0001564590-22-028971.txt : 20220810 0001564590-22-028971.hdr.sgml : 20220810 20220810170822 ACCESSION NUMBER: 0001564590-22-028971 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 51 CONFORMED PERIOD OF REPORT: 20220630 FILED AS OF DATE: 20220810 DATE AS OF CHANGE: 20220810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Breeze Holdings Acquisition Corp. CENTRAL INDEX KEY: 0001817640 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39718 FILM NUMBER: 221152655 BUSINESS ADDRESS: STREET 1: 955 W. JOHN CARPENTER FWY. STREET 2: STE. 100-929 CITY: IRVING STATE: TX ZIP: 75039 BUSINESS PHONE: 619-500-7747 MAIL ADDRESS: STREET 1: 955 W. JOHN CARPENTER FWY. STREET 2: STE. 100-929 CITY: IRVING STATE: TX ZIP: 75039 10-Q 1 brez-10q_20220630.htm 10-Q brez-10q_20220630.htm
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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, 2022

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the transition period from                  to                   

 

Commission File No. 001-39718

 

BREEZE HOLDINGS ACQUISITION CORP.

(Exact name of registrant as specified in its charter)

 

Delaware

 

85-1849315

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.) 

 

955 W. John Carpenter Freeway, Suite 100-929

 

 

Irving, TX

 

75039

(Address of principal executive offices)

 

(Zip Code)

 

(619) 500-7747

(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

Common Stock, $0.0001 par value per share

 

BREZ

 

The Nasdaq Stock Market LLC

Rights exchangeable into one-twentieth of one share of common stock

 

BREZR

 

The Nasdaq Stock Market LLC

Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50 per whole share

 

BREZW

 

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 1, 2022 there were 7,907,013 shares of the registrant’s common stock, $0.0001 per share, issued and outstanding.

 

 

 

 

 


 

BREEZE HOLDINGS ACQUISITON CORP.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS

 

 

 

Page

Part I. Financial Information

 

2

Item 1. Condensed Financial Statements

 

2

Condensed Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021

 

2

Unaudited Condensed Statements of Operations for the Three and Six Months ended June 30, 2022 and 2021

 

3

Unaudited Condensed Statements of Changes in Stockholders’ Deficit for the Six Months ended June 30, 2022 and 2021

 

4

Unaudited Condensed Statements of Cash Flows for the Six Months ended June 30, 2022 and 2021

 

5

Notes to Unaudited Condensed Financial Statements

 

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

29

Item 4. Controls and Procedures

 

29

Part II. Other Information

 

31

Item 1. Legal Proceedings

 

31

Item 1A. Risk Factors

 

31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

31

Item 3. Defaults Upon Senior Securities

 

31

Item 4. Mine Safety Disclosures

 

31

Item 5. Other Information

 

31

Item 6. Exhibits

 

32

Part III. Signatures

 

33

 

 

 

1


 

 

PART I - FINANCIAL INFORMATION

Item 1. INTERIM FINANCIAL STATEMENTS

BREEZE HOLDINGS ACQUISITION CORP.

CONDENSED BALANCE SHEETS

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

1,239

 

 

$

5,403

 

Prepaid expenses

 

 

168,369

 

 

 

124,157

 

Total Current Assets

 

 

169,608

 

 

 

129,560

 

Cash and marketable securities held in Trust Account

 

 

49,391,071

 

 

 

117,931,556

 

Total Assets

 

$

49,560,679

 

 

$

118,061,116

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

857,524

 

 

$

598,447

 

Note payable due Sponsor

 

 

886,975

 

 

 

 

Due to Sponsor

 

 

2,321,122

 

 

 

1,198,315

 

Franchise taxes payable

 

 

99,178

 

 

 

200,000

 

Total Current Liabilities

 

 

4,164,799

 

 

 

1,996,762

 

Warrant liabilities

 

 

2,762,250

 

 

 

7,108,500

 

Total Liabilities

 

 

6,927,049

 

 

 

9,105,262

 

Commitments

 

 

 

 

 

 

 

 

Common stock subject to possible redemption, 4,767,013 and 11,500,000 shares at redemption value as of June 30, 2022 and December 31, 2021, respectively

 

 

49,338,585

 

 

 

117,875,000

 

Stockholders’ Deficit

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 1,000,000 authorized; none issued and

   outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 100,000,000 shares authorized;

3,140,000 shares issued and outstanding as

of June 30, 2022 and December 31, 2021 (excluding common stock subject to possible redemption, 4,767,013 and 11,500,000 shares at redemption value as of June 30, 2022 and December 31, 2021, respectively)

 

 

315

 

 

 

315

 

Additional paid-in capital

 

 

 

 

Accumulated deficit

 

 

(6,705,270

)

 

 

(8,919,461

)

Total Stockholders’ Deficit

 

 

(6,704,955

)

 

 

(8,919,146

)

TOTAL LIABILITIES, COMMON STOCK SUBJECT TO

   POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT

 

$

49,560,679

 

 

$

118,061,116

 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.  

 

2


 

 

BREEZE HOLDINGS ACQUISITION CORP.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

Three Months

Ended

June 30,

 

 

Six Months

Ended

June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating and formation costs

$

101,896

 

 

$

458,673

 

 

$

1,086,990

 

 

$

679,021

 

Loss from operations

 

101,896

 

 

 

458,673

 

 

 

1,086,990

 

 

 

679,021

 

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

209

 

 

 

 

 

 

687

 

Unrealized gain (loss) on marketable securities held in Trust Account

 

66,260

 

 

 

(2,597

)

 

 

119,144

 

 

 

15,591

 

Change in fair value of warrant liabilities

 

846,250

 

 

 

(1,124,000

)

 

 

4,346,250

 

 

 

4,854,000

 

Total other income (loss)

 

912,510

 

 

 

(1,126,388

)

 

 

4,465,394

 

 

 

4,870,278

 

Net income (loss)

$

810,614

 

 

$

(1,585,061

)

 

$

3,378,404

 

 

$

4,191,257

 

Basic and diluted weighted average shares outstanding

 

10,496,623

 

 

 

14,625,000

 

 

 

12,556,866

 

 

 

14,625,000

 

Basic and diluted net income (loss) per share of Common Stock

$

0.08

 

 

$

(0.11

)

 

$

0.27

 

 

$

0.29

 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

3


 

BREEZE HOLDINGS ACQUISITION CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE SIX MONTHS ENDED JUNE 30, 2022 and 2021

(UNAUDITED)

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance – January 1, 2022

 

 

3,140,000

 

 

$

315

 

 

$

 

 

$

(8,919,461

)

 

$

(8,919,146

)

Accretion of Common Stock to redemption value

 

 

 

 

 

 

 

 

 

 

 

(1,150,000

)

 

 

(1,150,000

)

Net income

 

 

 

 

 

 

 

 

 

 

 

2,567,790

 

 

 

2,567,790

 

Balance – March 31, 2022

 

 

3,140,000

 

 

$

315

 

 

$

 

 

$

(7,501,671

)

 

$

(7,501,356

)

Accretion of Common Stock to redemption value

 

 

 

 

 

 

 

 

 

 

 

(14,213

)

 

 

(14,213

)

Net income

 

 

 

 

 

 

 

 

 

 

 

810,614

 

 

 

810,614

 

Balance – June 30, 2022

 

 

3,140,000

 

 

 

315

 

 

 

 

 

 

(6,705,270

)

 

 

(6,704,955

)

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance – January 1, 2021

 

 

3,125,000

 

 

$

313

 

 

$

 

 

$

(15,224,285

)

 

$

(15,223,972

)

Net income

 

 

 

 

 

 

 

 

 

 

 

5,776,318

 

 

 

5,776,318

 

Balance – March 31, 2021

 

 

3,125,000

 

 

$

313

 

 

$

 

 

$

(9,447,967

)

 

$

(9,447,654

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,585,061

)

 

 

(1,585,061

)

Balance – June 30, 2021

 

 

3,125,000

 

 

$

313

 

 

$

 

 

$

(11,033,028

)

 

$

(11,032,715

)

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

 

4


 

 

BREEZE HOLDINGS ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Six

Months

Ended

June 30,

2022

 

 

Six

Months

Ended

June 30,

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

3,378,404

 

 

$

4,191,257

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities held in Trust Account

 

 

(119,144

)

 

 

(15,591

)

Change in fair value of warrant liabilities

 

 

(4,346,250

)

 

 

(4,854,000

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other liabilities

 

 

(44,212

)

 

 

(110,000

)

Accounts payable and accrued expenses

 

 

259,077

 

 

 

185,526

 

Franchise taxes payable

 

 

(100,822

)

 

 

76,022

 

Current portion of long-term liabilities

 

 

(27,193

)

 

 

 

Net cash used in operating activities

 

 

(1,000,140

)

 

 

(526,786

)

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Investment of cash in Trust Account

 

 

(1,150,000

)

 

 

 

 

Cash withdrawn from Trust Account to redeeming shareholders

 

 

69,700,629

 

 

 

 

Cash withdrawn from Trust Account to pay franchise and income taxes

 

 

109,000

 

 

 

 

Net cash provided by investing activities

 

 

68,659,629

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from short-term working capital loan - related party

 

 

886,975

 

 

 

 

Proceeds from promissory note - related party

 

 

1,150,000

 

 

 

 

Redemption of common stock

 

 

(69,700,628

)

 

 

 

Net cash used in financing activities

 

 

(67,663,653

)

 

 

 

Net Change in Cash

 

 

(4,164

)

 

 

(526,786

)

Cash – Beginning of period

 

 

5,403

 

 

 

693,818

 

Cash – End of period

 

$

1,239

 

 

$

167,032

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

Accretion of Common Stock to redemption value

 

$

1,164,213

 

 

$

 

 

The accompanying notes are an integral part of the unaudited condensed financial statements.

5


 

BREEZE HOLDINGS ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

Note 1 — Description of Organization and Business Operations

Breeze Holdings Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on June 11, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of June 30, 2022, the Company had not commenced any operations. All activity through June 30, 2022 relates to the Company’s formation, the Initial Public Offering (“Initial Public Offering”), which is described below, and, after the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering and from changes in the fair value of its warrant liability.

The registration statement for the Company’s Initial Public Offering was declared effective on November 23, 2020. On November 25, 2020, the Company consummated the Initial Public Offering of 11,500,000 units (the “Units” and, with respect to the shares of common stock included in the Units sold, the “Public Shares”), generating gross proceeds of $115,000,000, which is described in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 5,425,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Breeze Sponsor, LLC, a Delaware limited liability company (the “Sponsor”) and I-Bankers Securities, Inc, generating gross proceeds of $5,425,000, which is described in Note 4.

Following the closing of the Initial Public Offering on November 25, 2020, an amount of $115,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and $1,725,000 from the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested 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 of 1940, as amended (the “Investment Company Act”), as determined by the Company, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the Trust Account to the Company’s stockholders, as described below.

Transaction costs incurred in connection with the Initial Public Offering amounted to $4,099,907, consisting of $2,300,000 of underwriting fees, $1,322,350 of representative share offering costs, and $477,557 of other offering costs. As of June 30, 2022, cash of $1,239 was held outside of the Trust Account and was available for working capital purposes.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete an initial Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable) at the time of the agreement to enter into the 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.

6


 

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. 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 stockholders will be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.15 per 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. The per-share amount to be distributed to stockholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

 

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 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 Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”) and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased by it during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares, regardless of whether they vote for or against a 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 Certificate of Incorporation 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 10% or more of the Public Shares, without the Company’s prior written consent.

 

The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by November 25, 2021 (which can be extended up to 6 months) and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, 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.           

 

On November 22, 2021, the Company announced that its sponsor, Breeze Sponsor, LLC, timely deposited an aggregate of $1,150,000 (the “Extension Payment”), representing $0.10 per public share, into the Trust Account to extend the date by which the Company has to consummate a business combination from November 25, 2021 to February 25, 2022. The Sponsor loaned the Extension Payment to the Company in exchange for a promissory note in the amount of the Extension Payment. The loan under the promissory note is non-interest bearing and will be repaid upon the consummation of a business combination. The Company’s stockholders are not entitled to vote on or redeem their shares in connection with such extension.

 

On February 22, 2022, the Company announced that its sponsor, Breeze Sponsor, LLC, timely deposited an aggregate of $1,150,000 (the “Second Extension Payment”), representing $0.10 per public share, into the Trust Account to extend the date by which the Company has to consummate a business combination from February 25, 2022 to May 25, 2022. The Sponsor loaned the Second Extension Payment to the Company in exchange for a promissory note in the amount of the Second Extension Payment. The loan under the promissory note is non-interest

7


 

bearing and will be repaid upon the consummation of a business combination. The Company’s stockholders are not entitled to vote on or redeem their shares in connection with such extension.

 

On May 5, 2022, the Company held a stockholders’ meeting at which a proposal to approve the extension of time to consummate the closing of a Business Combination Agreement to September 26, 2022 was approved. The Company provided its stockholders with the opportunity to redeem all or a portion of their Public Shares at the time of this stockholders’ meeting. The stockholders who elected to redeem their shares did so for a pro rata portion of the amount then in the Trust Account ($10.35 per 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. In connection with the extension proposal, 6,732,987 shares of the Company’s common stock were redeemed for $69,700,628, (the “Redemption”), with 7,907,013 shares of common stock remaining outstanding after Redemption; 4,767,013 of the 7,907,013 shares of common stock remaining outstanding after redemption (the “Public Shares”) are owned by the public stockholders. The public stockholders will continue to have the opportunity to redeem all or a portion of their Public Shares upon the completion of an initial business combination at a per-share price, payable in cash, equal to the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the initial business combination, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares, subject to the limitations described herein.

 

Following the Redemption, approximately $49.3 million remains on deposit in our Trust Account. 

 

The Company will have until September 26, 2022 to complete a Business Combination (the “Combination Period”). 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 not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), 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 liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

 

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 third party 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 (1) $10.35 per Public Share or (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and will not apply 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”). Moreover, 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 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.

 

Proposed Business Combination with D-Orbit S.p.A.

 

On January 26, 2022, the Company (or “Breeze”), entered into a Business Combination Agreement (as it may be amended, supplemented or otherwise modified from time to time, the “Combination Agreement”), by and among Breeze, D-Orbit S.p.A, an Italian Società per azioni (“D-Orbit”), D-Orbit S.A., a newly-formed joint stock company (société anonyme) governed by the laws of the Grand Duchy of Luxembourg (“Holdco”), Lift-Off Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Seraphim Space (Manager) LLP, a UK limited liability partnership.

8


 

Upon consummation of the transactions contemplated by the Combination Agreement (the “Business Combination”), Holdco would become the NASDAQ-listed parent company of both Breeze and D-Orbit, with the former Breeze stockholders (including the Sponsor) owning pro forma approximately 11% and former D-Orbit shareholders owning approximately 84% of the Holdco Shares outstanding immediately after closing, assuming no redemptions.

 

The Combination Agreement provides that, on the terms and subject to the conditions contained therein, (i) each of the D-Orbit shareholders will enter into a Contribution and Exchange Agreement with D-Orbit and Holdco (each an “Exchange Agreement”), pursuant to which each such shareholder will agree to contribute all of their shares of D-Orbit (“D-Orbit Shares”) to Holdco, resulting in D-Orbit becoming a subsidiary of Holdco, in exchange for a number of ordinary shares of Holdco (“Holdco Shares”) equal to (x) the number of D-Orbit Shares contributed by such shareholder times (y) the Exchange Ratio (as defined below; such exchange, the “Exchange,” and the effective time of the Exchange, the “Exchange Effective Time”), and (ii) following the consummation of the Exchange, Merger Sub will merge with and into Breeze, with Breeze becoming a wholly-owned subsidiary of Holdco (the “Merger”), and each share of common stock, par value $0.0001 per share, of Breeze (“Breeze Common Stock”) will be converted into one Holdco Share.

 

In accordance with the terms and subject to the conditions of the Combination Agreement,

 

 

Each issued and outstanding D-Orbit Share contributed to Holdco pursuant to the applicable Exchange Agreement will entitle the contributing D-Orbit shareholder to receive a number of Holdco Shares equal to the quotient of (x) $1.2 billion divided by (y) the number of D-Orbit Shares outstanding immediately before the Exchange Effective Time, assuming the exercise of all vested options to acquire D-Orbit Shares then outstanding, divided by (z) $10 (the “Exchange Ratio”);

 

 

Each share of Breeze Common Stock issued and outstanding immediately prior to the time the Merger becomes effective (the “Merger Effective Time”) (other than shares held in treasury by Breeze, which will be cancelled for no consideration) will be converted into one Holdco Share;

 

 

Each outstanding right to acquire 1/20th of a share of Breeze Common Stock (a “Breeze Right”) will be converted into the right to receive 1/20th of a Holdco Share;

 

 

Each outstanding warrant to acquire shares of Breeze Common Stock (a “Breeze Warrant”) will be assumed by Holdco and converted into a warrant to acquire an equal number of Holdco Shares at an exercise price of $11.50 per share, subject to adjustment as described in the Breeze Warrant, at any time commencing 30 days after the Closing Date until five years after the Closing Date;

 

 

Each outstanding vested and unvested D-Orbit option is anticipated to be converted into the right to receive an option issued by Holdco for a number of Holdco Shares equal (x) to the number of D-Orbit Shares subject to such D-Orbit option immediately prior to the Exchange Effective Time multiplied by (y) the Exchange Ratio;

 

 

Each outstanding D-Orbit warrant is anticipated to be either exercised or converted into cash or warrants to acquire Holdco Shares prior to the Merger Effective Time or otherwise will remain in effect under its existing terms; and

 

 

Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into one share of common stock, par value $0.01 per share, of the surviving corporation of the Merger.

 

Concurrently with the execution of the Combination Agreement, Breeze, Breeze Sponsor, LLC and certain other holders of Breeze Common Stock and Breeze Warrants entered into a SPAC Stockholder Support Agreement (the “Breeze Stockholder Support Agreement”), pursuant to which such holders agreed, among other things, (i) to vote at any meeting of the stockholders of Breeze all of its shares of Breeze Common Stock held of record or thereafter acquired in favor of the proposals required to effect the Business Combination, (ii) be bound by certain other covenants and agreements related to the Business Combination and (iii) be bound by certain transfer restrictions with respect to such securities, prior to the closing of the Business Combination, in each case, on the terms and subject to the conditions set forth in the Breeze Stockholder Support Agreement.

9


 

 

Concurrently with the execution of the Combination Agreement, D-Orbit, Holdco and certain D-Orbit shareholders entered into a Company Stockholder Support Agreement providing that, among other things, the D-Orbit shareholders party thereto will contribute their D-Orbit Shares to Holdco in the Exchange pursuant to an Exchange Agreement.

 

Prior to execution of the Combination Agreement, on January 26, 2022, Breeze, Holdco and D-Orbit entered into a securities purchase agreement (the “Securities Purchase Agreement”) with an entity managed by ATW Partners, LLC (the “Debenture Investor”), pursuant to which the Debenture Investor agreed to purchase, and Holdco agreed to issue and sell to the Debenture Investor, on the Closing Date an aggregate principal amount of $30,000,000 of Holdco’s Original Issue Discount Convertible Debentures (the “Debentures”) due four years from their date of issuance (the “Debenture Financing”) with net proceeds of $29,126,214 (which is net of an original issuance discount). The Debentures will have an interest rate of 2.75% over the prime rate established by the Wall Street Journal. Subject to certain beneficial ownership limitations, the Debentures will be convertible, in whole or in part at the election of the holder, into Holdco Shares at a conversion price of $12.00 per share (the “Conversion Price”). Prior to the maturity date of the Debentures, Holdco may prepay all or any portion of the Debentures, upon sixty (60) business days’ written notice, for 110% of the total outstanding balance of the Debentures being redeemed. Holdco may force conversion of all or any portion of the Debentures after the later of (i) the Effective Date (as defined in the Securities Purchase Agreement) and (ii) the first anniversary of the Closing Date, subject to the Debenture Investor’s prior right to convert its Debenture, if the trading price of the Holdco Shares exceeds 130% of the Conversion Price during 20 out of the preceding 30 trading days (the “Measurement Period”) and the 30-day average daily trading volume ending on, and including, the last trading day of such 30-trading day period exceeds $2,000,000. In the event of a prepayment or forced conversion of the Debentures, Holdco will be obligated to issue additional Debenture Investor Warrants (defined below) exercisable at 130% of the Conversion Price for 25% of the principal amount of the Debentures being prepaid (in the event of a prepayment) or subject to conversion (in the event of a forced conversion), divided by the Conversion Price. Holdco may at its election pay any interest payments on the Debentures in the form of Holdco Shares pursuant to and in accordance with the terms of the Debentures.

 

Pursuant to the Securities Purchase Agreement, Holdco also agreed to issue, immediately following the Closing and for no additional consideration, warrants to purchase 2,400,000 Holdco Shares (the “Debenture Investor Warrants”) to the Debenture Investor and callable warrants (the “Callable Warrants”) to an affiliate of the Debenture Investor (the “Callable Warrant Holder”) to acquire up to 12,000,000 Holdco Shares (the “Callable Shares”). Subject to certain beneficial ownership limitations, the Warrants will be initially exercisable after the issuance date at an exercise price equal to $12.50 per Holdco Share, subject to adjustments as provided under the terms of the Warrants. The Warrants will terminate seven and one-half years after the initial exercise date. The Warrants will also include anti-dilution protection on the price and the number of shares issuable with respect to future equity offerings by Holdco. The Warrants will also include customary cashless exercise or net exercise provisions, which may be exercised if the underlying Holdco Shares are not subject to an effective registration statement at the time of exercise.

 

The Callable Warrants will be callable by Holdco after the Effective Date if, on a call date, (i) the simple average of the volume weighted average price per Holdco Share for each of five consecutive trading days prior to such call date exceeds $5.00 and (ii) the average trading volume for the three-trading day period prior to such call date exceeds 50,000 Holdco Shares. Each call notice will be for an amount of Callable Shares equal to the lesser of 10,000,000 Callable Shares and 15% of the daily trading volume of the Holdco Shares and subject to certain beneficial ownership limitations. The call exercise price for Holdco shall be an amount equal to 95% of the volume weighted average price of the Holdco Shares for the two-day period following the call notice. The Callable Warrants may be exercised by the Callable Warrant Holder after the issuance date at an exercise price equal to $30.00 per Callable Share. The Callable Warrants will terminate three years after the Closing Date unless earlier terminated by Holdco after providing five trading days’ advance notice to the Callable Warrant Holder. The Callable Warrants will not include cashless exercise or net exercise provisions.

 

In advance of entering into the Combination Agreement, D-Orbit and Holdco entered into Subscription Agreements with certain D-Orbit shareholders (collectively, the “PIPE Investors”), pursuant to which, among other things, the PIPE Investors agreed to subscribe for and purchase, and Holdco agreed to issue and sell to the PIPE Investors, 550,000 newly issued Holdco Shares for gross proceeds of approximately $5.5 million.

 

10


 

 

Prior to entering into the Combination Agreement, D-Orbit entered into Convertible Bond Subscription Agreements with certain investors (the “Convertible Bondholders”) pursuant to which the Convertible Bondholders purchased Convertible Bonds from D-Orbit in exchange for approximately $59 million (€51.5 million). The Convertible Bonds will convert into D-Orbit Shares immediately prior to the Exchange, at which time the Convertible Bondholders will become the Converted Company Shareholders. The Converted Company Shareholders will receive Holdco Shares in exchange for their D-Orbit Shares pursuant to the Exchange along with the Existing Company Shareholders. The Holdco Shares received by the Converted Company Shareholders will be included in the Holdco Shares registered for resale pursuant to the Investor Registration Rights Agreement.

 

Liquidity

 

As of June 30, 2022, the Company had $1,239 in cash held outside of the Trust Account and negative working capital of $3,896,013, excluding franchise taxes payable.

 

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, and a loan of $300,000 under an unsecured and non-interest bearing promissory note (see Note 5). Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity needs have been satisfied from the net proceeds from the private placement held outside of the Trust Account.

 

The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the financial statements are issued. Management plans to address this uncertainty through the Business Combination as discussed above. In addition, in order to finance transaction costs in connection with an intended initial business combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,000,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants. There is no assurance that the Company’s plans to consummate the Business Combination or obtain Working Capital Loans will be successful or 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

 

Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

With rising tensions around the world based on the current conflict between Ukraine and Russia, we may be unable to complete a business combination if concerns related to this and other potential conflicts impact global capital markets, the ability to transfer money, currency exchange rates, cyber attacks and infrastructure including power generation and transmission, communications, and travel. Escalating conflicts could also have an impact on global demands for health care, international trade including vendor supply chains, and energy. In addition, there have been recent threats to space infrastructure and equipment including cyber attacks, physical facility destruction and in-orbit satellite and equipment destruction. The outcome of these conflicts or their impact cannot be predicted and may have an adverse impact in a material way on our ability to consummate a business combination, or to operate a target business with which we ultimately consummate a business combination. 

 

      

Note 2 — Summary of Significant Accounting Policies

 

Basis of presentation

 

The accompanying unaudited condensed 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

11


 

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 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 period ended December 31, 2021 as filed with the SEC on March 11, 2022. The financial information as of December 31, 2021 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the period ended December 31, 2021. The interim results for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the period ending December 31, 2022 or for any future interim periods.

 

Emerging growth company

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

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of estimates

The preparation of the condensed 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 revenues and 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 did not have any cash equivalents as of June 30, 2022 and December 31, 2021.

 

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Cash and marketable securities held in Trust Account

 

At June 30, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities. The Company accounts for its securities held in the Trust Account in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 320, “Debt and Equity Securities.” These securities are classified as trading securities with unrealized gains/losses, if any, recognized through the condensed statement of operations.

 

Common stock subject to possible redemption

 

All of the 11,500,000 shares of common stock sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s Amended and Restated Certificate of Incorporation. In accordance with SEC and its staff’s 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 the Company require common stock subject to possible redemption to be classified outside of permanent equity. On May 5, 2022, the Company held a stockholders’ meeting at which a proposal to approve the extension of time to consummate the closing of a Business Combination Agreement to September 26, 2022 was approved. The Company provided its stockholders with the opportunity to redeem all or a portion of their Public Shares at the time of this stockholders’ meeting.  In connection with the extension proposal, 6,732,987 shares of the Company’s common stock were redeemed. The 4,767,013 shares of common stock remaining from the Initial Public Offering have been classified outside of permanent equity.

 

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 at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are recorded as charges to additional paid-in capital and, if necessary, accumulated deficit.

 

As of June 30, 2022, December 31, 2021 and 2020, the common stock reflected in the condensed balance sheet are reconciled in the following table:

 

Gross proceeds from IPO

 

$

115,000,000

 

Less:

 

 

 

 

Proceeds allocated to Public Warrants

 

 

10,580,000

 

Issuance costs allocated to common stock

 

 

3,704,282

 

Proceeds allocated to Public Rights, net of offering costs

 

 

4,214,968

 

Plus:

 

 

 

 

Accretion of Common stock to redemption value

 

 

20,224,250

 

Common stock subject to possible redemption – December 31, 2020

 

 

116,725,000

 

Plus:

 

 

 

 

Accretion of Common stock to redemption value

 

 

1,150,000

 

Common stock subject to possible redemption – December 31, 2021

 

 

117,875,000

 

Plus:

 

 

 

 

Accretion of Common stock to redemption value

 

 

1,150,000

 

Common stock subject to possible redemption – March 31, 2022

 

 

119,025,000

 

Plus:

 

 

 

 

Accretion of Common stock to redemption value

 

 

14,213

 

Less:

 

 

 

 

Common stock redeemed May 5, 2022

 

 

(69,700,628

)

Common stock subject to possible redemption – June 30, 2022

 

$

49,338,585

 

 

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Offering Costs associated with the Initial Public Offering

 

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 principally of professional and registration fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly attributable to the issuance of an equity contract are classified in equity are recorded as a reduction in equity. Offering costs for equity contracts that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $4,099,907 as a result of the Initial Public Offering (consisting of a $2,300,000 underwriting fee, $1,322,350 of representative founder share offering costs, and $477,557 of other offering costs). The Company recorded $3,704,282 of offering costs as a reduction of equity in connection with the shares of common stock and public rights included in the Units. The Company immediately expensed $395,625 of offering costs in connection with the Public Warrants and Private Placement Warrants that were classified as liabilities.

Warrant liabilities

The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrants”, see Note 7) in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, and concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the condensed balance sheet and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date thereafter in accordance with ASC 820, “Fair Value Measurement” (“ASC 820”), with changes in fair value recognized in the condensed statements of operations in the period of change.

Income taxes

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

ASC 740-270 prescribes a recognition threshold and a measurement attribute for the financial statement’s recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 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 is subject to income tax examinations by major taxing authorities since inception.

Net income (loss) per share

Net income (loss) per share of common stock is computed by dividing net income by the weighted-average number of common shares outstanding during the period. As the Public Shares are considered to be redeemable at fair value, and a redemption at fair value does not amount to a distribution different than other shareholders, redeemable and non-redeemable shares of common stock are presented as one class of shares in calculating net income (loss) per share of common stock. As a result, the calculated net income (loss) per share is the same for redeemable and non-redeemable shares of common stock. At June 30, 2022 and December 31, 2021, the Company did not have any dilutive securities and 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 income (loss) per share is the same as basic income per share for the periods presented.

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

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Basic and diluted net income (loss) per share of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

810,614

 

 

$

(1,585,061

)

 

$

3,378,404

 

 

$

4,191,257

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares common stock outstanding

 

10,496,623

 

 

 

14,625,000

 

 

 

12,556,866

 

 

 

14,625,000

 

Basic and diluted net income (loss) per share common stock

$

0.08

 

 

$

(0.11

)

 

$

0.27

 

 

$

0.29

 

 

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal Deposit Insurance Corporation coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Fair value of financial instruments

The Company applies ASC 820, which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

The carrying amounts reflected in the condensed balance sheet for cash, prepaid expenses and accrued offering costs approximate fair value due to their short-term nature.

 

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

 

Level 1 – Assets and liabilities with unadjusted, quoted prices  listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

 

Level 3 – Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

See Note 9 for additional information on assets and liabilities measured at fair value.

 

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Recent accounting pronouncements

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. The new standard is effective for the Company on January 1, 2024, although early adoption is permitted. The ASU allows the use of the modified retrospective method or the fully retrospective method. The Company is still in the process of evaluating the impact of this new standard; however, the Company does not believe the initial impact of adopting the standard will result in any changes to the Company’s statements of financial position, operations or cash flows.

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

Note 3 — Initial Public Offering

Pursuant to the Initial Public Offering, the Company sold 10,000,000 Units at a purchase price of $10.00 per Unit on November 23, 2020, for an aggregate purchase price of $100,000,000. Each Unit consists of one share of common stock, $0.0001 par value, one Right to receive one-twentieth (1/20) of one share of common stock upon the consummation of an initial business combination and one redeemable warrant (“Public Warrant”). In connection with the underwriters’ exercise of the over-allotment option on November 25, 2020, the Company sold an additional 1,500,000 Units at a price of $10.00 per Unit. Each whole Public Warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per whole share (see Note 7). Each Warrant will become exercisable on the later of 30 days after the completion of the Company’s initial Business Combination or 18 months from the closing of the Initial Public Offering and will expire five years after the completion of the Company’s initial Business Combination or earlier upon redemption or liquidation. However, if the Company does not complete its initial Business Combination on or prior to September 26, 2022, the Warrants will expire worthless at the end of such period.

Note 4 — Private Placement

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 5,425,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $5,425,000. Each Private Placement Warrant is exercisable to purchase one share of common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants were 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, certain of the proceeds from the sale of the Private Placement warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.

 

Note 5 — Related Party Transactions

 

Founder Shares

 

In June 2020, the Sponsor purchased 100 shares of common stock (the “Founder Shares”) for an aggregate purchase price of $25,000. On July 15, 2020, the Sponsor effected a 28,750-for-1 forward stock split and, as a result, our initial shareholders held 2,875,000 Founder Shares as of the date of our initial public offering.

 

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The 2,875,000 Founder Shares included an aggregate of up to 375,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the Sponsor will own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Sponsor does not purchase any Public Shares in the Initial Public Offering). As a result of the underwriters’ election to fully exercise their over-allotment option, 375,000 Founder Shares are no longer subject to forfeiture. The Founder Shares will automatically convert into shares of common stock upon consummation of a Business Combination on a one-for-one basis, subject to certain adjustments, as described in Note 6.

 

The Sponsor and each holder of Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Company’s 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 a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange 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. 

 

The Company had agreed with each of its four independent directors (the “Directors”) subsequent to incorporation of the Company to provide them the right to each purchase 25,000 Founder Shares with a par value of $0.0001 of the Company from Breeze Sponsor, LLC (the “Sponsor”). The Directors each exercised their right in full on July 6, 2021 and purchased 100,000 shares (25,000 per each Director) of the Founder Shares from Sponsor for a total of $10 in the aggregate.

 

The sale or allocation of the Founder Shares to the Company’s Directors, as described above, is within the scope of  FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718 stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The fair value of the 100,000 shares granted to the Company’s Directors was $401,000 or $4.01 per share. The compensation expense related to these share purchases was recorded in full on the grant date of July 6, 2021 for a total of $401,000. This expense is included within operating and formation costs on the condensed statement of operations for the three and nine months ended September 30, 2021.

 

Administrative Support Agreement

 

The Company entered into an agreement whereby, commencing on November 23, 2020 through the earlier of the Company’s consummation of a Business Combination and its liquidation, the Company will pay an affiliate of the Sponsor a total of $5,000 per month for office space, utilities and secretarial and administrative support services. For the six months ended June 30, 2022, the Company incurred and paid $30,000 in fees for these services. For the year ending December 31, 2021 the Company incurred $60,000 in fees for these services of which such amounts are included in accounts payable and accrued expenses in the accompanying condensed balance sheets.

 

Related Party Loans

   

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

 

On February 1, 2022 the Company signed a Promissory Note with Sponsor, with a Maturity Date of October 1, 2022, for a total of up to $1,500,000. As of June 30, 2022, the amount outstanding under this working capital loan was $886,975 from Sponsor. The working capital loan is not convertible and the principal will be repaid in cash at the closing of the Business Combination.

17


 

 

The Company had 12 months from the closing of the Initial Public Offering to consummate its initial Business Combination. However, by resolution of its board, requested by the Sponsor, the Company extended the period of time to consummate a Business Combination two times, each by an additional three months (for a total of up to 18 months to complete a Business Combination). The Sponsor deposited additional funds into the Trust Account in order to extend the time available for the Company to consummate its initial Business Combination. The Sponsor deposited into the Trust Account for each three-month extension, $1,150,000 ($0.10 per share) on or prior to the date of the applicable deadline, up to an aggregate of $2,300,000, or approximately $0.20 per share. The payments were made in the form of a loan. The loans are non-interest bearing and payable upon the consummation of the Company’s initial Business Combination. If the Company completes an initial Business Combination, it would repay such loaned amounts out of the proceeds of the Trust Account released to it. If the Company does not complete a Business Combination, it will not repay such loans. Furthermore, the letter agreement with the Company’s initial stockholders contains a provision pursuant to which the Sponsor has agreed to waive its right to be repaid for such loans out of the funds held in the Trust Account in the event that the Company does not complete a Business Combination.      

                    

Representative and Consultant Shares

 

Pursuant to the underwriting agreement (the “Underwriting Agreement”) between the Company and I-Bankers Securities (the “Representative”), on November 23, 2020, the Company issued to the Representative and its designee 250,000 shares of common stock and separately agreed to issue the Company’s Consultant 15,000 shares of common stock for nominal consideration in a private placement intended to be exempt from registration under Section 4(a)(2) of the Act. In August 2021, the Company issued to the Consultant such Consultant Shares. The Company accounts for the Representative Shares and the Consultant Shares as a deferred offering cost of the Initial Public Offering. Accordingly, the offering cost will be allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to the Warrants will be expensed immediately in the statement of operations, while offering costs allocated to the redeemable Public Shares will be deferred and subsequently charged to temporary equity upon the completion of the Initial Public Offering.

The Company estimated the fair value of the Representative Shares and Consultant Shares to be $1,322,350 based upon the price of the common stock issued ($4.99 per share) to the Representative and Consultant. The holders of the Representative Shares and Consultant Shares have agreed not to transfer, assign or sell any such shares until the later of (i) 30 days after the completion of a Business Combination and 180 days pursuant to FINRA Conduct Rule 5110(e)(1) following the effective date of the Registration Statement to anyone other than (i) the Representative or an underwriter or selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such underwriter or selected dealer. Additionally, pursuant to FINRA Conduct Rule 5110(e), the Representative Shares and Consultant Shares will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the Registration Statement.

 

In addition, the holders of the Representative Shares and Consultant Shares have agreed (i) to waive their redemption rights with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the time specified in the certificate of incorporation.

Note 6 — Commitments

Registration and Stockholder Rights

Pursuant to a registration rights and stockholder agreement entered into on November 23, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of  common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration and stockholder rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration

18


 

statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements. In the case of the private placement warrants and representative shares issued to I-Bankers Securities, the demand registration rights provided will not be exercisable for longer than five years from the effective date of the registration statement in compliance with FINRA Rule 5110(g)(8)(C) and the piggyback registration right provided will not be exercisable for longer than seven years from the effective date of the registration statement in compliance with FINRA Rule 5110(g)(8)(D). 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 1,500,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On November 25, 2020, the underwriters fully exercised their over-allotment option to purchase an additional 1,500,000 Units at $10.00 per Unit.

 

Business Combination Marketing Agreement

 

The Company has engaged I-Bankers Securities, Inc. as an advisor in connection with a Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay I-Bankers Securities, Inc. a cash fee for such services upon the consummation of a Business Combination in an amount equal to 2.75% of the gross proceeds of Initial Public Offering, or $3,162,500.

 

Note 7 – Warrants

 

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

We will not be obligated to deliver any shares of common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable for cash, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available. 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 our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we 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. 

We have agreed that as soon as practicable, but in no event later than 15 business days, after the closing of our initial business combination, we will use our reasonable best efforts to file, and within 60 business days after the closing of our initial business combination, to have declared effective, a registration statement relating to the shares of common stock issuable upon exercise of the warrants and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if our common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the

19


 

event we so elect, we will not be required to file or maintain in effect a registration statement, but will use our best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.

Once the warrants become exercisable, we may call the warrants for redemption:

in whole and not in part;

at a price of $0.01 per warrant;

upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

if, and only if, the reported last sale price of the Company’s 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 date we send to  the notice of redemption to the warrant holders.

 

We may not redeem the warrants when a holder may not exercise such warrants.

In addition, if (x) we issue additional shares of 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 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 initial stockholders or their affiliates, without taking into account any founder shares held by our initial stockholders 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 common stock during the 20 trading day period starting on the trading day after the day on which we consummate our initial 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 higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.

The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of common stock to be issued to the warrant holder.

The private placement warrants (including the common stock issuable upon exercise of the private placement warrants) will (with limited exceptions) not be transferable, assignable or salable until 30 days after the completion of our initial business combination and they will not be redeemable by us so long as they are held by the original holders or their permitted transferees. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants being sold as part of the public units. If the private placement warrants are held by holders other than the original holders or their permitted transferees, the private placement warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in our IPO.

The Sponsor and I-Bankers Securities purchased from the Company an aggregate of 5,425,000 Warrants at a price of $1.00 per Warrant (a purchase price of $5,425,000) in a private placement that occurred simultaneously with the completion of the Initial Public Offering (the “Private Placement Warrants”). Each Private Placement Warrant entitles the holder to purchase one share of common stock at $11.50. The purchase price of the Private Placement Warrants was added to the proceeds from the Initial Public Offering to be held in the Trust Account pending completion of the Company’s initial Business Combination. The Private Placement Warrants (including the common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination and they will be non-redeemable so

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long as they are held by the original holders or their permitted transferees. If the Private Placement Warrants are held by someone other than the original holders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Warrants included in the Units being sold in the Initial Public Offering. Otherwise, the Private Placement Warrants have terms and provisions that are substantially identical to those of the Warrants being sold as part of the Units in the Initial Public Offering.

If the Company does not complete a Business Combination, then the proceeds will be part of the liquidating distributions to the public stockholders and the Warrants issued to the Sponsor and I-Bankers Securities will expire worthless.

As of June 30, 2022 and December 31, 2021, there were 11,500,000 Public Warrants and 5,425,000 Private Placement Warrants outstanding. The Company classifies the outstanding Public Warrants and Private Placement Warrants as warrant liabilities on the condensed balance sheets in accordance with the guidance contained in ASC 815-40.

The warrant liabilities were initially measured at fair value upon the closing of the Initial Public Offering and subsequently re-measured at each reporting period using a Monte-Carlo model. The Public Warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value. The Company recognized gains  in connection with changes in the fair value of warrant liabilities of $4,346,250 and $4,854,000 within change in fair value of warrant liabilities in the condensed statements of operations for the six months ended June 30, 2022 and 2021, respectively.     

 

 

Note 8 — Stockholder’s Deficit

 

Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.

 

Common Stock — The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.0001 per share. Holders of common stock are entitled to one vote for each share. At June 30, 2022 and December 31, 2021, there were 3,140,000 shares of common stock issued and outstanding for both periods, excluding 4,767,013 and 11,500,000 shares of common stock subject to possible redemption respectively.

 

Rights —Except in cases where the Company is not the surviving company in a Business Combination, each holder of a Right will automatically receive one-twentieth (1/20) of a share of common stock upon consummation of the Business Combination, even if the holder of a Right converted all shares held by him, her or it in connection with the Business Combination or an amendment to the Company’s certificate of incorporation with respect to its pre-business combination activities. In the event that the Company will not be the surviving company upon completion of the Business Combination, each holder of a Right will be required to affirmatively convert his, her or its Rights in order to receive the one-twentieth (1/20) of a share of common stock underlying each Right upon consummation of the Business Combination. No additional consideration will be required to be paid by a holder of Rights in order to receive his, her or its additional share of common stock upon consummation of the Business Combination. The shares issuable upon exchange of the Rights will be freely tradable (except to the extent held by affiliates of the Company). If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement will provide for the holders of Rights to receive the same per share consideration the holders of shares of common stock will receive in the transaction on an as-converted into common stock basis.

 

The Company will not issue fractional shares in connection with an exchange of Rights. As a result, the holders of the Rights must hold Rights in multiples of 20 in order to receive shares for all of the holders’ Rights upon closing of a Business Combination. If the Company is unable to complete an initial Business Combination within the required time period and the Company liquidates the funds held in the Trust Account, holders of Rights will not receive any of such funds with respect to their Rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Rights, and the Rights will expire worthless. Additionally, in no event will the Company be required to net cash settle the Rights. Accordingly, the Rights may expire worthless.

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Note 9 — Fair Value Measurements 

The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis at June 30, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Investment held in Trust Account:

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities held in Trust Account - U.S. Treasury

 

 

 

 

 

 

 

 

 

 

 

 

Securities Money Market Fund

 

$

49,391,071

 

 

$

 

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability - Public Warrants

 

$

1,840,000

 

 

$

 

 

$

 

Warrant liability - Private Placement Warrants

 

$

 

 

$

 

 

$

922,250

 

 

The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis at December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Investment held in Trust Account:

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities held in Trust Account - U.S. Treasury

 

 

 

 

 

 

 

 

 

 

 

 

Securities Money Market Fund

 

$

117,931,556

 

 

$

 

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability - Public Warrants

 

$

4,830,000

 

 

$

 

 

$

 

Warrant liability - Private Placement Warrants

 

$

 

 

$

 

 

$

2,278,500

 

 

The Company utilized a Monte Carlo simulation model for the initial valuation of the Public Warrants. The subsequent measurement of the Public Warrants as of June 30, 2022 and December 31, 2021, are classified as Level 1 due to the use of an observable market quote in an active market under the ticker BREZW. The quoted prices of the Public Warrants were $0.16 and $0.42 per warrant as of June 30, 2022 and December 31, 2021, respectively.

  

The Company utilizes a Modified Black-Scholes model to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the Private Placement warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

 

The aforementioned warrant liabilities are not subject to qualified hedge accounting.

 

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants was transferred from a Level 3 measurement to a Level 1 fair value measurement in December 2020 when the Public Warrants were separately listed and traded. There were no transfers during the six months ended June 30, 2022 and the year ended December 31, 2021.

 

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The following table provides the significant inputs to the Modified Black Scholes model for the fair value of the Private Placement Warrants:

 

 

 

As of

June 30,

2022

 

 

As of

December 31,

2021

 

Stock price

 

$

10.27

 

 

$

10.21

 

Strike price

 

$

11.50

 

 

$

11.50

 

Probability of completing a Business Combination

 

 

21.5

%

 

 

100

%

Dividend yield

 

 

 

 

 

 

Term (in years)

 

 

5.25

 

 

 

5.40

 

Volatility

 

 

6.0

%

 

 

6.7

%

Risk-free rate

 

 

3.01

%

 

 

1.3

%

Fair value of warrants

 

$

0.17

 

 

$

0.42

 

 

 

The following table presents the changes in the fair value of warrant liabilities:

 

 

 

Private

Placement

 

 

Public

 

 

Warrant

Liabilities

 

Fair value as of December 31, 2020

 

$

5,642,000

 

 

$

11,845,000

 

 

$

17,487,000

 

Change in valuation inputs or other assumptions

 

 

(1,953,000

)

 

 

(4,025,000

)

 

 

(5,978,000

)

Fair value as of March 31, 2021

 

 

3,689,000

 

 

 

7,820,000

 

 

 

11,509,000

 

Change in valuation inputs or other assumptions

 

 

434,000

 

 

 

690,000

 

 

 

1,124,000

 

Fair value as of June 30, 2021

 

$

4,123,000

 

 

$

8,510,000

 

 

$

12,633,000

 

 

 

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