The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
NOTES TO CONDENSED UNAUDITED FINANCIAL
STATEMENTS
Note 1 — Organization and Business Operations
Sizzle Acquisition Corp.
was incorporated in Delaware on October 12, 2020. The Company is a blank check company formed for the purpose of entering into a
merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with
one or more businesses or entities.
As of March 31, 2023, the
Company had not commenced any operations. All activity for the period from October 12, 2020 (inception) through March 31, 2023 related
to the Company’s formation and the initial public offering (“IPO”), which is described below and since the offering
identifying and evaluating prospective acquisition targets for a Business Combination. The Company will not generate any operating revenues
until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form
of interest income from the proceeds derived from the IPO.
The Company’s Sponsor
is VO Sponsor, LLC.
The registration statement
for the Company’s IPO was declared effective on November 3, 2021 (the “Effective Date”). On November 8, 2021, the Company
consummated its IPO of 15,500,000 Units at $10.00 per Unit (which included a partial exercise of the underwriters’
over-allotment option), which is discussed in Note 3 and the sale of an aggregate of 770,000 shares at a price of $10.00 per
Private Placement Share in a private placement to the Sponsor and Cantor that closed simultaneously with the IPO. On November 8, 2021,
the underwriter exercised 2,000,000 of the full 2,025,000 over-allotment option available to them and forfeited the
remainder.
Transaction costs amounted
to $11,381,247 consisting of $2,700,000 of underwriting commissions, $8,150,000 of deferred underwriting fees and $531,247 of
other cash offering costs.
The Company’s leadership
has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Shares,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination
having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding taxes payable on income
earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The Company will only complete
a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of
the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Upon the closing of the IPO,
management has agreed that an amount equal to at least $10.20 per Unit sold in the IPO, including the proceeds from the sale of
the Private Placement Shares, will be held in a Trust Account, located in the United States and invested only in U.S. government securities,
within the meaning set forth in Section 2(a)(16) of 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 completion of a Business Combination
and (ii) the distribution of the funds in the Trust Account, as described below.
Following the closing of
the IPO on November 8, 2021, $158,100,000 ($10.20 per Unit) from the net proceeds sold in the IPO, including the proceeds of
the sale of the Private Placement Shares, was deposited in the Trust Account.
The Company will provide
the public stockholders with the opportunity to redeem all or a portion of the shares of common stock of the Company that were issued
in the Company’s initial public offering (the “Public Shares”) upon the completion of a Business Combination either
(i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision
as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company,
solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount
then in the Trust Account (initially anticipated to be $10.20 per Public Share, plus any pro rata interest earned on the funds held in
the Trust Account and not previously released to the Company to pay its tax obligations). 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 will be recorded
at redemption value and classified as temporary equity upon the completion of the IPO in accordance with the ASC Topic 480 “Distinguishing
Liabilities from Equity.”
The Company will
proceed with a Business Combination if the Company seeks stockholder approval and a majority of the shares voted are voted in favor of
the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for
business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended
and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the SEC and file tender
offer documents with the SEC containing substantially the same information as would be included in a proxy statement prior to completing
a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder
approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to
the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination,
the Sponsor has agreed to vote its Founder Shares (as defined in Note 5), EarlyBirdCapital (“EBC”) Shares (as defined in
Note 7) and any Public Shares purchased during or after the IPO (a) in favor of approving a Business Combination and (b) not to redeem
any shares in connection with a stockholder vote to approve a Business Combination or sell any shares to the Company in a tender offer
in connection with a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the proposed transaction.
On February 1, 2023, the Company
held a special meeting of stockholders (“Special Meeting”). At the Special Meeting, the Company’s stockholders approved
an extension of the date by which the Company must consummate an initial business combination from February 8, 2023 to August 8, 2023,
or such earlier date as determined by the Company’s board of directors (the “Extension”).
In connection with the Special
Meeting, stockholders holding 11,076,703 Public Shares exercised their right to redeem their shares for a pro rata portion of the funds
in the trust account. As a result, approximately $114.3 million (approximately $10.32 per Public Share) was removed from the trust account
to pay such holders and approximately $45.6 million remained in the trust account. Following redemptions, the Company had 4,423,297 Public
Shares outstanding.
The Company has agreed to
deposit an aggregate amount of $200,000 (the “Extension Payment”) in the trust account by February 9, 2023 and to deposit
into the trust account the same amount of Extension Payment each additional month that is needed for the Company to consummate the proposed
Business Combination until August 8, 2023 (unless the Company’s board of directors decides to stop extending the time period earlier
than such date).
The Company has until August
8, 2023 to complete an initial Business Combination. If it has not completed an initial Business Combination by such date, 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 outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then
on deposit in the Trust Account, including any interest not previously released to it but net of taxes payable, divided by the number
of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including
the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible
following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate,
subject (in the case of (ii) and (iii) above) to the obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law.
The Sponsor has agreed
to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the
Combination Period. However, if the Sponsor acquires Public Shares in or after the IPO, such Public Shares will be entitled to liquidating
distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. In the event
of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the
IPO price per Unit ($10.00).
In order to protect the amounts
held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor 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 $10.20 per Public Share, except as to any claims by a third party
who executed a valid and enforceable agreement with the Company waiving any right, title, interest or claim of any kind they may have
in or to any monies held in the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of
IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed
to be unenforceable against a third party, the insiders 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 insiders will have to indemnify the Trust Account due to claims of creditors
by endeavoring to have all vendors, service providers (except 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.
Merger Agreement
On October 24, 2022, the Company
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with European Lithium Limited, an Australian Public
Company limited by shares (“EUR”), European Lithium AT (Investments) Limited, a BVI business company incorporated in the British
Virgin Islands and a direct, wholly-owned subsidiary of EUR (“European Lithium”), Critical Metals Corp., a BVI business company
incorporated in the British Virgin Islands (“Pubco”) and Project Wolf Merger Sub Inc., a Delaware corporation and wholly owned
subsidiary of Pubco, pursuant to which, upon closing of the Business Combination (the “Closing”), Pubco will acquire all of
the issued and outstanding capital shares and equity interests of the European Lithium from EUR in exchange for ordinary shares of Pubco,
European Lithium shall become a wholly owned subsidiary of Pubco and EUR shall become a shareholder of Pubco (the “Share Exchange”);
and immediately thereafter Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and wholly
owned subsidiary of Pubco.
Further, (a) the Company’s
issued and outstanding shares of common stock immediately prior to the effective time of the Merger, will be cancelled in exchange for
the right of the holder thereof to receive one ordinary share, par value $0.0001 per share, of Pubco (“Ordinary Share”), (b)
all of the outstanding Public Warrants of the Company, entitling the holder thereof to purchase one share of common stock at an exercise
price of $11.50 per share will be converted into the right to receive a warrant to purchase one Ordinary Share at the same exercise price
of $11.50 per share, and (c) EUR will receive the number of Ordinary Shares in the Share Exchange that shall have an aggregate value equal
to the Closing Share Consideration (as defined in the Merger Agreement) consisting of $750,000,000 divided by the redemption amount per
share of common stock payable to the Company’s public stockholders that elect to redeem common stock in connection with the Closing,
and, subject to applicable terms and conditions, earnout consideration of up to an additional 10% of such Closing Share Consideration,
in each case subject to adjustment as set forth in the Merger Agreement, and all upon the terms and subject to the conditions set forth
in the Merger Agreement.
Liquidity, Capital Resources and Going
Concern
As of March 31, 2023, the
Company had $378,936 of cash in its operating bank account and a working capital deficit of $2,329,027 (excluding franchise and
income taxes payable). As of December 31, 2022, the Company had $823,945 of cash in its operating bank account and a working capital
deficit of $436,721 (excluding franchise and income taxes payable).
The Company has incurred
and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. If the Company’s estimates
of the costs of identifying a target business, undertaking in-depth due diligence, and negotiating a Business Combination are less than
the actual amount necessary to do so, the Company may have insufficient funds to operate its business prior to an initial business combination.
The Company has until August 8, 2023, to consummate a Business Combination (the “Combination Period”). It is uncertain that
the Company will be able to consummate a Business Combination within the Combination Period. If a Business Combination is not consummated
within the Combination Period, there will be a mandatory liquidation and subsequent dissolution.
As a result of the above,
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 the liquidity condition, in addition to the possibility that Company would not be able to close a business combination through August
8, 2023, raise substantial doubt about the Company’s ability to continue as a going concern through that date. These financial statements
do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be
necessary should the Company be unable to continue as a going concern.
Risks and Uncertainties
Management is currently
evaluating the impact of the COVID-19 pandemic and Russia-Ukraine war and has concluded that while it is reasonably
possible that the virus and the war could have a negative effect on the Company’s financial position, and/or search for a target
company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited
condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On August 16, 2022, the
Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things,
a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic
subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing
corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair
market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing
corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases
during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”)
has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other
repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject
to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination,
extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases
in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and
amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection
with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and
other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder,
the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available
on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
As discussed above, on February 1, 2023, holders of 11,076,703 shares
of Common Stock elected to redeem their shares in connection with the Extension. As a result, $114,362,703 was removed from the Company’s
Trust Account to pay such holders. Management has evaluated the requirements of the IR Act and the Company’s operations and has
determined that a liability of $1,143,627 should be recorded for the excise tax in connection with the above mentioned redemptions. This
liability will be reviewed and remeasured at each subsequent reporting period.
Note 2 — Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying unaudited
condensed financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the
SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation
of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial
statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial
position, operating results and cash flows for the periods presented.
The accompanying unaudited
condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December
31, 2022 as filed with the SEC on March 28, 2023, which contains the audited financial statements and notes thereto. The interim results
for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31,
2023 or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging
growth company”, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging
growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404
of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy
statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation
and stockholder approval of any golden parachute payments not previously approved.
In addition, Section 107
of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided
in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging
growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
The Company intends to take advantage of the benefits of this extended transition period.
Use of Estimates
The preparation of the financial
statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
Cash and Cash Equivalents
The Company considers all
short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company has
$378,936 and $823,945 in cash 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
As of March 31, 2023 the assets
held in the Trust Account were held in a money market fund. The Company’s portfolio of investments held in the Trust Account is
comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity
of 185 days or less, investments in money market funds that invest in U.S. government securities, cash, or a combination thereof. The
Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the condensed
balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities
is included in gain on Investments Held in Trust Account in the accompanying condensed statements of operations. During the three months
ended March 31, 2023, and year ended December 31, 2022, the Company withdrew $274,580 and $762,917, respectively, of the interest income
from the Trust Account to pay its tax obligations.
As of December 31, 2022, the
assets held in the Trust Account were held in U.S. Treasury Bills with a maturity of 185 days or less and in money market funds which
invest in U.S. Treasury securities.
The Company classifies its
United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments - Debt and Equity Securities.”
Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity
treasury securities are recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts.
A decline in the market
value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment that reduces the
carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for the security is established.
To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment
until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence
to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and the duration of the
impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the general market condition in the
geographic area or industry in which the investee operates.
Premiums and discounts are
amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest method.
Such amortization and accretion are included in the “interest income” line item in the statements of operations. Interest
income is recognized when earned.
Offering Costs
The Company complies with
the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering.” Offering
costs consist of underwriter, accounting, filing and legal expenses incurred through the balance sheet date that are directly related
to the IPO and were charged to temporary equity and stockholders’ (deficit) equity based on the underlying instruments’ relative
fair value upon the completion of the IPO. If the IPO had proved to be unsuccessful, these deferred costs, as well as additional expenses
to be incurred, would have been charged to operations.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the balance sheet, primarily due to its short-term nature.
Fair Value Measurement
Fair value is defined as
the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants
at the measurement date. 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). The Company’s financial instruments are classified as either
Level 1, Level 2 or Level 3. 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. |
Funds in Company’s Trust
Account were invested in Money Market Funds as March 31, 2023, and classified as trading securities and Level 1 in the hierarchy of fair
value measurements with carrying value approximating fair value.
Funds in Company’s Trust
Account were invested in U.S. Treasury Securities as of December 31, 2022 and classified as held to maturity and Level 1 in the hierarchy
of fair value measurements as follows:
| |
Carrying Value as of December 31, 2022 | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value as of December 31, 2022 | |
U.S. Treasury Securities | |
$ | 159,750,571 | | |
$ | 77,162 | | |
$ | — | | |
$ | 159,827,733 | |
Common Stock Subject to Possible Redemption
The Company accounts for
its shares of common stock subject to possible redemption in accordance with guidance in ASC Topic 480 “Distinguishing Liabilities
from Equity.” Shares of common stock subject to mandatory redemption (if any) are classified as a liability instrument and are
measured at fair value. Conditionally redeemable shares of common stock (including shares that feature redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ deficit.
The Company’s shares of common stock sold in the IPO feature certain redemption rights that are considered to be outside of the
Company’s control and subject to the occurrence of uncertain future events.
The Company recognizes changes
in redemption value immediately as they occur and adjusts the carrying value of shares of redeemable common stock to equal the redemption
value at the end of each reporting period. Such changes are reflected in additional paid-in capital, or in the absence of additional
capital, in accumulated deficit.
All of the 15,500,000 common stock sold as part of the Units
in the IPO contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation,
if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to
the Company’s second amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on
redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company
require common stock subject to redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the
redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Accordingly,
as of March 31, 2023 and December 31, 2022, 4,423,297 and 15,500,000 shares of common stock subject to possible redemption is presented
as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
The common stock subject
to possible redemption reflected on the balance sheets as of March 31, 2023 and December 31, 2022 is reconciled in the following table:
Gross Proceeds | |
$ | 155,000,000 | |
Less: | |
| | |
Fair Value of public warrants | |
| (6,062,414 | ) |
Common stock issuance costs | |
| (10,936,100 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 21,759,260 | |
Common stock subject to possible redemption (December 31, 2022) | |
| 159,760,746 | |
Less: | |
| | |
Redemption | |
| (114,362,703 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 1,131,744 | |
Common stock subject to possible redemption (March 31, 2023) | |
$ | 46,529,787 | |
Net Income (Loss) Per Common Stock
The Company applies the
two-class method in calculating earnings per share, with one class being the redeemable shares and one class being the non-redeemable
shares. The contractual formula utilized to calculate the redemption amount approximates fair value. Changes in fair value are not considered
a dividend for the purposes of the numerator in the earnings per share calculation. Net income (loss) per common stock is computed by
dividing the pro rata net income (loss) between the redeemable common stock and the non-redeemable common stock by the weighted average
number of shares of common stock outstanding for each of the periods. The calculation of diluted income (loss) per share of common stock
does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants is contingent upon
the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
Reconciliation of Net Income (Loss) per Common Stock
The Company’s net
income (loss) is adjusted for the portion of net income (loss) that is allocable to each class of common stock. The allocable net income
(loss) is calculated by multiplying net income (loss) by the ratio of weighted average number of shares outstanding attributable to common
stock to the total weighted average number of shares outstanding for the period. Accordingly, basic and diluted income (loss) per common
stock is calculated as follows:
| |
For the Three Months Ended March 31, | |
| |
2023 | | |
2022 | |
Redeemable Common Stock | |
| | |
| |
Net income (loss) allocable to redeemable common stock | |
$ | 66,506 | | |
$ | (120,827 | ) |
Basic and diluted weighted average shares outstanding, redeemable common stock | |
| 9,934,408 | | |
| 15,500,000 | |
Basic and diluted net income (loss) per common stock | |
$ | 0.01 | | |
$ | (0.01 | ) |
Non-Redeemable Common Stock | |
| | | |
| | |
Net loss allocable to non-redeemable common stock | |
$ | 41,978 | | |
$ | (48,881 | ) |
Basic and diluted weighted average shares outstanding, non-redeemable common stock | |
| 6,270,600 | | |
| 6,270,600 | |
Basic and diluted net income (loss) per common stock | |
$ | 0.01 | | |
$ | (0.01 | ) |
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, including funds
held in Trust on behalf of the Company, which, at times, may exceed the Federal Deposit Insurance Company coverage of $250,000. The Company
has not experienced losses on this account.
Income Taxes
The Company accounts for income
taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities
and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of March
31, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective
tax rate was 64.18% and 0.00% for the three months ended March 31, 2023 and 2022, respectively. The effective tax rate differs from the
statutory tax rate of 21% for the three months ended March 31, 2023 and 2022, due to changes in fair value in warrant liability and the
valuation allowance on the deferred tax assets.
ASC 740 also clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and
transition.
The Company recognizes accrued
interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts
accrued for interest and penalties as of March 31, 2023 and December 31, 2022. The Company is currently not aware of any issues under
review that could result in significant payments, accruals or material deviation from its position.
The Company has identified
the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities
since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax
jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months.
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”)
2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”). This update requires financial assets measured at amortized cost basis to be presented at the net amount expected
to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience,
current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Since June 2016, the
FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance
is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption
permitted. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial
statements.
Note 3 — Initial Public Offering
On November 8, 2021, the
Company consummated its IPO of 15,500,000 Units, which included the partial exercise of 2,000,000 of the underwriters’
full 2,025,000 over-allotment option, at a price of $10.00 per Unit, generating gross proceeds of $155,000,000. Each Unit
consists of one share of common stock, par value $0.0001 per share and one-half of one redeemable warrant. Each Public
Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share.
Note 4 — Private Placement
Shares
Simultaneously with the
closing of the IPO and the sale of the Units, the Sponsor, and Cantor have purchased an aggregate of 770,000 Private Placement
Shares at a price of $10.00 per Private Placement Share, for an aggregate purchase price of $7,700,000. Of the total Private Placement
Shares sold, 722,750 were purchased by the Sponsor and 47,250 were purchased by Cantor.
The proceeds from the Private
Placement Shares were added to the proceeds from the IPO 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 Shares will be used to fund the redemption of the
Public Shares (subject to the requirements of applicable law). The Private Placement Shares are identical to the shares in the Units
sold to the public, except that the purchasers of the Private Placement Shares have also agreed not to transfer, assign or sell any of
the Private Placement Shares (except in connection with the same limited exceptions that the Founder Shares may be transferred as described
below) until after the completion of the Business Combination.
Note 5 — Related Party Transactions
Founder Shares
On November 20, 2020,
the Sponsor paid $25,000 in consideration for 2,875,000 shares of common stock (the “Founder Shares”). On
March 2, 2021, the Company effected a stock dividend of 1.25 for 1 for each common stock held by the Sponsor, resulting in
the Sponsor holding an aggregate of 3,593,750 common stock, of which up to 468,750 shares were subject to forfeiture. On September 15,
2021, the Company effected an additional 1.4 for 1 dividend, resulting in 5,031,250 Founder Shares, of which up to 656,250 shares
were subject to forfeiture to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that
the Sponsor collectively owns shares equal to 35% of the shares issued in the IPO.
On November 3, 2021, the
Company effected an additional 1.08 for 1 dividend, and as a result, the Company’s initial stockholders held 5,433,750 Founder
Shares, which included an aggregate of up to 708,750 shares subject to forfeiture. On November 8, 2021 the underwriter
partially exercised their over-allotment option and purchased an additional 2,000,000 Units out of the 2,025,000 available to them and
forfeited the remainder. As a result, 8,750 Founder Shares were forfeited resulting in aggregate Founder Shares outstanding of 5,425,000.
The Company’s Sponsor,
officers and directors have agreed not to transfer, assign or sell any Founder Shares or Private Placement Shares until the date of the
consummation of our initial Business Combination. The limited exceptions include transfers, assignments or sales to the Company’s
or the Sponsor’s officers, directors, consultants or their affiliates, to an entity’s members upon its liquidation, to relatives
and trusts for estate planning purposes, by virtue of the laws of descent and distribution upon death, pursuant to a qualified domestic
relations order, to the Company for no value for cancellation in connection with the consummation of our initial Business Combination,
or in connection with the consummation of a Business Combination at prices no greater than the price at which the shares were originally
purchased, in each case where the transferee agrees to be bound by these transfer restrictions.
Promissory Note — Related
Party
On December 19, 2020,
the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company may
borrow up to an aggregate principal amount of $150,000. The Promissory Note is non-interest bearing and expired upon the consummation
of the IPO. As of March 31, 2023, and December 31, 2022, the Company had $129,437 and $153,127 outstanding under the Promissory
Note, respectively, which is now without fixed terms and due on demand. The Sponsor acknowledged that the Company is not in default.
On
February 6, 2023, the Company issued a promissory note in the principal amount of $200,000 to the Sponsor in connection with payments
to be made into the Trust Account for the Extension. The Note bears no interest and is due and payable upon the consummation of the Company’s
initial Business Combination.
Administrative Support Agreement
The Company has agreed,
commencing on the effective date of the IPO through the earlier of the Company’s consummation of a Business Combination and its
liquidation, to pay an affiliate of the Company’s management a total of $10,000 per month for office space, utilities and
secretarial support. For the three months ended March 31, 2023, $30,000, had been incurred and paid. For the three months ended March
31, 2022, $30,000, had been incurred and paid.
Related Party Loans
In addition, in order to
finance transaction costs in connection with a Business Combination, the Sponsor or certain of the Company’s officers and directors
or their affiliates may, but are not obligated to, loan the Company funds as may be required. Each loan would be evidenced by promissory
note. 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 notes may be converted upon completion of a Business Combination into Units at a price of $10.00 per unit. 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, no such Working Capital Loans were outstanding.
Note 6 — Commitments and Contingencies
Registration Rights
The holders of the Founder
Shares and EBC Shares, as well as the holders of any warrants the Company’s Sponsor, officers, directors or their affiliates may
be issued in payment of working capital loans made to the Company (and all underlying securities), will be entitled to registration rights
pursuant to an agreement to be signed prior to or on the effective date of the offering. The holders of a majority of these securities
are entitled to make up to two demands that we register such securities. The holders of the majority of the Founder Shares can elect to
exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to
be released from lock up. The holders of a majority of the Founder Shares, EBC Shares, and warrants issued to the Sponsor, officers, directors
or their affiliates in payment of working capital loans made to the Company (or underlying securities) can elect to exercise these registration
rights at any time after consummation of the Business Combination. Notwithstanding anything to the contrary, EBC and Cantor may only make
a demand on one occasion and only during the five-year period beginning on the Effective Date of the registration statement of which
the prospectus forms a part. In addition, the holders have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to consummation of the Business Combination; provided, however, that EBC and Cantor may participate in a “piggy-back”
registration only during the seven-year period beginning on the Effective Date of the registration statement of which this prospectus
forms a part. 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 IPO to purchase up to 2,025,000 additional Units to cover over-allotments, if any, at
the IPO price less the underwriting discounts and commissions. On November 8, 2021, the underwriters partially exercised this option and
purchased an additional 2,000,000 Units and forfeited the remaining 25,000 available.
The underwriters received
a cash underwriting discount of 2.0% of the gross proceeds of the IPO, or $2,700,000 (which is capped at $2,700,000 with
the remaining $400,000 deferred to the close of the Business Combination with the rest of the deferred underwriting discount due
to the underwriters’ partial over-allotment exercise).
The underwriters will be
entitled to a cash underwriting discount of 5.0% of the gross proceeds of the IPO, or $6,750,000 (or up to $8,150,000, inclusive
of the $400,000 deferral noted above, if the underwriters’ over-allotment is exercised in full) upon consummation of the
Business Combination.
The underwriters agreed to
reimburse the Company a portion of expenses related to the IPO. A total of $543,450 was reimbursed to the Company by the underwriters
in pursuant of this agreement.
Consulting and Advisory Services Fees
The Company engaged Cohen & Company Capital Markets (“CCM”), an affiliate of a passive member of the Sponsor, to provide consulting and advisory
services in connection with the IPO, for which it received an advisory fee equal to 0.6% of the aggregate proceeds of the IPO, net of
underwriter’s expenses. This fee was deducted from the underwriting fees paid to Cantor as described above. Affiliates of CCM have
and manage investment vehicles with a passive investment in the Sponsor. CCM agreed to defer the portion of its fee resulting from exercise
of the underwriters’ over-allotment option until the consummation of our initial Business Combination. The Company has also
engaged CCM as an advisor in connection with our initial Business Combination for which it will earn an advisory fee of 1.5% of the proceeds
of the IPO payable at closing of the Business Combination, which will be deducted from the deferred underwriting fee paid to Cantor as
described above. CCM’s fees will be offset from the underwriting fees described above and will not result in any incremental
fees to the Company.
CCM is engaged to represent
the Company’s interests only and did not participate in the IPO as defined in FINRA Rule 5110(j)(16); it is acting as an independent
financial adviser as defined in FINRA Rule 5110(j)(9). As such, CCM did not act as an underwriter in connection with the IPO, it did not
identify or solicit potential investors in the IPO or otherwise be involved in the distribution of the IPO.
On April 25, 2022, the
Company entered into an agreement with BTIG for capital market advisory services in relation to the management of the redemptions of Public
Shares in connection with the anticipated Business Combination. The Company will pay BTIG a base advisory fee of $1,500,000, plus an additional
fee of up to $3,750,000 depending on the amount of funds remaining in the Trust Account. The advisory fee is to be paid upon completion
of the Business Combination.
On August 11, 2022,
the Company entered into an additional agreement with CCM for financial and market advisory services in connection with the anticipated
Business Combination. The agreement stipulates a transaction fee of $5,000,000 to be paid upon successful completion of the Business Combination.
On August 18, 2022,
the Company entered into an agreement with CCM and Jett Capital to act as co-placement agents in the event the Company raises a
PIPE financing in connection with the Business Combination. As compensation for their services as co-placement agents, CCM and Jett
Capital are collectively entitled to a cash fee of 5% of the PIPE financing proceeds, to be shared equally between the CCM and Jett Capital.
On September 10, 2022, the
Company entered in a consulting agreement with the ICR LLC (“ICR”) to provide certain services related to the Business Combination.
ICR’s compensation consists of the following:
| ● | $20,000 per month until the three (3) month anniversary of the announcement date of the Business Combination, pro-rated for any partial month, which is expensed by the Company as incurred; |
| ● | a transaction fee of $250,000, payable immediately upon completion of the Business Combination (and which shall be waived if the Business Combination is not completed for any reason); and |
| ● | a performance-based fee of $250,000, payable immediately upon completion of the Business Combination, based on certain performance indicators related to market capitalization of the combined company. |
Except for ICR’s monthly
fees, which the Company records in its results of operations as they are incurred, all other arrangements described in this section are
contingent upon closing of the business combination and related PIPE financing and will be recorded upon their completion.
Note 7 — Stockholders’
Deficit
Preferred Stock —
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 and with such designations,
voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March
31, 2023 and December 31, 2022, there was no preferred stock issued or outstanding.
Common Stock — The
Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. As of March 31,
2023, there were 10,693,897 shares of common stock issued and outstanding, which includes 5,425,000 Founder Shares, 75,600 EBC
Shares, 770,000 Private Placement Shares and 4,423,297 Public Shares. As of December 31, 2022, there were 21,770,600 shares
of common stock issued and outstanding, which includes 5,425,000 Founder Shares, 75,600 EBC Shares, 770,000 Private
Placement Shares and 15,500,000 Public Shares.
EBC Shares — On
October 12, 2020, the Company issued to the designees of EBC 100,000 EBC Shares for nominal consideration. On March 2,
2021, the Company effected a 1.25 for 1 dividend resulting in 125,000 EBC Shares, 25,000 of which EBC returned to
the Company, at no cost, resulting in 100,000 EBC shares. On March 9, 2021, the Company issued to EBC and its designees
an additional 100,000 EBC Shares at a price of $0.0001 per share, resulting in 200,000 EBC Shares being outstanding.
On July 12, 2021, EBC
returned 150,000 EBC Shares to the Company, at no cost, which were subsequently cancelled. This return resulted in EBC shares
outstanding of 50,000 pre-dividend. The number of EBC Shares outstanding increased to 70,000 after giving effect to
the stock dividend of 1.4 for 1 on September 15, 2021, which is what was outstanding as of September 30, 2021. On November 3, 2021, the
Company issued a stock dividend of 1.08 for 1, which resulted in 75,600 EBC Shares outstanding.
The Company accounted for
the EBC Shares as a charge directly to stockholders’ deficit. The Company estimated the fair value of representative shares to be
$870.
The holders of the EBC Shares
have agreed not to transfer, assign or sell any such shares without our prior consent until the completion of our initial Business Combination.
In addition, the holders of the EBC Shares have agreed (i) to waive their conversion rights (or right to participate in any tender offer)
with respect to such shares in connection with the completion of our initial Business Combination and (ii) to waive their rights to liquidating
distributions from the Trust Account with respect to such shares if we fail to complete our initial Business Combination within the Combination
Period.
Public Warrants — As
of March 31, 2023 and December 31, 2022, there were 7,750,000 Public Warrants issued or outstanding. The Public Warrants will
become exercisable 30 days after the completion of a Business Combination. No warrants will be exercisable for cash unless the Company
has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current
prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of
common stock issuable upon exercise of the Public Warrants is not effective within a specified period following the consummation of a
Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when
the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption
provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption,
is not available, holders will not be able to exercise their warrants on a cashless basis. The Public Warrants will expire five years
after the completion of a Business Combination or earlier upon redemption or liquidation.
Redemption of warrants
The Company may redeem the Public Warrants:
|
● |
in whole and not in part; |
|
● |
at a price of $0.01 per warrant; |
|
● |
at any time after the warrants become exercisable; |
|
● |
if, and only if, the reported last sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending on the third business day prior to the notice of redemption to the warrant holders; |
|
● |
if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the warrants |
If the Company calls the
Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do
so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable
upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization,
reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of common
stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the 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 warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution
from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire
worthless.
In addition, if (x) the Company
issues additional common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business
Combination at an issue price or effective issue price of less than $9.20 per common stock (with such issue price or effective issue price
to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates,
without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance), (y) the
aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for
the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume
weighted average trading price of its common stock during the 20 trading day period starting on the trading day prior to the day on which
the Company consummates its Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price
of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) Market Value or (ii) the price at which
the Company issue the additional shares of common stock or equity-linked securities.
Note 8 — Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up through the date that unaudited condensed financial statements were
issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the unaudited condensed financial statements.