UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
(MARK
ONE)
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarter ended June 30, 2024
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from
to
Commission
file number: 001-41668
TRAILBLAZER
MERGER CORPORATION I
(Exact
Name of Registrant as Specified in Its Charter)
Delaware | | 87-3710376 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
510
Madison Avenue Suite 1401
New
York, NY 10022
(Address
of principal executive offices)
(212)
586-8224
(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 |
Units | | TBMCU | | The Nasdaq Stock Market LLC |
Class A Common Stock | | TBMC | | The Nasdaq Stock Market LLC |
Rights | | TBMCR | | The Nasdaq Stock Market LLC |
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. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller
reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
As of August 11, 2024, there were 9,019,499 shares
of Class A common stock, $0.0001 par value and 1 Class B common stock, $0.0001 par value, issued and outstanding.
TRAILBLAZER
MERGER CORPORATION I
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2024
TABLE
OF CONTENTS
PART I -
FINANCIAL INFORMATION
Item 1.
Interim Financial Statements
TRAILBLAZER
MERGER CORPORATION I
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June 30,
2024 |
|
|
December 31,
2023 |
|
|
|
(Unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash |
|
$ |
326,280 |
|
|
$ |
607,816 |
|
Cash – restricted |
|
|
62,068 |
|
|
|
— |
|
Prepaid expenses |
|
|
130,176 |
|
|
|
141,937 |
|
Total current assets |
|
|
518,524 |
|
|
|
749,753 |
|
|
|
|
|
|
|
|
|
|
Prepaid insurance |
|
|
— |
|
|
|
25,681 |
|
Cash and marketable securities in Trust Account |
|
|
76,096,169 |
|
|
|
72,994,863 |
|
Total Assets |
|
$ |
76,614,693 |
|
|
$ |
73,770,297 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
802,728 |
|
|
$ |
238,834 |
|
Accrued offering costs |
|
|
— |
|
|
|
75,000 |
|
Income taxes payable |
|
|
894,613 |
|
|
|
306,834 |
|
Promissory note related party |
|
|
1,701,585 |
|
|
|
321,585 |
|
Total current liabilities |
|
|
3,398,926 |
|
|
|
942,253 |
|
Deferred tax liability |
|
|
7,996 |
|
|
|
210,152 |
|
Deferred underwriting fee payable |
|
|
2,070,000 |
|
|
|
2,070,000 |
|
Total Liabilities |
|
|
5,476,922 |
|
|
|
3,222,405 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 6) |
|
|
|
|
|
|
|
|
Class A common stock subject to possible redemption, 6,900,000 shares at redemption value at $10.88 per share as of June 30, 2024 and $10.47 at December 31, 2023 |
|
|
75,063,624 |
|
|
|
72,224,950 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding |
|
|
— |
|
|
|
— |
|
Class A common stock, $0.0001 par value; 100,000,000 shares authorized: 2,119,499 issued and outstanding (excluding 6,900,000 shares subject to possible redemption) at June 30, 2024 and December 31, 2023 |
|
|
212 |
|
|
|
212 |
|
Class B common stock, $0.0001 par value; 5,000,000 shares authorized; 1 share issued and outstanding at June 30, 2024 and December 31, 2023 |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
— |
|
|
|
— |
|
Accumulated deficit |
|
|
(3,926,065 |
) |
|
|
(1,677,270 |
) |
Total Stockholders’ Deficit |
|
|
(3,925,853 |
) |
|
|
(1,677,058 |
) |
Total Liabilities and Stockholders’ Deficit |
|
$ |
76,614,693 |
|
|
$ |
73,770,297 |
|
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
TRAILBLAZER
MERGER CORPORATION I
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
For the Three Months Ended June 30, | | |
For the Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
Operating and formation costs | |
$ | 572,468 | | |
$ | 185,587 | | |
$ | 960,799 | | |
$ | 238,591 | |
Loss from operations | |
| (572,468 | ) | |
| (185,587 | ) | |
| (960,799 | ) | |
| (238,591 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation expense | |
| — | | |
| — | | |
| — | | |
| (207,087 | ) |
Interest earned on marketable securities held in Trust Account | |
| 977,178 | | |
| 798,002 | | |
| 1,930,770 | | |
| 798,002 | |
Unrealized loss on marketable securities held in Trust Account | |
| 9,504 | | |
| (81,626 | ) | |
| 5,531 | | |
| (81,626 | ) |
Other income, net | |
| 986,682 | | |
| 716,376 | | |
| 1,936,301 | | |
| 509,289 | |
| |
| | | |
| | | |
| | | |
| | |
Income before provision for income taxes | |
| 414,214 | | |
| 530,789 | | |
| 975,502 | | |
| 270,698 | |
Provision for income taxes | |
| (196,703 | ) | |
| (139,917 | ) | |
| (385,623 | ) | |
| (129,417 | ) |
Net income | |
$ | 217,511 | | |
$ | 390,872 | | |
$ | 589,879 | | |
$ | 141,281 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Class A common stock | |
| 9,019,499 | | |
| 9,019,499 | | |
| 9,019,499 | | |
| 5,392,400 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net income per share, Class A common stock | |
$ | 0.02 | | |
$ | 0.04 | | |
$ | 0.07 | | |
$ | 0.03 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Class B common stock | |
| 1 | | |
| 1 | | |
| 1 | | |
| 1 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net income per share, Class B common stock | |
$ | 0.00 | | |
$ | 0.00 | | |
$ | 0.00 | | |
$ | 0.00 | |
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
TRAILBLAZER
MERGER CORPORATION I
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 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 | |
| 2,119,499 | | |
$ | 212 | | |
| 1 | | |
$ | — | | |
$ | — | | |
$ | (1,677,270 | ) | |
$ | (1,677,058 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Remeasurement of carrying value to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,400,699 | ) | |
| (1,400,699 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 372,368 | | |
| 372,368 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balances – March 31, 2024 | |
| 2,119,499 | | |
| 212 | | |
| 1 | | |
| — | | |
| — | | |
| (2,705,601 | ) | |
| (2,705,389 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Remeasurement of carrying value to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,437,975 | ) | |
| (1,437,975 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 217,511 | | |
| 217,511 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balances – June 30, 2024 | |
| 2,119,499 | | |
$ | 212 | | |
| 1 | | |
$ | — | | |
$ | — | | |
$ | (3,926,065 | ) | |
$ | (3,925,853 | ) |
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
| |
Class A Common Stock | | |
Class B Common Stock | | |
Additional Paid-in | | |
Accumulated | | |
Total Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Equity (Deficit) | |
Balance — January 1, 2023 | |
| 1,724,999 | | |
$ | 172 | | |
| 1 | | |
$ | — | | |
$ | 24,828 | | |
$ | (5,187 | ) | |
$ | 19,813 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Sale of 394,500 private placement units | |
| 394,500 | | |
| 40 | | |
| — | | |
| — | | |
| 3,944,960 | | |
| — | | |
| 3,945,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock-based compensation expense to certain officers/directors | |
| — | | |
| — | | |
| — | | |
| — | | |
| 207,087 | | |
| — | | |
| 207,087 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Fair value of rights included in public units | |
| — | | |
| — | | |
| — | | |
| — | | |
| 745,200 | | |
| — | | |
| 745,200 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Allocated value of transaction costs to Class A shares | |
| — | | |
| — | | |
| — | | |
| — | | |
| (89,233 | ) | |
| — | | |
| (89,233 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Remeasurement of carrying value to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| (4,832,842 | ) | |
| (1,174,387 | ) | |
| (6,007,229 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (249,591 | ) | |
| (249,591 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance – March 31, 2023 | |
| 2,119,499 | | |
| 212 | | |
| 1 | | |
| — | | |
| — | | |
| (1,429,165 | ) | |
| (1,428,953 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Remeasurement of carrying value to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (386,959 | ) | |
| (386,959 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 390,872 | | |
| 390,872 | |
Balance – June 30, 2023 | |
| 2,119,499 | | |
$ | 212 | | |
| 1 | | |
$ | — | | |
$ | — | | |
$ | (1,425,252 | ) | |
$ | (1,425,040 | ) |
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
TRAILBLAZER
MERGER CORPORATION I
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
For the Six Months Ended June 30, | |
| |
2024 | | |
2023 | |
Cash Flows from Operating Activities: | |
| | |
| |
Net income | |
$ | 589,879 | | |
$ | 141,281 | |
Adjustments to reconcile net income to net cash used in operating activities: | |
| | | |
| | |
Stock-based compensation expense to certain officers and directors | |
| — | | |
| 207,087 | |
Interest earned on marketable securities held in Trust Account | |
| (1,930,770 | ) | |
| (798,002 | ) |
Unrealized loss on marketable securities held in Trust Account | |
| (5,531 | ) | |
| 81,626 | |
Benefit from income taxes | |
| — | | |
| (17,142 | ) |
Deferred benefit from income taxes | |
| (202,156 | ) | |
| — | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 11,761 | | |
| (168,663 | ) |
Prepaid insurance | |
| 25,681 | | |
| (79,431 | ) |
Accrued expenses | |
| 563,894 | | |
| 135,347 | |
Income taxes payable | |
| 587,779 | | |
| 146,559 | |
Net cash used in operating activities | |
| (359,463 | ) | |
| (351,338 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Cash withdrawn from Trust Account to pay franchise taxes | |
| 214,995 | | |
| — | |
Investment of cash into Trust Account | |
| — | | |
| (70,380,000 | ) |
Extension deposit into Trust Account | |
| (1,380,000 | ) | |
| — | |
Net cash used in investing activities | |
| (1,165,005 | ) | |
| (70,380,000 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from sale of units, net of underwriting discounts paid | |
| — | | |
| 67,965,000 | |
Proceeds from sale of private placement units | |
| — | | |
| 3,945,000 | |
Proceeds from promissory note - related party | |
| 1,380,000 | | |
| 100,085 | |
Payment of offering costs | |
| (75,000 | ) | |
| (581,635 | ) |
Net cash provided by financing activities | |
| 1,305,000 | | |
| 71,428,450 | |
| |
| | | |
| | |
Net Change in Cash and Restricted Cash | |
| (219,468 | ) | |
| 697,112 | |
Cash and Restricted Cash – Beginning of period | |
| 607,816 | | |
| 34,393 | |
Cash and Restricted Cash – End of period | |
$ | 388,348 | | |
$ | 731,505 | |
| |
| | | |
| | |
Cash and Restricted Cash, end of period | |
| | | |
| | |
Cash | |
$ | 326,280 | | |
$ | 731,505 | |
Cash – restricted | |
| 62,068 | | |
| — | |
Cash and Restricted Cash, end of period | |
$ | 388,348 | | |
$ | 731,505 | |
| |
| | | |
| | |
Non-Cash investing and financing activities: | |
| | | |
| | |
Offering costs included in accrued offering costs | |
$ | — | | |
$ | 75,000 | |
Remeasurement of carrying value to redemption value | |
$ | 2,838,674 | | |
$ | 6,394,188 | |
Deferred underwriting fee payable | |
$ | — | | |
$ | 2,070,000 | |
The
accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
TRAILBLAZER
MERGER CORPORATION I
NOTES TO
CONDENSED CONSOLIDATED 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”).
As
of June 30, 2024, the Company has one subsidiary, Trailblazer Merger Sub Ltd, an Israeli company and a direct, wholly owned subsidiary
of the Company incorporated on June 25, 2024. As of June 30, 2024, the subsidiary had no activity.
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 June 30, 2024, the Company had not yet commenced any operations. All activity for the period November 12, 2021 (inception) through
June 30, 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 6,900,000 units (the “Units” and, with respect to the shares
of Class A common stock included in the Units being offered, the “Public Shares”), which includes the full exercise
by the underwriters of their over-allotment option in the amount of 900,000 Units, at $10.00 per Unit, generating gross proceeds of $69,000,000
which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 394,500 units (the “Placement Units”)
at a price of $10.00 per Placement Unit, in a private placement to Trailblazer Sponsor Group, LLC (the “Sponsor”), generating
gross proceeds of $3,945,000, which is described in Note 4.
Transaction
costs amounted to $3,971,262 consisting of $1,035,000 of cash underwriting discount, $2,070,000 of deferred underwriting fees, and $866,262
of other offering costs. The allocated value of transaction costs to Class A common stock amounted to $89,233.
Following
the closing of the Initial Public Offering on March 31, 2023, an amount of $70,380,000 ($10.20 per Unit) from the net proceeds of
the sale of the Units in the Initial Public Offering and the sale of the Placement Units was placed in a trust account (the “Trust
Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company
Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment
company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined
by the Company, until the earlier of: (i) the completion of a Business Combination or (ii) the distribution of the funds in
the Trust Account to the Company’s stockholders, as described below.
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 80% of the net assets held in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes
payable on interest earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The
Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register
as an investment company under the Investment Company Act of 1940. There is no assurance that the Company will be able to successfully
effect a Business Combination.
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 $10.20 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not
previously released to the Company to pay its tax obligations).
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.
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 15% or more of the Public Shares, without the prior consent of the Company.
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 18 months from the closing of the Initial Public Offering and (c) not to propose
an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s
obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares
if the Company does not complete a Business Combination or with respect to any other provision relating to stockholders’ rights
or pre-initial business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their
Public Shares in conjunction with any such amendment.
The
Company will have until 18 months from the closing of the Initial Public Offering, or until September 30, 2024, as extended on June
27, 2024, to complete a Business Combination. If the Company is unable to complete a Business Combination within 18 months (the
“Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the
Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution
expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably
possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board
of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
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.
On
June 27, 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 June 30, 2024 to September 30, 2024.
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 ($10.00).
In
order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims
by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed
entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.20 per Public Share or (2) the
actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in
the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes. This liability will not apply
with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except
as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an
executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability
for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account
due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public
accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company
waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going
Concern Consideration
The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000
from the Sponsor issuance of Founder Shares and loan proceeds from the Sponsor under the Promissory Note (as defined in Note 5).
Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds
from the Initial Public Offering and the sale of the Placement Units in a private placement.
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 $1,500,000 of such Working Capital Loans may be converted into units of the post-Business Combination entity
at a price of $10.00 per unit at the option of the lender. The units would be identical to the Placement Units. As of June 30, 2024 and
December 31, 2023, there were no amount outstanding under the Working Capital Loan.
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 September 30, 2024, as extended, 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 September 30, 2024, there will be a mandatory liquidation and subsequent dissolution. Management has determined that
mandatory liquidation, should a Business Combination not occur, 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 September 30, 2024. The Company intends to complete a Business Combination with Cyabra (see Note 6) 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 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations
and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise
tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased. The amount of the excise
tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating
the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair
market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S.
Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out
and prevent the abuse or avoidance of the excise tax.
Any
redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or
otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection
with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value
of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a
Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business
Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business
Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would
be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined.
The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability
to complete a Business Combination.
NOTE 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed 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 management, the accompanying unaudited condensed consolidated
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 consolidated
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. The interim results for the three and six months ended June 30, 2024 are not necessarily indicative of
the results to be expected for the year ending December 31, 2024 or for any future periods.
Principles
of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary. As of June 30, 2024, the subsidiary had no activity.
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.
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 $326,280 and $607,816 in unrestricted cash and no cash equivalents as of June 30, 2024 and December 31, 2023, respectively.
Cash
- Restricted
Cash
that is encumbered or otherwise restricted as to its use is included in cash – restricted. As of June 30, 2024 and December 31,
2023, the balance was $62,068 and $0, respectively. Cash – restricted at June 30, 2024 represents cash that was withdrawn from
the Trust Account to pay franchise taxes but is yet to be utilized at the end of the period.
Cash
and Marketable Securities in Trust Account
At
June 30, 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 June 30,
2024, the Company withdrew $214,995 of interest earned on the Trust Account to pay for the Company franchise taxes payable. As of June
30, 2024, $62,068 of the amount withdrawn from Trust remains to be utilized.
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 June 30, 2024 and June 30, 2023 were $75,000 and $581,635, respectively.
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 June 30, 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.
At
June 30, 2024 and December 31, 2023, the Class A common stock subject to redemption reflected in the balance sheet are reconciled
in the following table:
Gross proceeds | |
$ | 69,000,000 | |
Less: | |
| | |
Proceeds allocated to Public Rights | |
| (745,200 | ) |
Class A common stock issuance costs | |
| (3,882,029 | ) |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 7,852,179 | |
Class A Common Stock subject to possible redemption, December 31, 2023 | |
$ | 72,224,950 | |
Plus: | |
| | |
Remeasurement of carrying value to redemption value | |
| 2,838,674 | |
Class A Common Stock subject to possible redemption, June 30, 2024 | |
$ | 75,063,624 | |
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 consolidated 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 June 30, 2024, the Company reported a net deferred tax liability of $7,996, the deferred tax asset
of $169,030 was fully offset by a valuation allowance. As of December 31, 2023, the Company reported a net deferred tax liability of
$210,151, the deferred tax asset of $82,679 was fully offset by a valuation allowance. The effective tax rate differs from the statutory
tax rate of 21% for the three and six months ended June 30, 2024 and 2023, due to stock-based compensation expense, merger and acquisition
related costs, and the valuation allowance on the deferred tax assets related to organization expenses.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of June 30, 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 June 30, 2024.
Net
Income Per Share of Common Stock
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net 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. Subsequent remeasurement of the redeemable Class A common stock is excluded from income per share of common stock as the
redemption value approximates fair value. Net income 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 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 729,450 shares of Class A common stock in the aggregate.
The
following table reflects the calculation of basic and diluted net income per share of common stock (in dollars, except share amounts):
| |
For the Three Months Ended June 30, | | |
For the Six Months Ended June 30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income per common share | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Allocation of net income | |
$ | 217,511 | | |
$ | — | | |
$ | 390,872 | | |
$ | — | | |
$ | 589,879 | | |
$ | — | | |
$ | 141,281 | | |
$ | — | |
Denominator: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average common shares outstanding | |
| 9,019,499 | | |
| 1 | | |
| 9,019,499 | | |
| 1 | | |
| 9,019,499 | | |
| 1 | | |
| 5,392,400 | | |
| 1 | |
Basic and diluted net income per common share | |
$ | 0.02 | | |
$ | — | | |
$ | 0.04 | | |
$ | — | | |
$ | 0.07 | | |
$ | — | | |
$ | 0.03 | | |
$ | — | |
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 $250,000. The Company has not experienced losses
on this account.
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.
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 6,900,000 Units, which includes the full exercise by the underwriters of their over-allotment
option in the amount of 900,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of the Company’s
Class A common stock and one right to receive one-tenth (1/10) of a share of Class A common stock.
NOTE 4.
PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 394,500 Placement Units at a price of $10.00 per
Placement Unit, for an aggregate purchase price of $3,945,000 in a private placement. A portion of the proceeds from the Placement Units
was added to the proceeds from the Initial Public Offering held in the Trust Account so that the Trust Account holds $10.20 per unit
sold. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Placement
Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Placement Units
will expire worthless.
NOTE 5.
RELATED PARTY TRANSACTIONS
Founder
Shares
On
May 17, 2022, the Sponsor purchased 1,940,625 shares (the “Founder Shares”) of the Company’s Class B common
stock for an aggregate price of $25,000. On September 23, 2022, the Company and the Sponsor entered into a share exchange agreement
pursuant to which the Sponsor exchanged 1,940,624 Founder Shares for 1,940,624 shares of Class A common stock. As a result of the
share exchange, the Founder Shares consisted of 1,940,624 shares of Class A common stock and 1 share of Class B common stock.
On January 20, 2023, the Sponsor forfeited for no consideration and the Company canceled 215,625 of such Founder Shares, resulting
in 1,724,999 Founder Shares remaining outstanding of Class A common stock and 1 share of Class B common stock. The 1 share
of Class B common stock will automatically be canceled at the time of the initial Business Combination. The holder of the 1 share
of Class B common stock will have the right to elect all of the directors prior to the initial Business Combination and the holders
of the shares of Class A common stock will not be entitled to vote on the election of directors during such time.
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 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. These interests are not subject to performance conditions and as such stock-based compensation of $207,087 was recorded on the
statement of operations.
On
November 10, 2023, the Company reimbursed its officers an aggregate amount of $3,545 for the out-of-pocket expenses paid by officers
in connection with meeting a prospective target.
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) one 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 $12.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 180 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital
stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their
shares of common stock for cash, securities or other property.
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 $400,000 (as amended). The Promissory Note is non-interest bearing and is payable on the earlier of
(i) the close of the Company’s initial business combination or (ii) September 30, 2024. On November 21, 2023,
the Promissory Note was further amended to permit the Company to pay certain expenses of the Sponsor which would reduce the
principal balance of the Promissory Note by the same amount. On March 27, 2024, the maximum amount available under the Note was
further amended and increased to $1,090,000. On June 25, 2024, the maximum amount available under the Note was further amended and
increased to $1,780,000. As of June 30, 2024 and December 31, 2023, there was $1,701,585 and $321,585, respectively, outstanding
under the Promissory Note.
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 $1,500,000 of such Working Capital Loans 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 Placement Units (see Note 4). As of June 30,
2024 and December 31, 2023, there was no amount outstanding under the Working Capital Loan.
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 900,000 additional Units to cover over-allotments at the Initial Public
Offering price, less the underwriting discounts and commissions. On March 31, 2023, simultaneously with the closing of the Initial
Public Offering, the underwriters elected to fully exercise the over-allotment option to purchase an additional 900,000 Units at a price
of $10.00 per Unit.
The
underwriters were also 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, the underwriters are entitled to a deferred fee of $0.30 per Unit, or $2,070,000
in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event
that the Company completes a 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, the Company 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,
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 $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.
NOTE 7.
STOCKHOLDERS’ DEFICIT
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At June 30, 2024
and December 31, 2023, there were no shares of preferred stock issued and outstanding.
Class A
Common Stock — The Company is authorized to issue up to 100,000,000 shares of Class A, $0.0001 par value common
stock. Holders of the Company’s common stock are entitled to one vote for each share. At June 30, 2024 and December 31, 2023, there
were 2,119,499 shares of Class A common stock issued and outstanding, excluding 6,900,000 shares of Class A common stock subject
to possible redemption, respectively.
Class B
Common Stock — The Company is authorized to issue up to 5,000,000 shares of Class B, $0.0001 par value common
stock. Holders of the Company’s common stock are entitled to one vote for each share. At June 30, 2024 and December 31, 2023, there
was 1 share of Class B common stock issued and outstanding.
The
holder of our 1 share of Class B common stock will have the right to elect all of our directors prior to our initial business combination
and the holders of our shares of Class A common stock will not be entitled to vote on the election of directors during such time.
Holders of Class A common stock and Class B common stock will vote together as a single class on other matters submitted to
a vote of stockholders, except as required by law. However, with respect to amending our charter to increase or decrease the aggregate
number of authorized shares, holders of our Class A common stock and holders of our Class B common stock will vote as a separate
class.
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.
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
June 30, 2024, assets held in the Trust Account were comprised of $3,662 in cash and $76,092,507 in U.S. Treasury securities. During
the period ended June 30, 2024, the Company has withdrawn $214,995 interest income from the Trust Account to pay for the Company
franchise taxes.
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30,
2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair
value.
Description
| |
Level | | |
June 30, 2024 | | |
December 31, 2023 | |
Assets: | |
| | |
| | |
| |
Marketable securities held in Trust Account | |
| 1 | | |
$ | 76,092,507 | | |
$ | 72,994,711 | |
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
consolidated financial statements were issued. Based upon this review, other than stated below, the Company did not identify any subsequent
events that have required adjustment or disclosure in the unaudited condensed consolidated financial statements.
Merger
Agreement
On July 22, 2024, the
Company entered into a merger agreement, by and among Parent, Trailblazer Merger Sub, Ltd., an Israeli company and a direct, wholly owned
subsidiary of the Company (“Merger Sub”), Trailblazer Holdings, Inc., a Delaware corporation and a direct, wholly owned subsidiary
of the Company (“Holdings”), and Cyabra Strategy Ltd., a private company organized in Israel (“Cyabra”) (as it
may be amended and/or restated from time to time, the “Merger Agreement”).
The Merger Agreement provides that, among other
things and upon the terms and subject to the conditions thereof, (a) the Company shall merge with and into Holdings and Holdings shall
be the survivor of such merger (the “Company Merger” and all references to the Company subsequent to the Company Merger shall
be intended to refer to Holdings as the survivor of the Company Merger) and (b) Merger Sub shall merge with and into Cyabra, with Cyabra
being the surviving entity (the “Merger”), following which Merger Sub will cease to exist and Cyabra will become a wholly
owned subsidiary of the Company (the “Surviving Corporation”). In connection with the Merger, the Company will be renamed
“Cyabra, Inc.” (“Pubco”).
Parent Support Agreement
Contemporaneously with
the execution of, and as a condition and an inducement to the Company and Cyabra entering into the Merger Agreement, the Sponsor and certain
other stockholders of the Company are entering into and delivering the Parent Support Agreement (the “Parent Support Agreement”),
pursuant to which the Sponsor and each such Company stockholder have agreed (i) not to transfer or redeem any of the Company Common Stock
held by such Company stockholder and (ii) to vote in favor of the Merger Agreement and the Merger and the other transactions contemplated
thereby at the Company stockholder meeting.
Company Support Agreement
Contemporaneously with
the execution of, and as a condition and an inducement to the Company and Cyabra entering into the Merger Agreement, certain Cyabra shareholders
are entering into and delivering the Company Support Agreement (the “Company Support Agreement”), pursuant to which each such
Cyabra shareholder has agreed (i) not to transfer any equity securities held by such shareholder and (ii) to vote in favor of the Merger
Agreement and the Merger and the other transactions contemplated thereby.
Lock-Up Agreement
Prior to the Closing,
Cyabra shall use reasonable best efforts to cause certain Cyabra securityholders to enter into a Lock-Up Agreement with the Company to
be effective as of the Closing, pursuant to which the shares comprising the Aggregate Merger Consideration shall be subject to a lock-up,
restricting the sale, transfer or other disposition of such shares for a period of nine months in accordance with the terms and conditions
more fully set forth in the form of Lock-Up Agreement.
Registration Rights
Agreement
The Merger Agreement
contemplates that, at the Closing, Pubco, the Sponsor and certain former shareholders of Cyabra (collectively, the “Holders”)
will enter into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which Pubco will agree
to register for resale, pursuant to Rule 415 under the Securities Act, certain of the Company Common Shares, the Company Units and the
Company Rights that are held by the Holders from time to time.
The Registration Rights
Agreement will terminate on the earlier of (a) the five year anniversary of the date of the Registration Rights Agreement or (b) the date
as of which (i) all of the Registrable Securities have been sold pursuant to a Registration Statement or (ii) the Holders of all Registrable
Securities are permitted to sell the Registrable Securities under Rule 144 (or any similar provision) under the Securities Act without
limitation on the amount of securities sold or the manner of sale and without compliance with public reporting requirements.
The PIPE Investment
The Company will enter
into subscription agreements with certain investors providing for aggregate investments in the amount of no less than $6,000,000 in the
Company Common Stock in a private placement that will close concurrently with the Closing (the “PIPE Investment”).
In the event that in
excess of $3,500,000 remains in the Trust Account after redemption of the Company Class A Common Stock in connection with the Merger,
the PIPE Investment shall be reduced by the amount by which the Trust Account exceeds $3,500,000. Further, up to $1,000,000 of the PIPE
Investment may be provided upon the initial filing of the Registration Statement with the Securities and Exchange Commission, if mutually
agreed upon between the parties.
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; |
|
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● |
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; |
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|
● |
our
immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
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● |
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; |
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● |
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; |
|
● |
increased
vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
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● |
limitations
on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution
of our strategy; and |
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● |
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.
Merger
Agreement
On
July 22, 2024, Trailblazer Merger Corporation I (“Parent”), a Delaware corporation, entered into a merger agreement, by and
among Parent, Trailblazer Merger Sub, Ltd., an Israeli company and a direct, wholly owned subsidiary of Parent (“Merger Sub”),
Trailblazer Holdings, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Holdings”), and Cyabra
Strategy Ltd., a private company organized in Israel (the “Company”) (as it may be amended and/or restated from time to time,
the “Merger Agreement”).
The
Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, (a) Parent shall merge with
and into Holdings and Holdings shall be the survivor of such merger (the “Parent Merger” and all references to Parent subsequent
to the Parent Merger shall be intended to refer to Holdings as the survivor of the Parent Merger) and (b) Merger Sub shall merge with
and into the Company, with the Company being the surviving entity (the “Merger”), following which Merger Sub will cease to
exist and the Company will become a wholly owned subsidiary of Parent (the “Surviving Corporation”). In connection with the
Merger, Parent will be renamed “Cyabra, Inc.” (“Pubco”).
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 June 30, 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 June 30, 2024, we had a net income of $217,511, which consists of interest earned on marketable securities held
in Trust Account of $977,178 and unrealized gain on marketable securities held in Trust Account of $9,504, offset by the operating costs
of $572,468, and provision for income taxes of $196,703.
For
the six months ended June 30, 2024, we had a net income of $589,879, which consists of interest earned on marketable securities held
in Trust Account of $1,930,770 and unrealized gain on marketable securities held in Trust Account of $5,531, offset by the operating
costs of $960,799, and provision for income taxes of $385,623.
For
the three months ended June 30, 2023, we had a net income of $390,872, which consists of interest earned on marketable securities
held in trust account of $798,002, offset by the operating costs of $185,587, provision for income taxes of $139,917 and unrealized loss
on marketable securities held in trust account of $81,626.
For
the six months ended June 30, 2023, we had a net income of $141,281, which consists of interest earned on marketable securities
held in trust account of $798,002, offset by operating costs of $238,591, provision for income taxes of $129,417, stock-based compensation
expense of $207,087 and unrealized loss on marketable securities held in trust account of $81,626.
Liquidity
and Capital Resources
As
of June 30, 2024, we had $326,280 in our operating bank account available for working capital needs, while restricted cash available
to pay for the Company’s franchise taxes is $62,068. 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 eighteen (18) months
from the closing of this offering 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
eighteen (18) months from the closing of this offering, 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 eighteen (18) months from the closing of this offering, 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.
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.
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.
On
June 27, 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 June 30, 2024 to September 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, further, amended and increased to $1,090,000. On June 25, 2024, the maximum amount available under the Note was further
amended and increased to $1,780,000.
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 June 30, 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 September 30,
2024, as extended, 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 September 30, 2024, there will be a mandatory liquidation and subsequent
dissolution. Management has determined that mandatory liquidation, should a Business Combination not occur, 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 September 30, 2024. The Company intends to complete a Business Combination with Cyabra
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 June 30, 2024.
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 further amended and increased to $1,090,000. On June 25, 2024, the maximum amount available
under the Note was further amended and increased to $1,780,000. As of June 30, 2024 and December 31, 2023, there was $1,701,585 and $321,585,
respectively, outstanding under the Promissory 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.
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.
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 June 30, 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.
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
None
Item 6.
Exhibits
The
following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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: August 14, 2024 |
By: |
/s/
Arie Rabinowitz |
|
Name: |
Arie Rabinowitz |
|
Title: |
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
Date: August 14, 2024 |
By: |
/s/
Scott Burell |
|
Name: |
Scott Burell |
|
Title: |
Chief Financial Officer |
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