UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
(Mark
One)
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2023
☐ 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: 001-41005
SIZZLE
ACQUISITION CORP.
(Exact
name of registrant as specified in its charter)
Delaware | | 85-3418600 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
4201 Georgia Avenue NW Washington DC | | 20011 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s
telephone number, including area code: (202) 846-0300
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 common stock and one-half of one redeemable warrant | | SZZLU | | The Nasdaq Stock Market LLC |
Common stock, par value $0.0001 per share | | SZZL | | The Nasdaq Stock Market LLC |
Redeemable warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50 per share | | SZZLW | | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post 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 definition of “large accelerated filer,” “accelerated filer, “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ | | |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
As of August 11, 2023, there were 9,356,653
shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding.
SIZZLE
ACQUISITION CORP.
TABLE
OF CONTENTS
GLOSSARY
OF TERMS
Unless
otherwise stated in this Report (as defined below), or the context otherwise requires, references to:
| ● | “ASC”
are to the FASB (as defined below) Accounting Standards Codification; |
| ● | “ASU”
are to the FASB Accounting Standards Update; |
| ● | “board
of directors,” “board” or “directors” are to the board of directors of the Company (as defined below); |
| ● | “Business
Combination” are to a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination
with one or more businesses; |
| ● | “Cantor
Fitzgerald & Co.” are to the representatives of the underwriters of the Company’s initial public offering; |
| ● | “Combination Period” are to February 8, 2024, that the
Company has to consummate an initial Business Combination; |
|
● |
“common stock” are to the shares of common stock of the Company, par value $0.0001 per share;; |
| ● | “Company,”
“our Company,” “we” or “us” are to Sizzle Acquisition Corp., a Delaware corporation; |
| ● | “Continental”
are to Continental Stock Transfer & Trust Company, trustee of our Trust Account (as defined below) and warrant agent of our
public warrants (as defined below); |
| ● | “DGCL”
are to the Delaware General Corporation Law; |
| ● | “EBC
Shares” are to shares issued to EarlyBirdCapital, Inc.; |
| ● | “Exchange
Act” are to the Securities Exchange Act of 1934, as amended; |
| ● | “FASB”
are to the Financial Accounting Standards Board; |
| ● | “FINRA”
are to the Financial Industry Regulatory Authority; |
|
● |
“Founder Shares” are to the shares of common stock initially
purchased by our Sponsor (as defined below) in the private placement (as defined below) (for the avoidance of doubt, such shares of common
stock will not be “Public Shares” (as defined below)); |
|
● |
“GAAP”
are to the accounting principles generally accepted in the United States of America; |
|
● |
“initial
public offering” or “IPO” are to the initial public offering that was consummated by the Company on November 8,
2021; |
|
● |
“initial
stockholders” are to holders of our Founder Shares prior to our initial public offering; |
|
● |
“Investment
Company Act” are to the Investment Company Act of 1940, as amended; |
|
● |
“JOBS
Act” are to the Jumpstart Our Business Startups Act of 2012; |
|
● |
“Nasdaq”
are to the Nasdaq Global Market; |
|
● |
“PCAOB”
are to the Public Company Accounting Oversight Board (United States); |
|
● |
“private
placement” are to the private placement of Private Placement Shares (as defined below) that occurred simultaneously with the
closing of our initial public offering; |
|
● |
“Private
Placement Shares” are to the shares sold to the Sponsor (as defined below) and Cantor at a purchase price of $10.00 per private
share; |
|
● |
“Public
Shares” are to the shares of common stock sold as part of the Units in our initial public offering (whether they were
purchased in our initial public offering or thereafter in the open market); |
|
● |
“public
stockholders” are to the holders of our Public Shares, including our initial stockholders and management team to the extent
our initial stockholders and/or members of our management team purchase Public Shares, provided that each initial stockholder’s
and member of our management team’s status as a “public stockholder” will only exist with respect to such Public
Shares; |
|
● |
“Public
Warrants” refer to the redeemable warrants sold as part of the Units in our initial public offering (whether they were subscribed
for in our initial public offering or purchased in the open market); |
|
● |
“Registration
Statement” are to the Registration Statement on Form S-1 initially filed with the SEC (as defined below) on March 11, 2021,
as amended, and declared effective on November 3, 2021 (File No. 333-254182); |
|
● |
“Report”
are to this Quarterly Report on Form 10-Q for the quarter ended June 30, 2023; |
|
● |
“Sarbanes-Oxley Act”
are to the Sarbanes-Oxley Act of 2002; |
|
● |
“SEC”
are to the U.S. Securities and Exchange Commission; |
|
● |
“Securities
Act” are to the Securities Act of 1933, as amended; |
|
● |
“Sponsor”
are to VO Sponsor, LLC, a Delaware limited liability company; |
|
● |
“Trust
Account” are to the U.S.-based Trust Account in which an amount of $158,100,000 from the net proceeds of the sale of the Units
in the initial public offering and the Private Placement Shares was placed following the closing of the initial public offering; |
|
● |
“Units”
are to the Units sold in our initial public offering, which consist of one public share and one-half of one public warrant; and |
|
● |
“Working
Capital Loans” are to funds that, in order to finance transaction costs in connection with a Business Combination, the initial
stockholders or an affiliate of the initial stockholders or certain of the Company’s directors and officers may, but are not
obligated to, loan the Company. |
PART
I. FINANCIAL INFORMATION
Item
1. Condensed Financial Statements.
SIZZLE
ACQUISITION CORP.
CONDENSED
BALANCE SHEETS
| |
June 30, 2023 | | |
December 31, 2022 | |
| |
(Unaudited) | | |
| |
Assets: | |
| | |
| |
Cash | |
$ | 23,415 | | |
$ | 823,945 | |
Prepaid expenses | |
| 39,167 | | |
| 60,417 | |
Total current assets | |
| 62,582 | | |
| 884,362 | |
Investments held in Trust Account | |
| 47,479,282 | | |
| 159,759,471 | |
Total assets | |
$ | 47,541,864 | | |
$ | 160,643,833 | |
| |
| | | |
| | |
Liabilities, Redeemable Common Stock and Stockholders’ Deficit | |
| | | |
| | |
Accrued offering costs and expenses | |
$ | 1,864,763 | | |
$ | 1,152,735 | |
Deferred tax liability | |
| — | | |
| 212,062 | |
Income tax payable | |
| 720,769 | | |
| 233,251 | |
Excise tax payable | |
| 1,143,627 | | |
| — | |
Promissory note – related party | |
| 529,437 | | |
| 153,127 | |
Total current liabilities | |
| 4,258,596 | | |
| 1,751,175 | |
Deferred underwriters’ fee | |
| 8,150,000 | | |
| 8,150,000 | |
Total liabilities | |
| 12,408,596 | | |
| 9,901,175 | |
| |
| | | |
| | |
Commitments and Contingencies (Note 6) | |
| | | |
| | |
Common stock subject to possible redemption, 4,423,297 and 15,500,000 shares at redemption value of approximately $10.72 and $10.31 per share as of June 30, 2023 and December 31, 2022, respectively | |
| 47,435,190 | | |
| 159,760,746 | |
| |
| | | |
| | |
Stockholders’ Deficit: | |
| | | |
| | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | |
Common stock, $0.0001 par value; 50,000,000 shares authorized; 6,270,600 shares issued and outstanding (excluding 4,423,297 and 15,500,000 shares subject to possible redemption), as of June 30, 2023 and December 31, 2022, respectively | |
| 627 | | |
| 627 | |
Additional paid-in capital | |
| — | | |
| — | |
Accumulated deficit | |
| (12,302,549 | ) | |
| (9,018,715 | ) |
Total stockholders’ deficit | |
| (12,301,922 | ) | |
| (9,018,088 | ) |
Total Liabilities, Redeemable Common Stock and Stockholders’ Deficit | |
$ | 47,541,864 | | |
$ | 160,643,833 | |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
SIZZLE
ACQUISITION CORP.
CONDENSED
STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
For the Three Months Ended
June 30, | | |
For the Six Months Ended
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Formation and operating cost | |
$ | 516,040 | | |
$ | 222,062 | | |
$ | 1,139,300 | | |
$ | 405,515 | |
Franchise tax | |
| 23,000 | | |
| 173,214 | | |
| 45,400 | | |
| 223,873 | |
Loss from operations | |
| (539,040 | ) | |
| (395,276 | ) | |
| (1,184,700 | ) | |
| (629,388 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other expense | |
| | | |
| | | |
| | | |
| | |
Interest income on Trust Account | |
| 408,289 | | |
| 240,660 | | |
| 1,357,094 | | |
| 305,064 | |
| |
| | | |
| | | |
| | | |
| | |
Loss before provision for income taxes | |
| (130,751 | ) | |
| (154,616 | ) | |
| 172,394 | | |
| (324,324 | ) |
Provision for income taxes | |
| (80,795 | ) | |
| (3,410 | ) | |
| (275,456 | ) | |
| (3,410 | ) |
Net loss | |
$ | (211,546 | ) | |
$ | (158,026 | ) | |
$ | (103,062 | ) | |
$ | (327,734 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, redeemable common stock | |
| 4,423,297 | | |
| 15,500,000 | | |
| 7,163,628 | | |
| 15,500,000 | |
Basic and diluted net loss per common stock, redeemable common stock | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.02 | ) |
Basic and diluted weighted average shares outstanding, non-redeemable common stock, subject to redemption | |
| 6,270,600 | | |
| 6,270,600 | | |
| 6,270,600 | | |
| 6,270,600 | |
Basic and diluted loss per common stock, non-redeemable common stock | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.02 | ) |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
SIZZLE
ACQUISITION CORP.
CONDENSED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
| |
Common stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance as of January 1, 2023 | |
| 6,270,600 | | |
$ | 627 | | |
$ | — | | |
$ | (9,018,715 | ) | |
$ | (9,018,088 | ) |
Remeasurement of common stock subject to possible redemption | |
| — | | |
| — | | |
| — | | |
| (1,131,744 | ) | |
| (1,131,744 | ) |
Excise tax on stock redemptions | |
| | | |
| | | |
| | | |
| (1,143,627 | ) | |
| (1,143,627 | ) |
Net income | |
| — | | |
| — | | |
| — | | |
| 108,484 | | |
| 108,484 | |
Balance as of March 31, 2023 | |
| 6,270,600 | | |
| 627 | | |
| — | | |
| (11,185,600 | ) | |
| (11,184,973 | ) |
Remeasurement of common stock subject to possible redemption | |
| — | | |
| — | | |
| — | | |
| (905,403 | ) | |
| (905,403 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| (211,546 | ) | |
| (211,546 | ) |
Balance as of June 30, 2023 | |
| 6,270,600 | | |
$ | 627 | | |
$ | — | | |
$ | (12,302,549 | ) | |
$ | (12,301,922 | ) |
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
| |
Common stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance as of January 1, 2022 | |
| 6,270,600 | | |
$ | 627 | | |
$ | — | | |
$ | (7,104,137 | ) | |
$ | (7,103,510 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| (169,708 | ) | |
| (169,708 | ) |
Balance as of March 31, 2022 | |
| 6,270,600 | | |
$ | 627 | | |
$ | — | | |
$ | (7,273,845 | ) | |
$ | (7,273,218 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| (158,026 | ) | |
| (158,026 | ) |
Balance as of June 30, 2022 | |
| 6,270,600 | | |
$ | 627 | | |
$ | — | | |
$ | (7,431,871 | ) | |
$ | (7,431,244 | ) |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
SIZZLE
ACQUISITION CORP.
CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
For the Six Months Ended
June 30, | |
| |
2023 | | |
2022 | |
Cash flows from operating activities: | |
| | |
| |
Net loss | |
$ | (103,062 | ) | |
$ | (327,734 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Interest earned on investments held in Trust Account | |
| (1,357,094 | ) | |
| (305,064 | ) |
Changes in current assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 21,250 | | |
| 159,274 | |
Accrued offering costs and expenses | |
| 712,031 | | |
| (50,403 | ) |
Deferred tax liability | |
| (212,062 | ) | |
| — | |
Franchise tax payable | |
| — | | |
| 137,252 | |
Income tax payable | |
| 487,518 | | |
| 3,410 | |
Net cash used in operating activities | |
| (451,419 | ) | |
| (383,265 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Cash withdrawn from trust account to pay taxes | |
| 274,580 | | |
| — | |
Cash withdrawn from trust account for redemptions | |
| 114,362,702 | | |
| — | |
Principal deposited in Trust Account | |
| (1,000,000 | ) | |
| — | |
Net cash provided by investing activities | |
| 113,637,282 | | |
| — | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Redemption of shares | |
| (114,362,702 | ) | |
| — | |
Payment of promissory note | |
| 376,310 | | |
| — | |
Net cash used in financing activities | |
| (113,986,392 | ) | |
| — | |
| |
| | | |
| | |
Net change in cash | |
| (800,529 | ) | |
| (383,265 | ) |
Cash, beginning of the period | |
| 823,945 | | |
| 1,046,646 | |
Cash, end of the period | |
$ | 23,416 | | |
$ | 663,381 | |
| |
| | | |
| | |
Supplemental disclosure of non-cash financing activities: | |
| | | |
| | |
Excise tax payable | |
$ | 1,143,627 | | |
$ | — | |
Remeasurement of common stock subject to possible redemption | |
$ | 2,037,147 | | |
$ | — | |
The
accompanying notes are an integral part of these unaudited condensed financial statements.
SIZZLE
ACQUISITION CORP.
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 June 30, 2023, the Company had not commenced any operations. All activity for the period from October 12, 2020 (inception) through
June 30, 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 (“February Special Meeting”). At the February 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 “February Extension”).
In connection with the February
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 “February Extension Payment”) in the trust account by February 9, 2023 and to
deposit into the trust account the same amount as the February 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).
On August 7, 2023, the Company
held a special meeting of stockholders (“August Special Meeting”). At the August Special Meeting, the Company’s stockholders
approved an extension of the date by which the Company must consummate an initial business combination from August 8, 2023 to February
8, 2024, or such earlier date as determined by the Company’s board of directors (the “August Extension”).
In connection with the August Special Meeting, stockholders holding
1,337,244 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 $14.5 million (approximately $10.85 per Public Share) was removed from the trust account to pay such holders and approximately
$33.5 million remained in the trust account. Following redemptions, the Company had 3,086,053 Public Shares outstanding.
The Company has agreed to
deposit an aggregate amount of $60,000 (the “August Extension Payment”) in the trust account by August 9, 2023 and to deposit
into the trust account the same amount as the August Extension Payment each additional month that is needed for the Company to consummate
the proposed Business Combination until February 8, 2024 (unless the Company’s board of directors decides to stop extending the
time period earlier than such date).
The Company has until February
8, 2024 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 (“Merger Sub”), 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 European Lithium from EUR and European Lithium
shareholders in exchange for ordinary shares of Pubco, European Lithium shall become a wholly owned subsidiary of Pubco and European Lithium
shareholders shall become shareholders 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.
The Merger Agreement provides
that at the effective time of the Closing (the “Effective Time”):
(i) all of the outstanding
shares of the Company’s common stock, will be exchanged for the right to receive the ordinary shares of Pubco, par value $0.001
per share (the “Pubco Ordinary Shares”) (following which exchange all shares of the Company’s common stock will be cancelled
and cease to exist);
(ii) all of the outstanding whole warrants of the Company, entitling the
holder thereof to purchase one share of the Company’s common stock at an exercise price of $11.50 per share (collectively, the “Company
Warrants”) will be assumed by Pubco and converted into the right to receive a warrant to purchase one Pubco Ordinary Share (in lieu
of the Company’s common stock) at the same exercise price (collectively, the “Pubco Warrants”); and
(iii) shareholders of the Company will receive Pubco Ordinary Shares in the
Share Exchange, equal to the amount of shares consisting of (i) $750,000,000, divided by (ii) the redemption amount per share of the Company’s
common stock payable to the Company’s stockholders in connection with the closing of the Business Combination as provided in the
Merger Agreement, and which is referred to as the Closing Share Consideration.
Upon the Effective Time, the outstanding publicly traded units of the
Company will be separated into their component securities, consisting of (a) one share of the Company’s common stock and (b) one-half
of one Company Warrant (each of which shall be exchanged in accordance with the foregoing description). According to the Merger Agreement,
each registered holder of the Company Warrants will be eligible to have each whole the Company Warrant converted into one Pubco Warrant,
following aggregation of such holder’s registered Company Warrants, and rounded down to the nearest whole warrant following such
aggregation of warrants, with no issuance of a fractional Pubco Warrant.
Up to an additional 10% of the Closing Share Consideration will be
contingently issuable to EUR, in the form of an earnout which is subject to certain terms and conditions relating to the price of Pubco
Ordinary Shares, during the five year period following the consummation of the Business Combination.
Liquidity,
Capital Resources and Going Concern
As of June 30, 2023, the Company
had $23,415 of cash in its operating bank account and a working capital deficit of $3,445,065 (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 February 8, 2024, 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 February
8, 2024, 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 February 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.
As discussed above, on August 7, 2023, holders of 1,337,244 shares
of common stock elected to redeem their shares in connection with the August Extension. As a result, approximately $14.5 million will
be 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 $0.1 million 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 and six months ended June 30, 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 had $23,415
and $823,945 in cash as of June 30, 2023 and December 31, 2022, respectively. The Company did not have any cash equivalents as of
June 30, 2023 and December 31, 2022.
Investments
Held in Trust Account
As of June 30, 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 six months
ended June 30, 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 June 30, 2023, 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 June 30, 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 June 30, 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 June 30, 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 | |
| 2,037,147 | |
Common stock subject to possible redemption (June 30, 2023) | |
$ | 47,435,190 | |
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 June 30, | | |
For the Six Months Ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Redeemable Common Stock | |
| | |
| | |
| | |
| |
Net loss allocable to redeemable common stock | |
$ | (87,501 | ) | |
$ | (112,510 | ) | |
$ | (54,956 | ) | |
$ | (233,337 | ) |
Basic and diluted weighted average shares outstanding, redeemable common stock | |
| 4,423,297 | | |
| 15,500,000 | | |
| 7,163,628 | | |
| 15,500,000 | |
Basic and diluted net loss per common stock | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.02 | ) |
Non-Redeemable Common Stock | |
| | | |
| | | |
| | | |
| | |
Net loss allocable to non-redeemable common stock | |
$ | (124,045 | ) | |
$ | (45,516 | ) | |
$ | (48,105 | ) | |
$ | (94,397 | ) |
Basic and diluted weighted average shares outstanding, non-redeemable common stock | |
| 6,270,600 | | |
| 6,270,600 | | |
| 6,270,600 | | |
| 6,270,600 | |
Basic and diluted net loss per common stock | |
$ | (0.02 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.02 | ) |
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 June 30, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance
recorded against it. Our effective tax rate was 61.79% and 2.21% for the three months ended June 30, 2023 and 2022, respectively, (159.78%)
and 1.05% for the six months ended June 30, 2023 and 2022, respectively. The effective tax rate differs from the statutory tax rate of
21% for the three and six months ended June 30, 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 June 30, 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 collectability 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 June 30, 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 “Extension
Note”). The Extension Note bears no interest and is due and payable upon the consummation of the Company’s initial Business
Combination. As of June 30, 2023, the Company had borrowed an additional principal amount of $400,000 on the same terms as the Extension
Note.
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 and six months ended June 30, 2023, $30,000 and $60,000 had been incurred and paid, respectively. For the three and six
months ended June 30, 2022, $30,000 and $60,000, respectively, 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
June 30, 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 June 30, 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 June 30, 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 June 30, 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, other than as discussed below, the Company did not identify any subsequent
events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On
July 7, 2023, the Company, Critical Metals and Merger Sub entered into that certain Second Amendment to the Agreement and Plan of Merger
(the “Second Amendment”), pursuant to which the Merger Agreement was amended to (i) extend the date (the “Outside Date”)
by which either the Company or Critical Metals may terminate the Merger Agreement if the proposed business combination (the “Proposed
Business Combination”) has not been consummated, (ii) remove as a condition to the closing of the Proposed Business Combination
that the Company or Pubco have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the United States Securities
Exchange Act of 1934 ) of at least $5,000,001 (the “Net Tangible Asset Test”), unless, at the meeting of Company’s
stockholders held to approve the Proposed Business Combination, Company’s stockholders reject a proposal to remove the Net Tangible
Asset Test from the Company’s organizational documents, and (iii) provide that the Company shall, by no later than July 14, 2023,
prepare and file with the SEC a proxy statement pursuant to which it shall seek the approval of its stockholders for proposals to amend
its organizational documents to extend the time period for it to consummate its initial business combination. The Second Amendment extended
the Outside Date to the earlier of (A) the last date for Company to consummate its initial business combination pursuant to an extension
granted pursuant to the Company’s organizational documents and (B) September 8, 2023.
On August 7, 2023, the Company
held the August Special Meeting. At the August Special Meeting, the Company’s stockholders approved an extension of the date by
which the Company must consummate an initial business combination from August 8, 2023 to February 8, 2024, or such earlier date as determined
by the Company’s board of directors.
In connection with the August Special Meeting, stockholders holding
1,337,244 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 $14.5 million (approximately $10.85 per Public Share) was removed from the trust account to pay such holders and approximately
$33.5 million remained in the trust account. Following redemptions, the Company had 3,086,053 Public Shares outstanding.
The Company has agreed to
deposit an aggregate amount of $60,000 in the trust account by August 9, 2023 and to deposit into the trust account the same amount of
August Extension Payment each additional month that is needed for the Company to consummate the proposed Business Combination until February
8, 2024 (unless the Company’s board of directors decides to stop extending the time period earlier than such date).
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Note Regarding Forward-Looking Statements
All statements other than
statements of historical fact included in this Report including, without limitation, statements under this “Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and
the plans and objectives of management for future operations, are forward- looking statements. When used in this Report, words such as
“anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions,
as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs
of our management, as well as assumptions made by, and information currently available to our management. Actual results could differ
materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety
by this paragraph.
The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial
statements and the notes thereto included in this Report under “Item 1 Financial Statements”. Certain information contained
in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company
incorporated on October 12, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition,
stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities.
We expect to continue to
incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial Business Combination
will be successful.
Our sponsor is VO Sponsor,
LLC. The IPO Registration Statement was declared effective on November 3, 2021. On November 8, 2021, the Company consummated its initial
public offering 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 of the financial statements included elsewhere in this Report 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
initial public offering. 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. Due to the partial exercise of the over-allotment option, the initial stockholders forfeited 8,750
Founder Shares. 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.
Simultaneously with the
closing of the initial public offering, we consummated the sale of an aggregate of 770,000 shares of common stock at a price of $10.00
per Private Placement Share in a private placement to our Sponsor and to Cantor, generating gross proceeds to us of $7,700,000. Of the
total Private Placement Shares sold, 722,750 shares were purchased by the Sponsor and 47,250 shares were purchased by Cantor.
Following the closing of
the initial public offering on November 8, 2021, $158,100,000 ($10.20 per Unit) from the net proceeds sold in the initial public offering
and the proceeds of the sale of the private placement shares, was deposited in a trust account. Except with respect to interest earned
on the funds held in the trust account that may be released to the Company to pay its franchise and income tax obligations (less up to
$100,000 of interest to pay dissolution expenses), the proceeds from the initial public offering and the sale of the private placement
shares will not be released from the trust account until the earliest of: (a) the completion of our initial business combination; (b)
the redemption of any public shares properly submitted in connection with a stockholder vote to amend our certificate of incorporation:
(i) to modify the substance or timing of our obligation to redeem 100% of the public shares if we do not complete the initial business
combination within the Combination Period; or (ii) with respect to any other material provision relating to stockholders’ rights
or pre-initial business combination activity; and (c) the redemption of the public shares if we are unable to complete the initial business
combination within the Combination Period, subject to applicable law.
Our 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
shares, although substantially all of the net proceeds are intended to be applied generally toward consummating an initial business combination.
We will have until February
8, 2024, the end of the Combination Period, unless the Company’s board of directors determines not to extend it that long, to complete
an initial business combination. If we have not completed an initial business combination by such date, we 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 us 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 our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii)
and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
EUR Business Combination
On October 24, 2022, the Company entered into the Merger Agreement,
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 European Lithium from EUR and European Lithium shareholders in exchange for ordinary shares of
Pubco, European Lithium shall become a wholly owned subsidiary of Pubco and European Lithium shareholders shall become shareholders 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.
Extension Amendments and Redemptions
On February 1, 2023, we held a special meeting of stockholders
and approved an extension amendment, which extended the date by which we must consummate a business combination from February 8, 2023
to August 8, 2023 (or such earlier date as determined by the board). In connection with the Extension Amendment, stockholders holding
11,076,703 shares of common stock exercised their right to redeem such shares for a pro rata portion of the trust account. We paid cash
in the aggregate amount of approximately $114.3 million, or approximately $10.32 per share, to redeeming stockholders in connection with
the February Extension. For each one-month extension our sponsor loaned the Company $200,000 to be deposited into the trust account for
shares of common stock not redeemed in connection with the Extension Amendment. The first deposit was made on February 6, 2023 and subsequent
monthly deposits were made through the Company’s extension date of August 8, 2023.
On August 7, 2023, we held a special meeting of stockholders and
approved an extension amendment, which extended the date by which we must consummate a business combination from August 8, 2023 to February
8, 2024 (or such earlier date as determined by the board). In connection with the extension amendment, stockholders holding 1,337,224
shares of common stock exercised their right to redeem such shares for a pro rata portion of the trust account. We will pay cash in the
aggregate amount of approximately $14.5 million, or approximately $10.85 per share, to redeeming stockholders in connection with the August
Extension. For each one-month extension our sponsor will loan the Company $60,000 to be deposited into the trust account for shares of
common stock not redeemed in connection with the extension amendment. The first deposit will be made on or about August 9, 2023 and subsequent
deposits are payable monthly through the Company’s extension date of February 8, 2024 (if we fully extend the term we have to complete
our initial business combination). Our board has the sole discretion whether to continue extending for additional calendar months until
February 8, 2024, the end of the Combination Period. Immediately after the August Extension, the amount in the trust account was approximately
$33.5 million.
Liquidity, Capital Resources and Going Concern
As of June 30, 2023, we had
$23,415 of cash in our operating bank account and a working capital of $3,445,065 (excluding franchise and income taxes payable). As of
December 31, 2022, we had $823,945 of cash in our operating bank account and a working capital deficit of $436,721 (excluding franchise
and income taxes payable).
Our liquidity needs up to
June 30, 2023 have been satisfied through a payment from the Sponsor of $25,000 for the Founder Shares, the loan under an unsecured
promissory note from the Sponsor of $150,000, which was fully drawn down as of June 30, 2023, and the cash amounts held outside of the
Trust Account. In addition, in order to finance transaction costs in connection with an initial Business Combination, our Sponsor or an
affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, provide us working capital loans. As
of June 30, 2023 and December 31, 2022, there were no amounts outstanding under any working capital loans.
Based on the foregoing,
management believes that we may not have sufficient working capital and borrowing capacity to meet our needs through the earlier of the
consummation of an initial business combination or one year from filing the financial statements. Over this time period, we will be using
these funds for paying existing accounts payable, identifying and evaluating prospective initial business combination candidates, performing
due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire,
and structuring, negotiating and consummating the initial business combination.
In addition, the Company has
until February 8, 2024, the end of the Combination Period, to consummate an initial business combination. It is uncertain that we will
be able to consummate an initial business combination within the Combination Period. If an initial 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 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 the liquidity condition
as well as possibility of liquidation raise substantial doubt about the Company’s ability to continue as a going concern through
the earlier of the liquidation deadline of February 8, 2024 and approximately one year from the date of filing. 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.
Results of Operations
As of June 30, 2023, we
had not commenced any operations. All activity for the period from October 12, 2020 (inception) through June 30, 2023 relates to our formation
and the initial public offering, and since the initial public offering identifying and evaluating prospective acquisition targets for
a business combination, such as the EUR Business Combination. We have neither engaged in any operations nor generated any revenues to
date. We will not generate any operating revenues until after the completion of our initial business combination, at the earliest. We
generate non-operating income in the form of interest income on funds in the Trust Account. We expect to incur increased expenses as a
result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended
June 30, 2023, we had net loss of $211,546, which consisted of formation and operating costs of $516,040, Delaware franchise tax of $23,000
and income tax provision of $80,795, offset by interest income on Trust Account of $408,289.
For the six months ended
June 30, 2023, we had net loss of $103,062, which consisted of formation and operating costs of $1,139,300, Delaware franchise tax of
$45,400 and income tax provision of $275,456, offset by interest income on Trust Account of $1,357,094.
For the three months ended
June 30, 2022, we had net loss of $158,026, which consisted of formation and operating costs of $222,062, Delaware franchise tax of $173,214
and income tax provision of $3,410, offset by interest income on Trust Account of $240,660.
For the six months ended
June 30, 2022, we had net loss of $327,734, which consisted of formation and operating costs of $405,515, Delaware franchise tax of $223,873
and income tax provision of $3,410, offset by interest income on Trust Account of $305,064.
Contractual Obligations
We do not have any long-term
debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.
Administrative Services Agreement
Commencing on the date that
our securities were first listed on the Nasdaq Global Market, we agreed to pay the sponsor $10,000 per month for office space, utilities
and secretarial and administrative support services. Upon the earlier of the completion of the initial business combination or our
liquidation, we will cease paying such monthly fees.
Registration Rights
The holders of the Founder
Shares, Private Placement Shares, EBC Shares and warrants that may be issued upon conversion of working capital loans (and any shares
of common stock issuable upon the exercise of the warrants that may be issued upon conversion of working capital loans) will be entitled
to registration rights pursuant to a registration rights agreement dated November 8, 2021, requiring us to register such securities for
resale. The holders of these securities will be entitled to make up to three demands, excluding short form 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 the initial Business Combination. Notwithstanding the foregoing, the underwriters may not exercise
their demand and “piggyback” registration rights after five and seven years after the effective date of the Registration Statement
and may not exercise their demand rights on more than one occasion.
Underwriting Agreement
The underwriter had a 45-day
option from the date of the initial public offering to purchase up to an aggregate of 2,025,000 additional units at the public offering
price less the underwriting commissions to cover over-allotments, if any. On November 8, 2021, the underwriters partially exercised this
option and purchased an additional 2,000,000 units and forfeited the remaining 25,000 units available.
The underwriters received
a cash underwriting discount of 2.0% of the gross proceeds of the initial public offering, or $2,700,000 (which is capped at $2,700,000
with the remaining $400,000 deferred to the close of the initial 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 initial public offering, or $8,150,000 (inclusive of the $400,000 deferral noted above) upon consummation
of the initial business combination.
Critical Accounting Policies
Offering Costs
We comply with the requirements
of ASC Topic 340-10-S99-1, “Expenses of Offering” 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 initial public offering and were charged to temporary equity and stockholders’ equity (deficit) based on the underlying
instruments’ relative fair value upon the completion of the initial public offering. If the initial public offering had proved to
be unsuccessful, these deferred costs, as well as additional expenses to be incurred, would have been charged to operations.
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). Our 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. |
Common Stock Subject to Possible Redemption
We account for our 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 our control) are classified as temporary
equity. At all other times, shares of common stock are classified as stockholders’ deficit. Our shares of common stock sold in the
initial public offering feature certain redemption rights that are considered to be outside of our control and subject to the occurrence
of uncertain future events.
We recognize 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.
Net Income (Loss) Per Common Stock
We apply 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 initial public offering since the exercise of the warrants is contingent upon
the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
Off-Balance Sheet Arrangements
As of June 30, 2023 and
December 31, 2022, we did not have any off-balance sheet arrangements.
Inflation
We do not believe that inflation
had a material impact on our business, revenues or operating results during the period presented.
Emerging Growth Company Status
We are an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth
companies but any such election to opt out is irrevocable. We have 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 our 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.
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 collectability
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.
Factors That May Adversely Affect Our Results
of Operations
Our results of operations
and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty
and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply
chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and
the emergence of new variants, and geopolitical instability, such as the military conflict in Ukraine. We cannot at this time fully predict
the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business
and our ability to complete an initial Business Combination.
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 otherwise required under this item.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and
procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our
Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions,
as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and
with the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based
on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the
period covered by this Report, due to the following material weaknesses:
As disclosed in the previously
filed Company’s 10-K/A for the year ended December 31, 2021, as filed with the SEC on June 13, 2022, the Company did not properly
account for and classify (i) prepaid expenses, resulting in an overstatement of prepaid expenses and overstatement of non-current prepaid
expense; (ii) accrued expenses, resulting in an understatement of accrued expenses and related general and administrative expenses; and
(iii) deferred offering costs, resulting in an overstatement of deferred offering costs and understatement of general and administrative
expenses.
In addition, the Company
has determined that payment to one of its financial advisors was inappropriately recorded in the Company’s Statements of Operations
for the year ended December 31, 2021, instead of appropriately recording it in the Company’s Statements of Changes in Stockholders’
Deficit for the same period. The impact of the misstatement is material, and the Company filed an amended Form 10-K for the year ended
December 31, 2021, to reflect corrected amounts and their appropriate accounting treatment. Such restatement represented a further material
weakness.
During quarterly period ended
September 30, 2022 we identified additional material weaknesses in internal controls related to recording of accruals, proper cut off
procedures, remeasurement of redeemable shares, completeness and accuracy of disclosure of commitments and contingencies, and management
review of financial reporting control.
During the fourth quarter
2022 we identified additional material weaknesses over recording of the Company’s income and franchise tax provision.
None of the above listed
material weaknesses were remediated through June 30, 2023.
A material weakness is a
deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Notwithstanding
the determination that our internal control over financial reporting was not effective as of June 30, 2023, and that there were material
weaknesses as identified above, we believe that our financial statements contained in this Report fairly present our financial position,
results of operations and cash flows for the periods covered hereby in all material respects.
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 discussed
above, there have been no changes to our internal control over financial reporting during the quarter ended June 30, 2023 that materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
To the knowledge of our
management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity
as such or against any of our property.
Item 1A. Risk Factors.
As of the date of this Report, there have been no material changes
with respect to those risk factors previously disclosed in our (i) Registration Statement, (ii) Annual Report on Form 10-K for the year
ended December 31, 2022, as filed with the SEC on March 28, 2023 and (iii) Quarterly Report on Form 10-Q for the quarter ended March 31,
2023, as filed with the SEC on May 15, 2023. Any of these factors could result in a significant or material adverse effect on our results
of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial
Business Combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future
filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
For a description of the
use of proceeds generated in our initial public offering and private placement, see Part II, Item 2 of the Company’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2021, as filed with the SEC on December 20, 2021. There has been no material change in
the planned use of proceeds from the Company’s initial public offering and private placement as described in the Registration Statement.
Purchases of Equity Securities by the Issuer
and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
The following exhibits are
filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Sizzle Acquisition Corp. |
|
|
|
August 11, 2023 |
By: |
/s/ Steve Salis |
|
Name: |
Steve Salis |
|
Title: |
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
August 11, 2023 |
By: |
/s/ Daniel Lee |
|
Name: |
Daniel Lee |
|
Title: |
Chief Financial Officer |
|
|
(Principal Accounting and Financial Officer) |
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In connection with the Quarterly
Report on Form 10-Q of Sizzle Acquisition Corp. (the “Company”) for the quarter ended June 30, 2023, as filed with the Securities
and Exchange Commission (the “Report”), I, Steve Salis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
In connection with the Quarterly
Report on Form 10-Q of Sizzle Acquisition Corp. (the “Company”) for the quarter ended June 30, 2023, as filed with the Securities
and Exchange Commission (the “Report”), I, Daniel Lee, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: