| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Delaware | 86-2230021 | |
(State or other jurisdiction of incorporation) | ||
(IRS Employer Identification No.) | ||
2750 E. Cottonwood Parkway Suite #500 Cottonwood Heights, Utah | 84121 | |
(Address of principal executive offices) | (Zip Code) | |
Title of Each Class: | Trading Symbol(s) | Name of Each Exchange on Which Registered: | ||
Units, each consisting of one share of Class A Common Stock and one-half of one Warrant | MPRAU | The Nasdaq Stock Market LLC | ||
Class A Common Stock, par value $0.0001 per share | MPRA | The Nasdaq Stock Market LLC | ||
Warrants, each whole Warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share | MPRAW | The Nasdaq Stock Market LLC |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
MERCATO PARTNERS ACQUISITION CORP.
Quarterly Report on Form
Table of Contents
Page No. | ||||||
| 1 | ||||||
Item 1. | Condensed Financial Statements | 1 | ||||
| Condensed Balance Sheets as of | 1 | |||||
| 2 | ||||||
| 3 | ||||||
| 4 | ||||||
| Notes to Unaudited Condensed Financial Statements | 5 | |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||||
Item 4. | Controls and Procedures | |||||
Item 1. | Legal Proceedings | |||||
Item 1A. | Risk Factors | |||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||
Item 3. | Defaults Upon Senior Securities | |||||
Item 4. | Mine Safety Disclosures | 25 | ||||
Item 5. | Other Information | 25 | ||||
Item 6. | Exhibits | 25 | ||||
Item 1. Condensed Financial Statements |
June 30, 2022 | December 31, 2021 | March 31, | December 31, | |||||||||||||
(Unaudited) | 2023 | 2022 | ||||||||||||||
Assets: | ||||||||||||||||
Current assets: | ||||||||||||||||
| Cash | $ | 70,578 | $ | 387,206 | $ | 26,027 | $ | 52,955 | ||||||||
| Prepaid expenses - current | 329,697 | 478,734 | 45,687 | 103,491 | ||||||||||||
Total current assets | 400,275 | 865,940 | 71,714 | 156,446 | ||||||||||||
| Prepaid expenses - non current | — | 42,295 | ||||||||||||||
| Investments held in Trust Account | 233,755,262 | 233,450,000 | 45,576,312 | 236,940,614 | ||||||||||||
Total Assets | $ | 234,155,537 | $ | 234,358,235 | $ | 45,648,026 | $ | 237,097,060 | ||||||||
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit: | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable | $ | 232,421 | $ | 86,149 | $ | 302,747 | $ | 248,571 | ||||||||
| Accrued expenses | 145,996 | 133,172 | 3,273,129 | 272,711 | ||||||||||||
| Due to related party | 3,275 | 3,275 | ||||||||||||||
| Excise tax payable | 1,931,649 | — | ||||||||||||||
| Income tax payable | 35,618 | — | 871,482 | 524,799 | ||||||||||||
| Franchise tax payable | 98,082 | 37,022 | 50,000 | 167,523 | ||||||||||||
| Deferred tax liabilities | 36,300 | 158,801 | ||||||||||||||
| Convertible working capital loan - related party | 1,600,000 | 740,000 | ||||||||||||||
Total current liabilities | 512,117 | 256,343 | 8,068,582 | 2,115,680 | ||||||||||||
| Derivative liabilities | 3,232,500 | 12,930,000 | 2,155,000 | 323,250 | ||||||||||||
| Deferred underwriting commissions | 8,050,000 | 8,050,000 | ||||||||||||||
Total Liabilities | 11,794,617 | 21,236,343 | 10,223,582 | 2,438,930 | ||||||||||||
Commitments and Contingencies (Note 5) | ||||||||||||||||
Class A common stock subject to possible redemption; 23,000,000 shares at redemption valueof approximately $10.153 | 233,521,562 | 233,450,000 | ||||||||||||||
Commitments and Contingencies | ||||||||||||||||
| Class A common stock subject to possible redemption; 4,300,363 and 23,000,000 shares at redemption value of approximately $10.35 and $10.26 per share as of March 31, 2023 and December 31, 2022, respectively | 44,554,830 | 235,921,638 | ||||||||||||||
Stockholders’ Deficit: | ||||||||||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaNissued and outstanding | — | — | ||||||||||||||
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 0 non-redeemable shares issued and outstanding as of June 30, 2022 and December 31, 2021 | — | — | ||||||||||||||
| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021 | 575 | 575 | ||||||||||||||
| 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; no non-redeemable shares issued and outstanding | — | — | ||||||||||||||
| Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding | 575 | 575 | ||||||||||||||
Additional paid-in capital | — | — | — | — | ||||||||||||
| Accumulated deficit | (11,161,217 | ) | (20,328,683 | ) | (9,130,962 | ) | (1,264,083 | ) | ||||||||
Total stockholders’ deficit | (11,160,642 | ) | (20,328,108 | ) | ||||||||||||
Total Stockholders’ deficit | (9,130,387 | ) | (1,263,508 | ) | ||||||||||||
Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit | $ | 234,155,537 | $ | 234,358,235 | $ | 45,648,026 | $ | 237,097,060 | ||||||||
For The Three Months Ended June 30, | For The Six Months Ended June 30, 2022 | For The Period From February 22, 2021 (inception) Through June 30, 2021 | For The Three Months Ended March 31, | |||||||||||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||||||||||
| General and administrative expenses | $ | 249,552 | $ | — | $ | 510,488 | $ | 4,496 | $ | 3,276,559 | $ | 260,936 | ||||||||||||
| General and administrative expenses - related party | 119,000 | 119,000 | 45,000 | — | ||||||||||||||||||||
| Franchise tax expenses | 49,861 | 1,381 | 98,628 | 1,999 | 56,314 | 48,767 | ||||||||||||||||||
Loss from operations | (418,413 | ) | (1,381 | ) | (728,116 | ) | (6,495 | ) | (3,377,874 | ) | (309,703 | ) | ||||||||||||
| Other income: | ||||||||||||||||||||||||
| Other (expense) income: | ||||||||||||||||||||||||
| Change in fair value of derivative liabilities | 3,663,500 | — | 9,697,500 | — | (1,831,750 | ) | 6,034,000 | |||||||||||||||||
| Income from investments held in Trust Account | 283,982 | — | 305,262 | — | 1,296,709 | 21,280 | ||||||||||||||||||
Total o ther (expense) income, net | (535,041 | ) | 6,055,280 | |||||||||||||||||||||
| Net income (loss) before income taxes | 3,529,069 | (1,381 | ) | 9,274,646 | (6,495 | ) | ||||||||||||||||||
| Income tax expense | (35,618 | ) | — | (35,618 | ) | — | ||||||||||||||||||
| (Loss) Income before provision for income taxes | (3,912,914 | ) | 5,745,577 | |||||||||||||||||||||
| Provision for income taxes | (224,182 | ) | — | |||||||||||||||||||||
Net income (loss) | $ | 3,493,451 | $ | (1,381 | ) | $ | 9,239,028 | $ | (6,495 | ) | ||||||||||||||
Net (loss) income | $ | (4,137,096 | ) | $ | 5,745,577 | |||||||||||||||||||
Weighted average shares outstanding of Class A common stock, basic and diluted | 23,000,000 | — | 23,000,000 | — | 11,156,897 | 23,000,000 | ||||||||||||||||||
Basic and diluted net loss per share, Class A common stock | $ | 0.12 | $ | — | $ | 0.32 | $ | — | ||||||||||||||||
Basic and diluted net (loss) income per share, Class A common stock | $ | (0.24 | ) | $ | 0.20 | |||||||||||||||||||
Weighted average shares outstanding of Class B common stock, basic and diluted | 5,750,000 | 5,000,000 | 5,750,000 | 4,612,403 | 5,750,000 | 5,750,000 | ||||||||||||||||||
Basic and diluted net loss per share, Class B common stock | $ | 0.12 | $ | (0.00 | ) | $ | 0.32 | $ | (0.00 | ) | ||||||||||||||
Basic and diluted net (loss) income per share, Class B common stock | $ | (0.24 | ) | $ | 0.20 | |||||||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Deficit | |||||||||||||||||||||||||
Class A | Class B | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
| Balance - January 1, 2022 | — | $ | — | 5,750,000 | $ | 575 | $ | — | $ | (20,328,683 | ) | $ | (20,328,108 | ) | ||||||||||||||
| Net income | — | — | — | — | — | 5,745,577 | 5,745,577 | |||||||||||||||||||||
| Balance - March 31, 2022 | — | — | 5,750,000 | 575 | — | (14,583,106 | ) | (14,582,531 | ) | |||||||||||||||||||
| Remeasurement on Class A common stock subject to possible redemption | — | — | — | — | — | (71,562 | ) | (71,562 | ) | |||||||||||||||||||
| Net income | — | — | — | — | — | 3,493,451 | 3,493,451 | |||||||||||||||||||||
| Balance - June 30, 2022 | — | $ | — | 5,750,000 | $ | 575 | $ | — | $ | (11,161,217 | ) | $ | (11,160,642 | ) | ||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||
Class A | Class B | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
| Balance - February 22, 2021 (inception) | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Issuance of Class B common stock to Sponsor (1) | — | — | 5,750,000 | 575 | 24,425 | — | 25,000 | |||||||||||||||||||||
| Net loss | — | — | — | — | — | (5,114 | ) | (5,114 | ) | |||||||||||||||||||
| Balance - March, 2021 | — | — | 5,750,000 | 575 | 24,425 | (5,114 | ) | 19,886 | ||||||||||||||||||||
| Net loss | — | — | — | — | — | (1,381 | ) | (1,381 | ) | |||||||||||||||||||
| Balance - June 30, 2021 | — | $ | — | 5,750,000 | $ | 575 | $ | 24,425 | $ | (6,495 | ) | $ | 18,505 | |||||||||||||||
Common Stock | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - December 31, 2022 | — | $ | — | 5,750,000 | $ | 575 | $ | — | $ | (1,264,083 | ) | $ | (1,263,508 | ) | ||||||||||||||
| Remeasurement on Class A common stock subject to possible redemption | — | — | — | — | — | (1,798,134 | ) | (1,798,134 | ) | |||||||||||||||||||
| Excise tax payable | — | — | — | — | — | (1,931,649 | ) | (1,931,649 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | (4,137,096 | ) | (4,137,096 | ) | |||||||||||||||||||
Balance – March 31, 2023 | — | $ | — | 5,750,000 | $ | 575 | $ | — | $ | (9,130,962 | ) | $ | (9,130,387 | ) | ||||||||||||||
Common Stock | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance - December 31, 2021 | — | $ | — | 5,750,000 | $ | 575 | $ | — | $ | (20,328,683 | ) | $ | (20,328,108 | ) | ||||||||||||||
| Net income | — | — | — | — | — | 5,745,577 | 5,745,577 | |||||||||||||||||||||
Balance - March 31, 2022 (Unaudited) | — | $ | — | 5,750,000 | $ | 575 | $ | — | $ | (14,583,106 | ) | $ | (14,582,531 | ) | ||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||
For The Six Months Ended June 30, 2022 | For The Period From February 22, 2021 (inception) Through June 30, 2021 | 2023 | 2022 | |||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
| Net income (loss) | $ | 9,239,028 | $ | (6,495 | ) | |||||||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||||||
| Net (loss) income | $ | (4,137,096 | ) | $ | 5,745,577 | |||||||||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||||||||||
| General and administrative expenses paid by related party under promissory note | — | — | ||||||||||||||
| Change in fair value of derivative liabilities | (9,697,500 | ) | — | 1,831,750 | (6,034,000 | ) | ||||||||||
| Income from investments held in Trust Account | (305,262 | ) | — | (1,296,709 | ) | (21,280 | ) | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||
| Prepaid expenses - current | 191,332 | — | ||||||||||||||
| Income tax payable | 35,618 | — | ||||||||||||||
| Prepaid expenses | 57,804 | 66,191 | ||||||||||||||
| Accounts payable | 146,272 | 4,496 | 54,176 | 63,752 | ||||||||||||
| Accrued expenses | 12,824 | — | 3,000,419 | (6,359 | ) | |||||||||||
| Income tax payable | 346,683 | — | ||||||||||||||
| Franchise tax payable | 61,060 | 1,999 | (117,523 | ) | 48,767 | |||||||||||
Deferred tax payabl e | (122,501 | ) | — | |||||||||||||
Net cash used in operating activities | (316,628 | ) | — | (382,998 | ) | (137,352 | ) | |||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
| Cash deposited in Trust Account | (675,000 | ) | — | |||||||||||||
| Cash withdrawn from Trust Account for tax purposes | 171,069 | — | ||||||||||||||
| Cash withdrawn from Trust Account in connection with redemption | 193,164,942 | — | ||||||||||||||
Net cash provided by investing activities | 192,661,011 | — | ||||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
| Proceeds from issuance of Class B common stock to Sponsor | — | 25,000 | ||||||||||||||
| Offering costs paid | — | (5,000 | ) | |||||||||||||
| Proceeds from convertible working capital loan | 185,000 | — | ||||||||||||||
| Proceeds from extension loan | 675,000 | — | ||||||||||||||
| Redemption of common stock | (193,164,942 | ) | — | |||||||||||||
Net cash provided by financing activities | — | 20,000 | ||||||||||||||
Net cash used in financing activities | (192,304,942 | ) | — | |||||||||||||
Net change in cash | (316,628 | ) | 20,000 | (26,929 | ) | (137,352 | ) | |||||||||
Cash - beginning of the period | 387,206 | — | 52,955 | 387,206 | ||||||||||||
Cash - end of the period | $ | 70,578 | $ | 20,000 | $ | 26,027 | $ | 249,854 | ||||||||
Supplemental disclosure of noncash financing activities: | ||||||||||||||||
| Offering costs included in accounts payable | $ | — | $ | 548,765 | ||||||||||||
| Offering costs paid by related party under promissory note | $ | — | $ | 94,360 | ||||||||||||
| Excise tax payable | $ | 1,931,649 | — | |||||||||||||
| Remeasurement on Class A common stock subject to possible redemption | $ | 1,798,134 | $ | — | ||||||||||||
| Gross proceeds from Initial Public Offering | $ | 230,000,000 | ||
| Less: | ||||
| Fair value of Public Warrants at issuance | (6,966,700 | ) | ||
| Offering costs allocated to Class A common stock subject to possible redemption | (13,306,293 | ) | ||
| Plus: | ||||
| Remeasurement on Class A common stock subject to possible redemption | 23,722,993 | |||
| Class A common stock subject to possible redemption, December 31, 2021 | 233,450,000 | |||
| Remeasurement on Class A common stock subject to possible redemption | 71,562 | |||
| Class A common stock subject to possible redemption, June 30, 2022 | $ | 233,521,562 | ||
| Gross proceeds from Initial Public Offering | $ | 230,000,000 | ||
| Less: | ||||
| Fair value of Public Warrants at issuance | (6,966,700 | ) | ||
| Offering costs allocated to Class A common stock subject to possible redemption | (13,306,294 | ) | ||
| Plus: | ||||
| Remeasurement on Class A common stock subject to possible redemption | 23,722,994 | |||
| Class A common stock subject to possible redemption, December 31, 2021 | 233,450,000 | |||
| Remeasurement on Class A common stock subject to possible redemption | 2,471,638 | |||
| Class A common stock subject to possible redemption, December 31, 2022 | $ | 235,921,638 | ||
| Redemption of Class A common stock | (193,164,941 | ) | ||
| Remeasurement on Class A common stock subject to possible redemption | 1,798,134 | |||
| Class A common stock subject to possible redemption, March 31, 2023 | $ | 44,554,830 |
For the Three Months Ended June 30, 2022 | For the Three Months Ended June 30, 2021 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income (loss) per common stock: | ||||||||||||||||
Numerator: | ||||||||||||||||
| Allocation of net income (loss) | $ | 2,794,761 | $ | 698,690 | $ | — | $ | (1,381 | ) | |||||||
Denominator: | ||||||||||||||||
| Basic and diluted weighted average common stock outstanding | 23,000,000 | 5,750,000 | — | 5,000,000 | ||||||||||||
| Basic and diluted net income (loss) per common stock | $ | 0.12 | $ | 0.12 | $ | — | $ | (0.00 | ) | |||||||
For The Six Months Ended June 30, 2022 | For The Period From February 22, 2021 (inception) Through June 30, 2021 | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | 2023 | 2022 | |||||||||||||||||||||||||||
| Basic and diluted net income (loss) per common stock: | ||||||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||||||||||||||||||
| Basic and diluted net (loss) income per common stock: | ||||||||||||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income (loss) | $ | 7,391,222 | $ | 1,847,806 | $ | — | $ | (6,495 | ) | |||||||||||||||||||||||
| Allocation of net (loss) income | $ | (2,730,079 | ) | $ | (1,407,018 | ) | $ | 4,596,462 | $ | 1,149,115 | ||||||||||||||||||||||
Denominator: | ||||||||||||||||||||||||||||||||
| Basic and diluted weighted average common stock outstanding | 23,000,000 | 5,750,000 | — | 4,612,403 | 11,156,897 | 5,750,000 | 23,000,000 | 5,750,000 | ||||||||||||||||||||||||
| Basic and diluted net income (loss) per common stock | $ | 0.32 | $ | 0.32 | $ | — | $ | (0.00 | ) | |||||||||||||||||||||||
| Basic and diluted net (loss) income per common stock | $ | (0.24 | ) | $ | (0.24 | ) | $ | 0.20 | $ | 0.20 | ||||||||||||||||||||||
June 30, 2022 | ||||||||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
| Investments held in Trust Account - Money Market Fund | $ | 233,755,262 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
| Derivative liabilities-Public Warrants | $ | 1,725,000 | $ | — | $ | — | ||||||
| Derivative warrant liabilities-Private Placement Warrants | $ | — | $ | 1,507,500 | $ | — | ||||||
December 31, 2021 | ||||||||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Liabilities: | ||||||||||||
| Derivative liabilities-Public Warrants | $ | 6,900,000 | $ | — | $ | — | ||||||
| Derivative warrant liabilities-Private Placement Warrants | $ | — | $ | 6,030,000 | $ | — | ||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
| Investments held in Trust Account - Money Market Fund | $ | 45,576,312 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
| Derivative liabilities-Public Warrants | $ | 1,150,000 | $ | — | $ | — | ||||||
| Derivative warrant liabilities-Private Placement Warrants | $ | — | $ | 1,005,000 | $ | — | ||||||
Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
Assets: | ||||||||||||
| Investments held in Trust Account - Money Market Fund | $ | 236,940,614 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
| Derivative liabilities-Public Warrants | $ | 172,500 | $ | — | $ | — | ||||||
| Derivative warrant liabilities-Private Placement Warrants | $ | — | $ | 150,750 | $ | — | ||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed financial statements and related notes included in Part I, Item 1 of this Quarterly Report. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form
Overview
We are a blank check company incorporated in Delaware on February 22, 2021. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
As of June 30, 2022,March 31, 2023, we have not commenced any operations. All activity for the period from February 22, 2021 (inception) through June 30, 2022March 31, 2023 relates to our formation and the IPO, described below, and, since the offering, the search for a prospective initial business combination. We will not generate any operating revenues until after the completion of its initial business combination, at the earliest. We will generate
Our sponsor is Mercato Partners Acquisition Group, LLC, a Delaware limited liability company. The registration statement filed in connection with our Initial Public Offering was declared effective on November 3, 2021. On November 8, 2021, we consummated our Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “public shares”), at $10.00 per Unit, generating gross proceeds of $200.0 million, and incurring offering costs of approximately $12.1 million, of which $4.0 million was for underwriting commissions, $7.0 million was for deferred underwriting commissions and approximately $1.1 million was for offering costs, of which approximately $0.3 million was allocated to derivative warrant liabilities.
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 9,000,000 warrants, at a price of $1.00 per private placement warrant to the sponsor, generating proceeds of $9.0 million.
In connection with the Initial Public Offering, the underwriter was granted an option (the “Over-allotment Option”) to purchase up to an additional 3,000,000 Units (“Over-allotment Units”) solely to cover over-allotments, if any, at an offering price of $10.00 per Over-allotment Unit. On November 19, 2021, the underwriter exercised the Over-allotment Option in full and, on November 23, 2021, purchased 3,000,000 Over-allotment Units, generating gross proceeds of $30 million,$30,000,000, and incurring additional offering costs of approximately $1.7 million, of which $0.6 million$600,000 was paid for underwriting commissions, and approximately $1.1 million is payable to the underwriter for deferred underwriting commissions.
On August 1, 2022 the underwriter irrevocably waived its rights to the deferred underwriting commissions due under the underwriting agreement consummated in connection with the Initial Public Offering.
Simultaneously with the sale of the Over-allotment Units, on November 23, 2021, the Company consummated a second closing of the Private Placement of an aggregate of 1,050,000 private placement warrants, at a price of $1.00 per private placement warrant, with the sponsor. The second closing of the Private Placement generated additional aggregate gross proceeds of $1,050,000. The private placement warrants are identical to the warrants sold as part of the Units in the Initial Public Offering except that, if held by the sponsor or its permitted transferees, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption under certain redemption scenarios and (iii) subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of the Company’s initial business combination.
Upon the closing of the Initial Public Offering, over-allotment and the Private Placement, $233.45 million ($10.15 per Unit) of net proceeds, including the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement, was placed in a trust account (“trust account”) with Continental Stock Transfer & Trust Company acting as trustee and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule
Our management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and the sale of private placement warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a business combination. Our business combination must be 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 (excluding the deferred underwriting commissions, which the underwriter irrevocably waived on August 1, 2022, and taxes payable on the interest earned on the trust account) at the time we sign a definitive agreement in connection with the initial business combination. However, we will only complete a business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
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We will provide our holders of the 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 stockholders’ meeting called to approve the business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a business combination or conduct a tender offer will be made by us, 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 at $10.15 per share, plus any pro rata interest earned on the funds held in the trust account and not previously released to us to pay its tax obligations). The
If we seek stockholder approval in connection with a business combination, the holders of the founder shares prior to this Initial Public Offering (the “initial stockholders”) agreed to vote their founder shares and any public shares purchased during or after the Initial Public Offering in favor of a business combination. In addition, the initial stockholders agreed to waive their redemption rights with respect to their founder shares and public shares in connection with the completion of a business combination. In addition, we agreed not to enter into a definitive agreement regarding an initial business combination without the prior consent of the sponsor.
Notwithstanding the foregoing, our amended and restated certificate of incorporation will provide 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 Class A common stock sold in the Initial Public Offering, without the prior consent of us.
The sponsor, executive officers, directors and director nominees have agreed not to propose an amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to provide for the redemption of its public shares in connection with a business combination or to redeem 100% of its public shares if we do not complete a business combination, unless we provide the public stockholders with the opportunity to redeem their Class A common stock in conjunction with any such amendment. Any such payments would be made in the form of a loan.
We will have 1520 months from the closing of the Initial Public Offering, or FebruaryJuly 8, 2023, to consummate an initial business combination. In connection with the special meeting approving the extension, our stockholders were provided an opportunity to redeem all or a portion of their Class A common stock, and stockholders holding 18,699,637 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. Consequently, approximately $193,164,942 (approximately $10.33 per share) was removed from the trust account to pay such redeeming holders. Additionally, in connection with the approval of the extension, we issued a promissory instrument (the “Extension Instrument”) in the principal amount of up to $1,350,000 to our Sponsor, pursuant to which our Sponsor agreed to loan us up to $1,350,000. The Extension Note bears no interest and is repayable in full upon the earlier of (a) the date of the consummation of the initial Business Combination or (b) the date of our liquidation. In order to extend the time available for the Company to consummate the initial Business Combination for an additional five months, the Sponsor or its affiliates or designees deposited into the Trust Account $0.157 per Public Share, or $675,000 in the aggregate. However, if we anticipatethe Company anticipates that it may not be able to consummate the initial business combinationBusiness Combination within 1520 months, we will,the Company may, by resolution of its board of directors if requested by the sponsor,Sponsor, extend the period of time to consummate a business combinationBusiness Combination up to five times, each by anone additional three monthsmonth (for a total of 18 monthsup to complete a business combination)five additional months), subjectby depositing into the Trust Account, for each such monthly extension, an amount equal to the sponsor depositing additional funds into the trust account as set out below. Inlesser of (x) $135,000 and (y) $0.045 for each public share that is not redeemed in connection with any such extension, public stockholders will not be offered the opportunity to vote on or redeem their shares. In order to extend the time available to us to consummate the initial business combination for an additional three months, the sponsor or its affiliates or designees must deposit into the trust account $0.10 per Public Share, or $2.3 million in the aggregate on or prior to the date of the deadline.
If we are unable to complete a business combinationBusiness Combination within 1520 months from the closing of the Initial Public Offering or a potential three-monthfive-month extension period (the “Combination Period”), we 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
In connection with the redemption of 100% of our outstanding public shares for a portion of the funds held in the trust account, each holder will receive a full pro rata portion of the amount then in the trust account, plus any pro rata interest earned on the funds held in the trust account and not previously released to the Company to pay the Company’s taxes payable (less up to $100,000 of interest to pay dissolution expenses).
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The initial stockholders agreed to waive their liquidation rights with respect to the founder shares if we fail to complete a business combination within the Combination Period. However, if the initial stockholders should acquire public shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete a business combination within the Combination Period. The underwriter irrevocably waived its rights to the deferred underwriting commissions held in the trust account and such amounts will be included with the funds held in the trust account that will be available to fund the redemption of our public shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including trust account assets) will be only $10.15 per share initially held in the trust account. In order to protect the amounts held in the trust account, the sponsor agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to our, or a prospective target business with which we have entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.15 per Public Share and (ii) the actual amount per Public Share held in the trust account as of the date of the liquidation of the trust account, if less than $10.15 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). 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. We 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 vendors, service providers (except our independent registered public accounting firm), prospective target businesses or other entities with which we do business, execute agreements with our waiving any right, title, interest or claim of any kind in or to monies held in the trust account.
Going Concern Consideration
As of June 30, 2022,March 31, 2023, we have had approximately $71,000$26,000 in cash and working capital deficit of approximately $22,000 (excluding franchise and income taxes payable).
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 to purchase founder shares and a loan under the Note from the sponsor of approximately $162,000. The Company fully repaid the Note on November 12, 2021. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the trust account and proceeds from a convertible promissory instrument (the “Instrument”) issued to the Company by the Sponsor inon July 26, 2022.
In connection with our assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”)
Results of Operations
Our entire activity from February 22, 2021 (inception) through June 30, 2022March 31, 2023 was in preparation for our formation and the Initial Public Offering, and subsequent to the IPO, identifying a target company for a business combination. We will not be generating any operating revenues until the closing and completion of our initial business combination.
For the three months ended June 30,March 31, 2023, we had a net loss of approximately $4,137,096 which consisted of approximately $1,832,000 of non-operating gain from the change in the fair value of derivative liabilities, approximately $3,322,000 of general and administrative expenses, approximately $224,000 of income tax expense, and approximately $56,000 in franchise tax expense, partially offset by approximately $1,297,000 in income from investments held in trust account.
For the three months ended March 31, 2022, we had a net income of approximately $3,493,000,$5,746,000, which consisted of approximately $3,664,000$6,034,000 of
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Other Contractual Obligations
Registration and Shareholder Rights
The holders of the founder shares, private placement warrants, Class A common stock underlying the private placement warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to the registration and shareholder rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial business combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter received an underwriting discount of $0.20 per Unit, or $4.6 million in the aggregate, paid upon the closing of the Initial Public Offering and over-allotment. An additional fee of $0.35 per Unit, or $8.05 million in the aggregate will be payable to the underwriter for deferred underwriting commissions. On August 1, 2022, the underwriter irrevocably waived its rights to the deferred underwriting commissions due under the under writingunderwriting agreement.
Risks and Uncertainties
Management continues to evaluate the impact of the
Critical Accounting Policies and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the following as our critical accounting policies:
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC
Redeemable Class A Common Stock
All of the 20,000,000 shares of Class A common stock sold as parts of the Units in the Initial Public Offering contain a redemption feature. In accordance with the Accounting Standards Codification“Classification “Classification and Measurement of Redeemable Securities”, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. We classified all of the shares of Class A common stock as redeemable. Immediately upon the closing of the Initial Public Offering, we recognized a
Effective with the closing of the Initial Public Offering, we recognized the accretion from initial book value to redemption amount, which resulted in charges against additional
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Net Income (Loss) Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net lossincome (loss) per share is computed by dividing net lossincome (loss) by the weighted average number of shares of common stock outstanding during the periods, excluding common stock subject to forfeiture. We considered the effect of Class B common stock that were excluded from the weighted average number of basic shares outstanding as they were contingent on the exercise of the Over-allotment Option by the underwriter. As of June 30,March 31, 2023 and 2022, and December 31, 2021, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of ours. As a result, diluted income (loss) per share is the same as basic lossincome (loss) per share for the periods presented.
Our management does not believe that any other recently issued, but not yet effective, accounting pronouncements,standards updates, if currently adopted, would have a material effect on our unaudited condensed financial statements.
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Off-Balance
As of June 30, 2022,March 31, 2023, we did not have any
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
We are a smaller reporting company as defined by Rule
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial 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, 2022,March 31, 2023, as such term is defined in Rules
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complex financial instruments and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis. As a result, our management performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with generally accepted in the United States of America. Accordingly, management believes that the financial statements included in this Form
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.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2022March 31, 2023 covered by this Quarterly Report on Form
Our principal executive officer and principal financial officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for certain complex equity instruments issued by the Company. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.
PART II - 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 its Initial Public Offering, as filed with the SEC on November 5, 2021, our quarterly report on Form 10-Q for the quarter ended September 30, 2022, as filed with the SEC on November 15, 2022, and the Company’sour annual report on Form
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
On November 8, 2021, the Company consummated its initial public offering (the “IPO”) of 20,000,000 Units, including 3,000,000 Units issued pursuant to the exercise of the underwriters’ over-allotment option in full. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share, and
A total of $233,450,000 of the proceeds from the IPO and the sale of the Private Placement Warrants, which also includes $8,050,000 of deferred underwriting fees, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. The proceeds held in the trust account will be invested by the trustee in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule
We incurred offering costs of approximately $12.1 million, of which $4.0 million was for underwriting commissions, $7.0 million was for deferred underwriting commissions and approximately $1.1 million was for offering costs, of which approximately $343,000 was allocated to derivative warrant liabilities. We incurred additional offering costs of approximately $1.7 million in connection with the over-allotment, of which $600,000 was paid for underwriting commissions, and approximately $1.1 million was for deferred underwriting commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form
Item 3. | Defaults Upon Senior Securities |
None.
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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
EXHIBIT INDEX
| * | Filed herewith. |
| ** | Furnished herewith. |
| (1) | Incorporated by reference to the Company’s Form 8-K, filed with the SEC on February 27, 2023. |
| (2) | Incorporated by reference to the Company’s Form S-1,filed with the SEC on October 13, 2021 (File No. 333-260219). |
Incorporated by reference to the Company’s Form 8-K, filed with the SEC on November 8, 2021. |
Incorporated by reference to the Company’s |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 11, 2022
| Mercato Partners Acquisition Corp. | ||
| By: | /s/ Greg Warnock | |
| Name: | Greg Warnock | |
| Title: | Chief Executive Officer and Chair of the Board | |
| By: | /s/ Scott Klossner | |
| Name: | Scott Klossner | |
| Title: | Chief Financial Officer | |
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