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 No. 001-40380
MAQUIA CAPITAL ACQUISITION CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware | | 85-4283150 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
50 Biscayne Boulevard, Suite 2406 Miami, FL 33132 |
(Address of Principal Executive Offices, including zip code) |
(305) 608-1395 |
(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant
to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Units, each consisting of one share of Class A Common Stock, and one-half of one Redeemable Warrant | | MAQCU | | The Nasdaq Stock Market LLC |
Class A Common Stock, par value $0.0001 per share | | MAQC | | The Nasdaq Stock Market LLC |
Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 | | MAQCW | | The Nasdaq Stock Market LLC |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒ No ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer |
| ☒ Non-accelerated filer | ☒ Smaller reporting company |
| | ☒ Emerging growth company |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☒ No ☐
As of August 18, 2023, there
were 3,803,156 shares of Class A Common Stock, par value $0.0001 per share, and 2,371,813 shares of Class B Common Stock, par
value $0.0001 per share, of the registrant issued and outstanding.
MAQUIA CAPITAL ACQUISITION CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2023
TABLE OF CONTENTS
Item 1. Financial Statements
MAQUIA CAPITAL ACQUISITION CORPORATION
BALANCE SHEETS
| |
June 30, 2023 | | |
December 31, 2022 | |
| |
(unaudited) | | |
| |
ASSETS | |
| | |
| |
Current asset | |
| | |
| |
Cash and cash equivalents | |
$ | 124,267 | | |
$ | 67,022 | |
Cash – restricted | |
| 261,900 | | |
| — | |
Prepaid expenses | |
| 35,000 | | |
| 66,301 | |
Total current assets | |
| 421,167 | | |
| 133,323 | |
| |
| | | |
| | |
Investments held in the Trust Account | |
| 11,868,068 | | |
| 37,570,177 | |
Total Assets | |
$ | 12,289,235 | | |
$ | 37,703,500 | |
| |
| | | |
| | |
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 596,298 | | |
$ | 379,783 | |
Excise tax payable | |
| 265,380 | | |
| — | |
Income tax payable | |
| 54,778 | | |
| 291,112 | |
Due to Trust Account | |
| 261,900 | | |
| — | |
Notes payable – Sponsor at cost | |
| 1,127,818 | | |
| 318,582 | |
Convertible Note payable – Sponsor at fair value (cost: $3,461,944 at June 30, 2023 and December 31, 2022) | |
| 1,021,911 | | |
| 1,037,272 | |
Total current liabilities | |
| 3,328,085 | | |
| 2,026,749 | |
| |
| | | |
| | |
Deferred tax liability | |
| 100,266 | | |
| 46,496 | |
Deferred underwriting compensation | |
| 5,192,916 | | |
| 5,192,916 | |
Warrant liability - Private Placement Warrants | |
| 14,594 | | |
| 11,675 | |
Warrant liability - Public Warrants | |
| 431,878 | | |
| 311,575 | |
Total liabilities | |
| 9,067,739 | | |
| 7,589,412 | |
| |
| | | |
| | |
Commitments and Contingencies (Note 5) | |
| | | |
| | |
Class A Common Stock subject to possible redemption; 1,090,718 and 3,539,809 shares at redemption value of $10.91 and $10.52 per share as of June 30, 2023 and December 31, 2022, respectively | |
| 11,899,026 | | |
| 37,247,257 | |
| |
| | | |
| | |
Stockholders’ Deficit | |
| | | |
| | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | |
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 2,712,438 and 583,743 issued and outstanding (excluding 1,090,718 and 3,539,809 shares subject to possible redemption, as of June 30, 2023 and December 31, 2022, respectively) | |
| 271 | | |
| 58 | |
Class B common stock, par value $0.0001; 10,000,000 shares authorized; 2,371,813 and 4,500,528 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | |
| 237 | | |
| 450 | |
Accumulated deficit | |
| (8,678,038 | ) | |
| (7,133,678 | ) |
Total Stockholders’ Deficit | |
| (8,677,530 | ) | |
| (7,133,170 | ) |
Total Liabilities, Temporary Equity and Stockholders’ Deficit | |
$ | 12,289,235 | | |
$ | 37,703,500 | |
The accompanying notes are an integral part of
these unaudited financial statements
MAQUIA CAPITAL ACQUISITION CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
| |
For the | | |
For the | | |
For the | | |
For the | |
| |
Three Months Ended | | |
Three Months Ended | | |
Six Months Ended | | |
Six Months Ended | |
| |
June 30, 2023 | | |
June 30, 2022 | | |
June 30, 2023 | | |
June 30, 2022 | |
General and administrative expenses | |
$ | 352,825 | | |
$ | 230,682 | | |
$ | 522,819 | | |
$ | 407,064 | |
Total expenses | |
| 352,825 | | |
| 230,682 | | |
| 522,819 | | |
| 407,064 | |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses) | |
| | | |
| | | |
| | | |
| | |
Unrealized and realized gain on investment held in Trust Account | |
| 298,305 | | |
| 168,445 | | |
| 706,126 | | |
| 290,004 | |
Change in fair value of derivative liabilities | |
| (238,982 | ) | |
| 2,169,295 | | |
| (107,860 | ) | |
| 4,967,129 | |
Total other income | |
| 59,323 | | |
| 2,337,740 | | |
| 598,266 | | |
| 5,257,133 | |
Income (loss) before tax | |
| (293,502 | ) | |
| 2,107,058 | | |
| 75,447 | | |
| 4,850,069 | |
Income tax expense | |
| (73,933 | ) | |
| — | | |
| (164,622 | ) | |
| — | |
Net income (loss) | |
$ | (367,435 | ) | |
$ | 2,107,058 | | |
$ | (89,175 | ) | |
$ | 4,850,069 | |
Weighted average shares outstanding of Class A Common Stock, basic and diluted | |
| 3,926,398 | | |
| 17,893,462 | | |
| 4,024,430 | | |
| 17,893,462 | |
Basic and diluted net income (loss) per share – Class A Common Stock | |
$ | (0.05 | ) | |
$ | 0.09 | | |
$ | (0.01 | ) | |
$ | 0.22 | |
Weighted average shares outstanding of Class B Common Stock, basic and diluted | |
| 3,190,560 | | |
| 4,500,528 | | |
| 3,841,930 | | |
| 4,500,528 | |
Basic and diluted net income (loss) per share - Class B Common Stock | |
$ | (0.05 | ) | |
$ | 0.09 | | |
$ | (0.01 | ) | |
$ | 0.22 | |
The accompanying notes are an integral part of
these unaudited financial statements
MAQUIA CAPITAL ACQUISITION CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS’
DEFICIT
(unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2023
| |
Class A Common Stock | | |
Class B Common Stock | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Deficit | | |
Deficit | |
Balance as of January 1, 2023 | |
| 583,723 | | |
$ | 58 | | |
| 4,500,528 | | |
$ | 450 | | |
$ | (7,133,678 | ) | |
$ | (7,133,170 | ) |
Remeasurement of Class A common stock to redemption value | |
| - | | |
| - | | |
| - | | |
| - | | |
| (745,006 | ) | |
| (745,006 | ) |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| 278,260 | | |
| 278,260 | |
Balance March 31, 2023 | |
| 583,723 | | |
| 58 | | |
| 4,500,528 | | |
| 450 | | |
| (7,600,424 | ) | |
| (7,599,916 | ) |
Conversion of Class B to Class A common stock | |
| 2,128,715 | | |
| 213 | | |
| (2,128,715 | ) | |
| (213 | ) | |
| — | | |
| — | |
Remeasurement of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| (444,799 | ) | |
| (444,799 | ) |
Finance cost of shares to be issued under non-redemption agreements | |
| | | |
| | | |
| | | |
| | | |
| 879,900 | | |
| 879,900 | |
Contribution from Sponsor of shares to be issued under non-redemption agreements | |
| | | |
| | | |
| | | |
| | | |
| (879,900 | ) | |
| (879,900 | ) |
Excise tax on redemption of Class A common stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| (265,380 | ) | |
| (265,380 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (367,435 | ) | |
| (367,435 | ) |
Balance as of June 30, 2023 | |
| 2,712,438 | | |
$ | 271 | | |
| 2,371,823 | | |
$ | 237 | | |
$ | (8,678,038 | ) | |
$ | (8,677,530 | ) |
FOR THE SIX MONTHS ENDED JUNE 30, 2022
| |
Class A Common Stock | | |
Class B Common Stock | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Deficit | | |
Deficit | |
Balance as of January 1, 2022 | |
| 583,723 | | |
$ | 58 | | |
| 4,500,528 | | |
$ | 450 | | |
$ | (9,310,329 | ) | |
$ | (9,309,821 | ) |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,743,011 | | |
| 2,743,011 | |
Balance March 31, 2022 | |
| 583,723 | | |
$ | 58 | | |
| 4,500,528 | | |
| 450 | | |
| (6,567,318 | ) | |
| (6,566,810 | ) |
Remeasurement of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,730,972 | ) | |
| (1,730,972 | ) |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,107,058 | | |
| 2,107,058 | |
Balance as of June 30, 2022 | |
| 583,723 | | |
$ | 58 | | |
| 4,500,528 | | |
$ | 450 | | |
$ | (6,191,232 | ) | |
$ | (6,190,724 | ) |
The accompanying notes are an integral part of
these unaudited financial statements
MAQUIA CAPITAL ACQUISITION CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
| |
For the Six Months | | |
For the Six Months | |
| |
Ended | | |
Ended | |
| |
June 30, 2023 | | |
June 30, 2022 | |
Cash Flows From Operating Activities: | |
| | |
| |
Net (loss) income | |
$ | (89,175 | ) | |
$ | 4,850,069 | |
Adjustments to reconcile net income to net cash used in operating activities: | |
| | | |
| | |
Unrealized and realized gains on investments held in the Trust Account | |
| (706,126 | ) | |
| (290,004 | ) |
Change in fair value of derivative liabilities | |
| 107,860 | | |
| (4,967,129 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 31,301 | | |
| 78,750 | |
Income taxes payable | |
| (236,334 | ) | |
| — | |
Deferred income taxes | |
| 53,770 | | |
| — | |
Accounts payable and accrued expenses | |
| 216,514 | | |
| (94,604 | ) |
Net Cash Used In Operating Activities | |
| (622,190 | ) | |
| (422,917 | ) |
| |
| | | |
| | |
Cash Flows From Investing Activities: | |
| | | |
| | |
Cash deposited into the Trust | |
| (691,701 | ) | |
| (1,730,972 | ) |
Cash withdrawn from Trust for redemptions | |
| 26,538,036 | | |
| — | |
Cash withdrawn from Trust for taxes | |
| 823,798 | | |
| — | |
Net Cash Used In Investing Activities | |
| 26,670,133 | | |
| (1,730,972 | ) |
| |
| | | |
| | |
Cash Flows From Financing Activities: | |
| | | |
| | |
Cash paid for redemptions | |
| (26,538,036 | ) | |
| — | |
Proceeds from Note payable - sponsor | |
| 809,238 | | |
| 1,730,972 | |
Net Cash Provided By Investing Activities | |
| (25,728,798 | ) | |
| 1,730,972 | |
| |
| | | |
| | |
Net change in cash and restricted cash | |
| 319,145 | | |
| (422,917 | ) |
| |
| | | |
| | |
Cash and restricted cash at beginning of period | |
| 67,022 | | |
| 475,500 | |
| |
| | | |
| | |
Cash and restricted cash at end of period | |
$ | 386,167 | | |
$ | 52,583 | |
| |
| | | |
| | |
Supplemental disclosure of non-cash financing activities: | |
| | | |
| | |
Excise tax on redemptions of Class A common stock subject to possible redemption | |
$ | 265,380 | | |
$ | — | |
Remeasurement of Class A common stock subject to possible redemption | |
$ | 1,189,805 | | |
$ | 1,730,972 | |
Due to Trust | |
$ | 261,900 | | |
$ | — | |
Finance costs of shares to be issued under non-redmeption agreements | |
$ | 879,900 | | |
$ | — | |
The accompanying notes are an integral part of
these unaudited financial statements
MAQUIA CAPITAL ACQUISITION CORPORATION
NOTES TO FINANCIAL
STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND
GOING CONCERN
Organization and General
Maquia Capital Acquisition Corporation (the “Company”)
is a blank check company incorporated in the State of Delaware on December 10, 2020. There was no activity from December 10, 2020 through
December 31, 2020. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation
with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar
business combination with one or more businesses or entities (“Business Combination”). Although the Company is not limited
to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on companies
in the technology-focused middle market and emerging growth companies in North America.
At June 30, 2023, the Company had not yet commenced
any operations. All activity through June 30, 2023 related to the Company’s formation and the Initial Public Offering which was
consummated on May 7, 2021 (as defined below) and subsequent to the Initial Public Offering, identifying a target company for a Business
Combination. The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest.
The Company will generate non-operating income in the form of interest income or unrealized gains on investments held in the trust account
and gains or losses from the change in the fair value of the warrant liabilities. The Company has selected December 31 as its fiscal year
end. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with
early stage and emerging growth companies.
Sponsor and Initial Financing
The Company’s sponsor is Maquia Investment
North America LLC, (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared
effective on May 4, 2021. On May 7, 2021, the Company closed its Initial Public Offering of 16,000,000 units (the “Units”)
at $10.00 per Unit, generating gross proceeds of $160 million, and incurring offering costs of approximately $7.0 million, inclusive of
$5,192,916 million in deferred underwriting commissions (Note 5). Each Unit consists of one share of the Company’s Class A common
stock (the “Public Shares”) and one-half of one redeemable warrant (each, a “Warrant” and, collectively, the “Warrants”).
On May 7, 2021, the Company issued 160,000 shares of Class B common stock to the underwriter for services rendered and recorded $1,209,600
which is recorded as a stock issuance cost.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated a private sale (the “Private Placement”) of 551,000 units (each, a “Private
Placement Unit” and collectively, the “Private Placement Units”) to the Sponsor at a purchase price of $10.00 per Private
Placement Unit, generating gross proceeds of approximately $5,510,000 (Note 4). The Private Placement Units are identical to the Units
in the Initial Public Offering, except as otherwise disclosed in the Registration Statement. No underwriting discounts or commissions
were paid with respect to such sale.
On May 10, 2021, the Company consummated the closing
of the sale of 1,309,719 additional units of the Company’s Class A common stock, $0.0001 par value at a price of $10.00 per unit
upon receiving notice of the underwriters’ election to partially exercise their overallotment option (“Over-allotment Units”),
generating additional gross proceeds of $13,097,190 and incurred additional offering costs of $130,972 in underwriting fees. Each Over-allotment
Unit consists of one share of the Company’s Class A common stock, $0.0001 par value, and one-half of one warrant (each, an “Over-allotment
Warrant” and, collectively, the “Over-allotment Warrants”). Each whole Warrant entitles the holder to purchase one Class
A common stock at a price of $11.50 per share. Simultaneously with the exercise of the over-allotment, the Company consummated the private
placement of an additional 32,743 private placement units (the “Over-allotment Private Placement Units”) to the Sponsor, generating
gross proceeds of $327,430. As a result of the underwriters’ election to partially exercise their over-allotment option, 327,430
Founder Shares are no longer subject to forfeiture. The remaining 272,570 Founders shares were forfeited. On May 12, 2021, the Company
issued 13,098 shares of Class B common stock to the underwriter for services rendered and recorded $99,021 which is recorded as a stock
issuance cost.
The Trust Account
Following the closing of the Initial Public Offering
in May 2021, $175.7 million of the net proceeds of the sale of the Units, the Private Placement Units, the Over-allotment Units and the
Over-allotment Private Placement Units were placed in a trust account (the “Trust Account”) with Continental Stock Transfer
& Trust Company. The funds held in the Trust Account will be invested only in U.S. government treasury bills with a maturity of one
hundred eighty five (185) days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company
Act of 1940 and that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i)
the consummation of the Initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining
proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and
continuing general and administrative expenses.
On May 5,
2023 the Company held a special meeting of stockholders (the “Meeting”). At the Meeting, the Company’s stockholders
approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter Amendment”) to
extend the date by which the Company must consummate its initial business combination (the “Initial Business Combination”)
from May 7, 2023 to February 7, 2024 (or such earlier date as determined by the board of directors) (the “Third Extension Charter
Amendment”).
In connection with the May 5, 2023 special meeting,
stockholders holding 2,449,091 shares of Class A common stock (“Public Shares”) exercised their right to redeem such shares.
Following redemptions, the Company has 1,090,718 Public Shares outstanding. The Company withdrew from the Trust Account and disbursed
to the redeeming public stockholders approximately $26.5 million.
In connection with the redemption, the Company
recorded excise tax of $265,380. This excise tax may be reduced by shares issued by the Company in 2023.
Except with respect to interest earned on the
funds held in the Trust Account that may be released to the Company to pay its taxes and up to $100,000 of interest that may be used for
dissolution expenses, the proceeds from the Initial Public Offering and the Private Placement will not be released from the Trust Account
until the earlier of: (i) the completion of the Company’s Initial Business Combination; (ii) the redemption of any Public Shares
that have been properly tendered in connection with a stockholder vote to amend the Company’s amended and restated certificate of
incorporation (A) to modify the substance or timing of the Company’s obligation to redeem 100% of Public Shares if the Company does
not complete its Initial Business Combination within 24 months, now 30 months following the completion of the Third Extension (as defined
below), from the closing of the Initial Public Offering or such a later date pursuant to stockholder approval or (B) with respect to any
other provision relating to stockholders’ right or pre-Initial Business Combination activity; and (iii) the redemption of 100% of
the Public Shares if the Company is unable to complete an Initial Business Combination within the Combination Period (as defined below),
subject to the requirements of applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s
creditors, if any, which could have priority over the claims of the Company’s public stockholders.
Initial Business Combination
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Placement Units, although
substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide
that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80%
of the balance in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes payable on interest earned
and less any interest earned thereon that is released for taxes) at the time of the signing of an agreement to enter into a Business Combination.
The Company will only complete a Business Combination if the post-Business Combination 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”). There is no
assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its stockholders with
the opportunity to redeem all or a portion of their 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. In connection with a proposed
Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which
stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will
proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business
Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business
Combination.
If the Company seeks stockholder approval of a
Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated
Memorandum and Articles of Association provides that a public stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to 15% or more
of the Public Shares without the Company’s prior written consent.
The stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.15 per share, which was increased by an additional
$0.20 per unit following our sponsor’s initial election to extend the period of time to consummate a business combination from 12-months
following closing of our Initial Public Offering to 18 months following our Initial Public Offering (the “First Extension”))),
plus the additional contributions to the Trust Account made by our sponsor in connection with the Second Extension (as defined below)
and the Third Extension 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). The per-share amount to be distributed to stockholders who redeem their Public Shares will not be reduced
by the deferred underwriting commissions the Company will pay to the underwriter. There will be no redemption rights upon the completion
of a Business Combination with respect to the Company’s warrants.
All of the Public Shares contain a redemption
feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder
vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s
amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance with the rules of the
U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified
in Accounting Standards Codification (“ASC”) 480-10-S99, redemption provisions not solely within the control of a company
require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares were issued with
other freestanding instruments (i.e., public warrants), the initial carrying value of the shares of Class A common stock classified as
temporary equity was the allocated proceeds determined in accordance with ASC 470-20. Because of the redemption feature noted above, the
shares of Class A common stock are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the
Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date
that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii)
recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption
value at the end of each reporting period. The Company has elected to recognize the changes immediately. The re-measurement is treated
as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). While redemptions
cannot cause the Company’s net tangible assets to fall below $5,000,001, the Public Shares are redeemable and will be classified
as such on the balance sheet until such date that a redemption event takes place.
If a stockholder vote is not required and the
Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and
Restated Memorandum and Articles of Association, offer such redemption pursuant to the tender offer rules of the SEC, and file tender
offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing
a Business Combination.
The Sponsor has agreed (a) to vote its Class B
common stock, the common stock included in the Private Placement Units (the “Placement Shares”) and any Public Shares purchased
during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s
Amended and Restated Memorandum and Articles of Association with respect to the Company’s pre-Business Combination activities prior
to the consummation of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem
their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Class B common stock) and Private
Placement Units (including underlying securities) into the right to receive cash from the Trust Account in connection with a stockholder
vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company
does not seek stockholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Certificate
of Incorporation relating to stockholders’ rights of pre-Business Combination activity and (d) that the Class B common stock and
Private Placement Units (including underlying securities) shall not participate in any liquidating distributions upon winding up if a
Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with
respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
The Company initially had until May 7, 2022 to
consummate a Business Combination, which period was extended to November 7, 2022 following the First Extension. On November 4, 2022, the
Company held a special meeting of stockholders in which the Company’s stockholders approved an amendment to extend the date by which
the Company must consummate a Business Combination from November 7, 2022 to May 7, 2023 (the “Second Extension”).
On May 5,
2023, the Company held a special meeting of stockholders in which the Company’s stockholders approved another amendment to extend
the date by which the Company must consummate a Business Combination from May 7, 2023 to February 7, 2024 (the “Third Extension,”
and period of time through the Third Extension, the “Combination Period”).
On May 5,
2023, the Company and the Sponsor entered into
a non-redemption agreement (“Non-Redemption Agreement”) with one or more unaffiliated
third party or parties in exchange for such third party or third parties agreeing not to redeem an aggregate of 847,883 shares of the
Company’s Class A common stock sold in its initial public offering (“Non-Redeemed Shares”)
in connection with the special meeting of the stockholders called by the Company (the “Special Meeting”)
to consider and approve an extension of time for the Company to consummate an initial business combination (the “Extension
Proposal”) from May 7, 2023 to February 7, 2024 (the “Extension”).
In exchange for the foregoing commitments not to redeem such Non-Redeemed Shares, the Sponsor has agreed to transfer to such third party
or third parties an aggregate of 271,323 shares of the Company’s Class A common stock held by the Sponsor immediately following
the consummation of an initial business combination if they continue to hold such Non-Redeemed Shares through the Special Meeting.
The Company recorded $879,900 related to the non redemption agreements as a contribution from Sponsor and an adjustment to accumulated
deficit in the statement of changes in stockholders’ deficit.
In connection with the Second Extension, the Sponsor
made monthly loans of $159,291 through May 7, 2023. In connection with the Third Extension, the Sponsor will make additional monthly loans
of $27,268 for each monthly period following May 7, 2023 through February 7, 2024 (or nine monthly contributions in total if the full
Combination Period is required). As of December 31, 2022, an aggregate of $318,582 had been deposited into the trust account account related
to the Second and Third Extensions.. As of June 30, 2023, an aggregate of $1,010,282 had been deposited into the trust account account
related to the Second and Third Extensions.. If the Company is unable to complete a Business Combination within the Combination Period,
the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than
five 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 interest earned (net of taxes payable and less interest to pay dissolution expenses
up to $100,000), 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 Company’s
board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case
to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriter has agreed to waive its
rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination
within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be
available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the
assets remaining available for distribution will be less than the Initial Public Offering price per Unit.
The Sponsor has agreed that it will be liable
to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target
business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below
$10.15 per share, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account
and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver
is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third
party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims
of creditors by endeavoring to have all vendors, service providers (except for the company’s independent registered 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.
On August
8, 2023, the Company, Maquia Merger Sub, Inc., a Delaware corporation and wholly owned direct subsidiary of the Company (“Merger
Sub”), and Immersed Inc., a Delaware corporation (“Immersed”), entered into a business combination agreement (the “Business
Combination Agreement”), pursuant to which the Company and Immersed agreed to combine. Pursuant to the Business Combination Agreement,
on the date (the “Closing Date”) of the closing (the “Closing”) of the transactions contemplated by the Business
Combination Agreement (the “Proposed Transactions”), Merger Sub, a newly formed, wholly-owned direct subsidiary of Maquia,
will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned direct subsidiary
of Maquia (the “Surviving Corporation”). The consideration is $150,000,000 and will be paid at closing in shares of Maquia
at a per share price equal to the then applicable redemption price.
Going Concern and Liquidity
In May 2021, the Company closed its Initial Public
Offering of 17,309,719 Units at $10.00 per Unit, which includes underwriters’ over-allotment, generating gross proceeds of $173.1
million. Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 583,743 Private
Placement Warrants, which includes underwriters’ over-allotment, to the Sponsor at a purchase price of $10.00 per Private Placement
Warrant, generating gross proceeds of approximately $5,837,430.
The Company’s liquidity needs prior to the
consummation of the Initial Public Offering were satisfied through the proceeds of $25,000 from the sale of the Founder Shares (Note 4),
and a loan of $177,111 under an unsecured and noninterest bearing promissory note – related party (Note 4). Subsequent to the consummation
of the Initial Public Offering, the Company plans to address its liquidity through the net proceeds from the consummation of the Initial
Public Offering and the Private Placement held outside of the Trust Account. The Company has incurred and expects to incur significant
costs in pursuit of its acquisition plans.
In connection with the Company’s assessment
of going concern considerations in accordance with FASB’s ASC Subtopic 205-40, “Presentation of Financial Statements –
Going Concern,” the Company has until February 7, 2024, to consummate an initial business combination. It is uncertain that the
Company will be able to consummate an initial business combination by this time. If an initial business combination is not consummated
by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, the Company may not have
sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these financial statements.
Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and
potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 7, 2024.
There is no assurance that the Company’s
plans to consummate an Initial Business Combination will be successful within the Combination Period. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Risks and Uncertainties
Various social and political circumstances in
the U.S. and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and
China, and other uncertainties regarding actual and potential shifts in the U.S. and foreign, trade, economic and other policies with
other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes
and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the U.S.
and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility could adversely affect the
Company’s ability to complete a business combination. In response to the conflict between Russia and Ukraine, the U.S. and other
countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls,
tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s ability to complete a
Business Combination and the value of the Company’s securities.
The Inflation Reduction Act (“IR
Act”) was enacted on August 16, 2022. The IR Act includes provisions imposing a 1% excise tax on share repurchases that occur
after December 31, 2022 and introduces a 15% corporate alternative minimum tax (“CAMT”) on adjusted financial statement
income. The CAMT was effective for the Company on January 1, 2023 and as a result of the redemptions in May 2023, the Company
recorded an excise tax liability in the amount of $265,380.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for
interim financial information and in accordance with the instructions to Form 10-Q and Article 8 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 the Company’s management,
the unaudited financial statements as of June 30, 2023 include all adjustments, which are only of a normal and recurring nature, necessary
for a fair statement of the financial position of the Company as of June 30, 2023 and its results of operations and cash flows for the
three and six months ended June 30, 2023. The results of operations for the three and six months ended June 30, 2023 are not necessarily
indicative of the results to be expected for the full fiscal year ending December 31, 2023 or any future interim period.
Emerging growth company
The Company is an emerging growth company, as
defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent
to the enactment of the JOBS Act, until such time as those standards apply to private companies.
The Company has elected to use this extended transition
period for complying with new or revised accounting standards that have different effective dates for public and private companies until
the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of
the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to the financial
statements of issuers who are required to comply with the effective dates for new or revised accounting standards based on public company
effective dates.
The Company will remain an emerging growth company
until the earliest of (i) the last day of the first fiscal year (a) following the fifth anniversary of the completion of the Initial Public
Offering, (b) in which the Company’s total annual gross revenue is at least $1.235 billion or (c) when the Company is deemed to
be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as
of the prior June 30th and (ii) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities
during the prior three-year 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. Actual results could differ 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 no cash equivalents at June 30,
2023 or December 31, 2022.
Restricted cash
Cash that is encumbered or otherwise restricted
as to its use is included in restricted cash. As of June 30, 2023 and December 31, 2022, the balance was $261,900 and $0, respectively.
Restricted cash at June 30, 2023 represents cash that was over withdrawn from the Trust Account and was subsequently returned to the Trust
Account after June 30, 2023.
Offering Costs Associated with the Initial
Public Offering
The Company complies with the requirements of
the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”)
Topic 5A, “Expenses of Offering.” Deferred offering costs were allocated to the separable financial instruments issued
in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Upon completion of the Initial
Public Offering, offering costs associated with warrant liabilities have been expensed and presented as non-operating expenses in the
statement of operations and offering costs associated with the Class A common stock have been charged to stockholders’ equity. Offering
costs of $584,295 consisted principally of costs incurred in connection with preparation for the Initial Public Offering. These offering
costs, together with the underwriter fees of $6,923,888, were charged to additional paid-in capital upon completion of the Initial Public
Offering. Of these costs, $494,344 were allocated to the Public Warrants and the Private Placement Warrants and are included in the statement
of operations as a component of other income (expense). After the Initial Public Offering occurred, offering costs with a fair value of
$1,837,821 were recorded in connection with Class B Common Stock issued to the underwriters and a consultant.
Income taxes
The Company complies with the accounting and reporting
requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and
tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing
authorities. The Company’s management determined the United States is the Company’s only major tax jurisdiction. The Company
recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized
tax benefits as of June 30, 2023 and December 31, 2022 and no amounts accrued for interest and penalties. The
Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from
its position. The Company is subject to income tax examinations by major taxing authorities since inception.
While ASC 740 identifies usage of the effective
annual tax rate for purposes of an interim provision, it does allow for estimating individual elements in the current period if they are
significant unusual or infrequent. Computing the ETR for the Company is complicated due to the potential impact of the Company’s
change in fair value of warrants for any other change in fair value of a complex financial instrument), the timing of any potential Business
Combination expenses and the actual interest income that will be recognized during the year. The Company has taken a position as to the
calculation of income tax expenses in the current period based on 740-270-25-3 which states, “if an entity is unable to estimate
a part of its ordinary income (or loss) or the related tax (or benefit) but is otherwise able to make a reliable estimate, the tax (or
benefit) applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported.”
The Company believes its calculation to be a reliable estimate and allows it to properly take into account the unusual elements that can
impact its annualized book income and its impact on ETR. As such, the Company is computing its taxable income (loss) and associated income
tax provision based on actual results through June 30, 2023.
The Company’s effective tax rate was (25.2)%
and 218.2% for the three and six months ended June 30, 2023, respectively. The Company’s effective tax rate was 0% for
the three and six months ended June 30, 2022. The effective tax rate differs from the statutory tax rate of 21.0% for the three
and six months ended June 30, 2023 and 2022, due to changes in the valuation allowance on the deferred tax assets.
Class A Common Stock Subject to Possible
Redemption
The Company accounts for the Class A common stock
subject to possible redemption in accordance with the guidance enumerated in ASC 480, “Distinguishing Liabilities from Equity.”
Shares of the common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally
redeemable shares of the common stock (including shares of the common stock that feature redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the issuer’s control) are
classified as temporary equity. At all other times, shares of the common stock are classified as stockholders’ equity. The Class
A common stock features certain redemption rights that are considered by the Company to be outside of the Company’s control and
subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2023 and December 31, 2022, the shares of the Class
A common stock subject to possible redemption in the amount of $11,899,026 and $37,247,257, respectively, are presented as temporary equity,
outside of the stockholders’ equity section of the Company’s balance sheets.
The Company recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value, which approximates
fair value, at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the
re-measurement from initial carrying value to redemption amount value. The change in the carrying value of redeemable Class A common stock
resulted in charges against additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
| |
Shares | | |
Dollars | |
Gross proceeds | |
| 17,309,719 | | |
$ | 175,693,636 | |
Less: | |
| - | | |
| | |
Proceeds allocated to the fair value of warrants | |
| - | | |
| (11,760,676 | ) |
Class A common stock issuance costs and overallotment costs | |
| - | | |
| (3,832,731 | ) |
Plus: | |
| | | |
| | |
Accretion of carrying value to redemption value | |
| - | | |
| 15,593,409 | |
Class A common stock subject to possible redemption - December 31, 2021 | |
| 17,309,719 | | |
| 175,693,636 | |
Sponsor deposits | |
| - | | |
| 3,780,526 | |
Redemption and withdrawals | |
| (13,769,910 | ) | |
| (143,462,986 | ) |
Remeasurement carrying value to redemption value | |
| - | | |
| 5,016,618 | |
Class A common stock subject to possible redemption – December 31, 2022 | |
| 3,539,809 | | |
| 37,247,257 | |
Remeasurement carrying value to redemption value | |
| - | | |
| 745,006 | |
Class A common stock subject to possible redemption – March 31, 2023 | |
| 3,539,809 | | |
| 37,992,263 | |
Redemption and withdrawals | |
| (2,449,091 | ) | |
| (26,538,036 | ) |
Remeasurement carrying value to redemption value | |
| - | | |
| 444,799 | |
Class A common stock subject to possible redemption – June 30, 2023 | |
| 1,090,718 | | |
$ | 11,899,026 | |
Net income (loss) per share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share of common stock is computed by dividing
net income (loss) by the weighted average number of shares of common stock outstanding for the period. The Company applies the two-class
method in calculating income per share of common stock. Re-measurement associated with the redeemable shares of Class A common stock is
excluded from income (loss) per common share as the redemption value approximates fair value.
The calculation of diluted income (loss) per share
of common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the Private
Placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase
8,946,731 shares of Class A common stock in the aggregate. As of June 30, 2023 and December 31, 2022, the Company did not have any dilutive
securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the
Company. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the period
presented.
Class B Founder Shares subject to forfeiture are
not included in weighted average shares outstanding until the forfeiture restrictions lapse.
Non-redeemable common stock includes the Founder
Shares and non-redeemable shares of common stock as these shares do not have any redemption features.
The following table reflects the calculation of
basic and diluted net income per common share (in dollars, except per share amounts):
| |
For the Three Months | | |
For the Six Months | |
| |
Ended June 30, 2023 | | |
Ended June 30, 2023 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net loss per share | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net loss | |
$ | (202,713 | ) | |
$ | (164,723 | ) | |
$ | (45,622 | ) | |
$ | (43,553 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 3,926,398 | | |
| 3,190,560 | | |
| 4,024,430 | | |
| 3,841,930 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net loss per share | |
$ | (0.05 | ) | |
$ | (0.05 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| |
For the Three Months | | |
For the Six Months | |
| |
Ended June 30, 2022 | | |
Ended June 30, 2022 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per share | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net income | |
$ | 1,685,646 | | |
$ | 421,412 | | |
$ | 3,875,305 | | |
$ | 974,764 | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 17,893,462 | | |
| 4,500,528 | | |
| 17,893,462 | | |
| 4,500,528 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net income per share | |
$ | 0.09 | | |
$ | 0.09 | | |
$ | 0.22 | | |
$ | 0.22 | |
Concentration of credit risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal
depository insurance coverage of $250,000. As of June 30, 2023 and December 31, 2022, the Company had not experienced losses on this account
and management believes the Company is not exposed to significant risks on such account.
Financial Instruments
The Company determines fair value based on assumptions
that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market
participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable
inputs, which are categorized in one of the following levels:
|
Level 1 |
Inputs: Unadjusted quoted prices for identical assets or instruments in active markets. |
|
Level 2 |
Inputs: Quoted prices for similar instruments in active markets and quoted prices for identical or similar instruments in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable. |
|
Level 3 |
Inputs: Significant inputs into the valuation model are unobservable. |
The Company does not have any recurring Level
2 assets or liabilities, see Note 8 for Level 3 assets and liabilities. The carrying value of the Company’s financial instruments
including its cash and accrued liabilities approximate their fair values principally because of their short-term nature.
Derivative Financial Instruments
The Company evaluates its financial instruments
to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic
815, “Derivatives and Hedging.” The Company’s derivative instruments are recorded at fair value as of the closing
date of the Initial Public Offering (i.e., March 15, 2021) and re-valued at each reporting date, with changes in the fair value
reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current
based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance
sheet date.
The Company has determined that the Public Warrants
and the Private Placement Warrants are derivative instruments. As the Public Warrants and the Private Placement Warrants meet the definition
of a derivative, the Public Warrants and the Private Placement Warrants are measured at fair value at issuance and at each reporting date
in accordance with ASC 820, “Fair Value Measurement,” with changes in fair value recognized in the statement of operations
in the period of change.
The Company has determined that the conversion
option of the Convertible Note payable (the “Note”) is a derivative instrument. The Company has elected to recognize the Note,
including the conversion option, at fair value as permitted under ASC Topic 815. The Note is measured at fair value at issuance and at
each reporting date in accordance with ASC 820, with changes in fair value recognized in the statement of operations in the period of
change. The Company recognized an unrealized gain on fair value of debt for the change in the fair value of the Note of $39,806 and $15,361
for the three and six months ended June 30, 2023, which is included in change in fair value of derivative liabilities on the accompanying
statements of operations. There were gains of $1,362,630 and $1,362,630 for the three and six months ended June 30, 2022, which is included
in change in fair value of derivative liabilities on the accompanying statements of operations.
Warrant Instruments
The Company accounts for the Public Warrants and
the Private Placement Warrants issued in connection with the Initial Public Offering and the Private Placement, respectively, in accordance
with the guidance contained in FASB ASC 815, “Derivatives and Hedging,” whereby under that provision the Public Warrants
and the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the
Company classifies the warrant instrument as a liability at fair value and adjusts the instrument to fair value at each reporting period.
This liability will be re-measured at each balance sheet date until the Public Warrants and the Private Placement Warrants are exercised
or expire, and any change in fair value will be recognized in the Company’s statement of operations. The fair value of the Public
Warrants and the Private Placement Warrants will be estimated using an internal valuation model. The Company’s valuation model utilizes
inputs and other assumptions and may not be reflective of the price at which they can be settled. Such warrant classification is also
subject to re-evaluation at each reporting period.
Recently issued accounting pronouncements
We do not believe that any recently issued,
but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, which
was consummated in May 2021, the Company sold 17,309,719 Units, which includes underwriters’ over-allotment, at a purchase price
of $10.00 per Unit generating gross proceeds to the Company in the amount of $173.1 million. Each Unit consists of one share of the Company’s
Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), and one-half of one redeemable warrant of
the Company (each whole warrant, a “Warrant”), with each whole Warrant entitling the holder thereof to purchase one whole
share of Class A Common Stock at a price of $11.50 per share, subject to adjustment.
NOTE 4. RELATED PARTY TRANSACTIONS
Founder Shares
On January 28, 2021, the Company issued an aggregate
of 5,750,000 shares of Class B common stock to the Sponsor for an aggregate purchase price of $25,000 in cash. On May 4, 2021, the Sponsor
returned to the Company, at no cost, an aggregate of 1,150,000 founder shares, which the Company cancelled. Shares and associated accounts
have been retroactively restated to reflect the surrender of 1,150,000 Class B ordinary shares to the Company for no consideration on
May 4, 2021. The Sponsor also transferred 70,000 founder shares to ARC Group Limited in consideration of services provided by such party
as financial advisor to the Company in connection with the offering and recorded $529,200 which is recorded as a stock issuance cost.
As a result, the Sponsor currently owns 4,530,000 founder shares. Such Class B common stock included an aggregate of up to 600,000 shares
subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment is not exercised in full or in part, so
that the Sponsor will collectively own 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming
the initial stockholders do not purchase any Public Shares in the Initial Public Offering and excluding the Private Placement Units and
underlying securities). On May 7, 2021, the Company issued 160,000 shares of Class B common stock to the underwriter for services rendered
and recorded $1,209,600 which is recorded as a stock issuance cost. On May 12, 2021, the Company issued 13,098 shares of Class B common
stock to the underwriter for services rendered and recorded $99,021 which is recorded as a stock issuance cost. As a result of the underwriters’
election to partially exercise their over-allotment option on May 10, 2021, 272,570 Founder Shares are no longer subject to forfeiture.
The initial stockholder has agreed not to transfer,
assign or sell any of the Class B common stock or shares of Common Stock issuable upon conversion thereof, until the earlier to occur
of (A) six months after the completion of the Company’s initial Business Combination and (B) subsequent to the Company’s
initial Business Combination, (x) if the reported last sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted
for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day
period commencing at least 150 days after the Company’s initial Business Combination, or (y) the date on which the Company
completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s
stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.
On April 21, 2023, the Sponsor elected to
convert on a one-for-one basis one-half of the Founder Shares held by it, or 2,128,715 shares of the Company’s Class
B common stock (the “Founder Conversion”), into shares of Class A common, and following the Founder Conversion, the Sponsor
continued to own 2,128,715 shares of Class B common stock. The 2,128,715 shares of Class A common stock issued to the Sponsor
in connection with the Founder Conversion and the 2,128,715 shares of Class B common stock continued to be owned by our Sponsor are
collectively referred to herein, where the context warrants after the Founder Conversion, as the “Founder Shares”. The Founder
Shares following the Founder Conversion are subject to the same restrictions as the Class B common stock before the Founder Conversion,
including, among others, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial
Business Combination as described in the prospectus for the IPO. The Founder Shares are entitled to registration rights.
Private Placement
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the private sale of an aggregate of 583,743 units, which includes underwriters’ over-allotment,
to the Sponsor at a purchase price of $10.00 per unit, generating gross proceeds to the Company in the amount of $5,837,430. During the
three months ended September 30, 2021, due to the downsizing of the Initial Public Offering, $124,289 of funds were returned to the Sponsor.
A portion of the proceeds from the Private Placement
Units was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business
Combination within the Combination Period, the proceeds from the sale of the Private Placement Units held in the Trust Account will be
used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Units will
be worthless.
The Sponsor and the Company’s officers and
directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Shares until 30 days after
the completion of the initial Business Combination.
Promissory Note – Related Party
On January 29, 2021, the Sponsor issued an unsecured
promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000, to be used
for payment of costs related to the Initial Public Offering. The note is non-interest bearing and payable on the earlier of (i) June
30, 2021 or (ii) the consummation of the Initial Public Offering. In 2021, the Company borrowed $177,111 under this promissory note,
which was repaid in full. As of June 30, 2023 and December 31, 2022, the Company had no balance outstanding under the promissory note
with the Sponsor.
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or the Company’s officers and directors
may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital
Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest,
or, at the lender’s discretion, up to $1,500,000 of notes and any other loans made by the Sponsor or its affiliates (including
the loans made to effectuate extensions as described below), the Company’s officers and directors, or the Company’s and their
affiliates prior to or in connection with a Business Combination may be converted upon consummation of a Business Combination into additional
Private Placement 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, the Company had no borrowings under the Working
Capital Loans.
Pursuant to its amended and restated certificate
of incorporation, the Company may extend the period of time to consummate a Business Combination up to two times, each by an additional
three months (for a total of up to 18 months to complete a Business Combination). In order to effectuate such extensions, the Sponsor
or its affiliates or designees must deposit into the Trust Account $1,730,972 ($0.10 per share) on or prior to the date of the applicable
deadline, for each three-month extension (or up to an aggregate of $3,461,944 or $0.20 per share if the Company extends for the full
six months). Any such payments would be made in the form of a loan. Any such loans will be non-interest bearing and payable upon the
consummation of a Business Combination out of the proceeds of the trust account released to it. If the Company does not consummate a
Business Combination, such loans will not be repaid.
On May 3, 2022 the Company issued a convertible
note payable (the “Note”) in the principal amount of $1,730,972 (the “Extension Payment”) to the Sponsor in connection
with the First Extension. The Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which the Company’s
initial business combination is consummated and (ii) the liquidation of the Company. At the election of the Sponsor, up to $1,500,000
of the unpaid principal amount of the Note may be converted into units of the Company (the “Conversion Units”) with the total
Conversion Units so issued shall be equal to: (x) the portion of the principal amount of the Note being converted divided by (y) the conversion
price of ten dollars ($10.00), rounded up to the nearest whole number of units. On August 4, 2022, the Company amended and restated the
Note (the “Amended Note”) in its entirety solely to increase the principal amount thereunder from $1,730,972 to $3,461,944.
The Company has elected the fair value option of accounting for this note (see Note 8).
The table below provides the balances for the
convertible extension notes as of June 30, 2023 and December 31, 2022:
| |
(At Cost) | | |
| | |
(Carrying value) | |
| |
Convertible Extension Note | | |
Fair value adjustment | | |
Convertible Extension Note | |
Balance, January 1, 2022 | |
$ | - | | |
$ | - | | |
$ | - | |
Proceeds | |
| 3,461,944 | | |
| - | | |
| 3,461,944 | |
Fair value adjustment | |
| - | | |
| (2,424,672 | ) | |
| (2,424,672 | ) |
Balance, December 31, 2022 | |
| 3,461,944 | | |
| (2,424,672 | ) | |
| 1,037,272 | |
Fair value adjustment | |
| - | | |
| 24,445 | | |
| 24,445 | |
Balance, March 31, 2023 | |
| 3,461,944 | | |
| (2,400,227 | ) | |
| 1,061,717 | |
Fair value adjustment | |
| - | | |
| (39,806 | ) | |
| (39,806 | ) |
Balance, June 30, 2023 | |
$ | 3,461,944 | | |
$ | (2,440,033 | ) | |
$ | 1,021,911 | |
As a result of stockholder approval of the Second
Extension Charter Amendment, and the Company’s implementation thereof, the Sponsor or its designees will contribute
to the Company as a loan an aggregate of $ 0.045 for each share of Class A commons stock that is not redeemed, for
each calendar month (commencing on November 7, 2022 and on the 7th day of each subsequent month) until May 7, 2023 (each, a “Second
Extension Period”), or portion thereof, that is needed to complete an initial business combination (the “Second Extension
Contribution”).
As a result of stockholder approval of the Second
Extension and the Company’s implementation thereof, on November 14, 2022, the Company issued a promissory note in the principal
amount of up to $955,748 to the Sponsor, pursuant to which the Sponsor loaned to the Company up to an aggregate of $955,748 (the “Second
Extension Funds”) to deposit into the Company’s trust account for each share of the Company’s Class A common stock
that was not redeemed in connection with the Second Extension.
The Company deposited the Second Extension
Funds into the Trust Account, which equates to approximately $0.045 per non-redeemed Public Share, for each month past November 7,
2022 until May 7, 2023 that the Company needed to complete an Initial Business Combination.
Based
on the outstanding 3,539,809 Public Shares following redemptions in connection with Second Extension, each monthly Contribution
was $159,291 which was deposited in the Trust Account within five (5) business days from the beginning of such calendar month
(or portion thereof).
In connection with the Third Extension, on May
22, 2023, the Company issued a promissory note in the aggregate principal amount of up to $245,412 to the Sponsor, pursuant to which the
Sponsor agreed to loan to the Company up to $245,412 to deposit into the Company’s Trust Account for the Public Shares, for each
calendar month (commencing on May 7, 2023 and each month thereafter) until February 7, 2024, with each monthly contribution being $27,268
based on 1,090,718 Public Shares outstanding following the approval of the Third Extension.
The Company will have the sole discretion
whether to continue extending for additional calendar months until February 7, 2024. If the Company opts not to utilize any
remaining portion of the Third Extension, then the Company will liquidate and dissolve promptly in accordance with its charter, and
its Sponsor’s obligation to make additional contribution in connection with Third Extension will terminate.
On May 22, 2023, the Company also issued a promissory
note (the “May Working Capital Note”) in the principal amount of $250,000 to the Sponsor to fund the Company’s ongoing
working capital needs. The May Working Capital Note bears no interest and is due and payable upon the earlier to occur of (i) the date
on which the Company’s initial business combination is consummated and (ii) the liquidation of the Company.
The table below provides the notes payable balances
as of June 30, 2023 and December 31, 2022:
| |
2nd Extension Note | | |
3rd Extension Note | | |
Working capital | | |
Total Notes payable | |
Balance, January 1, 2022 | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
Proceeds | |
| 318,582 | | |
| - | | |
| | | |
| 318,582 | |
Balance, December 31, 2022 | |
| 318,582 | | |
| - | | |
| - | | |
| 318,582 | |
Proceeds | |
| 477,873 | | |
| - | | |
| | | |
| 477,873 | |
Balance, March 31, 2023 | |
| 796,455 | | |
| - | | |
| - | | |
| 796,455 | |
Proceeds | |
| 159,291 | | |
| 54,536 | | |
| 117,536 | | |
| 331,363 | |
Balance, June 30, 2023 | |
$ | 955,746 | | |
$ | 54,536 | | |
$ | 117,536 | | |
$ | 1,127,818 | |
Non-redemption agreements
On May 5,
2023, the Company and the Sponsor entered into
a non-redemption agreement (“Non-Redemption Agreement”) with one or more unaffiliated
third party or parties in exchange for such third party or third parties agreeing not to redeem an aggregate of 847,883 shares of the
Company’s Class A common stock sold in its initial public offering (“Non-Redeemed Shares”)
in connection with the special meeting of the stockholders called by the Company (the “Special Meeting”)
to consider and approve an extension of time for the Company to consummate an initial business combination (the “Extension
Proposal”) from May 7, 2023 to February 7, 2024 (the “Extension”).
In exchange for the foregoing commitments not to redeem such Non-Redeemed Shares, the Sponsor has agreed to transfer to such third party
or third parties an aggregate of 271,323 shares of the Company’s Class A common stock held by the Sponsor immediately following
the consummation of an initial business combination if they continue to hold such Non-Redeemed Shares through the Special Meeting. The
Company recorded $879,900 related to the non redemption agreements as a contribution from Sponsor and an adjustment to accumulated deficit
in the statement of changes in stockholders’ deficit.
NOTE 5. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the founder shares, the representative
shares (see Note 7) as well as the holders of the Private Placement Units (and underlying securities) and any securities issued in payment
of working capital loans made to the Company, will be entitled to registration rights pursuant to an agreement to be signed prior to
or on the effective date of Initial Public Offering. The holders of a majority of these securities are entitled to make up to two demands
that the Company register such securities. Notwithstanding anything to the contrary, such holders may only make a demand registration
(i) on one occasion and (ii) during the five year period beginning on the effective date of the Initial Public Offering. 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 common stock are to be released from escrow. The holders of a majority of the Private Placement Units (and underlying
securities) and securities issued in payment of working capital loans (or underlying securities) can elect to exercise these registration
rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. Notwithstanding
anything to the contrary, such holders may participate in a “piggy-back” registration only during the seven-year period beginning
on the effective date of the Initial Public Offering. The Company will bear the expenses incurred in connection with the filing of any
such registration statements.
Underwriting Agreement
The Company granted the underwriters a 45-day
option from the date of Initial Public Offering to purchase up to 2,400,000 additional Units to cover over-allotments, if any, at the
Initial Public Offering price less the underwriting discounts and commissions. In connection with this issuance, the Company recorded
an over-allotment liability of $162,847. On May 12, 2021, the underwriters partially exercised the over-allotment option to purchase
an additional 1,309,719 Units. Upon partial exercise of the over-allotment option, an additional 32,743 private units were purchased
and $59,141 of the remaining overallotment liability was recorded to change in fair value of derivative liabilities in the accompanying
statement of operations. As a result of the underwriters’ election to partially exercise their over-allotment option, 272,570 Founder
Shares are no longer subject to forfeiture.
The underwriters were entitled to a cash underwriting
discount of: (i) one percent (1.00%) of the gross proceeds of the Initial Public Offering. The cash discount of $1,730,972 was paid in
May 2021 upon the closing of the IPO. In addition, the underwriters are entitled to a deferred fee of three percent (3.00%) of the gross
proceeds of the Initial Public Offering upon the closing of a Business Combination. The deferred fee after the IPO was consummated in
May 2021 was $5,192,916. The deferred fee will be paid in cash upon the closing of a Business Combination from the amounts held in the
Trust Account, subject to the terms of the underwriting agreement.
Right of First Refusal
For a period beginning on the closing of
this offering and ending 18 months from the closing of a business combination, we have granted EF Hutton, division of Benchmark
Investment, LLC a right of first refusal to acting as sole investment banker, sole book runner and/or sole placement for any and all
future private or public equity and debt offerings, including equity-linked financings during such period. In accordance with FINRA
Rule 5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more than three years from the effective date of the
registration statement of which this prospectus forms a part.
NOTE 6. WARRANTS
At June 30, 2023 and December 31, 2022, the Company
had 8,654,860 Public Warrants and 291,872 Private Placement Warrants outstanding, respectively.
On April 12, 2021, the SEC issued a statement
with respect to the accounting for warrants issued by special purchase acquisition companies. In light of the SEC Staff’s Statement,
the Company has determined that the fair value of the warrants should be classified as a warrant liability on the Company’s balance
sheets and subsequent changes to the fair value of the warrants will be recorded in the Company’s statements of operations.
Public Warrants may only be exercised for a whole
number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable
on the later of (a) the consummation of a Business Combination or (b) 12 months from the effective date of the registration statement
relating to the Initial Public Offering. No Public Warrants will be exercisable for cash unless the Company has an effective and current
registration statement covering the common stock issuable upon exercise of the Public Warrants and a current prospectus relating to such
common stock. Notwithstanding the foregoing, if a registration statement covering the common stock issuable upon the exercise of the
Public Warrants is not effective within 60 days from the consummation of a Business Combination, the 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 the Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities
Act. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis.
The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Company may call the warrants for redemption
(excluding the Private Placement Warrants), in whole and not in part, at a price of $0.01 per warrant:
|
● |
at any
time while the Public Warrants are exercisable, |
|
● |
upon not
less than 30 days’ prior written notice of redemption to each Public Warrant holder, |
| ● | if, and only if, the reported last sale price of the common stock equals or exceeds $18.00 per share, for any 20 trading days within a 30 trading day period ending on the third trading day prior to the notice of redemption to Public Warrant holders, and |
|
● |
if, and
only if, there is a current registration statement in effect with respect to the common stock underlying such warrants at the time
of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
The Private Placement Warrants are identical
to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the common
stock issuable upon the exercise of the Private Placement Warrants are not be transferable, assignable or salable until after the completion
of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless
basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Placement Warrants
are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants are redeemable by the Company
and exercisable by such holders on the same basis as the Public 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 common stock issuable upon exercise of the warrants
may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization,
merger or consolidation. However, the warrants will not be adjusted for issuances 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 respect to such warrants. Accordingly, the warrants may expire worthless.
The exercise price is $11.50 per share, subject
to adjustment as described herein. In addition, if (x) we issue additional shares of Class A common stock or equity-linked securities
for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue
price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith
by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any founder
shares held by our sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (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 our initial business combination on the date of the consummation of our initial business combination (net of redemptions),
and (z) the volume weighted average trading price of our Class A common stock during the 20 trading day period starting on the trading
day prior to the day on which we consummate our initial business combination (such price, the “Market Value”) is below $9.20
per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market
Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants”
will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
The accounting treatment of derivative financial
instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the
Company classified each Warrant as a liability at its fair value, and the Warrants were allocated a portion of the proceeds from the
issuance of the Units equal to their fair value determined by the Monte Carlo simulation. This liability is subject to re-measurement
at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair
value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date.
If the classification changes as a result of events during the period, the Warrants will be reclassified as of the date of the event
that causes the reclassification.
In the Company’s fiscal quarter ended on
June 30, 2021, the warrants detached from the units and started trading, therefore, since the fiscal quarter ended on June 30, 2021,
the trading price for the public warrants will be used as the fair value of the public warrants.
For the private warrants at June 30, 2023 and
December 31, 2022, the following assumptions were used to calculate the fair value:
|
|
June
30,
2023 |
|
|
December 31,
2022 |
|
Risk-free interest rate |
|
|
4.08 |
% |
|
|
3.98 |
% |
Expected life |
|
|
5.60 years |
|
|
|
5.35 years |
|
Expected volatility of underlying stock |
|
|
0 |
% |
|
|
0 |
% |
Dividends |
|
|
0 |
% |
|
|
0 |
% |
As of June 30, 2023 and December 31, 2022, the
derivative liability was $446,473 and $323,251, respectively. In addition, for the three and six months ended June 30, 2023 and 2022,
the Company recorded losses of $278,788 and $123,221, respectively, on the change in fair value of the derivative warrants which is included
in change in fair value of derivative liabilities in the accompanying statements of operations. For the three and six months ended June
30, 2022, the Company recorded gains of $806,665 and $3,604,499, respectively, on the change in fair value of the derivative warrants
which is included in change in fair value of derivative liabilities in the accompanying statements of operations.
NOTE 7. STOCKHOLDERS’ DEFICIT
Class A Common Stock — The
Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s
Class A common stock are entitled to one vote for each share. At June 30, 2023 and December 31, 2022, there were 3,803,156 and 4,123,552
shares of the Class A Common Stock, including 1,090,718 and 3,539,809, of shares of the Class A Common Stock subject to possible redemption,
that were classified as temporary equity in the accompanying balance sheets.
On November 4, 2022, the Company held a special
meeting in lieu of the 2022 annual meeting of stockholders (the “Meeting”). At the Meeting, the Company’s stockholders
approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter Amendment”)
to extend the date by which the Company must consummate its initial business combination from November 7, 2022 to May 7, 2023 or such
earlier date as determined by the Company’s board of directors (the “Board”). The Company filed the Charter Amendment
with the Secretary of State of the State of Delaware on November 4, 2022.
In connection with the November 4, 2022
Meeting, stockholders holding 13,769,910 shares of Class A common stock (“Public Shares”) exercised their
right to redeem such shares for a pro rata portion of the funds in the Company’s trust account (“Trust Account”).
As a result, approximately $143,462,997 (approximately $10.42 per Public Share) was removed from the Trust Account and paid to
such holders and approximately $36.9 million remains in the Trust Account after the redemption event. Following redemptions,
the Company has 3,539,809 Public Shares outstanding.
On May 5, 2023, the Company held a special meeting
of stockholders (the “Meeting”). At the Meeting, the Company’s stockholders approved an amendment to the Company’s
Charter Amendment to extend the date by which the Company must consummate its initial business combination from May 7, 2023 to February
7, 2024 or such earlier date as determined by the Board. The Company filed the Charter Amendment with the Secretary of State of the State
of Delaware on May 5, 2023.
In connection with the May 5, 2023 Meeting,
stockholders holding 2,449,091 shares of Class A common stock exercised their right to redeem such shares for a pro rata
portion of the funds in the Company’s trust account. As a result, approximately $26,538,036 (approximately $10.84 per
Public Share) was removed from the Trust Account and paid to such holders and approximately $11.6 million remains in the Trust
Account after the redemption event. Following redemptions, the Company has 1,090,718 Public Shares outstanding.
Class B Common Stock — The Company
is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of the Company’s
Class B common stock are entitled to one vote for each share. At June 30, 2023 and December 31, 2022, there were 2,371,813 and 4,500,528
shares of Class B common stock issued and outstanding held by the Sponsor, a consultant and the underwriter. On May 4, 2021, the Company
effected a cancellation agreement with the Sponsor, pursuant to which the Company cancelled 1,150,000 founder shares, resulting in the
Sponsor holding 4,600,000 founder shares (of which 600,000 of such shares being subject to forfeiture to the extent that the underwriter’s
over-allotment option is not exercised in full) so that the initial stockholders will own 20% of the issued and outstanding shares after
the Initial Public Offering (assuming the initial stockholders do not purchase any Public Shares in the Initial Public Offering and excluding
the Founder Shares). The Sponsor also transferred 70,000 Founder Shares to ARC Group Limited in consideration of services provided by
such party as financial advisor to the Company in connection with the Initial Public Offering. Shares and associated accounts have been
retroactively restated to reflect the surrender of 1,150,000 Class B ordinary shares. The Class B common stock will automatically convert
into shares of Class A common stock at the time of the consummation of our initial business combination, on a one-for-one basis. In connection
with April 21, 2023 Meeting, the Sponsor exchanged 2,128,715 Class B shares for 2,128,715 Class A shares.
Preferred Shares — The Company
is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share with such designation, rights and preferences
as may be determined from time to time by the Company’s Board of Directors. At June 30, 2023 and December 31, 2022, there were
no preferred shares issued or outstanding.
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for
its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale
of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of
observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1: |
Quoted prices in active
markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
|
Level 2: |
Observable inputs other
than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted
prices for identical assets or liabilities in markets that are not active. |
|
Level 3: |
Unobservable inputs based
on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about
the Company’s assets and liabilities that are measured at fair value at June 30, 2023 and December 31, 2022 and indicates the fair
value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description | |
Level | | |
June 30, 2023 | | |
December 31, 2022 | |
Assets: | |
| | |
| | |
| |
Marketable securities held in the Trust Account | |
| 1 | | |
$ | 11,868,068 | | |
$ | 37,570,177 | |
| |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | |
Convertible Note payable – Sponsor | |
| 3 | | |
$ | 1,021,911 | | |
$ | 1,037,272 | |
Warrant Liability – Private Placement Warrants | |
| 3 | | |
$ | 14,594 | | |
$ | 11,675 | |
Warrant Liability – Public Warrants | |
| 1 | | |
$ | 431,878 | | |
$ | 311,575 | |
The Public Warrants and the Private Placement
Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within liabilities in the balance sheets.
The Warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within
change in fair value of Warrant liabilities in the statement of operations.
Upon consummation of the Initial Public Offering,
the Company used a Monte Carlo simulation model to value the Public Warrants and a modified Black-Scholes model to value the Private
Placement Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of the Class
A Common Stock and one-half of one Public Warrant), (ii) the sale of the Private Placement Warrants and (iii) the issuance of the Class
B Common Stock, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated
to the Class A Common Stock subject to possible redemption (temporary equity), the Class A Common Stock (permanent equity) and the Class
B Common Stock (permanent equity) based on their relative fair values at the initial measurement date. At the initial measurement date,
the Warrants were classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs.
As of June 30, 2023 and December 31, 2022, the
Public Warrants were valued using the publicly available price for the Warrant and are classified as Level 1 on the Fair Value Hierarchy.
As of June 30, 2023 and December 31, 2022, the Company used a modified Black-Scholes model to value the Private Placement Warrants. The
Company relied upon the implied volatility of the Public Warrants and the implied volatilities of comparable companies and the closing
price as of June 30, 2023 and December 31, 2022 per Public Warrant to estimate the volatility for the Private Placement Warrants. As
of June 30, 2023 and December 31, 2022, the Private Placement Warrants were classified within Level 3 of the Fair Value Hierarchy at
the measurement dates due to the use of unobservable inputs.
As of June 30, 2023, the fair value of the
convertible note payable is the aggregate of (i) the liquidation-adjusted present value of the straight debt, discounted by a
six-month risk-free yield of 5.5% and spread on extrapolatable corporate bonds of 8.8% prevalent at the time of valuation; (ii) the
liquidation-adjusted fair value of the call option using the Black-Scholes method taking the stock price $10.74, six-month risk-free
yield of 5.5% and volatility of 23.7% observed in extrapolatable benchmarks, prevalent at the time of the valuation; and (iii) the
fair value of the warrants derived at $0.10 from the convertible units. The assumption for the probably of a business combination is
30%.
As of December 31, 2022, the fair value of
the convertible note payable is the aggregate of (i) the liquidation-adjusted present value of the straight debt, discounted by a
six-month risk-free yield of 4.7% and spread on extrapolatable corporate bonds of 10.2% prevalent at the time of valuation; (ii) the
liquidation-adjusted fair value of the call option using the Black-Scholes method taking the stock price $10.64, six-month risk-free
yield of 4.7% and volatility of 28.1% observed in extrapolatable benchmarks, prevalent at the time of the valuation; and (iii) the
fair value of the warrants derived at $0.10 from the convertible units. The assumption for the probably of a business combination is
30%.
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, except as
noted below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On August 2, 2023, the Company issued a promissory
note (the “August Working Capital Note”) in the principal amount of up to $150,000 to the Sponsor to fund the Company’s
ongoing working capital needs. The August Working Capital Note bears no interest and is due and payable upon the earlier to occur of (i)
the date on which the Company’s initial business combination is consummated and (ii) the liquidation of the Company.
On August
8, 2023, the Company, Maquia Merger Sub, Inc., a Delaware corporation and wholly owned direct subsidiary of the Company (“Merger
Sub”), and Immersed Inc., a Delaware corporation (“Immersed”), entered into a business combination agreement (the “Business
Combination Agreement”), pursuant to which the Company and Immersed agreed to combine. Pursuant to the Business Combination Agreement,
on the date (the “Closing Date”) of the closing (the “Closing”) of the transactions contemplated by the Business
Combination Agreement (the “Proposed Transactions”), Merger Sub, a newly formed, wholly-owned direct subsidiary of Maquia,
will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned direct subsidiary
of Maquia (the “Surviving Corporation”). The consideration is $150,000,000 and will be paid at closing in shares of Maquia
at a per share price equal to the then applicable redemption price.
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 in this section 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 financial statements and the
notes thereto contained elsewhere in this Report.
Recent Developments
On
August 8, 2023, the Company, Maquia Merger Sub, Inc., a Delaware corporation and wholly owned direct subsidiary of the Company (“Merger
Sub”), and Immersed Inc., a Delaware corporation (“Immersed”), entered into a business combination agreement (the “Business
Combination Agreement”), pursuant to which the Company and Immersed agreed to combine. Pursuant to the Business Combination Agreement,
on the date (the “Closing Date”) of the closing (the “Closing”) of the transactions contemplated by the Business
Combination Agreement (the “Proposed Transactions”), Merger Sub, a newly formed, wholly-owned direct subsidiary of Maquia,
will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned direct subsidiary
of Maquia (the “Surviving Corporation”). The consideration is $150,000,000 and will be paid at closing in shares of Maquia
at a per share price equal to the then applicable redemption price.
Results of Operations
We have not generated any
revenues to date, and we will not be generating any operating revenues until the closing and completion of our initial business combination.
Our entire activity up to June 30, 2023 was related to our formation, our initial public offering and, since the closing of our initial
public offering, a search for an initial business combination target. We have, and expect to continue to generate, non-operating income
in the form of interest income and unrealized gains on investments held in the trust account. We expect to continue 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 in connection with the search for an initial business combination target.
For the three months ended
June 30, 2023, we had net loss of $367,435, which primarily consisted of a change in fair value of the derivative warrant liabilities
of $278,788, general and administrative expenses of $352,826 and income tax expense of $73,933, partially offset by unrealized gains on
investments of $298,305 and a change in the fair value of the convertible note payable of $39,806.
For the three months ended
June 30, 2022, we had net income of $2,107,058, which primarily consisted of change in fair value of the derivative warrant liabilities
of $806,665, unrealized gain on fair value of the convertible note payable of $1,362,630 and unrealized gain on the Trust assets of $168,445, partially offset
by operating expenses of $230,682.
For the six months ended June
30, 2023, we had net loss of $89,175, which primarily consisted of change in fair value of the derivative warrant liabilities of $123,221,
general and administrative expenses of $522,819 and income tax expense of $164,622, partially offset by unrealized gains on investments
of $706,126 and a change in the fair value of the convertible note payable of $15,361.
For the six months ended
June 30, 2022, we had net income of $4,850,069, which primarily consisted of change in fair value of the derivative warrant liabilities
of $3,604,499, unrealized gain on fair value of the convertible note payable of $1,362,630 and unrealized gain on the Trust assets of $290,004, partially offset
by operating expenses of $407,064.
Liquidity and Capital Resources
Prior to the consummation
of our initial public offering, our only source of liquidity was the initial sale of the Founder Shares to our Sponsor and advances under
the promissory note with our sponsor.
Pursuant to our initial public
offering, which was consummated in May 2021, the Company sold 17,309,719 units, which includes underwriters’ over-allotment, at
a purchase price of $10.00 per unit generating gross proceeds to us in the amount of $173.1 million. Each unit consists of one share
of our Class A common stock, par value $0.0001 per share, and one-half of one public warrant, with each whole warrant
entitling the holder thereof to purchase one whole share of Class A common stock at a price of $11.50 per share, subject to adjustment.
Simultaneously with the closing
of our initial public offering, the Company consummated the private placement of an aggregate of 583,743 placement units, which includes
underwriters’ over-allotment, to our sponsor at a purchase price of $10.00 per placement unit, generating gross proceeds to us
in the amount of $5,837,430.
A portion of the proceeds
from the placement units was added to the proceeds from our initial public offering held in the trust account. If we do not complete
an initial business combination by the end of the Combination Period, the proceeds from the sale of the placement units held in the trust
account will be used to fund the redemption of the public shares (subject to the requirements of applicable law) and the placement units
will be worthless.
As indicated in the accompanying
financial statements, at June 30, 2023, we had $124,267 in cash, and a working capital deficiency of $2,906,917.
We presently have no operating
revenue. Through June 30, 2023, our liquidity needs were satisfied through receipt of $475,500 held outside of the trust account from
the sale of the placement warrants upon the closing of our initial public offering and various loans and advances from our sponsor as
described below. In the future, a portion of interest income on the funds held in the trust account may be released to us to pay tax obligations.
In order to finance transaction
costs in connection with an initial business combination, our sponsor or an affiliate of our sponsor, or our officers and directors may,
but are not obligated to, loan us funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be
evidenced by promissory notes. The notes would either be repaid upon consummation of an initial business combination, without interest,
or, at the lender’s discretion, up to $1,500,000 of notes and any other loans made by our sponsor or its affiliates (including
the loans made to effectuate extensions as described below), our officers and directors, or our company and its affiliates prior to or
in connection with an initial business combination may be converted upon consummation of an initial business combination into additional
placement units at a price of $10.00 per placement unit. In the event that an initial business combination does not close, we 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, we had no borrowings under the Working Capital
Loans.
On May 3, 2022 the Company
issued a convertible note payable (the “Note”) in the principal amount of $1,730,972 (the “Extension Payment”)
to the Sponsor in connection with the First Extension. The Note bears no interest and is due and payable upon the earlier to occur of
(i) the date on which the Company’s initial business combination is consummated and (ii) the liquidation of the Company. At the
election of the Sponsor, up to $1,500,000 of the unpaid principal amount of the Note may be converted into units of the Company (the “Conversion
Units”) with the total Conversion Units so issued shall be equal to: (x) the portion of the principal amount of the Note being converted
divided by (y) the conversion price of ten dollars ($10.00), rounded up to the nearest whole number of units. On August 4, 2022, the Company
amended and restated the Note (the “Amended Note”) in its entirety solely to increase the principal amount thereunder from
$1,730,972 to $3,461,944.
On November 14, 2022, the
Company issued a promissory note in the principal amount of up to $955,748 to the Sponsor as a result of stockholder approval of the Second
Extension and the Company’s implementation thereof, pursuant to which the Sponsor loaned to the Company up to an aggregate
of $955,748 (the “Second Extension Funds”) to deposit into the Company’s trust account for each share of the Company’s
Class A common stock that was not redeemed in connection with the Second Extension.
On May 22, 2023, the Company issued a promissory
note in the aggregate principal amount of up to $245,412 to the Sponsor in connection with the Third Extension, pursuant to which the
Sponsor agreed to loan to the Company up to $245,412 to deposit into the Company’s Trust Account for the Public Shares, for each
calendar month (commencing on May 7, 2023 and each month thereafter) until February 7, 2024, with each monthly contribution being $27,268
based on 1,090,718 Public Shares outstanding following the approval of the Third Extension.
On May 22, 2023, the Company also
issued a promissory note (the “May Working Capital Note”) in the principal amount of $250,000 to the Sponsor to fund the Company’s
ongoing working capital needs. The May Working Capital Note bears no interest and is due and payable upon the earlier to occur of (i)
the date on which the Company’s initial business combination is consummated and (ii) the liquidation of the Company. The outstanding
balance as of June 30, 2023 and December 31, 2022 was $117,536 and $0, respectively
On August 2, 2023, the Company issued a promissory note (the “August
Working Capital Note”) in the principal amount of up to $150,000 to the Sponsor to fund the Company’s ongoing working capital
needs. The August Working Capital Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which the
Company’s initial business combination is consummated and (ii) the liquidation of the Company.
We may also need to obtain
additional financing either to complete a business combination or because we become obligated to redeem a significant number of shares
of our Class A common stock upon completion of the business combination, in which case we may issue additional securities or incur
debt in connection with the business combination.
In connection with the Company’s
assessment of going concern considerations in accordance with FASB’s ASC Subtopic 205-40, “Presentation of Financial Statements
– Going Concern,” the Company has until February 7, 2024, to consummate an initial business combination. It is uncertain
that the Company will be able to consummate an initial business combination by this time. If an initial business combination is not consummated
by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, the Company may not have
sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these financial statements.
Management has determined that the liquidity condition and mandatory liquidation, should an initial business combination not occur, and
potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 7, 2024.
There is no assurance that
our plans to consummate an initial business combination will be successful by February 7, 2024. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies
We have identified the following
as our critical accounting policies:
Use of Estimates
The preparation of the financial
statements in conformity with GAAP requires our 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. Actual results could differ from those estimates.
Class A Common Stock Subject to Possible Redemption
We account for the Class A common
stock subject to possible redemption in accordance with the guidance enumerated in ASC 480, “Distinguishing Liabilities from
Equity.” Shares of the common stock subject to mandatory redemption are classified as a liability instrument and are measured
at fair value. Conditionally redeemable shares of the common stock (including shares of the common stock that feature redemption rights
that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the
issuer’s control) are classified as temporary equity. At all other times, shares of the common stock are classified as stockholders’
equity. The Class A common stock features certain redemption rights that are considered by the Company to be outside of our control and
subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2023 and December 31, 2022, the shares of the Class
A common stock subject to possible redemption in the amount of $11,899,026 and $37,247,257 are presented as temporary equity, outside
of the stockholders’ (deficit) equity section of our balance sheets.
Net income (loss) per share
We comply with accounting
and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per share of common stock is computed
by dividing net income by the weighted average number of shares of common stock outstanding for the period. We apply the two-class method
in calculating income (loss) per share of common stock. Accretion associated with the redeemable shares of Class A common stock is excluded
from income (loss) per common share as the redemption value approximates fair value.
The calculation of diluted
income (loss) per share of common stock does not consider the effect of the warrants issued in connection with the (i) initial public
offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants
are exercisable to purchase 8,946,731 shares of Class A common stock in the aggregate. As of June 30, 2023 and 2022, we did not have
any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the
earnings of the Company. As a result, diluted net income (loss) per common share is the same as basic net income per common share for
the periods presented.
Founder shares subject to
forfeiture are not included in weighted average shares outstanding until the forfeiture restrictions lapse.
Financial Instruments
We determine fair value based
on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When
considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable
and unobservable inputs, which are categorized in one of the following levels:
|
Level 1 Inputs: |
Unadjusted quoted prices
for identical assets or instruments in active markets. |
|
Level 2 Inputs: |
Quoted prices for similar
instruments in active markets and quoted prices for identical or similar instruments in markets that are not active and model derived
valuations whose inputs are observable or whose significant value drivers are observable. |
|
Level 3 Inputs: |
Significant inputs into
the valuation model are unobservable. |
We do not have any
recurring Level 2 assets or liabilities, see Note 9 of the financial statements for recurring Level 3 liabilities. The carrying
value of our financial instruments including its cash and accrued liabilities approximate their fair values principally because of
their short-term nature.
Derivative Financial Instruments
We evaluate our financial
instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with
ASC Topic 815, “Derivatives and Hedging.” Our derivative instruments are recorded at fair value as of the closing
date of our initial public offering (i.e., May 7, 2021) and re-valued at each reporting date, with changes in the fair value reported
in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based
on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet
date. We have determined that the public warrants and the placement warrants are derivative instruments. As the public warrants and the
placement warrants meet the definition of a derivative, the public warrants and the placement warrants are measured at fair value at
issuance and at each reporting date in accordance with ASC 820, “Fair Value Measurement,” with changes in fair value
recognized in the statement of operations in the period of change.
Warrant Instruments
We account for the public
warrants and the placement warrants issued in connection with our initial public offering and the private placement, respectively, in
accordance with the guidance contained in FASB ASC 815, “Derivatives and Hedging,” whereby under that provision the
public warrants and the placement warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly,
the Company classifies the warrant instrument as a liability at fair value and adjusts the instrument to fair value at each reporting
period. This liability will be re-measured at each balance sheet date until the public warrants and the placement warrants are exercised
or expire, and any change in fair value will be recognized in our statement of operations. The fair value of the public warrants and
the placement warrants will be estimated using an internal valuation model. Our valuation model utilizes inputs and other assumptions
and may not be reflective of the price at which they can be settled. Such warrant classification is also subject to re-evaluation at
each reporting period.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Not required for smaller
reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and
with the participation of our management, including our principal executive officer and principal financial and accounting officer, we
conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June
30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, and in light of
the material weakness in internal controls to properly evaluate complex equity transactions, our principal executive officer and principal
financial and accounting officer has concluded that during the period covered by this Quarterly Report on Form 10-Q, our disclosure controls
and procedures were not effective as of June 30, 2023.
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
Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our
internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2023 covered by this Quarterly Report
on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting,
with the exception of the below.
Our internal control over
financial reporting was not effective to properly evaluate complex equity transactions. This lack of control led to the improper accounting
classification of certain Class A common stock subject to redemption we issued in May 2021 as part of our Initial Public Offering which
are subject to redemption, which, due to its impact on our financial statements, we determined to be a material weakness in our internal
control over financial reporting. As a result of such re-classification, we restated our financial statements as of May 7, 2021 and as
of and for the period ended June 30, 2021.
Our management has expended,
and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control
over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements
and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure
that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
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 a smaller reporting company
under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. 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 on Form S-1 initially
filed with the SEC on February 16, 2021, as amended, and declared effective on May 4, 2021 (File No. 333-253167) (the “Registration
Statement”), (ii) Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on April 4, 2023, (iii)
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, June 30, 2022, September 30, 2022, and March 31, 2023,
as filed with the SEC on May 10, 2022, August 16, 2022, November 10, 2022 and May 22, 2023, respectively, and (iv) DEF 14A as filed with
the SEC on April 24, 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.
For risks relating to the Merger, please see the proxy statement/prospectus included in a Registration Statement on Form S-4 to be filed
by the Company in connection thereto, once available.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
(a) Sales of Unregistered Securities –
Not Applicable.
(b) Use of Proceeds - Not Applicable.
(c) Issuer Purchases of Securities
At the May Meeting, our stockholders approved
the Third Extension Charter Amendment. In connection with the stockholder vote to approve the Third Extension Charter Amendment, 2,449,091
Public Shares were redeemed at approximately $10.84 per share, resulting in a reduction of approximately $26.5 million in the amount
held in the Trust Account.
The following table contains monthly information
about the repurchases of our equity securities for the three months ended June 30, 2023:
Period | |
(a) Total number of shares (or units)
purchased | | |
(b) Average price paid per share
(or unit) | | |
(c) Total number of shares (or units)
purchased as part of publicly announced plans or programs | | |
(d) Maximum number (or approximate
dollar value) of shares (or units) that may yet be purchased under the plans or programs | |
April 1 – April 30, 2023 | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
May 1 – May 31, 2023 | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
June 1 – June 30, 2023 | |
| 2,449,091 | | |
$ | 10.84 | | |
| — | | |
| — | |
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.
No. |
|
Description of Exhibit |
2.1 |
|
Business Combination Agreement dated as of August 8, 2023, by and among Maquia Capital Acquisition Corporation, Maquia Merger Sub, Inc., and Immersed Inc. (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on August 10, 2023). |
10.1 |
|
May Working Capital Note, dated May 22, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on May 25, 2023). |
10.2 |
|
Extension Note, dated May 22, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on May 25, 2023). |
10.3 |
|
August Working Capital Note, dated August 2, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on August 8, 2023). |
10.4 |
|
Stockholder Support Agreement dated August 8, 2023, by and among Immersed, Inc., and the certain stockholders of Immersed and Maquia Capital Acquisition Corporation (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on August 10, 2023). |
10.5 |
|
Sponsor Support Agreement dated August 8, 2023, by and among Immersed, Inc., and the Sponsor and the directors and officers of Maquia Capital Acquisition Corporation (incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on August 10, 2023). |
31.1* |
|
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2* |
|
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1** |
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2** |
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS* |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
|
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
SIGNATURES
In accordance with the requirements
of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
MAQUIA
CAPITAL ACQUISITION CORPORATION |
|
|
|
Date:
August 23, 2023 |
By: |
/s/
Jeff Ransdell |
|
Name: |
Jeff
Ransdell |
|
Title: |
Chief
Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
Date:
August 23, 2023 |
By: |
/s/
Jeronimo Peralta |
|
Name: |
Jeronimo
Peralta |
|
Title: |
Chief Financial Officer |
|
|
(Principal Accounting
and Financial Officer) |
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In connection with the Quarterly Report on Form 10-Q of Maquia Capital Acquisition Corporation (the “Company”) for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Jeff Ransdell, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section 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 Maquia Capital Acquisition Corporation (the “Company”) for the quarter ended June 30, 2023, as
filed with the Securities and Exchange Commission (the “Report”), I, Jeronimo Peralta, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: