UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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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
As of June 14, 2024, there were
MAQUIA CAPITAL ACQUISITION CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024
TABLE OF CONTENTS
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PART 1 – FINANCIAL INFORMATION |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) | F-3 | ||
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Notes to Condensed Consolidated Financial Statements (unaudited) | F-5 | ||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 1 | ||
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Item 1. Financial Statements
MAQUIA CAPITAL ACQUISITION CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, | December 31, | |||||
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ASSETS |
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Current asset |
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Cash and cash equivalents | $ | | $ | | ||
Prepaid expenses |
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Due from Sponsor |
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Total current assets |
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Due from Sponsor | — | — | ||||
Investments held in the Trust Account |
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Total Assets | $ | | $ | | ||
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LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT |
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Accounts payable and accrued expenses | $ | | $ | | ||
Income taxes payable |
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Excise tax payable |
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Notes payable – Sponsor at cost |
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Note payable – Sponsor at fair value (cost: $ |
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Total current liabilities |
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Deferred underwriting compensation |
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Warrant liability – Private Placement Warrants |
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Warrant liability – Public Warrants |
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Total liabilities |
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Commitments and Contingencies (Note 5) |
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Class A Common Stock subject to possible redemption; |
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Stockholders’ Deficit |
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Preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, par value $ |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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Total Liabilities, Temporary Equity and Stockholders’ Deficit | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements
F-1
MAQUIA CAPITAL ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the | For the | |||||
three months ended | three months ended | |||||
March 31, | March 31, | |||||
| 2024 |
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General and administrative expenses | $ | | $ | | ||
Total expenses |
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Other income |
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Unrealized and realized gain on investment held in Trust Account |
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Change in fair value of derivative liabilities |
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Total other income |
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(Loss) income before tax |
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Income tax expense |
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Net (loss) income | $ | ( | $ | | ||
Weighted average shares outstanding of Class A Common Stock, basic and diluted |
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Basic and diluted net (loss) income per share - Class A Common Stock | $ | ( | $ | | ||
Weighted average shares outstanding of Class B Common Stock, basic and diluted |
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Basic and diluted net (loss) income per share - Class B Common Stock | $ | ( | $ | | ||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements
F-2
MAQUIA CAPITAL ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2024
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Balance as of January 1, 2024 |
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Exercise tax payable | — | — | — | — | ( | ( | ||||||||||
Fair value of shares issued under non-redemption agreements | — | — | — | — | ( | ( | ||||||||||
Sponsor contribution for shares issued under non-redemption agreement | — | — | — | — | | | ||||||||||
Remeasurement of Class A common stock to redemption value | — | — | — | — | ( | ( | ||||||||||
Net loss | — | — | — | — | ( | ( | ||||||||||
Balance March 31, 2024 |
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FOR THE THREE MONTHS ENDED MARCH 31, 2023
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Balance as of January 1, 2023 |
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Remeasurement of Class A common stock to redemption value | — | — | — | — | ( | ( | ||||||||||
Net income | — | — | — | — | | | ||||||||||
Balance March 31, 2023 |
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The accompanying notes are an integral part of these condensed consolidated unaudited financial statements
F-3
MAQUIA CAPITAL ACQUISITION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Cash Flows From Operating Activities: |
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Net (loss) income | $ | ( | $ | | ||
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
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Unrealized and realized gains on investments held in the Trust Account |
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Change in fair value of derivative liabilities |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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Deferred tax liability |
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Accounts payable, accrued expenses, and income tax payable |
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Net Cash Used In Operating Activities |
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Cash Flows From Investing Activities: |
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Cash withdrawn from the Trust for redemptions |
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Cash withdrawn from the Trust for taxes |
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Cash deposited into the Trust |
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Net Cash Provided By (Used In) Investing Activities |
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Cash Flows From Financing Activities: |
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Repayment to redeeming shareholders | ( | — | ||||
Proceeds from due from sponsor |
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Proceeds from Note payable - sponsor |
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Net Cash (Used In) Provided By Investing Activities |
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Net change in cash |
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Cash at beginning of period |
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Cash at end of period | $ | | $ | | ||
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Supplemental disclosure of non-cash financing activities: |
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Excise Tax payable | $ | | $ | — | ||
Remeasurement of Class A common stock subject to possible redemption | $ | | $ | | ||
Due from Sponsor | $ | | $ | | ||
Accrued redemptions payable | $ | | $ | — | ||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements
F-4
MAQUIA CAPITAL ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Organization and General
Maquia Capital Acquisition Corporation (the “Company”) is a blank check company incorporated in the State of Delaware on December 10, 2020. There was no activity from December 10, 2020 through December 31, 2020. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or more businesses or entities (“Business Combination”). Although the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, the Company intends to focus on companies in the technology-focused middle market and emerging growth companies in North America.
At March 31, 2024, the Company had not yet commenced any operations. All activity through March 31, 2024 related to the Company’s formation and the Initial Public Offering which was consummated on May 7, 2021 (as defined below) and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income or unrealized gains on investments held in the trust account and gains or losses from the change in the fair value of the warrant liabilities. The Company has selected December 31 as its fiscal year end. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
Sponsor and Initial Financing
The Company’s Sponsor is Maquia Investment North America LLC, (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on May 4, 2021. On May 7, 2021, the Company closed its Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated a private sale (the “Private Placement”) of
On May 10, 2021, the Company consummated the closing of the sale of
The Trust Account
Following the closing of the Initial Public Offering in May 2021, $
F-5
Account”) with Continental Stock Transfer & Trust Company. The funds held in the Trust Account will be invested only in U.S. government treasury bills with a maturity of one hundred eighty five (185) days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940 and that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the Initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
In connection with the November 4, 2022, special meeting, stockholders holding
In connection with the May 5, 2023, special meeting, stockholders holding
In connection with the February 5, 2024, special meeting, stockholders holding
Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes and up to $
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least
The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder approval of a Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
If the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended and Restated Memorandum and Articles of Association provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to
F-6
The stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in Accounting Standards Codification (“ASC”) 480-10-S99, redemption provisions not solely within the control of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares were issued with other freestanding instruments (i.e., public warrants), the initial carrying value of the shares of Class A common stock classified as temporary equity was the allocated proceeds determined in accordance with ASC 470-20. Because of the redemption feature noted above, the shares of Class A common stock are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The re-measurement is treated as a deemed dividend (i.e., a reduction to retained earnings, or in absence of retained earnings, additional paid-in capital). While redemptions cannot cause the Company’s net tangible assets to fall below $
If a stockholder vote is not required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, offer such redemption pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Sponsor has agreed (a) to vote its Class B common stock, the common stock included in the Private Placement Units (the “Placement Shares”) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Class B common stock) and Private Placement Units (including underlying securities) into the right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith) or a vote to amend the provisions of the Amended and Restated Certificate of Incorporation relating to stockholders’ rights of pre-Business Combination activity and (d) that the Class B common stock and Private Placement Units (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering if the Company fails to complete its Business Combination.
Prior to the amendment to the Company’s charter on November 4, 2022, the Company had until November 7, 2022 to consummate a Business Combination. On November 4, 2022, the Company held a special meeting of stockholders in which the Company’s stockholders approved an amendment to extend the date by which the Company must consummate a Business Combination from November 7, 2022 to May 7, 2023 (the “Combination Period”). The Sponsor made monthly loans of $
F-7
remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriter has agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit.
Prior to the amendment to the Company’s charter on May 5, 2023, the Company had until May 7, 2023 to consummate a Business Combination. On May 5, 2023, the Company held a special meeting of stockholders in which the Company’s stockholders approved an amendment to extend the date by which the Company must consummate a Business Combination from May 7, 2023 to February 7, 2024 (the “Third Combination Period”). The Sponsor made make monthly loans of $
On February 5, 2024, the Company held a Special Meeting at which time the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to the date by which the Company must consummate its initial business combination from February 7, 2024 to August 7, 2024 (or such earlier date as determined by the Board). The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on Feb 7, 2024. In connection with this extension, the Company and the Sponsor entered into a non-redemption agreement with one or more unaffiliated third party or parties in exchange for such third party or third parties agreeing not to redeem an aggregate of
The Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below $
F-8
On August 8, 2023, Maquia executed the Business Combination Agreement with Immersed, Inc. (“Immersed”). On October 4, 2023, Maquia, Immersed and Merger Sub entered into Amendment No. 1 to the Business Combination Agreement. On January 8, 2024, the parties entered into Amendment No. 2 to the Business Combination Agreement. On April 5,2024 the parties entered into Amendment No. 3 to the Business Combination Agreement extending the closing date for the Business Combination Agreement with Immersed, Inc. to May 7, 2024, subject to the Available Cash at closing being increased from $
On May 20, 2024, pursuant to Section 9.01(a) of the Business Combination Agreement, Maquia and Immersed entered into a Termination of Business Combination Agreement (“Termination Agreement”) pursuant to which the Business Combination Agreement was terminated effective as of May 20, 2024. Maquia intends to continue to identify and pursue a business combination with an appropriate target.
Use of Funds Restricted for Payment of Taxes
The Company determined an overdraw of interest and dividend income earned in the Trust Account for taxes. Since the Company went public on June 2021, the Company has incurred income and franchise tax for a total cumulative amount of $
In 2023, in connection with redemptions that occurred in November 2022, the Company determined it did not withdraw all the interest from the trust account that it was allowed to withdraw to cover federal income and State of Delaware franchise taxes which had accrued in the amount of $
The Company requested and received from Continental Stock Transfer & Trust Company, a waiver of these instances of non-compliance with the Investment Management Trust Agreement by and between the Company and Continental Stock Transfer & Trust Company.
Going Concern and Liquidity
In May 2021, the Company closed its Initial Public Offering of
The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the proceeds of $
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s ASC Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” the Company is a Special Purpose Acquisition Corporation that was formed for the purpose of completing a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities on or before August 7, 2024. There is no assurance that the Company will raise the additional capital it needs to fund its operations. The Company also has no approved plan in place to extend the business combination deadline and fund operations for any period of time after August 7, 2024, in the event that it is unable to complete a business combination by that date. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
F-9
There is no assurance that the Company’s plans to consummate an Initial Business Combination will be successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic 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, close of the Proposed Public Offering 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.
Various social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the U.S. and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility could adversely affect the Company’s ability to complete a business combination. In response to the conflict between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s ability to complete a Business Combination and the value of the Company’s securities.
The Inflation Reduction Act (“IR Act”) was enacted on August 16, 2022. The IR Act includes provisions imposing a
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows.
In the opinion of the Company’s management, the unaudited financial statements as of March 31, 2024 include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the financial position of the Company as of March 31, 2024 and its results of operations and cash flows for the three months ended March 31, 2024. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2024 or any future interim period.
These consolidated financial statements include the accounts of Maquia Capital Acquisition Corporation and its wholly owned subsidiary, Maquia Merger Sub, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Emerging growth company
The Company is an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies.
The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards based on public company effective dates.
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The Company will remain an emerging growth company until the earliest of (i) the last day of the first fiscal year (a) following the fifth anniversary of the completion of the Initial Public Offering, (b) in which the Company’s total annual gross revenue is at least $
Use of estimates
The preparation of the consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had
Offering Costs Associated with the Initial Public Offering
The Company complies with the requirements of the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A, “Expenses of Offering.” Deferred offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Upon completion of the Initial Public Offering, offering costs associated with warrant liabilities have been expensed and presented as non-operating expenses in the statement of operations and offering costs associated with the Class A common stock have been charged to stockholders’ equity. Offering costs of $
Income taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined the United States is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were
While ASC 740 identifies usage of an effective annual tax rate for purposes of an interim provision, it does allow for estimating individual elements in the current period if they are significant, unusual or infrequent. Computing the effective tax rate for the Company is complicated due to the potential impact of the timing of any Business Combination expenses and the actual interest income that will be recognized during the year. The Company has taken a position as to the calculation of income tax expense in a current period based on ASC 740-270-25-3 which states, “If an entity is unable to estimate a part of its ordinary income (or loss) or the related tax (benefit) but is otherwise able to make a reasonable estimate, the tax (or benefit) applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported.” The Company believes its calculation to be a reliable estimate and allows it to
F-11
properly take into account the usual elements that can impact its annualized book income and its impact on the effective tax rate. As such, the Company is computing its taxable income (loss) and associated income tax provision based on actual results through March 31, 2024.
The Company’s effective tax rate was (
Class A Common Stock Subject to Possible Redemption
The Company accounts for the Class A common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480, “Distinguishing Liabilities from Equity.” Shares of the common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of the common stock (including shares of the common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the issuer’s control) are classified as temporary equity. At all other times, shares of the common stock are classified as stockholders’ equity. The Class A common stock features certain redemption rights that are considered by the Company to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2024 and December 31, 2023, the shares of the Class A common stock subject to possible redemption in the amount of $
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value, which approximates fair value, at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the re-measurement from initial carrying value to redemption amount value. The change in the carrying value of redeemable Class A common stock resulted in charges against additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
| Shares |
| Dollars | ||
Class A common stock subject to possible redemption – December 31, 2022 |
| | $ | | |
Due from Sponsor |
| — |
| | |
Redemptions and withdrawals |
| ( |
| ( | |
Remeasurement carrying value to redemption value |
| — |
| | |
Class A common stock subject to possible redemption – December 31, 2023 |
| |
| | |
Redemption and withdrawals |
| ( |
| ( | |
Remeasurement carrying value to redemption value |
| — |
| | |
Due from Sponsor |
| — |
| | |
Class A common stock subject to possible redemption – March 31, 2024 |
| | $ | | |
Net (loss) income per share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net (loss) income per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. The Company applies the two-class method in calculating (loss) income per share of common stock. Re-measurement associated with the redeemable shares of Class A common stock is excluded from (loss) income per common share as the redemption value approximates fair value.
The calculation of diluted (loss) income per share of common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the Private Placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase
Class B Founder Shares subject to forfeiture are not included in weighted average shares outstanding until the forfeiture restrictions lapse.
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Non-redeemable common stock includes the Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features.
The following table reflects the calculation of basic and diluted net (loss) income per common share (in dollars, except per share amounts):
For the Three Months Ended | ||||||
March 31, 2024 | ||||||
| Class A |
| Class B | |||
Basic and diluted net loss per share |
|
| ||||
Numerator: |
|
|
|
| ||
Allocation of net loss | $ | ( | $ | ( | ||
Denominator: |
|
|
|
| ||
Basic and diluted weighted average shares outstanding |
| |
| | ||
|
|
| ||||
Basic and diluted net loss per share | $ | ( | $ | ( | ||
For the Three Months Ended | ||||||
March 31, 2023 | ||||||
| Class A |
| Class B | |||
Basic and diluted net income per share |
|
| ||||
Numerator: |
|
|
|
| ||
Allocation of net income | $ | | $ | | ||
Denominator: |
|
|
|
| ||
Basic and diluted weighted average shares outstanding |
| |
| | ||
|
|
| ||||
Basic and diluted net income per share | $ | | $ | | ||
Concentration of credit risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $
Financial Instruments
The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 | Inputs: Unadjusted quoted prices for identical assets or instruments in active markets. |
Level 2 | Inputs: Quoted prices for similar instruments in active markets and quoted prices for identical or similar instruments in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable. |
Level 3 | Inputs: Significant inputs into the valuation model are unobservable. |
The Company does not have any recurring Level 2 assets or liabilities, see Note 8 for Level 3 assets and liabilities. The carrying value of the Company’s financial instruments including its cash and accrued liabilities approximate their fair values principally because of their short-term nature.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” The Company’s derivative instruments are
F-13
recorded at fair value as of the closing date of the Initial Public Offering (i.e., March 15, 2021) and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date.
The Company has determined that the Public Warrants and the Private Placement Warrants are derivative instruments. As the Public Warrants and the Private Placement Warrants meet the definition of a derivative, the Public Warrants and the Private Placement Warrants are measured at fair value at issuance and at each reporting date in accordance with ASC 820, “Fair Value Measurement,” with changes in fair value recognized in the statement of operations in the period of change.
The Company has determined that the conversion option of the First Extension Note is a derivative instrument. The Company has elected to recognize the First Extension Note, including the conversion option, at fair value as permitted under ASC Topic 815. The First Extension Note is measured at fair value at issuance and at each reporting date in accordance with ASC 820, with changes in fair value recognized in the statement of operations in the period of change. The Company recognized an unrealized gain of $
Warrant Instruments
The Company accounts for the Public Warrants and the Private Placement Warrants issued in connection with the Initial Public Offering and the Private Placement, respectively, in accordance with the guidance contained in FASB ASC 815, “Derivatives and Hedging,” whereby under that provision the Public Warrants and the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the warrant instrument as a liability at fair value and adjusts the instrument to fair value at each reporting period. This liability will be re-measured at each balance sheet date until the Public Warrants and the Private Placement Warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statement of operations. The fair value of the Public Warrants and the Private Placement Warrants will be estimated using an internal valuation model. The Company’s valuation model utilizes inputs and other assumptions and may not be reflective of the price at which they can be settled. Such warrant classification is also subject to re-evaluation at each reporting period.
Recently issued accounting pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently assessing what impact, if any, that ASU 2023-09 would have on its financial position, results of operations or cash flows.
We do not believe that any recently other issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, which was consummated in May 2021, the Company sold
NOTE 4. RELATED PARTY TRANSACTIONS
Founder Shares
On January 28, 2021, the Company issued an aggregate of
F-14
of
The initial stockholder has agreed not to transfer, assign or sell any of the Class B common stock or shares of Common Stock issuable upon conversion thereof, until the earlier to occur of (A) six months after the completion of the Company’s initial Business Combination and (B) subsequent to the Company’s initial Business Combination, (x) if the reported last sale price of the Common Stock equals or exceeds $
On April 21, 2023, the Sponsor elected to convert on a one-for-one basis one-half of the Founder Shares held by it, or
Private Placement
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale of an aggregate of
A portion of the proceeds from the Private Placement Units was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Units will be worthless.
The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Shares until 30 days after the completion of the initial Business Combination.
Promissory Note – Related Party
On January 29, 2021, the Sponsor issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $
F-15
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
Pursuant to its amended and restated certificate of incorporation, the Company may extend the period of time to consummate a Business Combination up to two times, each by an additional three months (for a total of up to 18 months to complete a Business Combination). In order to effectuate such extensions, the Sponsor or its affiliates or designees must deposit into the Trust Account $
The Company elected the Fair Value option of accounting for the First Extension Note.
On May 3, 2022, the Company issued a promissory note (the “Note”) in the principal amount of $
As a result of stockholder approval of the Charter Amendment, and the Company’s implementation thereof, the Sponsor or its designees will contribute to the Company as a loan an aggregate of $
As a result of stockholder approval of the Extension and the Company’s implementation thereof, on November 14, 2022, the Company issued a promissory note in the principal amount of up to $
The Company will cause the Extension Funds to be deposited into the Trust Account, which equates to approximately $
On May 5, 2023, as a result of stockholder approval of the Extension and the Company’s implementation thereof, on May 22, 2023, the Company issued two promissory notes in the principal amount of up to $
On August 2, 2023, the Company issued an additional promissory note to the Sponsor for an amount of $
The Notes bear no interest and are repayable in full upon the earlier of (a) the date of the consummation of the Company’s Initial Business Combination, or (b) the date of the liquidation of the Company.
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Based on the outstanding
Outstanding loans, at cost, totaled $
NOTE 5. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the founder shares, the representative shares (see Note 7) as well as the holders of the Private Placement Units (and underlying securities) and any securities issued in payment of working capital loans made to the Company, will be entitled to registration rights pursuant to an agreement to be signed prior to or on the effective date of Initial Public Offering. The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities. Notwithstanding anything to the contrary, such holders may only make a demand registration (i) on one occasion and (ii) during the five year period beginning on the effective date of the Initial Public Offering. The holders of the majority of the founder shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these common stock are to be released from escrow. The holders of a majority of the Private Placement Units (and underlying securities) and securities issued in payment of working capital loans (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. Notwithstanding anything to the contrary, such holders may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the Initial Public Offering. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a
The underwriters were entitled to a cash underwriting discount of: (i) one percent (
Right of First Refusal
For a period beginning on the closing of this offering and ending 18 months from the closing of a business combination, we have granted EF Hutton, division of Benchmark Investment, LLC a right of first refusal to acting as sole investment banker, sole book runner and/or sole placement for any and all future private or public equity and debt offerings, including equity-linked financings during such period. In accordance with FINRA Rule 5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more than three years from the effective date of the registration statement of which this prospectus forms a part.
F-17
NOTE 6. WARRANTS
At March 31, 2024 and December 31, 2023, the Company had
On April 12, 2021, the SEC issued a statement with respect to the accounting for warrants issued by special purchase acquisition companies. In light of the SEC Staff’s Statement, the Company has determined that the fair value of the warrants should be classified as a warrant liability on the Company’s balance sheets and subsequent changes to the fair value of the warrants will be recorded in the Company’s statements of operations.
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) the consummation of a Business Combination or (b)
The Company may call the warrants for redemption (excluding the Private Placement Warrants), in whole and not in part, at a price of $
| ● | at any time while the Public Warrants are exercisable, |
| ● | upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder, |
| ● | if, and only if, the reported last sale price of the common stock equals or exceeds $ |
| ● | if, and only if, there is a current registration statement in effect with respect to the common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the common stock issuable upon the exercise of the Private Placement Warrants are not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
The exercise price is $
F-18
at an issue price or effective issue price of less than $
The accounting treatment of derivative financial instruments requires that the Company record a derivative liability upon the closing of the Initial Public Offering. Accordingly, the Company classified each Warrant as a liability at its fair value, and the Warrants were allocated a portion of the proceeds from the issuance of the Units equal to their fair value determined by the Monte Carlo simulation. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the Warrants will be reclassified as of the date of the event that causes the reclassification.
In the Company’s fiscal quarter ended on June 30, 2021, the warrants detached from the units and started trading, therefore, since the fiscal quarter ended on June 30, 2021, the trading price for the public warrants will be used as the fair value of the public warrants.
For the Private Placement Warrants at March 31, 2024 and December 31, 2023, the following assumptions were used to calculate the fair value:
March 31, | December 31, |
| |||
| 2024 |
| 2023 |
| |
Risk-free interest rate |
| | % | | % |
Expected life |
|
| |||
Expected volatility of underlying stock |
| | % | | % |
Dividends |
| | % | | % |
As of March 31, 2024 and December 31, 2023, the derivative liability associated with warrants was $
NOTE 7. STOCKHOLDERS’ EQUITY (DEFICIT)
Class A Common Stock — The Company is authorized to issue
On November 4, 2022, the Company held a special meeting in lieu of the 2022 annual meeting of stockholders (the “Meeting”). At the Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter Amendment”) to extend the date by which the Company must consummate its initial business combination from November 7, 2022 to May 7, 2023 or such earlier date as determined by the Company’s board of directors (the “Board”). The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on November 4, 2022.
In connection with the Meeting, stockholders holding
F-19
In April 2023, the Company converted
On May 5, 2023, the Company held a special meeting in lieu of the 2023 annual meeting of stockholders (the “Meeting”). At the Meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Charter Amendment”) to extend the date by which the Company must consummate its initial business combination from May 7, 2023 to February 7, 2024 or such earlier date as determined by the Company’s board of directors (the “Board”). The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on May 5, 2023.
In connection with the Meeting, stockholders holding
On February 5, 2024, the Company, held a Special Meeting at which time the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to the date by which the Company must consummate its initial business combination from February 7, 2024 to August 7, 2024 (or such earlier date as determined by the Board) The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on Feb 7, 2024.
In connection with the February 5, 2024, special meeting, stockholders holding 93,402 of the Company’s Class A common stock exercised their right to redeem such shares. Following this redemption, the Company has 997,316 Public Shares outstanding.
Class B Common Stock — The Company is authorized to issue
Preferred Shares — The Company is authorized to issue
F-20
NOTE 8. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value at March 31, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
March 31, | December 31, | |||||||
Description |
| Level |
| 2024 |
| 2023 | ||
Assets: |
|
|
|
|
|
| ||
Marketable securities held in the Trust Account |
| 1 | $ | | $ | | ||
| ||||||||
Liabilities: |
|
|
|
|
|
| ||
Note payable – Sponsor |
| 3 | $ | | $ | | ||
Warrant Liability – Private Placement Warrants |
| 3 | $ | | $ | | ||
Warrant Liability – Public Warrants |
| 1 | $ | | $ | | ||
The Public Warrants and the Private Placement Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within liabilities in the balance sheets. The Warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of derivative liabilities in the statement of operations.
F-21
Upon consummation of the Initial Public Offering, the Company used a Monte Carlo simulation model to value the Public Warrants and a modified Black-Scholes model to value the Private Placement Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of the Class A Common Stock and one-half of one Public Warrant), (ii) the sale of the Private Placement Warrants and (iii) the issuance of the Class B Common Stock, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to the Class A Common Stock subject to possible redemption (temporary equity), the Class A Common Stock (permanent equity) and the Class B Common Stock (permanent equity) based on their relative fair values at the initial measurement date. At the initial measurement date, the Warrants were classified within Level 3 of the fair value hierarchy at the measurement dates due to the use of unobservable inputs.
As of March 31, 2024 and December 31, 2023, the Public Warrants were valued using the publicly available price for the Warrant and are classified as Level 1 on the Fair Value Hierarchy. As of March 31, 2024 and December 31, 2023, the Company used a modified Black-Scholes model to value the Private Placement Warrants. The Company relied upon the implied volatility of the Public Warrants and the implied volatilities of comparable companies and the closing price as of March 31, 2024 and December 31, 2023, per Public Warrant to estimate the volatility for the Private Placement Warrants. As of March 31, 2024 and December 31, 2023, the Private Placement Warrants were classified within Level 3 of the Fair Value Hierarchy at the measurement dates due to the use of unobservable inputs.
As of March 31, 2024, the fair value of the First Extension Note is the aggregate of (i) the liquidation-adjusted present value of the straight debt, discounted by a six-month risk-free yield of
As of December 31, 2023, the fair value of the First Extension Note is the aggregate of (i) the liquidation-adjusted present value of the straight debt, discounted by a six-month risk-free yield of
F-22
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, except as identified below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
Termination of Business Combination Agreement
On May 20, 2024, pursuant to Section 9.01(a) of the Business Combination Agreement, Maquia and Immersed entered into a Termination of Business Combination Agreement (“Termination Agreement”) pursuant to which the Business Combination Agreement was terminated effective as of May 20, 2024. Maquia intends to continue to identify and pursue a business combination with an appropriate target.
Delisting Notices
On May 22, 2024, Maquia, received a notice from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) (the “Notice”) that Maquia was delinquent in the filing of its periodic Form 10Q Report with the Securities and Exchange Commission (the “SEC”) for the period ending March 31, 2024 and that Nasdaq has initiated a process which could result in the delisting of the Company’s securities from Nasdaq Stock Market as a result of the Company not being in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Listing Rule”), which requires listed companies to file in a timely manner all required periodic financial reports with the SEC. The Company has timely appealed the notice and request a hearing in accordance with NASDAQ Listing Rule 5815(a)(1)(B). A request for a hearing regarding a delinquent filing will stay the suspension of the Company’s securities for a period of 15 days from the date of the request and provided a plan for compliance. There can be no assurance that Nasdaq will accept the Company’s plan to regain compliance or that the Company will be successful in implementing its plan to regain compliance with the Rule, by filing the Report with the SEC.
Previous to this, and as reported by the Company, on May 7, 2024, Maquia , received a notice from the Listing Qualifications Department of Nasdaq (the “May 7th Notice”) that Maquia was not in compliance with Nasdaq Listing Rule IM-5101-2 requiring a special purpose acquisition company must complete one or more business combinations within 36 months of the effectiveness of its IPO registration statement triggering the issuance of a Staff Delisting Determination under Rule 5810 to delist the Company’s securities. The Company has appealed, the hearing for which is currently set for June 20, 2024.
The May 7th Notice also indicated that on January 8, 2024 (as reported on the Company’s January 12, 2024 8-K), the Company failed to hold an annual meeting of stockholders within the required twelve-month period of the end of the Company’s fiscal year end. As noted in the Company’s 8-K filed May 21, 2024, the Company held its annual meeting on May 20, 2024 in compliance with the Listing Rule.
F-23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward- looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Report.
Recent Developments
Termination of Business Combination Agreement
On May 20, 2024, pursuant to Section 9.01(a) of the Business Combination Agreement, Maquia and Immersed entered into a Termination of Business Combination Agreement (“Termination Agreement”) pursuant to which the Business Combination Agreement was terminated effective as of May 20, 2024. Maquia intends to continue to identify and pursue a business combination with an appropriate target.
Results of Operations
We have not generated any revenues to date, and we will not be generating any operating revenues until the closing and completion of our initial business combination. Our entire activity up to March 31, 2024 was related to our formation, our initial public offering and, since the closing of our initial public offering, a search for an initial business combination target. We have, and expect to continue to generate, non-operating income in the form of interest income and unrealized gains on investments held in the trust account. We expect to continue to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with the search for an initial business combination target.
For the three months ended March 31, 2024, we had a net loss of $162,958, which primarily consisted of general and administrative expenses of $237,978, loss on change in the fair value of the derivative liabilities of $45,744 and income taxes of $33,733, partially offset by unrealized gains on investments of $154,497.
For the three months ended March 31, 2023, we had net income of $278,260, which primarily consisted of unrealized gains on investments of $407,821 and change in fair value of the derivative warrant liabilities of $155,567, partially offset by general and administrative expenses of $169,993 and income taxes of $90,689.
Liquidity and Capital Resources
Prior to the consummation of our initial public offering, our only source of liquidity was the initial sale of the Founder Shares to our Sponsor and advances under the promissory note with our sponsor.
Pursuant to our initial public offering, which was consummated in May 2021, the Company sold 17,309,719 units, which includes underwriters’ over-allotment, at a purchase price of $10.00 per unit generating gross proceeds to us in the amount of $173.1 million. Each unit consists of one share of our Class A common stock, par value $0.0001 per share, and one-half of one public warrant, with each whole warrant entitling the holder thereof to purchase one whole share of Class A common stock at a price of $11.50 per share, subject to adjustment.
Simultaneously with the closing of our initial public offering, the Company consummated the private placement of an aggregate of 583,743 placement units, which includes underwriters’ over-allotment, to our sponsor at a purchase price of $10.00 per placement unit, generating gross proceeds to us in the amount of $5,837,430.
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A portion of the proceeds from the placement units was added to the proceeds from our initial public offering held in the trust account. If we do not complete an initial business combination by the end of the Combination Period, the proceeds from the sale of the placement units held in the trust account will be used to fund the redemption of the public shares (subject to the requirements of applicable law) and the placement units will be worthless.
As indicated in the accompanying financial statements, at March 31, 2024, we had $196,833 in cash, and a working capital deficiency of $4,145,758.
We presently have no operating revenue. Through March 31, 2024, our liquidity needs were satisfied through receipt of $475,500 held outside of the trust account from the sale of the placement warrants upon the closing of our initial public offering. In the future, a portion of interest income on the funds held in the trust account may be released to us to pay tax obligations.
In order to finance transaction costs in connection with an initial business combination, our sponsor or an affiliate of our sponsor, or our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of an initial business combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes and any other loans made by our sponsor or its affiliates (including the loans made to effectuate extensions as described below), our officers and directors, or our company and its affiliates prior to or in connection with an initial business combination may be converted upon consummation of an initial business combination into additional placement units at a price of $10.00 per placement unit. In the event that an initial business combination does not close, we may use a portion of proceeds held outside the trust account to repay the Working Capital Loans, but no proceeds held in the trust account would be used to repay the Working Capital Loans. As of March 31, 2024 and December 31, 2023, we had no borrowings under the Working Capital Loans.
We may also need to obtain additional financing either to complete a business combination or because we become obligated to redeem a significant number of shares of our Class A common stock upon completion of the business combination, in which case we may issue additional securities or incur debt in connection with the business combination.
In connection with the Company’s assessment of going concern considerations in accordance with FASB’s ASC Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” the Company is a Special Purpose Acquisition Corporation that was formed for the purpose of completing a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities on or before August 7, 2024. There is no assurance that the Company will raise the additional capital it needs to fund its operations. The Company also has no approved plan in place to extend the business combination deadline and fund operations for any period of time after August 7, 2024, in the event that it is unable to complete a business combination by that date. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern.
There is no assurance that our plans to consummate an initial business combination will be successful by August 7, 2024. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In connection with the First Extension (as defined below), the Sponsor loaned to the Company an aggregate of $3,461,944, which amount was deposited into the Trust Account. The loan is non-interest bearing and will be payable upon the earlier of consummation of the Company’s initial business combination and its winding up. At the election of the Sponsor, up to $1,500,000 of the loan is convertible into units of the Company identical to the units issued to the Sponsor in the private placement concurrent with the Company’s Initial Public Offering, at a conversion price of $10 per unit.
In connection with the Second Extension (as defined below), the Sponsor made six monthly contributions of $159,291, for a total of $955,746 in contributions through May 7, 2023, which amount was contributed to the Trust Account. In connection with the Third Extension (as defined below), the Sponsor or its designees have agreed to contribute to the Company as a loan an aggregate of $0.025 for each share of Class A commons stock that is not redeemed, for each calendar month (commencing on May 7, 2023 and each month thereafter) until February 7, 2024, with each monthly contribution being $27,267.95 based on 1,090,718 Public Shares outstanding following the approval of the Third Extension
On February 5, 2024, in connection with the Fourth extension, the Company held a Special Meeting at which time the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to the date by which the Company must consummate its initial business combination from February 7, 2024 to August 7, 2024 (or such earlier date as determined by the Board). The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on Feb 7,
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2024. In connection with this extension, the Company and the Sponsor entered into a non-redemption agreement with one or more unaffiliated third party or parties in exchange for such third party or third parties agreeing not to redeem an aggregate of 538,093 shares of Maquia Class A Common Stock sold in the IPO (“Non-Redeemed Shares”). In exchange for the foregoing commitments not to redeem such Non-Redeemed Shares, the Sponsor has agreed to transfer to such Third Parties 2.5% per month of the Non-Redeemed Shares up to a maximum of 6 months (depending upon the month the initial business combination is consummated), of the Company’s Class A common stock held by such Third Parties, immediately following the consummation of an initial business combination, if the Third Parties continue to hold such Non-Redeemed Shares through the Fourth Extension Meeting. In connection with the vote to approve the Extension Amendment Proposal, public stockholders holding 93,402 of the Company’s Class A common stock, par value $0.0001, properly exercised their right to redeem their shares for a cash payment out of the Company’s trust account in connection with the Extension Amendment Proposal leaving a balance of 997,316 class A Common shares in the hands of the Public Shareholders.
If the Company opts not to utilize any remaining portion of the extension period prior to August 7, 2024, then the Company will liquidate and dissolve promptly in accordance with its charter, and its Sponsor’s obligation to make additional Contributions will terminate.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with the determinations of the fair-market value of the preferred stock, stock-based compensation, and the impairment analysis of intangibles.
Our financial position, results of operations and cash flows are impacted by the accounting policies we have adopted. In order to get a full understanding of our financial statements, one must have a clear understanding of the accounting policies employed. A summary of our critical accounting policies is presented within the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may materially differ from these estimates under different assumptions or conditions.
Our critical accounting estimates have not changed materially from those previously reported in our Annual Report for the year ended December 31, 2023, on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report, due to the material weaknesses in internal controls over financial reporting. Specifically, we did not
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design and maintain an effective control environment to prevent or detect material misstatements in the financial statements. The following material weaknesses in internal controls over financial reporting were identified:
| ● | Controls over the identification, accounting and reporting for complex financial instruments. |
| ● | Controls over calculation and reporting for income taxes. |
| ● | Controls over the protection of funds permitted for withdrawal from the trust, including both the timely payment of income and other tax liabilities and ineffective oversight by the board and our management relating to the Company recurring non- compliance with an investment management trust agreement |
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
Our internal control over financial reporting and other transactions reported above were not effective to properly evaluate complex equity transactions, to properly calculate and report income taxes and improper monitoring and accounting of the trust account.
There has been no change in our internal control over financial reporting during the fiscal quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The breakdown of an internal control process that led to the overpayment issue was primarily caused by lack of an effective check and balance system which allowed an individual to perform multiple tasks such as authorize payments, process transactions, and reconcile bank statements, without additional oversight. Furthermore, regular internal audits or reviews were absent, which otherwise would have identified discrepancies early on.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 1A. Risk Factors.
As of the date of this Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our (i) Registration Statement on Form S-1 initially filed with the SEC on February 16, 2021, as amended, and declared effective on May 4, 2021 (File No. 333-253167) (the “Registration Statement”), (ii) Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on April 4, 2023, (iii) Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, June 30, 2022 and September 30, 2022, as filed with the SEC on May 10, 2022, August 16, 2022 and November 10, 2022, respectively , (iv) DEF 14A as filed with the SEC on April 24, 2023 and Amendment No. 2 to the S4 Registrations Statement filed April 19, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Market conditions, economic uncertainty or downturns could adversely affect our business, financial condition, operating results and our ability to consummate a business combination.
In recent years, the United States and other markets have experienced cyclical or episodic downturns, and worldwide economic conditions remain uncertain, including as a result of the COVID-19 pandemic, supply chain disruptions, the Ukraine-Russia conflict, instability in the U.S. and global banking systems, rising fuel prices, increasing interest rates or foreign exchange rates and high inflation and the possibility of a recession. A significant downturn in economic conditions may make it more difficult for us to consummate a business combination.
We cannot predict the timing, strength, or duration of any future economic slowdown or any subsequent recovery generally, or in any industry. If the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, operating results and our ability to consummate a business combination could be adversely affected. For example, in January 2023, the outstanding national debt of the U.S. government reached its statutory limit. The U.S. Department of the Treasury (the “Treasury Department”) has announced that, since then, it has been using extraordinary measures to prevent the U.S. government’s default on its payment obligations, and to extend the time that the U.S. government has to raise its statutory debt limit or otherwise resolve its funding situation. The failure by Congress to raise the federal debt ceiling could have severe repercussions within the U.S. and to global credit and financial markets. If Congress does not raise the debt ceiling, the U.S. government could default on its payment obligations, or experience delays in making payments when due. A payment default or delay by the U.S. government, or continued uncertainty surrounding the U.S. debt ceiling, could result in a variety of adverse effects for financial markets, market participants and U.S. and global economic conditions. In addition, U.S. debt ceiling and budget deficit concerns have increased the possibility a downgrade in the credit rating of the U.S. government and could result in economic slowdowns or a recession in the U.S. Although U.S. lawmakers have passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States as a result of disputes over the debt ceiling. The impact of a potential downgrade to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect economic conditions, as well as our business, financial condition, operating results and our ability to consummate a business combination.
The termination of the business combination agreement with Immersed, Inc. Will severely limit the company’s ability to consummate a business combination with a new target prior to August 7, 2024.
As reported above, the business combination agreement with Immersed Inc was mutually terminated on May 20, 2024. Pursuant to our charter we must complete a business combination no later than August 7, 2024. To accomplish this the Company must locate a suitable target, engage that target with a business combination agreement, and submit the matter to shareholders for approval prior to August 7, 2024. Failure to do this will result in the liquidation of the Company unless the August 7, 2024 date is further extended. In addition, Nasdaq has determined to delist the company for failure to complete a business combination within 36 months of the effective date of its IPO. Although the company has appealed this determination and seeks to extend the completion date to November 7, 2024, there can be no assurance that NASDAQ will grant this extension request. Because of the time limitations and the potential for delisting,
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the Company faces significant limitations on its ability to complete the business combination in a timely manner and thus may be forced to liquidate.
Should NASDAQ finally determine to delist the company’s securities, it will have a serious impact on the company’s ability to complete a business combination.
Maquia is subject to compliance with Nasdaq’s continued listing requirements in order to maintain the listing of our securities on Nasdaq. Maquia expects that if the Maquia Class A Common Stock fails to meet Nasdaq’s continued listing requirements, the Maquia Units and Maquia Warrants will also fail to meet Nasdaq’s continued listing requirements for those securities. If Maquia’s securities do not meet Nasdaq’s continued listing requirements, Nasdaq may delist such securities from trading on its exchange.
On May 22, 2024, Maquia, received a notice from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) (the “Notice”) that Maquia was delinquent in the filing of its periodic Form 10Q Report with the Securities and Exchange Commission (the “SEC”) for the period ending March 31, 2024 and that Nasdaq has initiated a process which could result in the delisting of the Company’s securities from Nasdaq Stock Market as a result of the Company not being in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Listing Rule”), which requires listed companies to file in a timely manner all required periodic financial reports with the SEC. The Company has timely appealed the notice and request a hearing in accordance with NASDAQ Listing Rule 5815(a)(1)(B). A request for a hearing regarding a delinquent filing will stay the suspension of the Company’s securities for a period of 15 days from the date of the request and provided a plan for compliance. There can be no assurance that Nasdaq will accept the Company’s plan to regain compliance or that the Company will be successful in implementing its plan to regain compliance with the Rule, by filing the Report with the SEC.
Previous to this, and as reported by the Company, on May 7, 2024, Maquia , received a notice from the Listing Qualifications Department of Nasdaq (the “May 7th Notice”) that Maquia was not in compliance with Nasdaq Listing Rule IM-5101-2 requiring a special purpose acquisition company must complete one or more business combinations within 36 months of the effectiveness of its IPO registration statement triggering the issuance of a Staff Delisting Determination under Rule 5810 to delist the Company’s securities. The Company has appealed, the hearing for which is currently set for June 20, 2024.
The May 7th Notice also indicated that on January 8, 2024 (as reported on the Company’s January 12, 2024 8-K), the Company failed to hold an annual meeting of stockholders within the required twelve-month period of the end of the Company’s fiscal year end. As noted in the Company’s 8-K filed May 21, 2024, the Company held its annual meeting on May 20, 2024 in compliance with the Listing Rule. On June 3, 2024, the Company was advised by the Nasdag Listing Qualifications Department that Nasdaq rules require companies listed on the Nasdaq Capital Market to maintain a minimum of 300 public holders for continued listing, and requested that the Company provide a certified list of Maquia shareholders. The Company is in the process of securing the requested report from the Company’s transfer agent and, to the Company’s present knowledge, it now satisfies the 300 public shareholder threshold.
If Nasdaq delists any of Maquia’s securities from trading on its exchange and Maquia is not able to list such securities on another national securities exchange, Maquia expects such securities could be quoted on an over-the-counter market. If this were to occur, Maquia could face significant material adverse consequences, including:
| ● | our ability to complete an initial Business Combination with a target company contemplating a Nasdaq listing, including the Business Combination; |
| ● | a limited availability of market quotations for Maquia’s securities; |
| ● | reduced liquidity for Maquia’s securities; |
| ● | a determination that the Maquia Class A Common Stock is a “penny stock” which will require brokers trading in Maquia Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for Maquia’s securities; |
| ● | a limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
| Description of Exhibit |
1.01 | ||
1.02 | Request for Withdrawal of Registration Statement on Form S-4Registration Statement File No. 333-275446, CIK No. 0001844419 | |
3.1 |
| |
3.2 | ||
10.1 |
| |
10.2 | ||
13 | submission of matters to security holders as reported on form 8K dated May 22, 2022 | |
31.1* |
| |
31.2* |
| |
32.1** |
| |
32.2** |
| |
101.INS* |
| Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
| Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
* | Filed herewith. |
** | Furnished. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MAQUIA CAPITAL ACQUISITION CORPORATION | |
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Date: June 14, 2024 | By: | /s/ Jeff Ransdell |
| Name: | Jeff Ransdell |
| Title: | Chief Executive Officer |
|
| (Principal Executive Officer) |
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|
Date: June 14, 2024 | By: | /s/ Jeronimo Peralta |
| Name: | Jeronimo Peralta |
| Title: | Chief Financial Officer |
|
| (Principal Accounting and Financial Officer) |
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