NOTES
TO CONDENSED FINANCIAL STATEMENTS
Note
1 — Organization and Business Operations
Sizzle
Acquisition Corp. was incorporated in Delaware on October 12, 2020. The Company is a blank check company formed for the purpose
of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business
combination with one or more businesses or entities.
As
of September 30, 2022, the Company had not commenced any operations. All activity for the period from October 12, 2020 (inception)
through September 30, 2022 related to the Company’s formation and the initial public offering (“IPO”), which is described
below and since the offering identifying and evaluating prospective acquisition targets for a Business Combination. The Company will
not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate
non-operating income in the form of interest income from the proceeds derived from the IPO.
The
Company’s Sponsor is VO Sponsor, LLC.
The
registration statement for the Company’s IPO was declared effective on November 3, 2021 (the “Effective Date”). On
November 8, 2021, the Company consummated its IPO of 15,500,000 Units at $10.00 per Unit (which included a partial exercise
of the underwriters’ over-allotment option), which is discussed in Note 3 and the sale of an aggregate of 770,000 shares
at a price of $10.00 per Private Placement Share in a private placement to the Sponsor and Cantor that closed simultaneously with
the IPO. On November 8, 2021, the underwriter exercised 2,000,000 of the full 2,025,000 over-allotment option available
to them and forfeited the remainder.
Transaction
costs amounted to $11,381,247 consisting of $2,700,000 of underwriting commissions, $8,150,000 of deferred underwriting
fees and $531,247 of other cash offering costs.
The
Company’s leadership has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale
of the Private Placement Shares, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account
(excluding taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination.
The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register
as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Upon the closing
of the IPO, management has agreed that an amount equal to at least $10.20 per Unit sold in the IPO, including the proceeds from
the sale of the Private Placement Shares, will be held in a Trust Account, located in the United States and invested only in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or
less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions
of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business
Combination and (ii) the distribution of the funds in the Trust Account, as described below.
Following
the closing of the IPO on November 8, 2021, $158,100,000 ($10.20 per Unit) from the net proceeds sold in the IPO, including
the proceeds of the sale of the Private Placement Shares, was deposited in the Trust Account.
The
Company will provide the public stockholders with the opportunity to redeem all or a portion of 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. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender
offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for
a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20 per Public Share, plus any pro rata
interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There
will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Public Shares
subject to redemption will be recorded at redemption value and classified as temporary equity upon the completion of the IPO in accordance
with the ASC Topic 480 “Distinguishing Liabilities from Equity.”
The
Company will proceed with a Business Combination if the Company seeks stockholder approval and a majority of the shares voted are voted
in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder
vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended
and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the SEC and file tender
offer documents with the SEC containing substantially the same information as would be included in a proxy statement prior to completing
a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder
approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to
the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination,
the Sponsor has agreed to vote its Founder Shares (as defined in Note 5), EarlyBirdCapital (“EBC”) Shares (as defined in
Note 7) and any Public Shares purchased during or after the IPO (a) in favor of approving a Business Combination and (b) not to redeem
any shares in connection with a stockholder vote to approve a Business Combination or sell any shares to the Company in a tender offer
in connection with a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the proposed transaction.
The
Company has until February 8, 2023, 15 months from the closing of the IPO (the “Combination Period”), which happened on November
8, 2021, to complete an initial Business Combination. If it has not completed an initial Business Combination by such date, the Company
will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem 100% of the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including any interest not previously released to it but net of taxes payable, divided by
the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders
(including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate,
subject (in the case of (ii) and (iii) above) to the obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law.
The
Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the Sponsor acquires Public Shares in or after the IPO, such Public Shares will be entitled
to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period.
In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be
less than the IPO price per Unit ($10.00).
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below $10.20 per Public Share, except
as to any claims by a third party who executed a valid and enforceable agreement with the Company waiving any right, title, interest
or claim of any kind they may have in or to any monies held in the Trust Account and except as to any claims under the Company’s
indemnity of the underwriters of IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event
that an executed waiver is deemed to be unenforceable against a third party, the insiders will not be responsible to the extent of any
liability for such third-party claims. The Company will seek to reduce the possibility that the insiders will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent
registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going
Concern, Liquidity and Capital Resources
As of September 30, 2022, the Company had $538,622 of cash in its operating
bank account and a working capital of $37,197 (excluding franchise and income taxes payable).
The
Company’s liquidity needs up to September 30, 2022 have been satisfied through a payment from the Sponsor of $25,000 (see
Note 5) for the Founder Shares and the loan under an unsecured promissory note from the Sponsor of $150,000 (see Note 5), which
was fully drawn down as of September 30, 2022. In addition, in order to finance transaction costs in connection with a Business Combination,
the Company’s Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not
obligated to, provide the Company Working Capital Loans, as defined below (see Note 5). As of September 30, 2022, there were no amounts
outstanding under any Working Capital Loans.
The Company has incurred and
expects to continue to incur significant costs in pursuit of its financing and acquisition plans. If the Company’s estimates of
the costs of identifying a target business, undertaking in-depth due diligence, and negotiating a Business Combination are less than the
actual amount necessary to do so, the Company may have insufficient funds to operate its business prior to an initial business combination.
The Company has until February 8, 2023, 15 months from the closing of the IPO, which happened on November 8, 2021, to consummate a Business
Combination (the “Combination Period”). It is uncertain that the Company will be able to consummate a Business Combination
within the Combination Period. If a Business Combination is not consummated within the Combination Period, there will be a mandatory liquidation
and subsequent dissolution. As a result of the above, in connection with the Company’s assessment of going concern considerations
in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s
Ability to Continue as a Going Concern,” management has determined that the liquidity conditions raise substantial doubt about the
Company’s ability to continue as a going concern through the earlier of liquidation deadline of February 8, 2023 and approximately
one year from the date of filing. These unaudited condensed financial statements do not include any adjustments relating to the recovery
of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a
going concern.
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic and Russia-Ukraine war and has concluded that while it
is reasonably possible that the virus and the war could have a negative effect on the Company’s financial position, and/or search
for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements.
The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Inflation
Reduction Act of 2022
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and
certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed
on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the
abuse or avoidance of the excise tax.
Any
redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise,
may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business
Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions
and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii)
the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued
not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content
of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the
redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction
in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
Comparative Amounts
As of December 31, 2021, amount
of Franchise tax payable was included in the total amount of Accrued offering costs and expenses.
Note
2 — Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with GAAP for interim financial information and
in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Certain information or footnote disclosures
normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and
regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary
for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying
unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a
fair presentation of the financial position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K
for the year ended December 31, 2021 as originally filed with the SEC on April 15, 2022, and on Form 10-K/A as filed with the SEC on
June 13, 2022, which contains the audited financial statements and notes thereto. The interim results for the three and nine months ended
September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future
interim periods.
Emerging
Growth Company Status
The
Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act,
and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in
its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote
on executive compensation and stockholder approval of any golden parachute payments not previously approved.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In
other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.
Use
of Estimates
The
preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates.
Cash
and Cash Equivalents
The Company considers all
short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company has $538,622
and $1,046,646 in cash as of September 30, 2022 and December 31, 2021, respectively. The Company did not have any cash equivalents
as of September 30, 2022 and December 31, 2021.
Investments
Held in Trust Account
As
of September 30, 2022 and December 31, 2021, the assets held in the Trust Account were held in U.S. Treasury Bills with a maturity of
185 days or less. During the nine months ended September 30, 2022, and year ended December 31, 2021, the Company did not withdraw any
of the interest income from the Trust Account to pay its tax obligations.
The
Company classifies its United States Treasury securities as held-to-maturity in accordance with FASB ASC Topic 320 “Investments
- Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to
hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost and adjusted for the amortization or accretion
of premiums or discounts.
A
decline in the market value of held-to-maturity securities below cost that is deemed to be other than temporary, results in an impairment
that reduces the carrying costs to such securities’ fair value. The impairment is charged to earnings and a new cost basis for
the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability
and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment
is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the
severity and the duration of the impairment, changes in value subsequent to year-end, forecasted performance of the investee, and the
general market condition in the geographic area or industry in which the investee operates.
Premiums
and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective-interest
method. Such amortization and accretion are included in the “interest income” line item in the statements of operations.
Interest income is recognized when earned.
Offering
Costs
The
Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering.”
Offering costs consist of underwriter, accounting, filing and legal expenses incurred through the balance sheet date that are directly
related to the IPO and were charged to temporary equity and stockholders’ (deficit) equity based on the underlying instruments’
relative fair value upon the completion of the IPO. If the IPO had proved to be unsuccessful, these deferred costs, as well as additional
expenses to be incurred, would have been charged to operations.
Fair
Value of Financial Instruments
The
fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet, primarily due to its short-term
nature.
Fair
Value Measurement
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s financial
instruments are classified as either Level 1, Level 2 or Level 3. These tiers include:
|
● |
Level
1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
|
● |
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted
prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;
and |
|
● |
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions,
such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
The
carrying value, excluding gross unrealized holding gain (loss) and fair value of held to maturity securities on September 30, 2022 and
December 31, 2021 are classified as Level 1 and are as follows:
| |
Carrying Value as of September 30, 2022 | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value as of September 30, 2022 | |
U.S. Treasury Securities | |
$ | 159,137,128 | | |
$ | — | | |
$ | 6,981 | | |
$ | 159,130,149 | |
| |
Carrying Value as of December 31, 2021 | | |
Gross Unrealized Gains | | |
Gross Unrealized Losses | | |
Fair Value as of December 31, 2021 | |
U.S. Treasury Securities | |
$ | 158,108,357 | | |
$ | 1,846 | | |
$ | — | | |
$ | 158,110,203 | |
Common
Stock Subject to Possible Redemption
The Company accounts for its
shares of common stock subject to possible redemption in accordance with guidance in ASC Topic 480 “Distinguishing Liabilities
from Equity.” Shares of common stock subject to mandatory redemption (if any) are classified as a liability instrument and are
measured at fair value. Conditionally redeemable shares of common stock (including shares that feature redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s
control) are classified as temporary equity. At all other times, shares of common stock are classified as stockholders’ (deficit)
equity. The Company’s shares of common stock sold in the IPO feature certain redemption rights that are considered to be outside
of the Company’s control and subject to the occurrence of uncertain future events.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of shares of redeemable common
stock to equal the redemption value at the end of each reporting period. Such changes are reflected in additional paid-in capital, or
in the absence of additional capital, in accumulated deficit.
All
of the 15,500,000 common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption
of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection
with the Business Combination and in connection with certain amendments to the Company’s second amended and restated certificate
of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in
ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified
outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity
instruments, are excluded from the provisions of ASC 480. Accordingly, as of September 30, 2022 and December 31, 2021, all shares of
common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ deficit equity section
of the Company’s balance sheets.
The
common stock subject to possible redemption reflected on the balance sheets as of September 30, 2022 and December 31, 2021 is reconciled
in the following table:
Gross Proceeds | |
$ | 155,000,000 | |
Less: | |
| | |
Fair Value of public warrants | |
| (6,062,414 | ) |
Common stock issuance costs | |
| (10,936,100 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 20,098,514 | |
Common stock subject to possible redemption (December 31, 2021) | |
$ | 158,100,000 | |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 728,453 | |
Common stock subject to possible redemption (September 30, 2022) | |
$ | 158,828,453 | |
Net
Income (Loss) Per Common Stock
The
Company applies the two-class method in calculating earnings per share, with one class being the redeemable shares and one class being
the non-redeemable shares. The contractual formula utilized to calculate the redemption amount approximates fair value. Changes in fair
value are not considered a dividend for the purposes of the numerator in the earnings per share calculation. Net income (loss) per common
stock is computed by dividing the pro rata net income (loss) between the redeemable common stock and the non-redeemable common stock
by the weighted average number of shares of common stock outstanding for each of the periods. The calculation of diluted income (loss)
per share of common stock does not consider the effect of the warrants issued in connection with the IPO since the exercise of the warrants
is contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
Reconciliation
of Net Income (Loss) per Common Stock
The
Company’s net income (loss) is adjusted for the portion of net income (loss) that is allocable to each class of common stock. The
allocable net income (loss) is calculated by multiplying net income (loss) by the ratio of weighted average number of shares outstanding
attributable to common stock to the total weighted average number of shares outstanding for the period. Accordingly, basic and diluted
income (loss) per common stock is calculated as follows:
| |
For the three months ended September 30, | | |
For the nine months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Redeemable Common Stock | |
| | |
| | |
| | |
| |
Net loss allocable to redeemable common stock | |
$ | (45,347 | ) | |
$ | — | | |
$ | (278,683 | ) | |
$ | — | |
Basic and diluted weighted average shares outstanding, redeemable common stock | |
| 15,500,000 | | |
| — | | |
| 15,500,000 | | |
| — | |
Basic and diluted net loss per common stock | |
$ | (0.00 | ) | |
$ | — | | |
$ | (0.02 | ) | |
$ | — | |
Non-Redeemable Common Stock | |
| | | |
| | | |
| | | |
| | |
Net loss allocable to non-redeemable common stock | |
$ | (18,345 | ) | |
$ | (1,446 | ) | |
$ | (112,743 | ) | |
$ | (9,030 | ) |
Basic and diluted weighted average shares outstanding, non-redeemable common stock | |
| 6,270,600 | | |
| 4,829,865 | | |
| 6,270,600 | | |
| 4,931,245 | |
Basic and diluted net loss per common stock | |
$ | (0.00 | ) | |
$ | 0.00 | | |
$ | (0.02 | ) | |
$ | 0.00 | |
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
including funds held in Trust on behalf of the Company, which, at times, may exceed the Federal Deposit Insurance Company coverage of
$250,000. The Company has not experienced losses on this account.
Income
Taxes
The Company accounts for income
taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities
and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September
30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective
tax rate was (186.01)% and 0.00% for the three months ended September 30, 2022 and 2021, respectively, and 56.40% and 0.00% for the nine
months ended September 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three
and nine months ended September 30, 2022 and 2021, due to changes in fair value in warrant liability and the valuation allowance on the
deferred tax assets.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently
not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The
Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation
by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus
of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect
that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recent
Accounting Pronouncements
The
Company’s management does not believe that there any recently issued, but not effective, accounting standards, which, if currently
adopted, would have a material effect on the Company’s financial statements.
Note
3 — Initial Public Offering
On
November 8, 2021, the Company consummated its IPO of 15,500,000 Units, which included the partial exercise of 2,000,000 of
the underwriters’ full 2,025,000 over-allotment option, at a price of $10.00 per Unit, generating gross proceeds
of $155,000,000. Each Unit consists of one share of common stock, par value $0.0001 per share and one-half of one redeemable
warrant. Each Public Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share.
Note
4 — Private Placement Shares
Simultaneously
with the closing of the IPO and the sale of the Units, the Sponsor, and Cantor have purchased an aggregate of 770,000 Private
Placement Shares at a price of $10.00 per Private Placement Share, for an aggregate purchase price of $7,700,000. Of the total Private
Placement Shares sold, 722,750 were purchased by the Sponsor and 47,250 were purchased by Cantor.
The
proceeds from the Private Placement Shares were added to the proceeds from the IPO held in the Trust Account. If the Company does not
complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Shares will be used
to fund the redemption of the Public Shares (subject to the requirements of applicable law). The Private Placement Shares are identical
to the shares in the Units sold to the public, except that the purchasers of the Private Placement Shares have also agreed not to transfer,
assign or sell any of the Private Placement Shares (except in connection with the same limited exceptions that the Founder Shares may
be transferred as described below) until after the completion of the Business Combination.
Note
5 — Related Party Transactions
Founder
Shares
On
November 20, 2020, the Sponsor paid $25,000 in consideration for 2,875,000 shares of common stock (the “Founder
Shares”). On March 2, 2021, the Company effected a stock dividend of 1.25 for 1 for each common stock held by the
Sponsor, resulting in the Sponsor holding an aggregate of 3,593,750 common stock, of which up to 468,750 shares were subject to
forfeiture. On September 15, 2021, the Company effected an additional 1.4 for 1 dividend, resulting in 5,031,250 Founder
Shares, of which up to 656,250 shares were subject to forfeiture to the extent that the underwriters’ over-allotment was
not exercised in full or in part, so that the Sponsor collectively owns shares equal to 35% of the shares issued in the IPO.
On
November 3, 2021, the Company effected an additional 1.08 for 1 dividend, and as a result, the Company’s initial stockholders
held 5,433,750 Founder Shares, which included an aggregate of up to 708,750 shares subject to forfeiture. On November 8, 2021 the
underwriter partially exercised their over-allotment option and purchased an additional 2,000,000 Units out of the 2,025,000 available
to them and forfeited the remainder. As a result, 8,750 Founder Shares were forfeited resulting in aggregate Founder Shares outstanding
of 5,425,000.
The
Company’s Sponsor, officers and directors have agreed not to transfer, assign or sell any Founder Shares or Private Placement Shares
until the date of the consummation of our initial Business Combination. The limited exceptions include transfers, assignments or sales
to the Company’s or the Sponsor’s officers, directors, consultants or their affiliates, to an entity’s members upon
its liquidation, to relatives and trusts for estate planning purposes, by virtue of the laws of descent and distribution upon death,
pursuant to a qualified domestic relations order, to the Company for no value for cancellation in connection with the consummation of
our initial Business Combination, or in connection with the consummation of a Business Combination at prices no greater than the price
at which the shares were originally purchased, in each case where the transferee agrees to be bound by these transfer restrictions.
Promissory
Note — Related Party
On
December 19, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant
to which the Company may borrow up to an aggregate principal amount of $150,000. The Promissory Note is non-interest bearing and
expired upon the consummation of the IPO. As of September 30, 2022, and December 31, 2021, the Company had $153,127 outstanding
under the Promissory Note, which is now without fixed terms and due on demand. The Sponsor acknowledged that the Company is not in default.
Administrative
Support Agreement
The
Company has agreed, commencing on the effective date of the IPO through the earlier of the Company’s consummation of a Business
Combination and its liquidation, to pay an affiliate of the Company’s management a total of $10,000 per month for office space,
utilities and secretarial support. For the three and nine months ended September 30, 2022, $30,000 and $90,000, respectively, had
been incurred and paid. For the three and nine months ended September 30, 2021, no administrative fees had been recorded or paid.
Related
Party Loans
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or certain of the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required. Each loan would
be evidenced by promissory note. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s
discretion, up to $1,500,000 of notes may be converted upon completion of a Business Combination into Units at a price of $10.00 per
unit. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account
to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of
September 30, 2022 and December 31, 2021, no such Working Capital Loans were outstanding.
Note
6 — Commitments and Contingencies
Registration
Rights
The
holders of the Founder Shares and EBC Shares, as well as the holders of any warrants the Company’s Sponsor, officers, directors
or their affiliates may be issued in payment of working capital loans made to the Company (and all underlying securities), will be entitled
to registration rights pursuant to an agreement to be signed prior to or on the effective date of the offering. The holders of a majority
of these securities are entitled to make up to two demands that we register such securities. The holders of the majority of the Founder
Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of
common stock are to be released from lock up. The holders of a majority of the Founder Shares, EBC Shares, and warrants issued to the
Sponsor, officers, directors or their affiliates in payment of working capital loans made to the Company (or underlying securities) can
elect to exercise these registration rights at any time after consummation of the Business Combination. Notwithstanding anything to the
contrary, EBC and Cantor may only make a demand on one occasion and only during the five-year period beginning on the Effective
Date of the registration statement of which the prospectus forms a part. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to consummation of the Business Combination; provided, however,
that EBC and Cantor may participate in a “piggy-back” registration only during the seven-year period beginning on the
Effective Date of the registration statement of which this prospectus forms a part. The Company will bear the expenses incurred in connection
with the filing of any such registration statements.
Underwriting
Agreement
The
Company granted the underwriters a 45-day option from the date of IPO to purchase up to 2,025,000 additional Units to
cover over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On November 8, 2021, the underwriters
partially exercised this option and purchased an additional 2,000,000 Units and forfeited the remaining 25,000 available.
The
underwriters received a cash underwriting discount of 2.0% of the gross proceeds of the IPO, or $2,700,000 (which is capped
at $2,700,000 with the remaining $400,000 deferred to the close of the Business Combination with the rest of the deferred underwriting
discount due to the underwriters’ partial over-allotment exercise).
The
underwriters will be entitled to a cash underwriting discount of 5.0% of the gross proceeds of the IPO, or $6,750,000 (or up
to $8,150,000, inclusive of the $400,000 deferral noted above, if the underwriters’ over-allotment is exercised in full)
upon consummation of the Business Combination.
The
underwriters agreed to reimburse the Company a portion of expenses related to the IPO. A total of $543,450 was reimbursed to the
Company by the underwriters in pursuant of this agreement.
Consulting
and Advisory Services Fee
The
Company engaged Cohen & Company Capital Markets (“CCM”), an affiliate of a passive member of the Sponsor, to provide
consulting and advisory services in connection with the IPO, for which it received an advisory fee equal to 0.6% of the aggregate proceeds
of the IPO, net of underwriter’s expenses. This fee was deducted from the underwriting fees paid to Cantor as described above.
Affiliates of CCM have and manage investment vehicles with a passive investment in the Sponsor. CCM agreed to defer the portion of its
fee resulting from exercise of the underwriters’ over-allotment option until the consummation of our initial Business Combination.
The Company has also engaged CCM as an advisor in connection with our initial Business Combination for which it will earn an advisory
fee of 1.5% of the proceeds of the IPO payable at closing of the Business Combination, which will be deducted from the deferred underwriting
fee paid to Cantor as described above. CCM’s fees will be offset from the underwriting fees described above and will not result
in any incremental fees to the Company.
CCM
is engaged to represent the Company’s interests only and did not participate in the IPO as defined in FINRA Rule 5110(j)(16); it
is acting as an independent financial adviser as defined in FINRA Rule 5110(j)(9). As such, CCM did not act as an underwriter in connection
with the IPO, it did not identify or solicit potential investors in the IPO or otherwise be involved in the distribution of the IPO.
Note
7 — Stockholders’ Deficit
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 and
with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of
directors. As of September 30, 2022 and December 31, 2021, there was no preferred stock issued or outstanding.
Common
Stock — The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per
share. As of September 30, 2022 and December 31, 2021, there were 21,770,600 shares of common stock issued and outstanding,
which includes 5,425,000 Founder Shares, 75,600 EBC Shares, 770,000 Private Placement Shares and 15,500,000 Public
Shares.
EBC
Shares — On October 12, 2020, the Company issued to the designees of EBC 100,000 EBC Shares for nominal consideration. On
March 2, 2021, the Company effected a 1.25 for 1 dividend resulting in 125,000 EBC Shares, 25,000 of which EBC
returned to the Company, at no cost, resulting in 100,000 EBC shares. On March 9, 2021, the Company issued to EBC and
its designees an additional 100,000 EBC Shares at a price of $0.0001 per share, resulting in 200,000 EBC Shares
being outstanding.
On
July 12, 2021, EBC returned 150,000 EBC Shares to the Company, at no cost, which were subsequently cancelled. This return
resulted in EBC shares outstanding of 50,000 pre-dividend. The number of EBC Shares outstanding increased to 70,000 after
giving effect to the stock dividend of 1.4 for 1 on September 15, 2021, which is what was outstanding as of September 30, 2021. On November
3, 2021, the Company issued a stock dividend of 1.08 for 1, which resulted in 75,600 EBC Shares outstanding.
The
Company accounted for the EBC Shares as a charge directly to stockholders’ deficit. The Company estimated the fair value of representative
shares to be $870.
The
holders of the EBC Shares have agreed not to transfer, assign or sell any such shares without our prior consent until the completion
of our initial Business Combination. In addition, the holders of the EBC Shares have agreed (i) to waive their conversion rights (or
right to participate in any tender offer) with respect to such shares in connection with the completion of our initial Business Combination
and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if we fail to complete
our initial Business Combination within the Combination Period.
Public
Warrants — As of September 30, 2022 and December 31, 2021, there were 7,750,000 Public Warrants issued
or outstanding. The Public Warrants will become exercisable 30 days after the completion of a Business Combination. No warrants will
be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable
upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration
statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within a specified period
following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless
basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that
exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public
Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Redemption
of warrants
The
Company may redeem the Public Warrants:
|
● |
in
whole and not in part; |
|
● |
at
a price of $0.01 per warrant; |
|
● |
at
any time after the warrants become exercisable; |
|
● |
if,
and only if, the reported last sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock
dividends, reorganizations and recapitalizations) for any 20 trading days within a 30-trading day period commencing once the warrants
become exercisable and ending on the third business day prior to the notice of redemption to the warrant holders; |
|
● |
if,
and only if, there is a current registration statement in effect with respect to the shares of common stock underlying the warrants |
If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the
Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares
of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend,
or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for
issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle
the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the
funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they
receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly,
the warrants may expire worthless.
In
addition, if (x) the Company issues additional common stock or equity-linked securities for capital raising purposes in connection
with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per common stock (with such
issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any
such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates,
as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity
proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination
(net of redemptions), and (z) the volume weighted average trading price of its common stock during the 20 trading day period starting
on the trading day prior to the day on which the Company consummates its Business Combination (such price, the “Market Value”)
is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater
of (i) Market Value or (ii) the price at which the Company issue the additional shares of common stock or equity-linked securities.
Note
8 — Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up through the date that unaudited condensed financial statements were
issued. Based upon this review, except as disclosed below, the Company did not identify any subsequent events that would have required
adjustment or disclosure in the unaudited condensed financial statements.
On October 24, 2022, the Company,
entered into an Agreement and Plan of Merger (the “Merger Agreement”) with European Lithium Limited, an Australian Public
Company limited by shares (“EUR”), European Lithium AT (Investments) Limited, a BVI business company incorporated in the British
Virgin Islands and a direct, wholly-owned subsidiary of EUR (the “European Lithium”), Critical Metals Corp., a BVI business
company incorporated in the British Virgin Islands (“Pubco”) and Project Wolf Merger Sub Inc., a Delaware corporation and
wholly owned subsidiary of Pubco, pursuant to which, upon closing of the Business Combination (the “Closing”), Pubco will
acquire all of the issued and outstanding capital shares and equity interests of the European Lithium from EUR in exchange for ordinary
shares of Pubco, European Lithium shall become a wholly owned subsidiary of Pubco and EUR shall become a shareholder of Pubco (the “Share
Exchange”); and immediately thereafter Merger Sub will merge with and into the Company, with the Company continuing as the surviving
entity and wholly owned subsidiary of Pubco.
Further, (a) the Company’s
issued and outstanding shares common stock immediately prior to the effective time of the Merger, will be cancelled in exchange for the
right of the holder thereof to receive one ordinary share, par value $0.0001 per share, of Pubco (“Ordinary Share”); (b) all
of the outstanding Public Warrants of the Company, entitling the holder thereof to purchase one share of common stock at an exercise price
of $11.50 per share will be converted into the right to receive a warrant to purchase one Ordinary Share at the same exercise price, being
an exercise price of $11.50 per share, and (c) EUR will receive the number of Ordinary Shares in the Share Exchange that shall have an
aggregate value equal to the Closing Share Consideration (as defined in the Merger Agreement) consisting of $750,000,000 divided by the
redemption amount per share of common stock payable to the Company’s public stockholders that elect to redeem common stock in connection
with the Closing, and, subject to applicable terms and conditions, earnout consideration of up to an additional 10% of such Closing Share
Consideration, in each case subject to adjustment as set forth in the Merger Agreement, and all upon the terms and subject to the conditions
set forth in the Merger Agreement.