UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The | ||||
| The |
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 14, 2024, there were
TRAILBLAZER MERGER CORPORATION I
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements
TRAILBLAZER MERGER CORPORATION I
CONDENSED BALANCE SHEETS
| March 31, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Prepaid insurance | ||||||||
| Cash and marketable securities in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued offering costs | ||||||||
| Income taxes payable | ||||||||
| Deferred tax liability | ||||||||
| Promissory note related party | ||||||||
| Total current liabilities | ||||||||
| Deferred tax liability | ||||||||
| Deferred underwriting fee payable | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 6) | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
TRAILBLAZER MERGER CORPORATION I
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating and formation costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Stock-based compensation expense | ( | ) | ||||||
| Interest earned on marketable securities held in Trust Account | ||||||||
| Unrealized loss on marketable securities held in Trust Account | ( | ) | ||||||
| Other income (expense) | ( | ) | ||||||
| Income (loss) before provision for income taxes | ( | ) | ||||||
| (Provision for) benefit from income taxes | ( | ) | ||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| $ | $ | ( | ) | |||||
| $ | $ | |||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
TRAILBLAZER MERGER CORPORATION I
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2024
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balances — December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement of carrying value to redemption value | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||
| Balances – March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2023
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balances — December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Sale of | ||||||||||||||||||||||||||||
| Stock-based compensation expense to certain officers/directors | — | — | ||||||||||||||||||||||||||
| Fair value of rights included in public units | — | — | ||||||||||||||||||||||||||
| Allocated value of transaction costs to Class A shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Remeasurement of carrying value to redemption value | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||
| Balances – March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
TRAILBLAZER MERGER CORPORATION I
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended March 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( |
) | ||||
| Adjustments to reconcile net income (loss) to net cash used in by operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Interest earned on marketable securities held in Trust Account | ( |
) | ||||||
| Unrealized gain on marketable securities held in Trust Account | ||||||||
| Deferred benefit from income taxes | ( |
) | ( |
) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( |
) | ||||||
| Prepaid insurance | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Income taxes payable | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account to pay franchise taxes | ||||||||
| Investment of cash into Trust Account | ( |
) | ||||||
| Extension deposit into Trust Account | ( |
) | ||||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of units, net of underwriting discounts paid | ||||||||
| Proceeds from sale of private placement units | ||||||||
| Proceeds from promissory note – related party | ||||||||
| Payment of offering costs | ( |
) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( |
) | ||||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Non-Cash investing and financing activities: | ||||||||
| Offering costs included in accrued offering costs | $ | $ | ||||||
| Remeasurement of carrying value to redemption value | $ | $ | ||||||
| Deferred underwriting fee payable | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
TRAILBLAZER MERGER CORPORATION I
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Trailblazer Merger Corporation I (the “Company”, “we”) is a blank check company incorporated in Delaware on November 12, 2021. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or geographic location for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies. While the Company may pursue an initial business combination target in any business or industry, the Company intends to focus the search for a target business on companies operating in the technology industry.
As of March 31, 2024, the Company had not yet commenced any operations. All activity for the period November 12, 2021 (inception) through March 31, 2024 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s
Initial Public Offering was declared effective on March 28, 2023. On March 31, 2023, the Company consummated the Initial Public
Offering of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of
Transaction costs amounted to $
Following the closing of the Initial Public Offering
on March 31, 2023, an amount of $
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Placement Units, although
substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance
that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business
Combinations with one or more operating businesses or assets with a fair market value equal to at least
The Company will provide its holders of the outstanding
Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination
or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $
If the Company seeks stockholder approval, it will only proceed with a Business Combination, if a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), which will be filed prior to the Initial Public Offering, increase the number of authorized shares, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5), placement shares (shares of Class A common stock included in the Placement Units) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or don’t vote at all.
5
Notwithstanding the above, if the Company seeks
stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and
Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of
The Sponsor has agreed (a) to waive its redemption rights
with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination, (b) to
waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within 15 months
from the closing of the Initial Public Offering (or up to 18 months, if we extend the time to complete a business combination as
described in this prospectus) and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to
modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business
Combination or to redeem
The Company will have until 15 months from the closing of
the Initial Public Offering, or until June 30, 2024, as extended on March 28, 2024, to complete a Business Combination. However, if the
Company anticipates that it may not be able to consummate a Business Combination within 15 months, the Company may, by resolution
of its board of directors and if requested by the Sponsor, extend the period of time the Company has to consummate a Business Combination
one time, by an additional three months (for a total of up to 18 months), provided that, pursuant to the terms of the Company’s
Amended and Restated Certificate of Incorporation and the trust agreement entered into between the Company and Continental Stock Transfer &
Trust Company in connection with the Initial Public Offering, in order for the time available for the Company to consummate a Business
Combination to be extended, the Sponsor or its affiliates or designees, upon five days’ advance notice prior to the applicable
deadline, must deposit into the Trust Account $
On March 28, 2024, the Sponsor deposited $
The Extension Payment was loaned as a draw down pursuant to an unsecured promissory note the Company issued to the Sponsor (see Note 5).
The Sponsor has agreed to waive its liquidation
rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However,
if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions
from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed
to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does
not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other
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 ($
6
In order to protect the amounts held in the Trust
Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or
products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement,
reduce the amount of funds in the Trust Account to below (1) $
Going Concern Consideration
The Company’s liquidity needs prior to the
consummation of the Initial Public Offering were satisfied through the payment of $
In order to fund working capital deficiencies
or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, it would repay such loaned amounts at that time. Up to $
In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company currently lacks the liquidity it needs to sustain operations for a reasonable period of time, which is considered to be at least one year from the date that the financial statements are issued as it expects to continue to incur significant costs in pursuit of its acquisition plans. In addition, the Company has until June 30, 2024 (as extended, or September 30, 2024 if we extend the period of time to consummate a Business Combination by the full amount of time) to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by June 30, 2024 (or September 30, 2024, if extended by the full amount of time), there will be a mandatory liquidation and subsequent dissolution. Management has determined that mandatory liquidation, should a Business Combination not occur, and an extension not be approved by the board of directors of the Company, and potential subsequent dissolution and the liquidity issue raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after June 30, 2024 (or September 30, 2024, if extended by the full amount of time). The Company intends to continue to search for and seek to complete a Business Combination before the mandatory liquidation date. The Company is within 12 months of its mandatory liquidation date as of the time of filing of this Quarterly Report on Form 10-Q.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction
Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
7
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s December 31, 2023 Annual Report on Form 10-K as filed with the SEC on March 29, 2024, as well as the Company’s Current Report on Form 8-K, as filed with the SEC on April 28, 2023. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
8
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires 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.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Cash and Marketable Securities in Trust Account
At March 31, 2024 and December 31, 2023, substantially all of
the assets held in the Trust Account were held in U.S. Treasury Bills. The Company accounts for its marketable securities as trading securities
under ASC 320, where securities are presented at fair value on the balance sheets and with unrealized gains or losses, if any, presented
on the statements of operations. From inception through March 31, 2024, the Company withdrew $
Offering Costs
The Company complies with the requirements
of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of
Offering”. Offering costs consist principally of professional and registration fees, cash underwriting discount, and deferred
underwriting fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs were
allocated to the separable financial instruments issued in the Initial Public Offering based on relative fair value basis, compared
to total proceeds received. Offering costs allocated to the Public Shares were charged to temporary equity and offering costs
allocated to Public Rights (as defined in Note 3) were charged to stockholders’ deficit upon the completion of the
Initial Public Offering. Offering costs paid during the period ended March 31, 2024 and March 31, 2023 were $
Class A Redeemable Stock Classification
The Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, or if there is a stockholder vote or tender offer in connection with the Company’s initial business combination. In accordance with ASC 480-10-S99, the Company classifies Public Shares subject to redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Public Shares sold as part of the Units in the Initial Public Offering were issued with other freestanding instruments (i.e., Public Rights) and as such, the initial carrying value of Public Shares classified as temporary equity are the allocated proceeds determined in accordance with ASC 470-20. The Company recognizes changes in redemption value immediately as it occurs and will adjust the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable shares will result in charges against additional paid-in capital and accumulated deficit. Accordingly, at March 31, 2024 and December 31, 2023, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheet.
9
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Rights | ( | ) | ||
| Class A common stock issuance costs | ( | ) | ||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Class A Common Stock subject to possible redemption, December 31, 2023 | $ | |||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Class A Common Stock subject to possible redemption, March 31, 2024 | $ |
Income Taxes
The Company accounts for income taxes under ASC 740, “Income
Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences
between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to
be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it
is more likely than not that all or a portion of deferred tax assets will not be realized. As of March 31, 2024, the Company reported
a net deferred tax liability of $
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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 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.
10
Net Income (Loss) Per Share of Common Stock
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per share of common stock is computed by dividing
net income (loss) by the weighted average number of shares of common stock outstanding for the period. Subsequent remeasurement of the
redeemable Class A common stock is excluded from income (loss) per share of common stock as the redemption value approximates fair
value. Net income (loss) per share of common stock is computed by dividing the pro rata net income between the shares of Class A
common stock and the shares of Class B common stock by the weighted average number of shares of common stock outstanding for each
of the periods. The calculation of diluted income (loss) per share does not consider the effect of the rights issued in connection with
the IPO, as well as rights issuable upon the exercise of the conversion option on outstanding working capital loans, since the exercise
of the rights is contingent upon the occurrence of future events and the inclusion of such rights would be anti-dilutive. The rights are
exercisable for
| For the Three Months Ended March 31, | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income (loss) per common share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income (loss) | $ | $ | $ | ( | ) | $ | ||||||||||
| Denominator: | ||||||||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
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
Deposit Insurance Corporation coverage limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to 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 FASB ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statement of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instruments could be required within 12 months of the balance sheet date.
Stock-Based Compensation
The Company adopted ASC Topic 718, Compensation—Stock Compensation, guidance to account for its stock-based compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest. Share-based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in costs and operating expenses depending on the nature of the services provided in the statement of operations.
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Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company
sold
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor purchased an aggregate of
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On May 17, 2022, the Sponsor purchased
On March 28, 2023, the Chief Financial Officer
of the Company and three directors (the “subscribers”) entered into subscription agreements with the Sponsor for an interest
in the Sponsor company for their own investment purposes. The interest is backed by the Class A common stock owned by the Company
as of March 28, 2023, the date of issuance. As such, the subscribers will participate in the profits or losses of the Sponsor company
though date of liquidation. The subscription into interests of the Class A common stock founder shares to the Company’s management
and directors is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC
718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The
On November 10, 2023, the Company reimbursed its
officers an aggregate amount of $
The Sponsor has agreed, subject to certain limited
exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (1) year after the
completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last reported sale price of the
Class A common stock equals or exceeds $
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Promissory Note — Related Party
On May 17, 2022, the Company issued an unsecured
promissory note to the Sponsor (the “Promissory Note”) as amended on January 20, 2023 and as further amended as of March 31,
2023, pursuant to which the Company may borrow up to an aggregate principal amount of $
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds
held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital
Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either
be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration and Stockholder’s Rights
Pursuant to a registration rights agreement entered into on March 28, 2023, the holders of the Founder Shares, Placement Units and any unit that may be issued upon conversion of the Working Capital Loans (and any underlying shares of Class A common stock) are entitled to registration rights pursuant to a registration rights agreement requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of our Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement will provide that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter a 45-day option
to purchase up to
The underwriters were also entitled to a cash
underwriting discount of $
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Advisory Agreement
Pursuant to the advisory agreement entered into
in September 2022 with LifeSci Capital LLC (“LifeSci”), further amended in March 2023, upon the consummation of the initial
business combination, the Company agreed to pay LifeSci equal to one and one half (
For the purposes of this section, “total consideration” means the total market value of, without duplication, all cash, securities, or other property paid or transferred at the closing of such transaction by the target’s stockholders or to be paid or transferred in the future to the target’s stockholders with respect to such transaction (other than payments of interest or dividends and any contingent or earnout consideration based upon future performance of the combined companies, however characterized), including, without limitation, to the extent applicable, any net value paid in respect of (i) the assets of the target and (ii) the capital stock of the target (and the spread value of any “in the money” securities convertible into options, warrants or other rights to acquire such capital stock), after giving effect to the assumption, retirement or defeasance, directly or indirectly (by operation of law or otherwise), of any long-term liabilities of the target or repayment of indebtedness, including, without limitation, indebtedness secured by the assets of the target, capital leases or preferred stock obligations; provided, that for the avoidance of doubt, any funds in the trust account (as may be applicable in the case of a Transaction) or financing proceeds raised in connection with the closing of the transaction (including by way of an offering, the compensation to underwriters for which is provided for below), in either case, that are not paid to the target’s stockholders as consideration in the transaction will not be included as part of the Total Consideration.
For purposes of this section, the market value
of any publicly traded common stock, whether already outstanding or newly-issued, will be equal to the greater of: (i) the value of such
common stock issued to the target upon the closing of a transaction at a price equal to $
Additionally, the Company agreed to reimburse
the underwriters for all out-of-pocket documented costs and expenses (including fees and expenses of counsel) incurred by the underwriters
in connection with provision of such services, up to $
NOTE 7. STOCKHOLDERS’ DEFICIT
Preferred Stock — The
Company is authorized to issue
Class A Common Stock —
The Company is authorized to issue up to
Class B Common Stock —
The Company is authorized to issue up to
The holder of our
Rights — Except in cases where the Company is not the surviving company in a Business Combination, each holder of a Public Right will automatically receive one-tenth (1/10) of one share of common stock upon consummation of a Business Combination, even if the holder of a Public Right converted all shares held by him, her or it in connection with a Business Combination or an amendment to the Company’s Amended and Restated Certificate of Incorporation with respect to its probusiness combination activities. In the event that the Company will not be the surviving company upon completion of a Business Combination, each holder of a Public Right will be required to affirmatively convert his, her or its rights in order to receive the one-tenth (1/10) of a share underlying each Public Right upon consummation of the Business Combination.
The Company will not issue fractional shares in connection with an exchange of Public Rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General Corporation Law. As a result, the holders of the Public Rights must hold rights in multiples of 10 in order to receive shares for all of the holders’ rights upon closing of a Business Combination.
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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-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. |
At March 31, 2024, assets held in the Trust Account were comprised
of $
Description
| Level | March 31, 2024 | December 31, 2023 | ||||||||||
| Assets: | ||||||||||||
| Marketable securities held in Trust Account | 1 | $ | $ | |||||||||
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Trailblazer Merger Corporation I References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Trailblazer Sponsor Group, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on November 12, 2021 for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering (the “Initial Public Offering”) and the private placement of the Private Units, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of the Initial Public Offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
The issuance of additional shares in connection with an initial business combination:
| ● | may significantly dilute the equity interest of our investors who would not have pre-emption rights in respect of any such issuance; | |
| ● | may subordinate the rights of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of common stock; | |
| ● | could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; | |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our common stock, rights and/or warrants. |
Similarly, if we issue debt securities or otherwise incur significant debt, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; | |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; | |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; | |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; | |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes; | |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
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| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; | |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and | |
| ● | other purposes and other disadvantages compared to our competitors who have less debt. |
We expect to continue to incur significant costs in the pursuit of our initial business combination plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities for the period November 12, 2021 (inception) through March 31, 2024 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the trust account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2024, we had a net income of $372,368, which consists of interest earned on marketable securities held in Trust Account of $953,592, offset by the operating costs of $388,331, unrealized loss on marketable securities held in Trust Account of $3,973 and provision for income taxes of $188,920.
For the three months ended March 31, 2023, we had a net loss of $249,591, which consists of operating costs of $53,004 and compensation expense of $207,087, offset by the benefit from income taxes of $10,500.
Liquidity and Capital Resources
As of March 31, 2024, we had $578,637 in our operating bank account available for working capital needs. All remaining cash was held in the trust account and is generally unavailable for our use prior to an initial business combination.
On March 31, 2023, the Company consummated the IPO of 6,000,000 units (the “Units”). Each Unit consisted of one share of Class A common stock, $0.0001 par value (“Common Stock”) and one right (“Right”) to receive one-tenth (1/10) of one share of Common Stock upon the consummation of an initial business combination. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $60,000,000. The Company granted the underwriters a 45-day option to purchase up to 900,000 additional Units to cover over-allotments, if any, which the underwriters exercised in full simultaneously with the consummation of the IPO. The total aggregate issuance by the Company of 6,900,000 Units at a price of $10.00 per unit resulted in a total gross proceeds of $69,000,000.
Simultaneously with the closing of the IPO, the Company consummated the Private Placement with the Sponsor 394,500 units (the “Private Units”), generating total proceeds of $3,945,000. The Private Units are identical to the Units sold in the IPO. The Sponsor agreed not to transfer, assign or sell any of the Private Units or underlying securities (except in limited circumstances, as described in the registration statement) until the completion of the Company’s initial business combination. The holders of the Private Units were granted certain demand and piggyback registration rights in connection with the purchase of the Private Units. The Private Units were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transaction did not involve a public offering.
As of March 31, 2023, a total of $70,380,000 of the net proceeds from the IPO and the Private Placement was deposited in a trust account established for the benefit of the Company’s public stockholders. Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our tax obligations (if any) and $100,000 of interest for our dissolution expenses, the proceeds from this offering and the sale of the Private Units will not be released from the trust account (1) to us, until the completion of the initial business combination, or (2) to our public stockholders, until the earliest of (a) the completion of our initial business combination, and then only in connection with those Class A common stock that stockholders properly elect to redeem, subject to the limitations, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within fifteen (15) months from the closing of this offering (or up to 18 months, if we extend the time to complete an initial business combination) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, and (c) the redemption of our public shares if we are unable to complete our initial business combination within fifteen (15) months from the closing of this offering (or up to 18 months, if we extend the time to complete an initial business combination), subject to applicable law. Public stockholders who redeem their Class A common stock in connection with a stockholder vote described in clause (b) in the preceding sentence shall not be entitled to funds from the trust account upon the subsequent completion of an initial business combination or liquidation if we have not consummated an initial business combination within fifteen (15) months from the closing of this offering (or up to 18 months, if we extend the time to complete an initial business combination), subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.
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On February 29, 2024, the board of directors approved the exercise by the Company of the automatic extension of the time the Company has to complete a business combination by an additional three months. Pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation and the trust agreement entered into between the Company and Continental Stock Transfer & Trust Company in connection with the Initial Public Offering, in order for the time available for the Company to consummate a Business Combination to be extended, the Sponsor or its affiliates or designees, upon five days’ advance notice prior to the applicable deadline, must deposit into the trust account $690,000 in full, (or $0.10 per share) for each extension, on or prior to the date of the applicable deadline.
Pursuant to the terms of the Company’s amended and restated certificate of incorporation and the trust agreement entered into between the Company and Continental Stock Transfer & Trust Company, if the Company anticipates that it may not be able to consummate its initial business combination within 15 months from the closing of the initial public offering, it may, by resolution of its board of directors and if requested by its Sponsor, extend the period of time it will have to consummate an initial business combination one time, by an additional three months (for a total of up to 18 months from the closing of the initial public offering). The Company must deposit $690,000 into the trust account for each extension.
On March 28, 2024, the Sponsor deposited $ 690,000 (the “Extension Payment”) into the Company’s trust account in order to extend the date by which the Company has to consummate a business combination from March 31, 2024 to June 30, 2024.
The Extension Payment was loaned as a draw down pursuant to an unsecured promissory note the Company issued to the Sponsor on May 17, 2022, pursuant to the Company was able borrow up to an aggregate principal amount of $300,000 (the “Note”). On January 20, 2023, the maximum amount available under the Note was amended and increased to $400,000. As of March 31, 2023, both the Company and the Sponsor mutually agreed to extend the maturity date of the original Note. The Note is non-interest bearing and payable on the earlier of (i) the close of the Company’s initial business combination or (ii) September 30, 2024. On March 27, 2024, the maximum amount available under the Note was, again, amended and increased to $1,090,000.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less income taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such Working Capital Loans (as defined below) may be convertible into Units of the post-business combination entity at a price of $10.00 per unit. The Units would be identical to the Private Units. As of March 31, 2024 and December 31, 2023, there was no amount outstanding under the Working Capital Loan.
We will need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors, or third parties. Our officers, directors and Sponsor may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all.
In connection with the Company’s assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company currently lacks the liquidity it needs to sustain operations for a reasonable period of time, which is considered to be at least one year from the date that the financial statements are issued as it expects to continue to incur significant costs in pursuit of its acquisition plans. In addition, the Company has until June 30, 2024 (as extended, or September 30, 2024 if we extend the period of time to consummate a Business Combination by the full amount of time) to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by June 30, 2024 (or September 30, 2024, if extended by the full amount of time), there will be a mandatory liquidation and subsequent dissolution. Management has determined that mandatory liquidation, should a Business Combination not occur, and an extension not be approved by the stockholders of the Company, and potential subsequent dissolution and the liquidity issue raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after June 30, 2024 (or September 30, 2024, if extended by the full amount of time). The Company intends to continue to search for and seek to complete a Business Combination before the mandatory liquidation date. The Company is within 12 months of its mandatory liquidation date as of the time of filing of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2024.
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Contractual Obligations
Promissory Notes - Related Party
On May 17, 2022, we issued an unsecured promissory note to the Sponsor, pursuant to which we may borrow up to an aggregate principal amount of $300,000 (the “Note”). On January 20, 2023, the maximum amount available under the Note was further increased to $400,000. As of March 31, 2023, both we and the Sponsor mutually agreed to extend the maturity date of the original Note. The Note is non-interest bearing and payable on the earlier of (i) the close of our initial business combination or (ii) September 30, 2024. On November 21, 2023, the Note was further amended to permit us to pay certain expenses of the Sponsor which would reduce the principal balance of the Note by the same amount. On March 27, 2024, the maximum amount available under the Note was again amended and increased to $1,090,000. As of March 31, 2024 and December 31, 2023, there was $1,011,585 and $321,585, respectively, outstanding under the Note.
Registration and Stockholder’s Rights
Pursuant to a registration rights agreement entered into on March 28, 2023, the holders of the founder shares, Placement Units and any unit that may be issued upon conversion of the Working Capital Loans (and any underlying shares of Class A common stock) are entitled to registration rights pursuant to a registration rights agreement requiring the Company to register such securities for resale (in the case of the founder shares, only after conversion to shares of our Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement will provide that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
On March 28, 2023, in connection with the Initial Public Offering, we entered into an underwriting agreement with LifeSci Capital LLC and Ladenburg Thalmann & Co. Inc., as representative of the underwriters named therein.
The underwriters were entitled to a cash underwriting discount of $0.15 per Unit, or $1,035,000 in the aggregate, which was paid upon the closing of the Initial Public Offering. In addition, $0.30 per Unit sold in the Initial Public Offering, or $2,070,000 in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete an initial business combination, subject to the terms of the underwriting agreement.
Advisory Agreement
Pursuant to the advisory agreement entered into in September 2022 with LifeSci Capital LLC (“LifeSci”), further amended in March 2023, upon the consummation of the initial business combination, we have agreed to pay LifeSci equal to one and one half (1.5%) percent of the total consideration paid in connection with the initial business combination in the form of equity interests in the entity that survives any such business combination in exchange for the provision by the underwriters of certain services relating to the initial business combination.
For the purposes of this section, “total consideration” means the total market value of, without duplication, all cash, securities, or other property paid or transferred at the closing of such transaction by the target’s stockholders or to be paid or transferred in the future to the target’s stockholders with respect to such transaction (other than payments of interest or dividends and any contingent or earnout consideration based upon future performance of the combined companies, however characterized), including, without limitation, to the extent applicable, any net value paid in respect of (i) the assets of the target and (ii) the capital stock of the target (and the spread value of any “in the money” securities convertible into options, warrants or other rights to acquire such capital stock), after giving effect to the assumption, retirement or defeasance, directly or indirectly (by operation of law or otherwise), of any long-term liabilities of the target or repayment of indebtedness, including, without limitation, indebtedness secured by the assets of the target, capital leases or preferred stock obligations; provided, that for the avoidance of doubt, any funds in the trust account (as may be applicable in the case of a Transaction) or financing proceeds raised in connection with the closing of the transaction (including by way of an offering, the compensation to underwriters for which is provided for below), in either case, that are not paid to the target’s stockholders as consideration in the transaction will not be included as part of the Total Consideration.
For purposes of this section, the market value of any publicly traded common stock, whether already outstanding or newly-issued, will be equal to the greater of: (i) the value of such common stock issued to the target upon the closing of a transaction at a price equal to $10.00 per share; and (ii) the dollar volume-weighted average price (VWAP) for such security on the principal securities exchange or securities market on which such security is then traded during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) for the first five (5) trading days following the consummation of the transaction.
Additionally, we agreed to reimburse the underwriters for all out-of-pocket documented costs and expenses (including fees and expenses of counsel) incurred by the underwriters in connection with provision of such services, up to $50,000 in the aggregate, and, upon the consummation of the initial business combination, to reimburse the underwriters for any such expenses incurred in excess of $50,000.
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Investment Management Trust Agreement
On March 28, 2023, in connection with the Initial Public Offering, we entered into an agreement with Continental Stock Transfer & Trust Company (“Trustee"). The Trustee agreed to manage, supervise and administer the Trust Account subject to the terms and conditions set forth in the agreement and in a timely manner, upon the written instruction of the Company, invest and reinvest the Property in United States government securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, having a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended (or any successor rule), which invest only in direct U.S. government treasury obligations, as determined by us; the Trustee may not invest in any other securities or assets, it being understood that the Trust Account will earn no interest while account funds are uninvested awaiting our instructions hereunder; and while account funds are invested or uninvested, the Trustee may earn bank credits or other consideration. We agreed to give all instructions to the Trustee in writing, signed by the Chairman of the Board, Chief Executive Officer, Chief Financial Officer or Secretary. In addition, the Trustee shall be entitled to rely on, and shall be protected in relying on, any verbal or telephonic advice or instruction which it, in good faith and with reasonable care, believes to be given by any one of the persons authorized to give written instructions, provided that we shall promptly confirm such instructions in writing. We will Pay the Trustee the fees set forth in the agreement, including an initial acceptance fee, annual administration fee, and transaction processing fee which fees shall be subject to modification by the parties from time to time.
Critical Accounting Estimates
Certain of our accounting policies require that management apply significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. Some of the more significant estimates are in connection with determining the fair value of the stock-based compensation and the derivative financial instruments at the time of the initial public offering. However, by their nature, judgments are subject to an inherent degree of uncertainty, and, therefore, actual results could differ from our estimates. We have identified the following critical accounting estimates:
Stock-Based Compensation
We adopted ASC Topic 718, Compensation—Stock Compensation, guidance to account for its stock-based compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. We recognize all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest. Share-based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in costs and operating expenses depending on the nature of the services provided in the statement of operations. On March 28, 2023, the Chief Financial Officer and three directors (the “subscribers”) entered into subscription agreements with the Sponsor for an interest in the Sponsor company for their own investment purposes. The interest is backed by our Class A common stock owned as of March 28, 2023, the date of issuance. As such, the subscribers will participate in the profits or losses of the Sponsor company though date of liquidation. The subscription into interests of the Class A common stock founder shares to the management and directors is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The 47,500 Class A common stock which support the subscription interests of management and the directors has a fair value of $207,087 or $4.36 per share, which has been recorded as stock-based compensation. The fair value was determined using a Monte Carlo Model with a volatility of 7.2%, risk-free rate of 3.97% and a stock price of $9.89 as of the valuation date of March 28, 2023.
Derivative Financial Instruments
We accounted for Rights as equity-classified instruments based on an assessment of the Rights’ specific terms and applicable authoritative guidance in FASB ASC Topic 815, “Derivatives and Hedging”. The assessment considered whether the Rights were freestanding financial instruments pursuant to ASC 480, met the definition of a liability pursuant to ASC 480, and whether the Rights met all the requirements for equity classification under ASC 815, including whether the Rights were indexed to the Company’s own shares of common stock, among other conditions for the equity classification. The rights were valued based on market comparables. The following criteria was utilized to select comparable Special Purpose Acquisition Companies who were pre-business combination and included rights as part of their units that were publicly trading with significant time remaining to complete their initial business combination:
| Criteria | Low | High | ||||||
| IPO Proceeds (in millions of dollars) | 50 | 240 | ||||||
| Warrant Coverage | — | 1.0 | ||||||
| Rights Coverage (per unit) | 0.05 | 0.20 | ||||||
| Remaining Months to Complete | — | 13 | ||||||
The appraiser utilized the median market price of 0.108 as the fair value of the Rights included in the initial public offering.
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Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. Our management does not believe the adoption of ASU 2023-09 will have a material impact on our financial statements and disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We adopted ASU 2016-13 on January 1, 2023, and we are electing to delay the adoption of other new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404,(ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company we are not required to make disclosures under this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our 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 this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our final prospectus for our Initial Public Offering filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. As of the date of this Report, there have been no material changes to the risk factors disclosed in our final prospectus for its Initial Public Offering filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
For a description of the use of the proceeds generated in our Initial Public Offering and private placement, see Part I, Item 2 of this Quarterly Report. There has been no material change in the planned use of the proceeds from the Initial Public Offering and private placement as is described in the Company’s final prospectus related to the Initial Public Offering.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
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.
| * | Filed herewith. |
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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.
| TRAILBLAZER MERGER CORPORATION I | ||
| Date: May 15, 2024 | By: | /s/ Arie Rabinowitz |
| Name: | Arie Rabinowitz | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: May 15, 2024 | By: | /s/ Scott Burell |
| Name: | Scott Burell | |
| Title: | Chief Financial Officer | |
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