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 March 31, 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: 001-41718

 

ESH ACQUISITION CORP.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware   87-4000684
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

228 Park Ave S, Suite 89898

New York, NY 10003

(Address of principal executive offices)

 

212-287-5022

(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   ESHAU   The Nasdaq Global Market
Class A shares   ESHA   The Nasdaq Global Market
Rights   ESHAR   The Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No ☐

 

As of May 20, 2024, there were 11,787,500 shares of Class A common stock, $0.0001 par value and 2,875,000 shares of Class B common stock, $0.0001 par value, issued and outstanding.

 

 

 

 

 

 

ESH ACQUISITION CORP.

 

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024

TABLE OF CONTENTS

 

    Page
Part I. Financial Information    
Item 1. Interim Financial Statements   1
Condensed Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023   1
Condensed Statements of Operations for the three months ended March 31, 2024 and 2023 (Unaudited)   2
Condensed Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023 (Unaudited)   3
Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)   4
Notes to Condensed Financial Statements (Unaudited)   5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   17
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk   20
Item 4. Controls and Procedures   20
Part II. Other Information    
Item 1. Legal Proceedings   21
Item 1A. Risk Factors   21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   21
Item 3. Defaults Upon Senior Securities   21
Item 4. Mine Safety Disclosures   21
Item 5. Other Information   21
Item 6. Exhibits   22
Part III. Signatures   23

 

i

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Interim Financial Statements

 

ESH ACQUISITION CORP.

CONDENSED BALANCE SHEETS

 

   March 31,
2024
   December 31,
2023
 
   (Unaudited)     
ASSETS        
Current assets        
Cash  $1,820,447   $1,879,227 
Due from Sponsor   10,136    25,796 
Prepaid expenses   8,209    18,082 
Short-term prepaid insurance   281,681    281,681 
Total Current Assets   2,120,473    2,204,786 
           
Long-term prepaid insurance   57,119    127,539 
Investments held in Trust Account   121,565,683    120,000,366 
TOTAL ASSETS  $123,743,275   $122,332,691 
           
LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and accrued expenses  $166,788   $107,954 
Franchise tax payable   162,961    112,343 
Income taxes payable   981,484    819,453 
TOTAL LIABILITIES   1,311,233    1,039,750 
           
Commitments and Contingencies   
 
    
 
 
           
COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION          
Class A common stock subject to possible redemption, 11,500,000 shares at redemption value of approximately $10.47 and $10.35 per share at March 31, 2024 and December 31, 2023, respectively   120,421,238    119,068,570 
           
STOCKHOLDERS’ EQUITY          
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at March 31, 2024 and December 31, 2023   
    
 
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 287,500 issued and outstanding (excluding 11,500,000 shares subject to possible redemption) at March 31, 2024 and December 31, 2023   28    28 
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 2,875,000 issued and outstanding at March 31, 2024 and December 31, 2023   288    288 
Additional paid-in capital   
    297,488 
Retained earnings   2,010,488    1,926,567 
TOTAL STOCKHOLDERS’ EQUITY   2,010,804    2,224,371 
TOTAL LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ EQUITY  $123,743,275   $122,332,691 

 

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

 

1

 

 

ESH ACQUISITION CORP.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   Three Months Ended
March 31,
 
   2024   2023 
General and administrative expenses  $213,567   $2,867 
Franchise tax expense   50,618    
 
Loss from operations   (264,185)   (2,867)
           
Other income:          
Interest earned on investments held in Trust Account   1,565,317    
 
Total other income   1,565,317    
 
           
Income (loss) before provision for income taxes   1,301,132    (2,867)
Provision for income taxes   (162,031)   
 
Net income (loss)  $1,139,101   $(2,867)
           
Basic and diluted weighted average shares outstanding, Class A common stock
   11,787,500    
 
Basic and diluted net income per share
  $0.08   $
 
           
Basic and diluted weighted average shares outstanding, Class B common stock(1)   2,875,000    2,500,000 
Basic and diluted net income (loss) per share
  $0.08   $(0.00)

 

(1) Excluded up to 375,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (Note 5).

 

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

 

2

 

 

ESH ACQUISITION CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

FOR THE THREE MONTHS ENDED MARCH 31, 2024

 

    Class A
Common Stock
    Class B
Common Stock
    Additional
Paid-in
    Retained     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Capital     Earnings     Equity  
Balance — January 1, 2024     287,500     $ 28       2,875,000     $ 288     $ 297,488     $ 1,926,567     $ 2,224,371  
Remeasurement of Class A common stock subject to possible redemption          
           
      (297,488 )     (1,055,180 )     (1,352,668 )
Net income          
           
     
      1,139,101       1,139,101  
Balance – March 31, 2024 (unaudited)     287,500     $ 28       2,875,000     $ 288     $
    $ 2,010,488     $ 2,010,804  

 

FOR THE THREE MONTHS ENDED MARCH 31, 2023

 

   Class A
Common Stock
   Class B
Common Stock
   Additional
Paid-in
   Accumulated   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Equity 
Balance — January 1, 2023(1)      $
    2,875,000   $288   $24,712   $(20,332)  $4,668 
Net loss       
        
    
    (2,867)   (2,867)
Balance – March 31, 2023(1) (unaudited)      $
    2,875,000   $288   $24,712   $(23,199)  $1,801 

 

(1) Included up to 375,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (Note 5).

 

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

 

3

 

 

ESH ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Three Months Ended
March 31,
 
   2024   2023 
Cash Flows from Operating Activities:        
Net income (loss)  $1,139,101   $(2,867)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:          
Interest earned on investments held in Trust Account   (1,565,317)   
 
Changes in operating assets and liabilities:          
Prepaid expenses and other current assets   9,873    
 
Long-term prepaid insurance   70,420    
 
Due from Sponsor   15,660    
 
Accounts payable and accrued expenses   137,717    (2,851)
Franchise tax payable   50,618    
 
Income taxes payable   162,031    
 
Net cash provided by (used in) operating activities   20,103    (5,718)
           
Cash Flows from Financing Activities:          
Payment of offering costs   (78,883)   (8,000)
Net cash used in financing activities   (78,883)   (8,000)
           
Net Change in Cash   (58,780)   (13,718)
Cash – Beginning of period   1,879,227    44,963 
Cash – End of period  $1,820,447   $31,245 
           
Non-cash investing and financing activities:          
Offering costs included in accrued expenses  $
   $30,000 

 

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

 

4

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED) 

 

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

 

ESH Acquisition Corp. (the “Company”) was incorporated as a Delaware corporation on November 17, 2021. The Company was incorporated for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities that the Company has not yet identified (the “Initial Business Combination”).

 

As of March 31, 2024, the Company had not commenced any operations. All activity for the period from November 17, 2021 (inception) through March 31, 2024 relates to the Company’s formation and the initial public offering (the “IPO”), which is described below, and subsequent to the IPO, identifying a target company for the Initial Business Combination. The Company will not generate any operating revenues until after the completion of the Initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds held in the Trust Account (defined below). The Company has selected December 31 as its fiscal year end.

 

The registration statement for the Company’s IPO was declared effective on June 13, 2023. On June 16, 2023, the Company consummated the IPO of 11,500,000 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 1,500,000 Units, at $10.00 per Unit, generating gross proceeds of $115,000,000 which is described in Note 3.

 

Simultaneously with the closing of the IPO, the Company consummated the sale of 7,470,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant, in a private placement to the Company’s Sponsor, ESH Sponsor LLC, a limited liability company, which is an affiliate of members of the Board of Directors and management team (the “Sponsor”), and I-Bankers Securities, Inc. (“I-Bankers”) and Dawson James (“Dawson James”), the representative of the underwriters of the IPO, generating gross proceeds of $7,470,000, which is described in Note 4.

 

Transaction costs amounted to $5,368,092, consisting of $2,300,000 of cash underwriting discount, $2,239,466 fair value of Representative Shares, and $828,626 of other offering costs.

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of its IPO and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating the Initial Business Combination. The Company’s Initial 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 (as defined below) (net of amounts disbursed to management for working capital purposes and excluding the amount of any Marketing Fee, as defined in Note 6, held in Trust Account) at the time the Company signs a definitive agreement in connection with the Initial Business Combination. However, the Company will only complete the Initial Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise is not required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”).

 

Following the closing of the IPO on June 16, 2023, an amount of $116,725,000 ($10.15 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in the 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 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of (i) the completion of the Initial Business Combination or (ii) the distribution of the Trust Account as described below.

 

The Company will provide holders of the Company’s outstanding Public Shares sold in the IPO (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the Initial Business Combination either (i) in connection with a stockholder meeting called to approve the Initial Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of the Initial 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 held in the Trust Account (initially anticipated to be $10.15 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the Marketing Fee the Company will pay to the underwriters (as discussed in Note 6).

 

5

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED) 

 

The Public Shares are recorded at a redemption value and classified as temporary equity in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”). The Company will proceed with an Initial Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of the Initial Business Combination and a majority of the shares voted are voted in favor of the Initial Business Combination. If a stockholder vote is not required by applicable law or stock exchange requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to the amended and restated certificate of incorporation adopted by the Company upon the consummation of the IPO (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”), and file tender offer documents with the SEC prior to completing an Initial Business Combination. If, however, a stockholder approval of the transactions 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. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with an Initial Business Combination, the holders of the Founder Shares prior to the IPO (the “Initial Stockholders”) agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of the Initial 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 an Initial Business Combination. In addition, the Company agreed not to enter into a definitive agreement regarding an Initial Business Combination without the prior consent of the Sponsor.

 

Notwithstanding the foregoing, 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 Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.

 

The Initial Stockholders will agree not to propose an amendment to the Certificate of Incorporation (A) in a manner that would affect the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete an Initial Business Combination within the time frame described below or (B) with respect to any other material provision relating to the rights of holders of Public Shares or pre-Initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares upon approval of any such amendment.

 

The Company will have only the Combination Period, or until December 16, 2024, to complete the Initial Business Combination.

 

On July 20, 2023, the Company issued a press release announcing that, on July 21, 2023, the Units would no longer trade, and that the Company’s common stock and rights, which together comprise the Units will commence trading separately. The common stock and rights will be listed on the Nasdaq Global Market and trade with the ticker symbols “ESHA,” and “ESHAR,” respectively. This is a mandatory and automatic separation, and no action was required by the holders of Units.

 

If the Company is unable to complete an Initial Business Combination within 18 months from the closing of the IPO (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 (which interest shall be net of taxes payable, and 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Board of Directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless if the Company fails to complete the Initial Business Combination within the Combination Period.

 

6

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED) 

 

The Initial Stockholders will not be entitled to liquidation rights with respect to the Founder Shares if the Company fails to complete an Initial Business Combination within the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete an Initial Business Combination within the Combination Period. The underwriters will agree to waive their rights to the Marketing Fee (see Note 6) held in the Trust Account in the event the Company does not complete an Initial Business Combination within 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 residual assets remaining available for distribution (including Trust Account assets) will be only $10.15. 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 (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”), 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 due to reductions in the value of the trust assets as of the date of the liquidation of the Trust Account, in each case including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes, less franchise and income taxes payable. This liability will not apply with respect to any claims by a third party or Target that executed an agreement waiving any and all rights to seek access to the Trust Account (whether or not such agreement is enforceable) or to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). 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 (other than 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.

 

Risks and Uncertainties

 

Management is currently evaluating the impact of the current global economic uncertainty, rising interest rates, high inflation, high energy prices, supply chain disruptions, the Israel-Hamas conflict and the Russia-Ukraine war (including the impact of any sanctions imposed in response thereto) and has concluded that while it is reasonably possible that any of these events could have a negative effect on the Company’s financial position, results of operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude, or the extent to which they may negatively impact the Company’s business and its ability to complete an Initial Business Combination.

 

Going Concern Consideration

 

As of March 31, 2024, the Company had cash of $1,820,447 and working capital of $809,240.

 

Until the consummation of an Initial Business Combination, the Company will be using the funds held outside the Trust Account for identifying and evaluating target businesses, performing due diligence on prospective target businesses, paying for travel expenditures, reviewing corporate documents and material agreements of prospective target businesses, and structuring, negotiating and completing an Initial Business Combination.

 

In order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes an Initial 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 the Initial 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 an Initial Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post-Initial Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2024 and December 31, 2023, the Company had no borrowings under the Working Capital Loans.

 

In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete an Initial Business Combination by December 16, 2024, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to consummate an Initial Business Combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after December 16, 2024.

 

7

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED) 

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

 

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 1, 2024. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.

 

Emerging Growth Company

 

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

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed 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 unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed 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 $1,820,447 and $1,879,227 of cash as of March 31, 2024 and December 31, 2023, respectively, and no cash equivalents.

 

Investments Held in Trust Account

 

At March 31, 2024 and December 31, 2023, all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. treasury securities. The investments held in Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on investments held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

 

8

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED) 

 

Fair Value of Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature.

 

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s financial instruments are classified as either Level 1, Level 2, or Level 3. These tiers include:

 

  Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
     
  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Offering Costs

 

Offering costs consisted of legal, accounting, and other costs incurred through the condensed balance sheet date that were directly related to the IPO. Upon completion of the IPO, offering costs were allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to the warrants were charged to equity. Offering costs allocated to the Class A common stock were charged against the carrying value of Class A common stock subject to possible redemption upon the completion of the IPO.

 

Class A Common Stock Subject to Possible Redemption

 

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 IPO were issued with other freestanding instruments (i.e., Public Rights), and as such, the initial carrying value of Public Shares classified as temporary equity is the allocated proceeds determined in accordance with ASC 470-20. The Company recognizes changes in redemption value immediately as they 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 IPO, 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 retained earnings. Accordingly, at March 31, 2024 and December 31, 2023, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.

 

The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2024 and December 31, 2023, there are 11,500,000 shares of Class A common stock subject to possible redemption presented as temporary equity, outside of the stockholders’ equity section of the accompanying condensed balance sheets.

 

Gross proceeds  $115,000,000 
Less:     
Proceeds allocated to Public Rights   (1,398,400)
Class A common stock issuance costs   (5,252,889)
Plus:     
Remeasurement of carrying value to redemption value   10,719,859 
Class A Common Stock subject to possible redemption, December 31, 2023  119,068,570 
Plus:     
Remeasurement of carrying value to redemption value   1,352,668 
Class A Common Stock subject to possible redemption, March 31, 2024  $120,421,238 

 

9

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED) 

 

Derivative Financial Instruments

 

The Company evaluates its equity-linked financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are classified as liabilities, the derivative instrument is initially recognized at fair value with subsequent changes in fair value recognized in the statements of operations each reporting period. The classification of derivative instruments, including whether such instruments should be classified as liabilities or as equity, is evaluated at the end of each reporting period. The Company accounted for the rights issued in connection with the IPO and the warrants issued in connection with the Private Placement as equity-classified instruments in accordance with ASC 815 as they did not meet the liability criteria (i.e., cashless exercises).

 

Income Taxes

 

The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets were deemed de minimis as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate was 12.5% and 0% for the three months ended March 31, 2024 and 2023, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three months ended March 31, 2024, due to changes in the valuation allowance on the deferred tax assets and prior year true ups from the tax return.

 

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 March 31, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

 

The Company has identified the United States as its only “major” tax jurisdiction. The Company has been 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.

 

Net Income (Loss) Per Share of Common Stock

 

The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares. The Company has not considered the effect of the rights and warrants sold in the IPO and the Private Placement to purchase an aggregate of 8,620,000 shares of its Class A common stock in the calculation of diluted net income (loss) per share, since their exercise is contingent upon future events. The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common stock:

 

   Three Months Ended March 31, 
   2024   2023 
   Class A   Class B   Class A   Class B 
Basic and Diluted net income (loss) per share                
Numerator:                
Allocation of net income (loss)  $915,748   $223,353   $
   $(2,867)
Denominator:                    
Basic and diluted weighted average shares outstanding
   11,787,500    2,875,000    
    2,500,000 
Basic and diluted net income (loss) per share
  $0.08   $0.08   $
   $(0.00)

 

10

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED)

 

Recent Accounting Standards

 

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 unaudited condensed financial statements.

 

NOTE 3. INITIAL PUBLIC OFFERING

 

Pursuant to the IPO, the Company sold 11,500,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one right. Each Public Right entitles the holder thereof to receive one-tenth (1/10) of one shares of Class A common stock upon the consummation of the Initial Business Combination.

 

NOTE 4. PRIVATE PLACEMENT

 

Simultaneously with the closing of the IPO, the Sponsor, I-Bankers and Dawson James purchased an aggregate of 7,470,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, or $7,470,000 in the aggregate, in a private placement.

 

Each whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the IPO held in the Trust Account so that the Trust Account holds $10.15 per unit sold. If the Company does not complete an Initial Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be redeemable and exercisable on a cashless basis.

 

The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the Initial business Combination.

 

NOTE 5. RELATED PARTY TRANSACTIONS

 

Founder Shares

 

On December 17, 2021, the Sponsor subscribed to purchase 8,625,000 shares of the Company’s Class B common stock, par value $0.0001 per share (the “Founder Shares”) for a subscription price of $25,000. Such subscription receivable was paid in full on March 9, 2022. On May 8, 2023, the Sponsor surrendered an aggregate of 5,750,000 shares of its Class B common stock for no consideration, which were cancelled, resulting in the Initial Stockholders holding an aggregate of 2,875,000 Founder Shares. The Initial Stockholders agreed to forfeit up to 375,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The forfeiture was to be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the IPO (excluding the Representative Shares). If the Company increased or decreased the size of the offering, the Company would effect a stock dividend or share contribution back to capital, as applicable, immediately prior to the consummation of the IPO in such amount as to maintain the Founder Share ownership of the Company’s stockholders prior to the IPO at 20.0% of the Company’s issued and outstanding common stock upon the consummation of the IPO (excluding the Representative Shares, as defined below). On June 16, 2023, the underwriters exercised their over-allotment option in full as part of the initial closing of the IPO. As such, the 375,000 Founder Shares are no longer subject to forfeiture.

 

11

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED)

 

The Initial Stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (A) one year after the completion of the Initial Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the Initial Business Combination that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property (the “Lock-Up”).

 

Notwithstanding the foregoing, if the last 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 150 days after the Initial Business Combination, the Founder Shares will be released from the Lock-Up.

 

Related Party Loans

 

Promissory Note to Sponsor

 

On December 17, 2021 and as amended on May 9, 2023, the Sponsor agreed to loan the Company up to $300,000 pursuant to a promissory note (the “Note”). The Note was non-interest bearing, unsecured and due upon the earlier of (x) June 30, 2023 (as amended), and (y) the closing of the IPO. The outstanding balance of $249,560 was repaid at the closing of the IPO on June 16, 2023. As of March 31, 2024 and December 31, 2023, this facility is no longer available.

 

Due from Sponsor

 

At the closing of the IPO on June 16, 2023, a portion of the proceeds from the sale of the Private Placement Warrants in the amount of $45,440 was due to the Company to be held outside of the Trust Account for working capital purposes. On June 21, 2023, the Sponsor paid the Company an amount of $30,292 to partially settle the outstanding balance. In July 2023, the Sponsor paid $13,712 expense reimbursements on behalf of the Company. In October and December 2023, the Company paid a total of $24,360 of Sponsor’s expenses on behalf of the Sponsor. As of March 31, 2024 and December 31, 2023, the Sponsor owes the Company an outstanding amount of $10,136 and $25,796, respectively.

 

Working Capital Loan

 

In addition, in order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes an Initial 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 an Initial 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 an Initial Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Initial Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2024 and December 31, 2023, the Company had no borrowings under the Working Capital Loans.

 

Administrative Services Agreement

 

The Company entered into an agreement, commencing on June 13, 2023 through the earlier of consummation of the Initial Business Combination and the Company’s liquidation, to reimburse an affiliate of the Company’s officers $5,000 per month for office space, utilities, secretarial support and other administrative and consulting services.

 

In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential partner businesses and performing due diligence on suitable Initial Business Combinations. Any such payments prior to an Initial Business Combination will be made using funds held outside the Trust Account.

 

For the three months ended March 31, 2024, the Company incurred and paid $15,000 in fees for these services. For the three months ended March 31, 2023, the Company did not incur any such fees for these services.

 

12

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED)

 

NOTE 6. COMMITMENTS AND CONTINGENCIES

 

Registration and Stockholder Rights

 

The holders of Founder Shares, Private Placement Warrants (and underlying securities) and Private Placement Warrants that may be issued upon conversion of Working Capital Loans (and any underlying securities) are entitled to registration rights pursuant to a registration rights agreement signed at the consummation of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

Underwriting Agreement

 

On June 16, 2023, the Company issued to I-Bankers 258,750 shares of Class A common stock and to Dawson James 28,750 shares of Class A common stock at the closing of the IPO (collectively, the “Representative Shares”). The Company determined the fair value of the 287,500 Representative Shares to be $2,239,466 (or $7.789 per share) using the Probability-Weighted Expected Return Method Model. The fair value of the shares granted to the underwriters utilized the following assumptions: (1) expected volatility of 5.7%, (2) risk-free interest rate of 5.15%, (3) expected life of 1.17 years, and (4) implied discount for lack of marketability of 1.4%. Accordingly, the fair value of $2,239,466 was accounted for as offering costs at the closing of the IPO.

 

The Representative Shares have been deemed compensation by Financial Industry Regulatory Authority (“FINRA”) and are therefore subject to a Lock-Up for a period of 180 days immediately following the commencement of sales in the IPO. Pursuant to FINRA Rule 5110(e)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the commencement of sales in the IPO, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales in the IPO, except to any underwriters and selected dealer participating in the offering and their bona fide officers or partners.

 

The underwriters were also entitled to an underwriting discount of $0.20 per unit, or $2.3 million in the aggregate, which was paid upon the closing of the IPO.

 

Initial Business Combination Marketing Agreement

 

The Company entered into the Marketing Agreement with the underwriters, I-Bankers and Dawson James to assist the Company in holding meetings with the stockholders to discuss the potential Initial Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with the Initial Business Combination, assist the Company in obtaining stockholder approval for the Initial Business Combination and assist the Company with its press releases and public filings in connection with the Initial Business Combination. Pursuant to the Initial Business Combination Marketing Agreement, the Company will pay I-Bankers and Dawson James, collectively, 3.5% of the gross proceeds of the IPO, or $4.03 million in the aggregate (the “Marketing Fee”). The Marketing Fee will become payable to I-Bankers and Dawson James from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination with a target introduced to the Company by I-Bankers.

 

NOTE 7. STOCKHOLDERS’ EQUITY

 

Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s Board of Directors. At March 31, 2024 and December 31, 2023, there were no shares of preferred stock issued or outstanding.

 

Class A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. At March 31, 2024 and December 31, 2023, there were 287,500 shares of Class A common stock issued and outstanding, excluding 11,500,000 shares of Class A common stock subject to possible redemption.

 

Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. At March 31, 2024 and December 31, 2023, there were 2,875,000 shares of Class B common stock issued and outstanding.

 

13

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED)

 

Holders of the Class B common stock will have the right to appoint all of the Company’s directors prior to an Initial Business Combination. On any other matter submitted to a vote of the Company’s stockholders, holders of the Class A common stock and holders of the Class B common stock will vote together as a single class, except as required by law or stock exchange rule; provided, that the holders of Class B common stock will be entitled to vote as a separate class to increase the authorized number of shares of Class B common stock. Each share of common stock will have one vote on all such matters.

 

The shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time of the Company’s Initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered and related to the closing of the Initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the IPO (excluding the Representative Shares) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the Initial business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Initial Business Combination, any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).

 

Rights — At March 31, 2024 and December 31, 2023, there were 11,500,000 rights outstanding. Each holder of a right will receive one-tenth (1/10) of a share of Class A common stock upon consummation of the Initial Business Combination. In the event the Company will not be the survivor upon completion of the Initial Business Combination, each holder of a right will be required to convert his, her or its rights in order to receive the 1/10 share underlying each right (without paying any additional consideration) upon consummation of the Initial Business Combination. If the Company is unable to complete an Initial Business Combination within the required time period and it liquidates the funds held in the Trust Account, holders of rights will not receive any of such funds for their rights and the rights will expire worthless. No fractional shares will be issued upon conversion of any rights. As a result, a holder must have 10 rights to receive one share of common stock at the closing of the Initial Business Combination.

 

Warrants — At March 31, 2024 and December 31, 2023, there were 7,470,000 warrants outstanding. No public warrants were sold in the IPO. The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the Initial business Combination.

 

Each Private Placement Warrant entitles the registered holder to purchase one share of the Class A common stock at a price of $11.50 per share, at any time commencing on the later of 12 months from the closing of the IPO or 30 days after the completion of the Initial business Combination. The Private Placement Warrants will expire five years after the completion of the Initial business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

 

The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the Initial Business Combination, the Company will use its reasonable best efforts to file, and within 60 business days after the closing the Initial Business Combination, to have declared effective, a registration statement relating to the shares of Class A common stock issuable upon exercise of the Private Placement Warrants and to maintain the effectiveness of such registration statement, and a current Prospectus relating to those shares of Class A common stock until the Private Placement Warrants expire. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of the Private Placement Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.

 

14

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED)

 

Redemption of warrants. Once the Private Placement Warrants become exercisable, the Company may redeem the outstanding warrants:

 

in whole and not in part;

 

at a price of $0.01 per warrant;

 

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

 

if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

 

The Company may not redeem the Private Placement Warrants when a holder may not exercise such warrants. The Company has established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the Private Placement Warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A common stock may fall below the $18.00 redemption trigger price as well as the $11.50 warrant exercise price (for whole shares) after the redemption notice is issued.

 

If the Company calls the Private Placement Warrants for redemption as described above, management will have the option to require any holder that wishes to exercise their warrant to do so on a “cashless basis”. In determining whether to require all holders to exercise their Private Placement Warrants on a “cashless basis,” the Company will consider, among other factors, the cash position, the number of Private Placement Warrants that are outstanding and the dilutive effect on the stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the Private Placement Warrants. If the Company takes advantage of this option, all holders of the Private Placement Warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

 

NOTE 8. FAIR VALUE MEASUREMENTS 

 

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).

 

15

 

 

ESH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2024

(UNAUDITED)

 

At March 31, 2024 and December 31, 2023, assets held in the Trust Account were comprised of $121,565,683 and $120,000,366 in money market funds which are invested primarily in U.S. Treasury Securities, respectively. Through March 31, 2024, the Company has not withdrawn any income earned from the Trust Account to pay certain tax obligations.

 

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

       March 31,   December 31, 
Description  Level   2024   2023 
Assets:            
Investments held in Trust Account – U.S. Treasury Securities Money Market Fund  1   $121,565,683   $120,000,366 

 

NOTE 9. SUBSEQUENT EVENTS 

 

The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.

 

16

 

 

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 ESH Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to ESH Sponsor 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 Initial 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 Initial 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 Company’s Annual Report on Form 10-K 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 17, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities. We intend to effectuate our Initial Business Combination using cash from the proceeds of the IPO and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.

 

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an Initial Business Combination will be successful.

 

Results of Operations

 

We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 17, 2021 (inception) through March 31, 2024 were organizational activities, those necessary to prepare for the IPO, described below, and identifying a target company for our Initial Business Combination. We do not expect to generate any operating revenues until after the completion of our Initial Business Combination. We generate non-operating income in the form of interest income on investments held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

 

For the three months ended March 31, 2024, we had a net income of $1,139,101, which consists of interest income on investments held in the Trust Account of $1,565,317, offset by operating costs of $213,567, provision for income taxes of $162,031, and franchise tax expense of $50,618.

 

For the three months ended March 31, 2023, we had a net loss of $2,867, which consists of operating costs.

 

17

 

 

Liquidity and Capital Resources

 

On June 16, 2023, we consummated the IPO of 11,500,000 Units at $10.00 per Unit, which includes the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at $10.00 per Unit, generating gross proceeds of $115,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 7,470,000 Private Placement Warrants at a price of $1.00 per warrant, in a private placement to the Sponsor and I-Bankers Securities, Inc. and Dawson James, generating gross proceeds of $7,470,000.

 

Following the IPO, the full exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $116,725,000 ($10.15 per Unit) was placed in the Trust Account. We incurred $5,368,092 in IPO related costs, consisting of $2,300,000 of cash underwriting discount, $2,239,466 fair value of Representative Shares, and $828,626 of other offering costs.

 

For the three months ended March 31, 2024, cash provided by operating activities was $20,103. Net income of $1,139,101 was affected by interest earned on investments held in the Trust Account of $1,565,317. Changes in operating assets and liabilities provided $446,319 of cash for operating activities.  

 

For the three months ended March 31, 2023, cash used in operating activities was $5,718. Net loss of $2,867 was affected by changes in operating assets and liabilities which used $2,851 of cash for operating activities.  

 

As of March 31, 2024, we had investments held in the Trust Account of $121,565,683 (including $4,840,683 of interest income) consisting of U.S. Treasury securities. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through March 31, 2024, we have not withdrawn any interest earned from the Trust Account.  

 

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 Initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Initial 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.

 

As of March 31, 2024, we had cash of $1,820,447. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete our Initial Business Combination.

 

In order to fund working capital deficiencies or finance transaction costs in connection with our Initial 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 our Initial Business Combination, we would repay such loaned amounts. In the event that our Initial 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 loans may be convertible into warrants at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.

 

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating our Initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Initial Business Combination. Moreover, we may need to obtain additional financing either to complete our Initial Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Initial Business Combination.

 

We have determined that mandatory liquidation, should a business combination not occur by December 16, 2024, and potential subsequent dissolution raise substantial doubt about our ability to continue as a going concern for a reasonable period of time which is considered to be one year from the date of the issuance of the financial statements. The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.

 

18

 

 

Off-Balance Sheet Arrangements

 

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

 

Contractual Obligations

 

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of one of our officers a monthly fee of $5,000 for office space, utilities, secretarial support and other administrative and consulting services. We began incurring these fees on June 13, 2023 and will continue to incur these fees monthly until the earlier of the completion of the Initial Business Combination and our liquidation.

 

In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential partner businesses and performing due diligence on suitable Initial Business Combinations. Any such payments prior to an Initial Business Combination will be made using funds held outside the Trust Account.

 

The underwriters were entitled to an underwriting discount of $0.20 per unit, or $2.3 million in the aggregate, which was paid upon the closing of the IPO.

 

We entered into an Initial Business Combination marketing agreement (the “Marketing Agreement”) with the underwriters, I-Bankers and Dawson James, to assist us in holding meetings with the stockholders to discuss the potential Initial Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with the Initial Business Combination, assist us in obtaining stockholder approval for the Initial Business Combination and assist us with its press releases and public filings in connection with the Initial Business Combination. Pursuant to the Marketing Agreement, we will pay I-Bankers and Dawson James, collectively, 3.5% of the gross proceeds of the IPO, or $4.03 million in the aggregate (the “Marketing Fee”). The Marketing Fee will become payable to I-Bankers and Dawson James from the amounts held in the Trust Account solely in the event that we complete an Initial Business Combination with a target introduced to us by I-Bankers.

 

Critical Accounting Policies and Estimates

 

The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. As of March 31, 2024, we have not identified any critical accounting policies, while we have identified a critical accounting estimate below:

 

Class A Common Stock Subject to Possible Redemption

 

We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified in temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2024 and December 31, 2023, 11,500,000 shares of Class A common stock are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheets. As of March 31, 2024 and December 31, 2023, Class A common stock subject to possible redemption amounts to $120,421,238 and $119,068,570, respectively.

 

19

 

 

Recent Accounting Standards

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

  

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2024 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

20

 

 

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 Annual Report on Form 10-K filed with the SEC. As of the date of this Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC.

 

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

 

On June 16, 2023, we consummated the Initial Public Offering of 11,500,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at $10.00 per Unit, generating total gross proceeds of $115,000,000. I-Bankers Securities, Inc and IB Capital LLC acted as joint book-running managers, with Dawson James Securities, Inc. acting as co-manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form S-1 (No. 333-265226). The Securities and Exchange Commission declared the registration statements effective on June 13, 2023.

 

Simultaneous with the consummation of the Initial Public Offering, the Sponsor, I-Bankers Securities, Inc. and Dawson James, consummated the private placement warrants of an aggregate of 7,470,000 warrants at a price of $1.00 per warrant, generating total proceeds of $7,470,000. Each Unit consists of one share of Class A common stock and one right. Each whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

 

Of the gross proceeds received from the Initial Public Offering, the full exercise of the over-allotment option and the Private Placement Warrants, an aggregate of $116,725,000 was placed in the Trust Account.

 

We incurred transaction costs amounting to $5,368,092 consisting of $2,300,000 of cash underwriting discount, $2,239,466 fair value of representative shares, and $828,626 of other offering costs.

 

For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

None

 

Item 5. Other Information

 

During the three months ended March 31, 2024, no director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation-S-K).

 

21

 

 

Item 6. Exhibits

 

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

No.   Description of Exhibit
1.1   Underwriting Agreement, dated June 13, 2023, by and among the Company, I-Bankers and Dawson James.(1)
1.2   Business Combination Marketing Agreement, dated June 13, 2023, by and among the Company, I-Bankers and Dawson James Securities, Inc. (1)
3.1   Amended and Restated Certificate of Incorporation(1)
3.2   By-Laws of ESH Acquisition Corp.(2)
4.1   Rights Agreement, dated June 13, 2023, by and between the Company and CST(1)
4.2   Warrant Agreement, dated June 13, 2023, by and between CST and the Company. (1)
10.1   Investment Management Trust Agreement, dated June 13, 2023, by and between CST and the Company. (1)
10.2   Registration and Rights Agreement, dated June 13, 2023, by and among the Company, the Sponsor, I-Bankers and Dawson James. (1)
10.3   Private Placement Warrants Purchase Agreement, dated June 13, 2023, by and among the Company, the Sponsor, I-Bankers and Dawson James. (1)
10.4   Indemnity Agreement, dated June 13, 2023, by and between the Company and James Franics. (1)
10.5   Indemnity Agreement, dated June 13, 2023, by and between the Company and Jonathan Morris. (1)
10.6   Indemnity Agreement, dated June 13, 2023, by and between the Company and Thomas Wolber. (1)
10.7   Indemnity Agreement, dated June 13, 2023, by and between the Company and Jonathan Gordon. (1)
10.8   Indemnity Agreement, dated June 13, 2023, by and between the Company and Christina Francis. (1)
10.9   Indemnity Agreement, dated June 13, 2023, by and between the Company and Christopher Ackerley. (1)
10.10   Indemnity Agreement, dated June 13, 2023, by and between the Company and Allen Weiss. (1)
10.11   Administrative Services Agreement, dated June 13, 2023, between the Company and the Sponsor. (1)
10.12   Letter Agreement, dated June 13, 2023, by and among the Company, the Sponsor, I-Bankers, Dawson James and the Company’s officers and directors. (1)
31.1*   Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*   Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*   Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*   Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*   Inline XBRL Instance Document
101.SCH*   Inline XBRL Taxonomy Extension Schema Document
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*   Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File

 

* Filed herewith.

 

(1)Previously filed as an exhibit to our Current Report on Form 8-K filed on June 20, 2023 and incorporated by reference herein.

 

(2)Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed on November 14, 2023 and incorporated by reference herein.

 

22

 

 

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.

 

  ESH Acquisition Corp.
     
Date: May 20, 2024 By: /s/ James Francis
  Name:  James Francis
  Title: Chief Executive Officer
    (Principal Executive Officer)
     
Date: May 20, 2024 By: /s/ Jonathan Morris
  Name:  Jonathan Morris
  Title: Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

23

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EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, James Francis, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of ESH Acquisition Corp.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

 

b)(Paragraph omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a);

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 20, 2024

 

  /s/ James Francis
  James Francis
  Chief Executive Officer
  (Principal Executive Officer)

 

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jonathan Morris, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of ESH Acquisition Corp.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

 

b)(Paragraph omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a);

 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 20, 2024

 

  /s/ Jonathan Morris
  Jonathan Morris
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of ESH Acquisition Corp. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2024, as filed with the Securities and Exchange Commission (the “Report”), I, James Francis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: May 20, 2024

 

  /s/ James Francis
  James Francis
  Chief Executive Officer
  (Principal Executive Officer)

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of ESH Acquisition Corp. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2024, as filed with the Securities and Exchange Commission (the “Report”), I, Jonathan Morris, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: May 20, 2024

 

  /s/ Jonathan Morris
  Jonathan Morris
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

 

v3.24.1.1.u2
Cover - shares
3 Months Ended
Mar. 31, 2024
May 20, 2024
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Entity Interactive Data Current Yes  
Amendment Flag false  
Document Period End Date Mar. 31, 2024  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q1  
Entity Information [Line Items]    
Entity Registrant Name ESH ACQUISITION CORP.  
Entity Central Index Key 0001918661  
Entity File Number 001-41718  
Entity Tax Identification Number 87-4000684  
Entity Incorporation, State or Country Code DE  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Shell Company true  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Contact Personnel [Line Items]    
Entity Address, Address Line One 228 Park Ave S  
Entity Address, Address Line Two Suite 89898  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10003  
Entity Phone Fax Numbers [Line Items]    
City Area Code 212  
Local Phone Number 287-5022  
Class A Common Stock    
Entity Listings [Line Items]    
Entity Common Stock, Shares Outstanding   11,787,500
Class B Common Stock    
Entity Listings [Line Items]    
Entity Common Stock, Shares Outstanding   2,875,000
Units    
Entity Listings [Line Items]    
Title of 12(b) Security Units  
Trading Symbol ESHAU  
Security Exchange Name NASDAQ  
Class A shares    
Entity Listings [Line Items]    
Title of 12(b) Security Class A shares  
Trading Symbol ESHA  
Security Exchange Name NASDAQ  
Rights    
Entity Listings [Line Items]    
Title of 12(b) Security Rights  
Trading Symbol ESHAR  
Security Exchange Name NASDAQ  
v3.24.1.1.u2
Condensed Balance Sheets - USD ($)
Mar. 31, 2024
Dec. 31, 2023
Current assets    
Cash $ 1,820,447 $ 1,879,227
Prepaid expenses 8,209 18,082
Short-term prepaid insurance 281,681 281,681
Total Current Assets 2,120,473 2,204,786
Long-term prepaid insurance 57,119 127,539
Investments held in Trust Account 121,565,683 120,000,366
TOTAL ASSETS 123,743,275 122,332,691
Current liabilities    
Accounts payable and accrued expenses 166,788 107,954
Franchise tax payable 162,961 112,343
Income taxes payable 981,484 819,453
TOTAL LIABILITIES 1,311,233 1,039,750
Commitments and Contingencies
COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION    
Class A common stock subject to possible redemption, 11,500,000 shares at redemption value of approximately $10.47 and $10.35 per share at March 31, 2024 and December 31, 2023, respectively 120,421,238 119,068,570
STOCKHOLDERS’ EQUITY    
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding at March 31, 2024 and December 31, 2023
Additional paid-in capital 297,488
Retained earnings 2,010,488 1,926,567
TOTAL STOCKHOLDERS’ EQUITY 2,010,804 2,224,371
TOTAL LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ EQUITY 123,743,275 122,332,691
Sponsor    
Current assets    
Due from Sponsor 10,136 25,796
Class A Common Stock    
STOCKHOLDERS’ EQUITY    
Common stock, value 28 28
Class B Common Stock    
STOCKHOLDERS’ EQUITY    
Common stock, value $ 288 $ 288
v3.24.1.1.u2
Condensed Balance Sheets (Parentheticals) - $ / shares
Mar. 31, 2024
Dec. 31, 2023
Common stock subject to possible redemption, shares 11,500,000 11,500,000
Common stock subject to possible redemption per shares (in Dollars per share) $ 10.47 $ 10.35
Preferred stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Class A Common Stock    
Common stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 287,500 287,500
Common stock, shares outstanding 287,500 287,500
Class B Common Stock    
Common stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 2,875,000 2,875,000
Common stock, shares outstanding 2,875,000 2,875,000
v3.24.1.1.u2
Condensed Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
General and administrative expenses $ 213,567 $ 2,867
Franchise tax expense 50,618
Loss from operations (264,185) (2,867)
Other income:    
Interest earned on investments held in Trust Account 1,565,317
Total other income 1,565,317
Income (loss) before provision for income taxes 1,301,132 (2,867)
Provision for income taxes (162,031)
Net income (loss) $ 1,139,101 $ (2,867)
Class A Common Stock    
Other income:    
Basic weighted average shares outstanding (in Shares) 11,787,500
Basic net income (loss) per share (in Dollars per share) $ 0.08
Class B Common Stock    
Other income:    
Basic weighted average shares outstanding (in Shares) [1] 2,875,000 2,500,000
Basic net income (loss) per share (in Dollars per share) $ 0.08 $ 0
[1] Excluded up to 375,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (see Note 5).
v3.24.1.1.u2
Condensed Statements of Operations (Unaudited) (Parentheticals) - $ / shares
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Class A Common Stock    
Diluted weighted average shares outstanding 11,787,500
Diluted net income (loss) per share $ 0.08
Class B Common Stock    
Diluted weighted average shares outstanding [1] 2,875,000 2,500,000
Diluted net income (loss) per share $ 0.08 $ 0.00
[1] Excluded up to 375,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (see Note 5).
v3.24.1.1.u2
Condensed Statements of Changes in Stockholders’ Equity (Unaudited) - USD ($)
Common Stock
Class A
Common Stock
Class B
Additional Paid-in Capital
Retained Earnings
Total
Balance at Dec. 31, 2022 [1] $ 288 $ 24,712 $ (20,332) $ 4,668
Balance (in Shares) at Dec. 31, 2022 [1]   2,875,000      
Net Income (loss) (2,867) (2,867)
Balance at Mar. 31, 2023 [1] $ 288 24,712 (23,199) 1,801
Balance (in Shares) at Mar. 31, 2023 [1]   2,875,000      
Balance at Dec. 31, 2022 [1] $ 288 24,712 (20,332) 4,668
Balance (in Shares) at Dec. 31, 2022 [1]   2,875,000      
Remeasurement of Class A common stock subject to possible redemption         (10,719,859)
Balance at Dec. 31, 2023 $ 28 $ 288 297,488 1,926,567 2,224,371
Balance (in Shares) at Dec. 31, 2023 287,500 2,875,000      
Remeasurement of Class A common stock subject to possible redemption (297,488) (1,055,180) (1,352,668)
Net Income (loss) 1,139,101 1,139,101
Balance at Mar. 31, 2024 $ 28 $ 288 $ 2,010,488 $ 2,010,804
Balance (in Shares) at Mar. 31, 2024 287,500 2,875,000      
[1] Included up to 375,000 shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters (see Note 5).
v3.24.1.1.u2
Condensed Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Cash Flows from Operating Activities:    
Net income (loss) $ 1,139,101 $ (2,867)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Interest earned on investments held in Trust Account (1,565,317)
Changes in operating assets and liabilities:    
Prepaid expenses and other current assets 9,873
Long term prepaid insurance 70,420
Due from Sponsor 15,660
Accounts payable and accrued expenses 137,717 (2,851)
Franchise tax payable 50,618
Income taxes payable 162,031
Net cash provided by (used in) operating activities 20,103 (5,718)
Cash Flows from Financing Activities:    
Payment of offering costs (78,883) (8,000)
Net cash used in financing activities (78,883) (8,000)
Net Change in Cash (58,780) (13,718)
Cash – Beginning of period 1,879,227 44,963
Cash – End of period 1,820,447 31,245
Non-cash investing and financing activities:    
Offering costs included in accrued expenses $ 30,000
v3.24.1.1.u2
Description of Organization and Business Operations
3 Months Ended
Mar. 31, 2024
Description of Organization and Business Operations [Abstract]  
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

 

ESH Acquisition Corp. (the “Company”) was incorporated as a Delaware corporation on November 17, 2021. The Company was incorporated for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities that the Company has not yet identified (the “Initial Business Combination”).

 

As of March 31, 2024, the Company had not commenced any operations. All activity for the period from November 17, 2021 (inception) through March 31, 2024 relates to the Company’s formation and the initial public offering (the “IPO”), which is described below, and subsequent to the IPO, identifying a target company for the Initial Business Combination. The Company will not generate any operating revenues until after the completion of the Initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds held in the Trust Account (defined below). The Company has selected December 31 as its fiscal year end.

 

The registration statement for the Company’s IPO was declared effective on June 13, 2023. On June 16, 2023, the Company consummated the IPO of 11,500,000 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 1,500,000 Units, at $10.00 per Unit, generating gross proceeds of $115,000,000 which is described in Note 3.

 

Simultaneously with the closing of the IPO, the Company consummated the sale of 7,470,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant, in a private placement to the Company’s Sponsor, ESH Sponsor LLC, a limited liability company, which is an affiliate of members of the Board of Directors and management team (the “Sponsor”), and I-Bankers Securities, Inc. (“I-Bankers”) and Dawson James (“Dawson James”), the representative of the underwriters of the IPO, generating gross proceeds of $7,470,000, which is described in Note 4.

 

Transaction costs amounted to $5,368,092, consisting of $2,300,000 of cash underwriting discount, $2,239,466 fair value of Representative Shares, and $828,626 of other offering costs.

 

The Company’s management has broad discretion with respect to the specific application of the net proceeds of its IPO and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating the Initial Business Combination. The Company’s Initial 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 (as defined below) (net of amounts disbursed to management for working capital purposes and excluding the amount of any Marketing Fee, as defined in Note 6, held in Trust Account) at the time the Company signs a definitive agreement in connection with the Initial Business Combination. However, the Company will only complete the Initial Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise is not required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”).

 

Following the closing of the IPO on June 16, 2023, an amount of $116,725,000 ($10.15 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in the 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 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of (i) the completion of the Initial Business Combination or (ii) the distribution of the Trust Account as described below.

 

The Company will provide holders of the Company’s outstanding Public Shares sold in the IPO (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the Initial Business Combination either (i) in connection with a stockholder meeting called to approve the Initial Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of the Initial 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 held in the Trust Account (initially anticipated to be $10.15 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the Marketing Fee the Company will pay to the underwriters (as discussed in Note 6).

 

The Public Shares are recorded at a redemption value and classified as temporary equity in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”). The Company will proceed with an Initial Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of the Initial Business Combination and a majority of the shares voted are voted in favor of the Initial Business Combination. If a stockholder vote is not required by applicable law or stock exchange requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to the amended and restated certificate of incorporation adopted by the Company upon the consummation of the IPO (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”), and file tender offer documents with the SEC prior to completing an Initial Business Combination. If, however, a stockholder approval of the transactions 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. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with an Initial Business Combination, the holders of the Founder Shares prior to the IPO (the “Initial Stockholders”) agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of the Initial 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 an Initial Business Combination. In addition, the Company agreed not to enter into a definitive agreement regarding an Initial Business Combination without the prior consent of the Sponsor.

 

Notwithstanding the foregoing, 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 Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.

 

The Initial Stockholders will agree not to propose an amendment to the Certificate of Incorporation (A) in a manner that would affect the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete an Initial Business Combination within the time frame described below or (B) with respect to any other material provision relating to the rights of holders of Public Shares or pre-Initial Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares upon approval of any such amendment.

 

The Company will have only the Combination Period, or until December 16, 2024, to complete the Initial Business Combination.

 

On July 20, 2023, the Company issued a press release announcing that, on July 21, 2023, the Units would no longer trade, and that the Company’s common stock and rights, which together comprise the Units will commence trading separately. The common stock and rights will be listed on the Nasdaq Global Market and trade with the ticker symbols “ESHA,” and “ESHAR,” respectively. This is a mandatory and automatic separation, and no action was required by the holders of Units.

 

If the Company is unable to complete an Initial Business Combination within 18 months from the closing of the IPO (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 (which interest shall be net of taxes payable, and 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Board of Directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless if the Company fails to complete the Initial Business Combination within the Combination Period.

 

The Initial Stockholders will not be entitled to liquidation rights with respect to the Founder Shares if the Company fails to complete an Initial Business Combination within the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete an Initial Business Combination within the Combination Period. The underwriters will agree to waive their rights to the Marketing Fee (see Note 6) held in the Trust Account in the event the Company does not complete an Initial Business Combination within 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 residual assets remaining available for distribution (including Trust Account assets) will be only $10.15. 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 (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”), 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 due to reductions in the value of the trust assets as of the date of the liquidation of the Trust Account, in each case including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its franchise and income taxes, less franchise and income taxes payable. This liability will not apply with respect to any claims by a third party or Target that executed an agreement waiving any and all rights to seek access to the Trust Account (whether or not such agreement is enforceable) or to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). 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 (other than 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.

 

Risks and Uncertainties

 

Management is currently evaluating the impact of the current global economic uncertainty, rising interest rates, high inflation, high energy prices, supply chain disruptions, the Israel-Hamas conflict and the Russia-Ukraine war (including the impact of any sanctions imposed in response thereto) and has concluded that while it is reasonably possible that any of these events could have a negative effect on the Company’s financial position, results of operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude, or the extent to which they may negatively impact the Company’s business and its ability to complete an Initial Business Combination.

 

Going Concern Consideration

 

As of March 31, 2024, the Company had cash of $1,820,447 and working capital of $809,240.

 

Until the consummation of an Initial Business Combination, the Company will be using the funds held outside the Trust Account for identifying and evaluating target businesses, performing due diligence on prospective target businesses, paying for travel expenditures, reviewing corporate documents and material agreements of prospective target businesses, and structuring, negotiating and completing an Initial Business Combination.

 

In order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes an Initial 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 the Initial 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 an Initial Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post-Initial Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2024 and December 31, 2023, the Company had no borrowings under the Working Capital Loans.

 

In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete an Initial Business Combination by December 16, 2024, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to consummate an Initial Business Combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after December 16, 2024.

v3.24.1.1.u2
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2024
Summary of Significant Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

 

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 1, 2024. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.

 

Emerging Growth Company

 

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

 

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed 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 unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed 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 $1,820,447 and $1,879,227 of cash as of March 31, 2024 and December 31, 2023, respectively, and no cash equivalents.

 

Investments Held in Trust Account

 

At March 31, 2024 and December 31, 2023, all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. treasury securities. The investments held in Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on investments held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

 

Fair Value of Financial Instruments

 

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature.

 

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s financial instruments are classified as either Level 1, Level 2, or Level 3. These tiers include:

 

  Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
     
  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Offering Costs

 

Offering costs consisted of legal, accounting, and other costs incurred through the condensed balance sheet date that were directly related to the IPO. Upon completion of the IPO, offering costs were allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to the warrants were charged to equity. Offering costs allocated to the Class A common stock were charged against the carrying value of Class A common stock subject to possible redemption upon the completion of the IPO.

 

Class A Common Stock Subject to Possible Redemption

 

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 IPO were issued with other freestanding instruments (i.e., Public Rights), and as such, the initial carrying value of Public Shares classified as temporary equity is the allocated proceeds determined in accordance with ASC 470-20. The Company recognizes changes in redemption value immediately as they 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 IPO, 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 retained earnings. Accordingly, at March 31, 2024 and December 31, 2023, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.

 

The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2024 and December 31, 2023, there are 11,500,000 shares of Class A common stock subject to possible redemption presented as temporary equity, outside of the stockholders’ equity section of the accompanying condensed balance sheets.

 

Gross proceeds  $115,000,000 
Less:     
Proceeds allocated to Public Rights   (1,398,400)
Class A common stock issuance costs   (5,252,889)
Plus:     
Remeasurement of carrying value to redemption value   10,719,859 
Class A Common Stock subject to possible redemption, December 31, 2023  119,068,570 
Plus:     
Remeasurement of carrying value to redemption value   1,352,668 
Class A Common Stock subject to possible redemption, March 31, 2024  $120,421,238 

 

Derivative Financial Instruments

 

The Company evaluates its equity-linked financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are classified as liabilities, the derivative instrument is initially recognized at fair value with subsequent changes in fair value recognized in the statements of operations each reporting period. The classification of derivative instruments, including whether such instruments should be classified as liabilities or as equity, is evaluated at the end of each reporting period. The Company accounted for the rights issued in connection with the IPO and the warrants issued in connection with the Private Placement as equity-classified instruments in accordance with ASC 815 as they did not meet the liability criteria (i.e., cashless exercises).

 

Income Taxes

 

The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets were deemed de minimis as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate was 12.5% and 0% for the three months ended March 31, 2024 and 2023, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three months ended March 31, 2024, due to changes in the valuation allowance on the deferred tax assets and prior year true ups from the tax return.

 

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 March 31, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

 

The Company has identified the United States as its only “major” tax jurisdiction. The Company has been 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.

 

Net Income (Loss) Per Share of Common Stock

 

The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares. The Company has not considered the effect of the rights and warrants sold in the IPO and the Private Placement to purchase an aggregate of 8,620,000 shares of its Class A common stock in the calculation of diluted net income (loss) per share, since their exercise is contingent upon future events. The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common stock:

 

   Three Months Ended March 31, 
   2024   2023 
   Class A   Class B   Class A   Class B 
Basic and Diluted net income (loss) per share                
Numerator:                
Allocation of net income (loss)  $915,748   $223,353   $
   $(2,867)
Denominator:                    
Basic and diluted weighted average shares outstanding
   11,787,500    2,875,000    
    2,500,000 
Basic and diluted net income (loss) per share
  $0.08   $0.08   $
   $(0.00)

 

Recent Accounting Standards

 

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 unaudited condensed financial statements.

v3.24.1.1.u2
Initial Public Offering
3 Months Ended
Mar. 31, 2024
Initial Public Offering [Abstract]  
INITIAL PUBLIC OFFERING

NOTE 3. INITIAL PUBLIC OFFERING

 

Pursuant to the IPO, the Company sold 11,500,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one right. Each Public Right entitles the holder thereof to receive one-tenth (1/10) of one shares of Class A common stock upon the consummation of the Initial Business Combination.

v3.24.1.1.u2
Private Placement
3 Months Ended
Mar. 31, 2024
Private Placement [Abstract]  
PRIVATE PLACEMENT

NOTE 4. PRIVATE PLACEMENT

 

Simultaneously with the closing of the IPO, the Sponsor, I-Bankers and Dawson James purchased an aggregate of 7,470,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant, or $7,470,000 in the aggregate, in a private placement.

 

Each whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the IPO held in the Trust Account so that the Trust Account holds $10.15 per unit sold. If the Company does not complete an Initial Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be redeemable and exercisable on a cashless basis.

 

The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the Initial business Combination.

v3.24.1.1.u2
Related Party Transactions
3 Months Ended
Mar. 31, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 5. RELATED PARTY TRANSACTIONS

 

Founder Shares

 

On December 17, 2021, the Sponsor subscribed to purchase 8,625,000 shares of the Company’s Class B common stock, par value $0.0001 per share (the “Founder Shares”) for a subscription price of $25,000. Such subscription receivable was paid in full on March 9, 2022. On May 8, 2023, the Sponsor surrendered an aggregate of 5,750,000 shares of its Class B common stock for no consideration, which were cancelled, resulting in the Initial Stockholders holding an aggregate of 2,875,000 Founder Shares. The Initial Stockholders agreed to forfeit up to 375,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. The forfeiture was to be adjusted to the extent that the over-allotment option was not exercised in full by the underwriters so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the IPO (excluding the Representative Shares). If the Company increased or decreased the size of the offering, the Company would effect a stock dividend or share contribution back to capital, as applicable, immediately prior to the consummation of the IPO in such amount as to maintain the Founder Share ownership of the Company’s stockholders prior to the IPO at 20.0% of the Company’s issued and outstanding common stock upon the consummation of the IPO (excluding the Representative Shares, as defined below). On June 16, 2023, the underwriters exercised their over-allotment option in full as part of the initial closing of the IPO. As such, the 375,000 Founder Shares are no longer subject to forfeiture.

 

The Initial Stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (A) one year after the completion of the Initial Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the Initial Business Combination that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property (the “Lock-Up”).

 

Notwithstanding the foregoing, if the last 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 150 days after the Initial Business Combination, the Founder Shares will be released from the Lock-Up.

 

Related Party Loans

 

Promissory Note to Sponsor

 

On December 17, 2021 and as amended on May 9, 2023, the Sponsor agreed to loan the Company up to $300,000 pursuant to a promissory note (the “Note”). The Note was non-interest bearing, unsecured and due upon the earlier of (x) June 30, 2023 (as amended), and (y) the closing of the IPO. The outstanding balance of $249,560 was repaid at the closing of the IPO on June 16, 2023. As of March 31, 2024 and December 31, 2023, this facility is no longer available.

 

Due from Sponsor

 

At the closing of the IPO on June 16, 2023, a portion of the proceeds from the sale of the Private Placement Warrants in the amount of $45,440 was due to the Company to be held outside of the Trust Account for working capital purposes. On June 21, 2023, the Sponsor paid the Company an amount of $30,292 to partially settle the outstanding balance. In July 2023, the Sponsor paid $13,712 expense reimbursements on behalf of the Company. In October and December 2023, the Company paid a total of $24,360 of Sponsor’s expenses on behalf of the Sponsor. As of March 31, 2024 and December 31, 2023, the Sponsor owes the Company an outstanding amount of $10,136 and $25,796, respectively.

 

Working Capital Loan

 

In addition, in order to finance transaction costs in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes an Initial 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 an Initial 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 an Initial Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Initial Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2024 and December 31, 2023, the Company had no borrowings under the Working Capital Loans.

 

Administrative Services Agreement

 

The Company entered into an agreement, commencing on June 13, 2023 through the earlier of consummation of the Initial Business Combination and the Company’s liquidation, to reimburse an affiliate of the Company’s officers $5,000 per month for office space, utilities, secretarial support and other administrative and consulting services.

 

In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential partner businesses and performing due diligence on suitable Initial Business Combinations. Any such payments prior to an Initial Business Combination will be made using funds held outside the Trust Account.

 

For the three months ended March 31, 2024, the Company incurred and paid $15,000 in fees for these services. For the three months ended March 31, 2023, the Company did not incur any such fees for these services.

v3.24.1.1.u2
Commitments and Contingencies
3 Months Ended
Mar. 31, 2024
Commitments and Contingencies [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 6. COMMITMENTS AND CONTINGENCIES

 

Registration and Stockholder Rights

 

The holders of Founder Shares, Private Placement Warrants (and underlying securities) and Private Placement Warrants that may be issued upon conversion of Working Capital Loans (and any underlying securities) are entitled to registration rights pursuant to a registration rights agreement signed at the consummation of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

Underwriting Agreement

 

On June 16, 2023, the Company issued to I-Bankers 258,750 shares of Class A common stock and to Dawson James 28,750 shares of Class A common stock at the closing of the IPO (collectively, the “Representative Shares”). The Company determined the fair value of the 287,500 Representative Shares to be $2,239,466 (or $7.789 per share) using the Probability-Weighted Expected Return Method Model. The fair value of the shares granted to the underwriters utilized the following assumptions: (1) expected volatility of 5.7%, (2) risk-free interest rate of 5.15%, (3) expected life of 1.17 years, and (4) implied discount for lack of marketability of 1.4%. Accordingly, the fair value of $2,239,466 was accounted for as offering costs at the closing of the IPO.

 

The Representative Shares have been deemed compensation by Financial Industry Regulatory Authority (“FINRA”) and are therefore subject to a Lock-Up for a period of 180 days immediately following the commencement of sales in the IPO. Pursuant to FINRA Rule 5110(e)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the commencement of sales in the IPO, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales in the IPO, except to any underwriters and selected dealer participating in the offering and their bona fide officers or partners.

 

The underwriters were also entitled to an underwriting discount of $0.20 per unit, or $2.3 million in the aggregate, which was paid upon the closing of the IPO.

 

Initial Business Combination Marketing Agreement

 

The Company entered into the Marketing Agreement with the underwriters, I-Bankers and Dawson James to assist the Company in holding meetings with the stockholders to discuss the potential Initial Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with the Initial Business Combination, assist the Company in obtaining stockholder approval for the Initial Business Combination and assist the Company with its press releases and public filings in connection with the Initial Business Combination. Pursuant to the Initial Business Combination Marketing Agreement, the Company will pay I-Bankers and Dawson James, collectively, 3.5% of the gross proceeds of the IPO, or $4.03 million in the aggregate (the “Marketing Fee”). The Marketing Fee will become payable to I-Bankers and Dawson James from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination with a target introduced to the Company by I-Bankers.

v3.24.1.1.u2
Stockholders’ Equity
3 Months Ended
Mar. 31, 2024
Stockholders’ Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 7. STOCKHOLDERS’ EQUITY

 

Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s Board of Directors. At March 31, 2024 and December 31, 2023, there were no shares of preferred stock issued or outstanding.

 

Class A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. At March 31, 2024 and December 31, 2023, there were 287,500 shares of Class A common stock issued and outstanding, excluding 11,500,000 shares of Class A common stock subject to possible redemption.

 

Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. At March 31, 2024 and December 31, 2023, there were 2,875,000 shares of Class B common stock issued and outstanding.

 

Holders of the Class B common stock will have the right to appoint all of the Company’s directors prior to an Initial Business Combination. On any other matter submitted to a vote of the Company’s stockholders, holders of the Class A common stock and holders of the Class B common stock will vote together as a single class, except as required by law or stock exchange rule; provided, that the holders of Class B common stock will be entitled to vote as a separate class to increase the authorized number of shares of Class B common stock. Each share of common stock will have one vote on all such matters.

 

The shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time of the Company’s Initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered and related to the closing of the Initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the IPO (excluding the Representative Shares) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the Initial business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the Initial Business Combination, any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).

 

Rights — At March 31, 2024 and December 31, 2023, there were 11,500,000 rights outstanding. Each holder of a right will receive one-tenth (1/10) of a share of Class A common stock upon consummation of the Initial Business Combination. In the event the Company will not be the survivor upon completion of the Initial Business Combination, each holder of a right will be required to convert his, her or its rights in order to receive the 1/10 share underlying each right (without paying any additional consideration) upon consummation of the Initial Business Combination. If the Company is unable to complete an Initial Business Combination within the required time period and it liquidates the funds held in the Trust Account, holders of rights will not receive any of such funds for their rights and the rights will expire worthless. No fractional shares will be issued upon conversion of any rights. As a result, a holder must have 10 rights to receive one share of common stock at the closing of the Initial Business Combination.

 

Warrants — At March 31, 2024 and December 31, 2023, there were 7,470,000 warrants outstanding. No public warrants were sold in the IPO. The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the Initial business Combination.

 

Each Private Placement Warrant entitles the registered holder to purchase one share of the Class A common stock at a price of $11.50 per share, at any time commencing on the later of 12 months from the closing of the IPO or 30 days after the completion of the Initial business Combination. The Private Placement Warrants will expire five years after the completion of the Initial business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

 

The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the Initial Business Combination, the Company will use its reasonable best efforts to file, and within 60 business days after the closing the Initial Business Combination, to have declared effective, a registration statement relating to the shares of Class A common stock issuable upon exercise of the Private Placement Warrants and to maintain the effectiveness of such registration statement, and a current Prospectus relating to those shares of Class A common stock until the Private Placement Warrants expire. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of the Private Placement Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.

 

Redemption of warrants. Once the Private Placement Warrants become exercisable, the Company may redeem the outstanding warrants:

 

in whole and not in part;

 

at a price of $0.01 per warrant;

 

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

 

if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

 

The Company may not redeem the Private Placement Warrants when a holder may not exercise such warrants. The Company has established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the Private Placement Warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A common stock may fall below the $18.00 redemption trigger price as well as the $11.50 warrant exercise price (for whole shares) after the redemption notice is issued.

 

If the Company calls the Private Placement Warrants for redemption as described above, management will have the option to require any holder that wishes to exercise their warrant to do so on a “cashless basis”. In determining whether to require all holders to exercise their Private Placement Warrants on a “cashless basis,” the Company will consider, among other factors, the cash position, the number of Private Placement Warrants that are outstanding and the dilutive effect on the stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the Private Placement Warrants. If the Company takes advantage of this option, all holders of the Private Placement Warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

v3.24.1.1.u2
Fair Value Measurements
3 Months Ended
Mar. 31, 2024
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 8. FAIR VALUE MEASUREMENTS 

 

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).

 

At March 31, 2024 and December 31, 2023, assets held in the Trust Account were comprised of $121,565,683 and $120,000,366 in money market funds which are invested primarily in U.S. Treasury Securities, respectively. Through March 31, 2024, the Company has not withdrawn any income earned from the Trust Account to pay certain tax obligations.

 

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

       March 31,   December 31, 
Description  Level   2024   2023 
Assets:            
Investments held in Trust Account – U.S. Treasury Securities Money Market Fund  1   $121,565,683   $120,000,366 
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Subsequent Events
3 Months Ended
Mar. 31, 2024
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 9. SUBSEQUENT EVENTS 

 

The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.

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Pay vs Performance Disclosure - USD ($)
3 Months Ended
Mar. 31, 2024
Mar. 31, 2023
Pay vs Performance Disclosure    
Net Income (Loss) $ 1,139,101 $ (2,867)
v3.24.1.1.u2
Insider Trading Arrangements
3 Months Ended
Mar. 31, 2024
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.1.1.u2
Accounting Policies, by Policy (Policies)
3 Months Ended
Mar. 31, 2024
Summary of Significant Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 1, 2024. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.

Emerging Growth Company

Emerging Growth Company

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

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed 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

Use of Estimates

The preparation of the unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed 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

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 $1,820,447 and $1,879,227 of cash as of March 31, 2024 and December 31, 2023, respectively, and no cash equivalents.

Investments Held in Trust Account

Investments Held in Trust Account

At March 31, 2024 and December 31, 2023, all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. treasury securities. The investments held in Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on investments held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

 

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature.

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s financial instruments are classified as either Level 1, Level 2, or Level 3. These tiers include:

  Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
     
  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
     
  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Offering Costs

Offering Costs

Offering costs consisted of legal, accounting, and other costs incurred through the condensed balance sheet date that were directly related to the IPO. Upon completion of the IPO, offering costs were allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to the warrants were charged to equity. Offering costs allocated to the Class A common stock were charged against the carrying value of Class A common stock subject to possible redemption upon the completion of the IPO.

Class A Common Stock Subject to Possible Redemption

Class A Common Stock Subject to Possible Redemption

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 IPO were issued with other freestanding instruments (i.e., Public Rights), and as such, the initial carrying value of Public Shares classified as temporary equity is the allocated proceeds determined in accordance with ASC 470-20. The Company recognizes changes in redemption value immediately as they 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 IPO, 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 retained earnings. Accordingly, at March 31, 2024 and December 31, 2023, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.

The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2024 and December 31, 2023, there are 11,500,000 shares of Class A common stock subject to possible redemption presented as temporary equity, outside of the stockholders’ equity section of the accompanying condensed balance sheets.

Gross proceeds  $115,000,000 
Less:     
Proceeds allocated to Public Rights   (1,398,400)
Class A common stock issuance costs   (5,252,889)
Plus:     
Remeasurement of carrying value to redemption value   10,719,859 
Class A Common Stock subject to possible redemption, December 31, 2023  119,068,570 
Plus:     
Remeasurement of carrying value to redemption value   1,352,668 
Class A Common Stock subject to possible redemption, March 31, 2024  $120,421,238 

 

Derivative Financial Instruments

Derivative Financial Instruments

The Company evaluates its equity-linked financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are classified as liabilities, the derivative instrument is initially recognized at fair value with subsequent changes in fair value recognized in the statements of operations each reporting period. The classification of derivative instruments, including whether such instruments should be classified as liabilities or as equity, is evaluated at the end of each reporting period. The Company accounted for the rights issued in connection with the IPO and the warrants issued in connection with the Private Placement as equity-classified instruments in accordance with ASC 815 as they did not meet the liability criteria (i.e., cashless exercises).

Income Taxes

Income Taxes

The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets were deemed de minimis as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate was 12.5% and 0% for the three months ended March 31, 2024 and 2023, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three months ended March 31, 2024, due to changes in the valuation allowance on the deferred tax assets and prior year true ups from the tax return.

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 March 31, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company has identified the United States as its only “major” tax jurisdiction. The Company has been 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.

Net Income (Loss) Per Share of Common Stock

Net Income (Loss) Per Share of Common Stock

The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares. The Company has not considered the effect of the rights and warrants sold in the IPO and the Private Placement to purchase an aggregate of 8,620,000 shares of its Class A common stock in the calculation of diluted net income (loss) per share, since their exercise is contingent upon future events. The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common stock:

   Three Months Ended March 31, 
   2024   2023 
   Class A   Class B   Class A   Class B 
Basic and Diluted net income (loss) per share                
Numerator:                
Allocation of net income (loss)  $915,748   $223,353   $
   $(2,867)
Denominator:                    
Basic and diluted weighted average shares outstanding
   11,787,500    2,875,000    
    2,500,000 
Basic and diluted net income (loss) per share
  $0.08   $0.08   $
   $(0.00)

 

Recent Accounting Standards

Recent Accounting Standards

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 unaudited condensed financial statements.

v3.24.1.1.u2
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2024
Summary of Significant Accounting Policies [Abstract]  
Schedule of Class A Common Stock Subject to Possible Redemption Accordingly, as of March 31, 2024 and December 31, 2023, there are 11,500,000 shares of Class A common stock subject to possible redemption presented as temporary equity, outside of the stockholders’ equity section of the accompanying condensed balance sheets.
Gross proceeds  $115,000,000