts were outstanding under the Promissory Note.

Related Party Loans

In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of March 31, 2023 and December 31, 2022, there were no amounts outstanding under the Working Capital Loans.

Extension Loan

The Company will have 18 months from the closing of the Initial Public Offering to complete a Business Combination (or up to 21 months if it extends the period of time to consummate a Business Combination in accordance with the terms described below). If the Company anticipates that it may not be able to consummate a Business Combination within 18 months from the closing of the Initial Public Offering, the Sponsor may, but is not obligated to, cause the Company to extend the period of time to consummate a Business Combination by an additional three months (for a total of 21 months from the closing of the Initial Public Offering to complete a Business Combination); provided that the Sponsor (or its assignees or designees) must deposit into the Trust Account funds in an aggregate amount equal to the number of Public Shares multiplied by $0.10 per share (a total of $2,225,000 on or prior to the date that is 18 months from the closing of the Initial Public Offering, in exchange for a non-interest bearing, unsecured promissory note.

F-15
NOTE 6 - COMMITMENTS AND CONTINGENCIES

Registration Rights

The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement signed on the pricing date of the Initial Public Offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. This option was partially exercised on January 6, 2022 for 2,250,000 additional Units.

The underwriters were paid a cash underwriting discount of $0.20 per Unit, or $4,000,000, upon the closing of the Initial Public Offering. In addition, the underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,000,000. Upon the exercise of the over-allotment option on January 6, 2022, the underwriters were paid an additional cash discount of $450,000 and became entitled to an additional deferred fee of $787,500. The deferred fee would become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Vendor Agreements

As of March 31, 2023 and December 31, 2022, the Company had incurred unpaid legal fees related to the Initial Public Offering of approximately $473,200, which are included in accounts payable and accrued expenses and accrued offering costs on the condensed balance sheets. These fees will only become due and payable upon the consummation of a Business Combination.

NOTE 7 - STOCKHOLDERS’ DEFICIT

Preferred Stock - The Company is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.

Class A Common Stock - The Company is authorized to issue 500,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of shares of Class A common stock are entitled to one vote for each share. As of March 31, 2023 and December 31, 2022, there were no shares of Class A common stock issued or outstanding. As of March 31, 2023 and December 31, 2022, there were 22,250,000 shares of Class A common stock that were classified as temporary equity in the accompanying condensed balance sheets.

Class B Common Stock - The Company is authorized to issue 50,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. As of March 31, 2023 and December 31, 2022, there were 5,562,500 shares of Class B common stock issued and outstanding. 

Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders except as otherwise required by law. In connection with a Business Combination, the Company may enter into a stockholders agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of the Initial Public Offering.

F-16
The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to or in connection with the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of Class A common stock issued and outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A common stock redeemed in connection with a Business Combination), excluding any shares or equity-linked securities issued, or issuable, to any seller of an interest in the target to us in a Business Combination.

NOTE 8 - WARRANTS LIABILITIES

Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available. However, the Company will use its commercially reasonable efforts to register or qualify the Class A common stock issuable upon the exercise of the warrants under applicable state securities laws to the extent an exemption from such registration or qualification is not available (including, without limitation, the exemption available so long as the Class A common stock is a “covered security” under (A) Section 18(b)(1) of the Securities Act or (B) solely in the cases of shares of Class A common stock being issued upon cashless exercise of a warrant (if such cashless exercise is permitted under the warrant agreement), Section 18(b)(4)(E) of the Securities Act, provided that, in the case of this clause (B), such warrant is being exercised pursuant and in accordance with Section 3(a)(9) of the Securities Act).

The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common 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, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 - Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:

•
in whole and not in part;

•
at a price of $0.01 per Public Warrant;

•
upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and

F-17
•
if, and only if, the last reported sale price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reverse stock splits, consolidations, reorganizations, recapitalizations and other similar transactions).

Redemption of Warrants When the Price per Class A Common Stock Equals or Exceeds $10.00 - Once the warrants become exercisable, the Company may redeem the outstanding warrants:

•
in whole and not in part;

•
at a price of $0.10 per warrant provided that the holder will be able to exercise their warrants on cashless basis prior to redemption and receive a specified number of shares based on the redemption date and the fair market value of the Class A common stock;

•
upon a minimum of 30 days’ prior written notice of redemption;

•
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reverse stock splits, rights issuances, consolidations, reorganizations, recapitalizations and other similar transactions); and

•
if, and only if, the Reference Value is less than $18.00 per share (as adjusted for stock splits, stock dividends, reverse stock splits, consolidations, reorganizations, recapitalizations and other similar transactions), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.

If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

The Company accounts for the 21,472,500 warrants issued in connection with the Initial Public Offering and the partial exercise of the underwriter’s over-allotment option (including 11,125,000 Public Warrants and 10,347,500 Private Placement Warrants) in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability.

The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company classifies each warrant as a liability at its fair value and the warrants are allocated a portion of the proceeds from the issuance of the Units and the Private Placement Warrants 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.

F-18
Upon issuance of the derivative warrants at the close of the Initial Public Offering, the Company recorded a derivative liability of $25,819,200 on the balance sheet as of December 13, 2021. The fair value of the Private Placement Warrants exceeded the proceeds received from the Private Placement Warrants, and the Company recorded a charge of $3,059,200 to accumulated deficit during the period ended December 31, 2021. Upon issuance of the derivative warrants at the close of the sale of the Over-Allotment Units on January 6, 2022, the Company recorded a derivative liability of $937,125 on the condensed balance sheets. The proceeds received from the sale of the Private Placement Warrants exceeded the fair value of the Private Placement Warrants, and the Company recorded $401,625 to additional paid in capital.

NOTE 9 - FAIR VALUE MEASUREMENTS

The following table presents information about the Company’s liabilities that are measured at fair value at March 31, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

Description:
  
Level
    
March 31,
2023
    
Level
    
December 31,
2022
  
                         
Assets:
                        
Investments held in Trust Account
    
1
    
$
231,021,253
      
1
     $
228,961,837
  
                           
   
Liabilities:
                                
Warrant liability - Private Placement Warrants
    
3
    
$
103,475
      
3
     $
103,475
  
Warrant liability - Public Warrants
    
1
     $
111,250
      
1
     $
111,250
  

Upon consummation of the Initial Public Offering, the Company used a Monte Carlo simulation model to value the Public Warrants and the Private Placement Warrants and a Black-Scholes model to value the Overallotment Option. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A common stock and one-half of one Public Warrant), (ii) the sale of Private Warrants, and (iii) the issuance of Class B common stock, first to the warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A common stock subject to possible redemption (temporary equity) and Class B common stock (permanent equity) based on their relative fair values at the initial measurement date. Since the Public Warrants were not publicly trading as of December 31, 2021, the Public Warrants and the Private Placement Warrants were classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs. Inherent in pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its common stock based on historical volatility 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 assumed to be equivalent to their remaining contractual term.

As of March 31, 2023, the Public Warrants were valued using market prices and are classified as Level 1 on the Fair Value Hierarchy. As of March 31, 2023, the Company used a Monte Carlo simulation model to value the Private Placement Warrants. The Company relied upon the implied volatility of the Public Warrants and the implied volatilities of comparable companies to estimate the volatility for the Private Placement Warrants. As of March 31, 2023 and December 31, 2022, the Private Placement Warrants were classified within Level 3 of the Fair Value Hierarchy at the measurement dates due to the use of unobservable inputs.

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2023:

   
Fair Value
Measurement
Using Level 3
Inputs Total
  
Balance, fair value at December 31, 2022
  
$
103,475
  
Change in fair value of derivative warrant liabilities
    
-

Balance, fair value at March 31, 2023   $
103,475
  

F-19
The key inputs into the Monte Carlo simulation model were as follows for the measurement of the Private Placement Warrants:

   
March 31, 2023
    
December 31, 2022
  
Stock price
  
$
10.30
     $ 10.11  
Exercise price
  
$
11.50
     $ 11.50  
Risk-free interest rate
    
3.60
%
     3.99 %
Expected life of warrants
  
5.24 years
    5.35 years
 
Expected volatility of underlying shares
    
1.00
%
     1.00 %
Dividend yield
    
0
%
     0 %
Probability of business combination
    
1
%
     1 %

The following table provides a summary of the changes in the fair value of the Company’s financial instruments that are measured at fair value on a recurring basis:

   
Private
Placement
Warrants
    
Public
Warrants
    
Over-allotment
Liability
    
Total
  
Fair value at December 31, 2022
  
$
103,475
    
$
111,250
    
$
-
    
$
214,725
  
Change in fair value
    
-
   
-
   
-
      
-
Fair value at March 31, 2023
  

103,475
    

111,250
    

-
    

214,725
  

NOTE 10 - SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

On May 10, 2023, the Company issued a press release announcing that it intends to redeem all of its outstanding shares of Class A common stock that were included in the Units issued in the Initial Public Offering, effective as of the close of business on June 13, 2023, as the Company does not expect to complete an initial business combination by June 13, 2023 and the Company’s sponsor has determined that it will not make an additional contribution to the Company’s trust account required in order to extend the June 13, 2023 deadline under the Company’s Amended and Restated Certificate of Incorporation for the Company to complete an initial business combination.  Accordingly, the amortization period for certain prepaid expenses has been revised which increased reported general and administrative expenses by $60,762 for the three months ended March 31, 2023.  Additionally, the remeasurement of the carrying value to redemption value of the Class A common stock subject to possible redemption at March 31, 2023 was adjusted by $100,000 for the anticipated withdrawal of funds from the trust account for liquidation and dissolution expenses, as allowed.
F-20
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our historical condensed financial statements and the related notes thereto appearing elsewhere in this Quarterly Report. The objective of the following discussion and analysis is to provide material information relevant to your assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources, and to better allow you to view our company from management’s perspective. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward‑looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2022, our actual results could differ materially from the results described in or implied by the forward‑looking statements contained in the following discussion and analysis.
 
Overview
 
References in this report to “we,” “us,” “our,” “company” or “our company” are to Jackson Acquisition Company, to “management” or our “management team” are to our directors and officers; and to the “sponsor” are to RJ Healthcare SPAC, LLC, a Delaware limited liability company. References to “founder shares” are to shares of our Class B Common Stock, par value $0.0001 per share, initially purchased by our sponsor in a private placement prior to our initial public offering, and the shares of our Class A Common Stock issued upon the conversion thereof as provided herein, and references to “initial stockholders” are to holders of our founder shares prior to our initial public offering. References to “extension option” are to the option of the sponsor, upon deposit of the extension fee into the trust account, to cause us to extend the period of time to consummate our initial business combination by three months, until September 13, 2023.
 
We are a blank check company, incorporated as a Delaware corporation for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. While we have engaged in discussions with multiple potential targets, as of the date hereof we have not entered into a definitive agreement with respect to an initial business combination. We intend to effectuate our initial business combination using cash from the proceeds of the Initial Public Offering and the Private Placements, our capital stock, debt or a combination of cash, stock and debt.
 
On December 13, 2021, we completed our Initial Public Offering of 20,000,000 Units and the simultaneous Private Placement of an aggregate of 9,560,000 Private Placement Warrants to our sponsor. On January 6, 2022, the underwriter partially exercised its option to purchase additional Units to cover over-allotments, if any, and purchased an additional 2,250,000 Units, generating gross proceeds of $22,500,000. Also on January 6, 2022, in connection with the underwriter’s partial exercise of its over-allotment option, we completed the additional private placement of an additional 787,500 Private Placement Warrants to our sponsor, at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $787,500. An aggregate of $225,837,500 in proceeds from the Initial Public Offering, partial exercise of the underwriter’s over-allotment option and the Private Placements has been placed in the Trust Account.
 
As of March 31, 2023, we had cash of $134,226 and a working capital deficit of $1,159,915.
 
Results of Operations and Known Trends or Future Events
 
We have neither engaged in any operations nor generated any revenues to date. Our only activities from March 5, 2021 (inception) through March 31, 2023, were organizational activities, those necessary to prepare for the Initial Public Offering, and the search for a target company for an initial business combination. We will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements, except for the subsequent event disclosed in the notes to our condensed financial statements. We have incurred and may continue to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance). On May 10, 2023, the Company issued a press release announcing that it intends to redeem all of its outstanding shares of Class A common stock that were issued in the Units in the Initial Public Offering, effective as of the close of business on June 13, 2023, as the Company does not expect to complete an initial business combination by June 13, 2023 and the Company’s sponsor has determined that it will not make an additional contribution to the Company’s trust account required in order to extend the June 13, 2023 deadline under the Company’s Amended and Restated Certificate of Incorporation for the Company to complete an initial business combination.
 
1
For the three months ended March 31, 2023, we had a net income of $1,464,887, which consists of interest income on marketable securities held in the trust account of $2,427,082 offset by operating costs of $463,008, which included $60,762 in increased expenses due to the subsequent event noted above. In addition, the Company recorded an income tax provision of $499,187.
 
For the three months ended March 31, 2022 we had a net income of $5,671,572, which consists of a gain in fair value of the derivative warrant liabilities of $6,227,025 and interest income on marketable securities held in the trust account of $21,452 offset by operating costs of $551,793 and transaction costs related to derivative warrant liabilities of $25,112.
 
Liquidity and Capital Resources and Going Concern
 
Until the consummation of our IPO, our only source of liquidity was an initial purchase of Class B Common Stock by our sponsor and loans from our sponsor, as described in Note 1 to our financial statements. In connection with the IPO, including the underwriter’s exercise of its overallotment option on January 6, 2022, and Private Placements, an aggregate of $225,837,500 in proceeds was placed in the Trust Account. As of March 31, 2023, the Trust Account had a balance of $231,021,253. The funds in the Trust Account have been or will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act and that invest only in direct U.S. government obligations. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting commissions) to complete our initial business combination. Delaware franchise tax is based on our authorized shares or on our assumed par and non-par capital, whichever yields a lower result. Under the authorized shares method, each share is taxed at a graduated rate based on the number of authorized shares with a maximum aggregate tax of $200,000 per year. Under the assumed par value capital method, Delaware taxes each $1,000,000 of assumed par value capital at the rate of $400; where assumed par value would be (1) our total gross assets, divided by (2) our total issued shares of common stock, multiplied by (3) the number of our authorized shares. Our annual franchise tax obligation is expected to be capped at the maximum amount of annual franchise taxes payable by us as a Delaware corporation of $200,000. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We expect the only taxes payable by us out of the funds in the Trust Account will be income and franchise taxes. We expect the interest earned on the amount in the Trust Account will be sufficient to pay our taxes. To the extent that our capital stock 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 (net of redemptions, deferred underwriting commissions and amounts used to pay expenses) may be available to be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
 
For the three months ended March 31, 2023, net cash used in operating activities was $538,553. Net income was $1,464,877 primarily as a result of investment income on the Trust account investments. These amounts were partially offset by operating expenses and income taxes. Net cash provided by changes in operating assets and liabilities was $423,642. For the three months ended March 31, 2022, net cash used in operating activities was $1,034,541. Net income was $5,671,572 primarily as a result of the gain in fair value of the derivative warrant liabilities of $6,227,025 and interest income of $21,452. These amounts were offset by transaction costs related to derivative warrant liabilities of $25,112. Net cash used for changes in operating assets and liabilities was $482,748.
 
For the three months ended March 31, 2023, net cash provided from investing activities of $367,664 was the result of withdrawals from the trust account for taxes. For the three months ended March 31, 2022, net cash used in investing activities of $22,837,500 was the result of the amount of net proceeds from the exercise of the underwriter’s overallotment option and Private Placements being deposited into the Trust Account.
 
For the three months ended March 31, 2022, net cash provided from financing activities of $22,825,732 was the result of the amount of net proceeds from our overallotment transaction of $22,050,000 and Private Placements of $787,500, partially offset by the $11,768 in payment of offering costs.
 
2
As of March 31, 2023, we held $134,226 outside the Trust Account and had a working capital deficit of $1,159,915. Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. In connection with our assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that these liquidity risks, as well as if we are unsuccessful in consummating an initial business combination within 18 months (or up to 21 months if we extend the period of time to consummate a business combination) from the closing of our Initial Public Offering, the requirement that we cease all operations, redeem the public shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. Due to the subsequent event discussed above, our condensed balance sheet as of March 31, 2023 was adjusted to reflect the $100,000 for the anticipated withdrawal of trust funds, as allowed, for liquidation and dissolution expenses recorded in the remeasurement of the carrying value to redemption value of the Class A common stock subject to possible redemption at March 31, 2023.
 
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor, any affiliate of our sponsor, or our officers or directors may, but none of them is obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that our initial 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 at a price of $1.00 per warrant at the option of the lender. These warrants would be identical to the Private Placement Warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor, or another affiliate of our sponsor, or our officers and directors, as we do 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 our Trust Account.
 
3
Commitments and Contractual Obligations
 
For the three months ended March 31, 2023, we did not have any long-term debt obligations, capital lease obligations or operating lease obligations.
 
The below summarizes certain other commitments and contractual obligations to which we are subject:
 
Administrative Services Agreement
 
Commencing on the date that our Units were first listed on the New York Stock Exchange, we have agreed to pay an affiliate of our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
 
Registration Rights Agreement
 
The holders of our founder shares, Private Placement Warrants and any warrants that may be issued on conversion of working capital loans (and any shares of our Class A Common Stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the working capital loans and upon conversion of the founder shares) are entitled to registration rights pursuant to a registration rights agreement we have entered into requiring us to register such securities for resale (in the case of the founder shares, only after conversion to shares of our Class A Common Stock). The holders of these securities are entitled to make up to three demands, excluding short form registration demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act.
 
Underwriting Agreement
 
The underwriters of the Initial Public Offering are entitled to a deferred underwriting commission of 3.5% of the gross proceeds of the Initial Public Offering and over-allotment, or $7,787,500 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
 
Vendor Agreements
 
As of March 31, 2023 and December 31, 2022, we had incurred unpaid legal fees related to the Initial Public Offering of approximately  $473,200 which are included in accounts payable and accrued expenses and accrued offering costs on the condensed balance sheets. These fees will only become due and payable upon the consummation of a Business Combination.
 
4
Critical Accounting Policies
 
The preparation of our 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 financial statements, and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
 
Class A Common Stock Subject to Possible Redemption
 
We account for the Class A Common Stock subject to possible redemption in accordance with the guidance enumerated in Accounting Standards Codification (“ASC”) 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 our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A Common Stock features certain redemption rights that we consider to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, at March 31, 2023, the 22,250,000 shares of Class A Common Stock subject to possible redemption in the amount of $229,532,636 is presented 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 adjust the carrying value of redeemable Class A Common Stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, we recognized a measurement adjustment from initial book value to redemption amount value. The change in the carrying value of redeemable Class A Common Stock resulted in charges against additional paid-in capital and accumulated deficit.
 
Net income per share
 
Net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. We apply the two-class method in calculating earnings per share. Earnings and losses are shared pro rata between the two classes of shares. The calculation of diluted income per share of common stock does not consider the effect of the warrants issued in connection with the (i) Public Offering and (ii) Private Placement, because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted earnings per common share is the same as basic earnings per common share for the periods presented. As of March 31, 2023, the Public Warrants and Private Warrants are exercisable to purchase an aggregate of 11,125,000 and 10,347,500 shares of Class A common stock, respectively.
 
Derivative Financial Instruments
 
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” Our derivative instruments are recorded at fair value as of the closing date of the Initial Public Offering (December 13, 2021) and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. 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 could be required within 12 months of the balance sheet date. We have determined the Public Warrants and the Private Placement Warrants are a derivative instrument. As the Warrants and the Private Placement Warrants meet the definition of a derivative, such warrants are measured at fair value at issuance and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statement of operations in the period of change.
 
5
Warrant Instruments
 
We account for the Public Warrants and the Private Placement Warrants issued in connection with the Initial Public Offering and the Private Placement in accordance with the guidance contained in FASB ASC 815, “Derivatives and Hedging” whereby under that provision, the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, we classify the warrant instrument as a liability at fair value and adjust the instrument to fair value at each reporting period. This liability will be re-measured at each balance sheet date until the Public Warrants and the Private Placement Warrants are exercised or expire, and any change in fair value will be recognized in our statement of operations. The fair value at issuance was calculated using a Monte Carlo simulation model to value the Public Warrants and the Private Placement Warrants. On March 31, 2023, the Public Warrants were valued using market price. The valuation models utilize inputs and other assumptions and may not be reflective of the price at which they can be settled. Such warrant classification is also subject to re-evaluation at each reporting period. Upon issuance of the Private Placement Warrants at the closing of the Initial Public Offering, we recorded a charge to the statement of operations at December 31, 2021 of $3,059,200 for the excess fair value of private warrant liabilities over the proceeds received. Upon issuance of the Private Placement Warrants at the closing of the partial exercise of the over-allotment option, we recorded $401,625 to additional paid in capital for the excess proceeds received over fair value of private warrant liabilities.
 
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
 
ITEM 4.
CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023, and due to a material weakness in our internal control over financial reporting over the accounting for complex financial instruments and income taxes, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable level of assurance as of March 31, 2023.
 
We have sought to remediate this material weakness by, among other things, devoting additional effort and resources to the remediation and improvement of our internal control over financial reporting as it relates to the accounting treatment for complex financial instruments. While we have processes to identify and appropriately apply applicable accounting requirements, we are enhancing these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our securities and financial statements. As we continue to evaluate and work to improve our internal control over financial reporting, management will continue to review and make necessary changes to the overall design of our internal controls.
 
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 
Changes in Internal Control over Financial Reporting
 
Other than as described herein, there was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2023 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards by creating and utilizing a financial instrument checklist that enhances our process as it provides prompts and questions to consider to help identify new complex financial instruments as well as any need for changes in proper accounting treatment. We can offer no assurance that these changes will ultimately have the intended effects.
 
6
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 quarterly report are any of the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022. Any of these factors could result in a significant or material adverse effect on our results of operation or financial conditions.
 
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
 
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
On December 13, 2021, we consummated our Initial Public Offering of 20,000,000 Units. The Units were sold at a price of $10.00 per Unit, and the Initial Public Offering generated gross proceeds of $200,000,000. BofA Securities, Inc. acted as the sole book-running manager of the Initial Public Offering. The securities sold in the Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-254727). The SEC declared the registration statement effective on December 8, 2021. On January 6, 2022, the underwriter partially exercised its option to purchase additional Units to cover over-allotments, if any, and purchased an additional 2,250,000 Units, generating gross proceeds of $22,500,000.
 
We paid a total of $4,450,000 in underwriting fees related to the Initial Public Offering. In addition, the representative of the sole underwriter agreed to defer $7,787,500 in underwriting fees.
 
On December 13, 2021, a total of $203,000,000 of the net proceeds from the Initial Public Offering and the Private Placement were deposited in the Trust Account. On January 6, 2022, a total of $22,837,500 of the net proceeds from the closing of the over-allotment option and the additional private placement were deposited into the Trust Account, resulting in a total deposit of $225,837,500 in the Trust Account since the Trust Account was established. The net proceeds deposited into the Trust Account remain on deposit in the Trust Account and are available for a business combination, assuming no redemptions, after payment of $7,787,500 of deferred underwriting fees, before fees and expenses associated with our initial business combination. The proceeds held in the Trust Account will be invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
 
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4.
MINE SAFETY DISCLOSURES
 
Not applicable.
 
ITEM 5.
OTHER INFORMATION
 
On May 10, 2023, we issued a press release announcing that we will redeem all of our outstanding shares of Class A common stock that were included in the Units issued in the Initial Public Offering, effective as of the close of business on June 13, 2023, as we will not consummate an initial business combination within the time period required by our Amended and Restated Certificate of Incorporation.
 
7
ITEM 6.
EXHIBITS
 
       
Incorporated by Reference
Exhibit
Number
  
Description of Exhibit
  
Form
  
File
Number
  
Date of
Filing
  
Exhibit
Number
  
Filed* or Furnished**
Herewith
 
Amended and Restated Certificate of Incorporation of the Company
  
8-K
  
001-41128
  
December 14, 2021
  
3.1
    
 
Amended and Restated Bylaws of the Company
  
S-1/A
  
333-254727
  
May 12, 2021
  
3.4
    
 
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
                  
*
 
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
                  
*
 
Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350
                  
**
 
Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350
                  
**
101.INS
  
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because 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 Label Linkbase Document
                  
*
101.PRE
  
Inline XBRL Taxonomy Extension Presentation Linkbase Document
                  
*
104
  
Cover Page Interactive Data File (embedded within the Inline XBRL document)
                  
*

8
SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
Jackson Acquisition Company
     
May 12, 2023
By:
/s/ Richard L. Jackson
   
Name: Richard L. Jackson
   
Title: Chief Executive Officer
     
May 12, 2023
By:
/s/ Douglas B. Kline
   
Name: Douglas B. Kline
   
Title: Chief Financial Officer


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