ACQC 10-Q
Relativity Acquisition Corp (ACQC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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 ☐
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ | Large accelerated filer | ☐ | Accelerated filer | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of March 17, 2025, there were
RELATIVITY ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
RELATIVITY ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expense | ||||||||
| Due from sponsor | ||||||||
| Total current assets | ||||||||
| Cash and investments held in Trust Account | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Redeemable Common Stock, and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Due to related party | $ | $ | ||||||
| Accrued costs and expenses | ||||||||
| Income tax payable | ||||||||
| Excise tax payable | ||||||||
| Promissory note – related party | ||||||||
| Franchise tax payable | ||||||||
| Total current liabilities | ||||||||
| Warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Class A common stock, $ | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Redeemable Common Stock, and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
RELATIVITY ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income: | ||||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||||||||||
| Gain from extinguishment of promissory notes | ||||||||||||||||
| Interest income on investment held in Trust Account | ||||||||||||||||
| Total other income, net | ( | ) | ||||||||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||||||||||
| Basic and diluted net income (loss) per common stock, Class A common stock subject to possible redemption | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted weighted average shares outstanding, Class A common stock non-redeemable | ||||||||||||||||
| Basic and diluted net income (loss) per common stock, Class A common stock non-redeemable | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted weighted average shares outstanding, Class B common stock | ||||||||||||||||
| Basic and diluted net income (loss) per common stock, Class B common stock | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
RELATIVITY ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
| Class A Common Stock | Class B Common Stock | Accumulated | Total Stockholders’ | |||||||||||||||||||||
| Share | Amount | Share | Amount | Deficit | Deficit | |||||||||||||||||||
| Balance as of December 31, 2023 | $ | | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Accretion for Class A common stock to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Excise tax payable attributable to redemption of common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Balance as of March 31, 2024 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
| Accretion for Class A common stock to redemption amount | — | — | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Balance as of September 30, 2024 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
| Accretion for Class A common stock to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Net income (loss) | — | — | ||||||||||||||||||||||
| Balance as of September 30, 2024 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
| Class A Common Stock | Class B Common Stock | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||
| Share | Amount | Share | Amount | Deficit | (Deficit) | |||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | ||||||||||||||||||||
| Conversion of Class B shares to Class A shares | ( | ) | ( | ) | ||||||||||||||||||||
| Accretion for Class A common stock to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Balance as of March 31, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
| Accretion for Class A common stock to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Balance as of June 30, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
| Accretion for Class A common stock to redemption amount | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||
| Balance as of September 30, 2023 (unaudited) | ( | ) | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
RELATIVITY ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Interest income on investment held in Trust Account | ( | ) | ( | ) | ||||
| Gain from extinguishment of promissory note | ( | ) | ||||||
| Change in fair value of derivative warrant liabilities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expense | ( | ) | ||||||
| Accrued costs and expenses | ||||||||
| Income taxes payable | ( | ) | ||||||
| Franchise tax payable | ( | ) | ( | ) | ||||
| Due to related party | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Investment of cash in Trust Account | ( | ) | ||||||
| Interest withdrawal for tax obligations | ||||||||
| Cash withdrawn from Trust Account in connection with redemption | ( | ) | ||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from promissory note related party (4503309 Nova Scotia Ltd.) | ||||||||
| Proceeds from issuance of promissory note – related party (SVES) | ||||||||
| Redemption of ordinary shares | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplementary cash flow information: | ||||||||
| Income taxes paid | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
RELATIVITY ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
Note 1 — Organization and Business Operations
Relativity Acquisition Corp. (the “Relativity” or the “Company”) is a blank check company incorporated as a Delaware corporation on April 13, 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 (the “Business Combination”). The Company may pursue an initial Business Combination target in any business or industry.
As of September 30, 2024, the Company had not commenced any operations. All activity for the period from April 13, 2021 (inception) through September 30, 2024 relates to the Company’s formation and the initial public offering (“IPO”), described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the IPO.
The Company has selected December 31 as its fiscal year end.
The sponsor is Relativity Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”).
The registration statement
for the Company’s IPO was declared effective on February 10, 2022 (the “Effective Date”). On February 15, 2022, the
Company consummated the IPO of
Simultaneously with the
consummation of the IPO, including
Transaction costs amounted
to $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
The initial Business Combination
must occur with one or more target businesses that together have an aggregate fair market value of at least
Following the closing of
the IPO and full exercise of the over-allotment by the underwriters on February 15, 2022, $
The Company will provide its 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 Business Combination or (ii) without a stockholder vote by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a proposed Business Combination or conduct a tender offer will be made by the Company, solely in the Company’s discretion.
5
The Company will provide
its public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of the initial Business
Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business
days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account
and not previously released to the Company to pay the Company’s franchise and income taxes, divided by the number of then outstanding
public shares, subject to the limitations described herein. The amount in the Trust Account initially was $
The shares of common stock subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the IPO in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company’s Class A common stock is not a “penny stock” upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
The Company had 12 months
from the closing of the IPO to complete the initial Business Combination, except that the Sponsor had two 3-month extensions available
to it for a total of up to 18 months to complete the initial Business Combination (as set out below). On December 21, 2022, the Company
held a special meeting of stockholders (the “Meeting”) in which the stockholders approved an amendment to the Company’s
second amended and restated certificate of incorporation to extend the date by which the Company must consummate its initial Business
Combination from February 15, 2023 to August 15, 2023, by which is was required to pay $
On February 13, 2024, the
Company announced that it had extended the date by which it has to consummate a Business Combination from February 15, 2024 to February
15, 2025 (the “Combination Period”). In connection with the extension on February 13, 2024, stockholders holding
In connection with the stockholders’
vote at the Meeting on December 21, 2022,
If the Company is unable
to complete the initial Business Combination within the Combination Period, the Company will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares,
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on
the funds held in the Trust Account and not previously released to the Company to pay the Company’s franchise and income taxes
(less up to $
6
The Sponsor, officers, directors
and initial stockholders of the Company have entered into a letter agreement with the Company, pursuant to which they have agreed to
(i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection with
the completion of the initial Business Combination, (ii) waive their redemption rights with respect to their founder shares and public
shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation
(A) to modify the substance or timing of the Company’s obligation to redeem
On January 12, 2023, the
Company received a determination letter (the “Letter”) from the Nasdaq Listing Qualifications staff (the “Staff”)
of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was not in compliance with the requirements of the
Nasdaq Listing Rules set forth in (i) Listing Rule 5450(b)(2)(A), requiring a minimum of $
In addition, on January 11, 2023, the Staff determined to halt trading in the Company’s securities (the “Trading Halt”). The Company requested a hearing before the Nasdaq Hearings Panel (the “Panel”) to appeal the Staff’s delisting determination. A hearing request stays any suspension or delisting of the Company’s securities, and the Company’s securities continued to be listed on The Nasdaq Global Market until the hearing process concluded and the Panel issued a written decision following the hearing. At this juncture, the Company is unable to provide assurance as to if and when the trading halt will be released.
On March 2, 2023, Relativity had a hearing before the Panel to appeal the Staff’s delisting determination. After the hearing, the Panel requested additional information from Relativity, which was provided on April 12, 2023. On April 20, 2023, the Panel granted Relativity’s request to continue the listing of its securities on the Nasdaq Capital Market. However, the Panel did not remove the Trading Halt. On June 3, 2024, Nasdaq filed a form 25-NSE removing and delisting the Company’s securities from Nasdaq and Section 12b of the Securities and Exchange Act.
On November 9, 2023, Relativity announced that it had extended the date by which it has to consummate a Business Combination from November 15, 2023 to February 15, 2024.
On March 27, 2024, Mr. John Anthony Quelch resigned from the Company. The resignation was not the result of any disagreement with the Company or any matter relating to the Company’s operations, policies or practices.
On July 11, 2024, the Company
announced that it entered into a non-binding Letter of Intent (“LOI”) providing for a proposed business combination (the
“Transaction”) that will result in the Company acquiring
7
Risks and Uncertainties
Results of operations and the Company’s ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond its control. The business could be impacted by, among other things, downturns in the financial markets or in economic conditions, inflation, increases in interest rates, adverse developments affecting the financial services industry, and geopolitical instability, such as the military conflict in the Ukraine. 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. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Consideration of IR Act Excise Tax
On August 16, 2022, the
Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things,
a new U.S. federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
On February 13, 2024, the
Company’s stockholders redeemed
Liquidity, Capital Resources and Going Concern
As of September 30, 2024,
the Company had $
The Company will need to
raise additional funds in order to meet the expenditures required for operating the business. In order to finance transaction costs in
connection with an intended 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 (the “Working Capital Loans”).
If the Company completes the initial Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the
Trust Account released to the Company. In the event that the initial Business Combination does not close, the Company may use a portion
of the working capital held outside the Trust Account to repay the Working Capital Loans, but no proceeds from the Trust Account would
be used to repay the Working Capital Loans. Up to $
8
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements—Going Concern,” the Company has until February 15, 2026 (absent any extensions of such period, pursuant to the terms described above) to consummate the proposed Business Combination. It is uncertain whether the Company will be able to consummate the proposed Business Combination by this date. If a Business Combination is not consummated by this date, unless that time is extended (as provided above, or pursuant to a stockholder vote), there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate by February 15, 2026. The Company intends to complete the proposed Business Combination before the end of the Combination Period. However, there can be no assurance that the Company will be able to consummate any Business Combination by the end of the Combination Period.
Note 2 — Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the balances and results for the periods presented. The interim results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future interim periods. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Form 10-K filed by the Company with the SEC on September 26, 2024.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Relativity Holdings Inc. There has been no intercompany activity since inception.
Emerging Growth Company Status
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 auditor 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 of 1934 (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
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 condensed consolidated 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. The Company has determined the more significant accounting estimates included in the condensed consolidated financial statements is the determination of the fair value of derivative financial instruments as described below.
9
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. As of September
30, 2024 and December 31, 2023, the Company had cash of $
Cash and Investments Held in Trust Account
As of September 30, 2024,
the Company held $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed consolidated balance sheets, primarily due to its short-term nature (except for the warrant liabilities – see Note 8).
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. U.S. 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. |
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the condensed consolidated balance sheet date.
Net Income (Loss) per 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
At September 30, 2024, the Company did not have any other dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted and basic loss per Class B share is the same for the period.
10
The following tables present a reconciliation of the numerator and denominator used to compute basic and diluted net (loss) income per share for each class of common stock.
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Class A Common Stock subject to possible redemption | ||||||||
| Numerator: Net income (loss) allocable to Class A common stock | $ | $ | ( | ) | ||||
| Denominator: Weighted Average Class A common stock | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net loss per share | $ | $ | ( | ) | ||||
| Class A Common Stock non-redeemable | ||||||||
| Numerator: Net income (loss) allocable to Class A common stock | $ | $ | ( | ) | ||||
| Denominator: Weighted Average Class A common stock | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net loss per share | $ | $ | ( | ) | ||||
| Class B Common Stock | ||||||||
| Numerator: Net income (loss) allocable to Class B common stock | $ | ( | ) | $ | ( | ) | ||
| Denominator: Weighted Average Class B common stock | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net loss per share | $ | $ | ( | ) | ||||
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Class A Common Stock subject to possible redemption | ||||||||
| Numerator: Net loss allocable to Class A common stock | $ | ( | ) | $ | ( | ) | ||
| Denominator: Weighted Average Class A common stock | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
| Class A Common Stock | ||||||||
| Numerator: Net loss allocable to Class A common stock | $ | ( | ) | $ | ( | ) | ||
| Denominator: Weighted Average Class A common stock | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
| Class B Common Stock | ||||||||
| Numerator: Net loss allocable to Class B common stock | $ | ( | ) | $ | ( | ) | ||
| Denominator: Weighted Average Class A common stock | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
11
Income Taxes
The Company accounts for
income taxes under ASC Topic 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax
assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities
and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of
September 30, 2024 and December 31, 2023, the Company’s deferred tax asset had a full valuation allowance recorded against it.
The Company’s effective tax rate was
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.
Common Stock Subject to Possible Redemption
The Company’s Class
A common stock that was sold as part of the Units in the IPO contains 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 classified the
On December 21, 2022, the
Company held the Meeting. At the Meeting, the Company’s stockholders approved an amendment to the Company’s second amended
and restated certificate of incorporation (the “Charter Amendment”) to extend the date by which the Company must consummate
its initial Business Combination from February 15, 2023 to August 15, 2023 or such earlier date as determined by the Company’s
Board of Directors, and to provide for up to two additional three-month extensions beyond August 15, 2023 for the period of time for
the Company to consummate an initial Business Combination. In connection with the Meeting, stockholders holding
On February 13, 2024, the
Company announced that it had extended the date by which it has to consummate a Business Combination from February 15, 2024 to February
15, 2025. In connection with the extension on February 13, 2024, stockholders holding
Following redemptions, the
Company has
On February 13, 2025, the Company held a special meeting of stockholders (the “2025 Meeting”). At the 2025 Meeting, the Company’s stockholders approved an amendment to the Company’s fourth amended and restated certificate of incorporation (the “Charter Amendment”) to extend the date by which the Company must consummate its initial business combination from February 15, 2025 to February 15, 2026 or such earlier date as determined by the Company’s board of directors. The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on February 17, 2025.
In connection with the extension
on February 13, 2025, stockholders holding 753 Public Shares exercised their right to redeem such shares for a pro rata portion of the
funds in the Company’s Trust Account. As a result, approximately $
12
Concentration of Credit Risk
The Company had significant
cash balances at financial institutions which throughout the year regularly exceeded the federally insured limit of $
Recent Accounting Standards
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 will become effective for Annual periods beginning after December 15, 2024. The Company is still reviewing the impact of ASU 2023-09.
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact this ASU may have on its condensed consolidated financial statements and related disclosures.
In August 2020, FASB issued ASU No. 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2020-06 effective as of April 13, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its condensed consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
Note 3 — Initial Public Offering
On February 15, 2022, the
Company consummated its IPO of
Following the closing of
the IPO on February 15, 2022, $
All of the
Accordingly, at September
30, 2024 and December 31, 2023,
13
The shares of Class A common stock are accounted for in accordance with the guidance in ASC Topic 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company recognizes changes in redemption value immediately as they occur. 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 common stock resulted in charges against additional paid-in capital and accumulated deficit.
As of September 30, 2024 and December 31 2023, the common stock subject to possible redemption reflected on the condensed consolidated balance sheets is reconciled in the following table:
| Common stock subject to possible redemption, December 31, 2023 | $ | |||
| Less: | ||||
| Redemptions | ( | ) | ||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Common stock subject to possible redemption, March 31, 2024 | $ | |||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ( | ) | ||
| Common stock subject to possible redemption, June 30, 2024 | $ | |||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Common stock subject to possible redemption, September 30, 2024 | $ |
Note 4 — Private Placement
Simultaneously with the
closing of the IPO, the Company’s Sponsor purchased an aggregate of
The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units being sold in the IPO.
Note 5 — Related Party Transactions
Founder Shares
In May 2021, the Sponsor
paid $
On February 27, 2023, the
Company issued an aggregate of
Following the redemptions
and the conversion of Class B common stock into shares of Class A common stock, there are currently
The initial stockholders
have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (i) six months after
the date of the consummation of the initial Business Combination or (ii) the date on which the Company consummates a liquidation,
merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange their shares
of Class A common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions
and other agreements of the initial stockholders with respect to any Founder Shares. Notwithstanding the foregoing, if the closing price
of the shares of Class A common stock equals or exceeds $
14
Promissory Note — Related Party
On July 2, 2021, the Sponsor
agreed to loan the Company up to $
On August 10, 2023, the
Company issued a promissory note to SVES LLC under which SVES LLC agreed to extend to the Company $
On February 13, 2024, the
Company borrowed $
Under the terms of the SVES
Note , SVES (or its affiliates or permitted designees) shall deposit $
On May 15, 2024, the Company
and SVES mutually terminated the SVES Business Combination Agreement. As part of the termination the SVES Note was declared null and
void. Accordingly, all debt proceeds received under the SVES Note, or $
As of September 30, 2024
and December 31, 2023, the Company had an outstanding balance of and $
On July 15, 2024, the Company
entered into a promissory note (“Mazaii Note”) with Mazaii Corp Ltd. pursuant to which Mazaii agreed to loan the Company
an aggregate principal amount of up to $
Working Capital Loans
In order to finance transaction
costs in connection with an intended 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 (the “Working Capital Loans”).
If the Company completes the 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 the working capital held
outside the Trust Account to repay the Working Capital Loans, but no proceeds from the Trust Account would be used to repay the Working
Capital Loans. Up to $
Administrative Service Fee
The Company entered into
an administrative services agreement on the effective date of the registration statement for the IPO pursuant to which the Company will
pay an affiliate of the Sponsor a total of $
Due to Related Party
At September 30, 2024 and
December 31, 2023, the Company had $
15
Due from Sponsor
Due from Sponsor is a non-interest-bearing
advance and is due on demand. At September 30, 2024 and December 31, 2023, $
Note 6 — Commitments and Contingencies
Registration and Stockholder Rights
The holders of the Founder Shares, Private Placement Units, the Private Placement Warrant, and the shares of Class A common stock underlying the Private Placement Warrants will have registration rights to require the Company to register a sale of any of the Company’s securities held by them pursuant to a registration rights agreement that was signed prior to or on the effective date of the IPO. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers such securities for sale under the Securities Act. In addition, these holders will have “piggyback” registration rights to include their securities in other registration statements filed by the Company. Notwithstanding the foregoing, the underwriters may not exercise their demand and “piggyback” registration rights after five and seven years, respectively, after the effective date of the registration statement of which the IPO forms a part and may not exercise their demand rights on more than one occasion.
Underwriting Agreement
The underwriters had a 45-day
option from the date of the IPO to purchase up to an additional
On December 14, 2021, the
Company sold an aggregate of
The fair value of Class
B common stock sold to A.G.P. was $
On February 15, 2022, the
Company paid cash underwriting commissions of $
Business Combination Marketing Agreement
The Company engaged A.G.P.
as an advisor in connection with the Business Combination to assist the Company in holding meetings with its stockholders to discuss
the potential Business Combination and the target business’ attributes, to introduce the Company to potential investors that are
interested in purchasing its securities in connection with the initial Business Combination, and to assist the Company with its press
releases and public filings in connection with the Business Combination. The Company will pay A.G.P. a fee in cash for such services
upon the consummation of the initial Business Combination in an amount equal to
Business Combination Agreement
On February 13, 2023, the
Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among (i) the Company
(ii) Relativity Holdings Inc., a Delaware corporation and a wholly owned subsidiary of Relativity (“Pubco”), (iii) Relativity
Purchaser Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Pubco (the “Merger Sub”), (iv) SVES GO,
LLC, a Florida limited liability company, SVES LLC, a Florida limited liability company, SVES CP LLC, a Florida limited liability company
and SVES Apparel LLC, a Florida limited liability company (collectively, the “Operating Companies” or “SVES”),
(v) SVGO LLC, ESGO LLC, SV Apparel LLC, and ES Business Consulting LLC (each a “Seller”), (vi) Timothy J. Fullum and Salomon
Murciano, (vii) the Sponsor and (viii) Timothy J. Fullum. SVES is a key intermediary connecting full-price fashion brands with off-price
retailers that are able to sell inventory that would otherwise be sold or disposed of by full-price brands at a significant loss. At
the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), in accordance with the
DGCL, (a) the Merger Sub will merge with and into the Company, with the Company surviving the Business Combination as a wholly owned
subsidiary of Pubco, and (b) each Seller will contribute all of its ownership interest in each Operating Company to Pubco in exchange
for aggregate consideration in the amount of $
16
On April 19, 2023, the Company, the Purchaser Representative and the Seller Representative entered into the Second Amendment to the Business Combination Agreement (the “Second BCA Amendment”) pursuant to which the parties amended the Business Combination Agreement, as amended, in order (i) to extend the date by which the Seller Representative is required to deliver Audited Company Financials to the Company from April 7, 2023 to May 1, 2023, (ii) to extend the period of time in which the Company may conduct additional due diligence on SVES (the “Due Diligence Period”) from 5:00 p.m. on April 7, 2023 to 5:00 p.m. May 1, 2023 and (iii) in connection with the transactions contemplated by the Business Combination Agreement, to permit the Company, subject to receiving any required consent from the holders of Public Warrants, to convert the Public Warrants into Class A common stock in a manner and amount to be specified in the Proxy Statement and approved by the Seller Representative, which Class A common stock would be converted automatically into the right to receive one share of Pubco common stock at the Closing.
On August 11, 2023, the
parties entered into a Third Amendment to the Business Combination Agreement, pursuant to which the parties amended the Business Combination
Agreement in order to, among other things, (i) extend the Due Diligence Period and the date of the required delivery of disclosure schedules
to August 31, 2023, (ii) provide for a proposal in the Proxy Statement to approve an amendment to the Company’s current charter
to eliminate the requirement that the Company retain at least $
On May 15, 2024, the Company and SVES mutually terminated the SVES Business Combination Agreement. As part of the termination the SVES Promissory Note was declared null and void.
Note 7 — Fair Value Measurement
The following tables present
information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30,
2024 and December 31, 2023 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair
value.
| September 30, 2024 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Warrants | ||||||||||||||||
| Warrant Liabilities | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | Quoted Prices In Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Mutual Fund held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Warrants | ||||||||||||||||
| Warrant Liabilities | $ | $ | $ | $ | ||||||||||||
Transfers to/from Levels
1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. During the
year ended December 31, 2023, there was a transfer of $
17
The warrants were initially classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. The subsequent measurement of the Public Warrants is classified as Level 1 due to the use of an observable market price of these warrants. On December 31, 2022, the Public Warrants were reclassified to Level 2 as no trading activity took place on the reporting dates. Subsequently, on December 31, 2023, the Public Warrants were reclassified to Level 3 as the Public Warrants were valued utilizing the market approach. The Company used the median warrant trading price of market comparable Special Purpose Acquisition Companies due to the lack of trading activity of the Company's warrants. The Company chose Special Purpose Acquisition Companies with a similar initial public offering size and warrant coverage for the analysis. This approach requires a significant amount of judgment and is highly susceptible to variability based on the sample of comparable Special Purpose Acquisition Companies used.
The Private Warrants, since issuance, have been valued using a Monte Carlo model, which is considered to be a Level 3 fair value measurement. Inherent in a Monte Carlo options pricing model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on projected volatility of comparable public companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is based on management assumptions regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. On December 31, 2023, the Private Warrants were valued utilizing the market approach, consistent with the valuation method applied to the Public Warrants.
For the three months ended September 30, 2024 and the year ended December 31, 2023, the Public and Private Warrants were valued utilizing the market approach as described above. The changes in the fair value of the Company’s Warrants have an effect on the Company’s net income, however, the changes in fair value have no effect on the cash flows of the Company.
The following table provides quantitative information regarding Level 3 fair value measurements inputs at September 30, 2024 and December 31, 2024 measurement dates for Public and Private Warrants:
| Measurement Date | Range | Median | ||||||
| September 30, 2024 | $ | $ | ||||||
| December 31, 2023 | $ | $ | ||||||
The change in the fair value of the warrant liabilities, measured using Level 3 inputs, for the three and nine months ended September 30, 2024 and 2023 is summarized as follows:
| Warrant | ||||
| Liabilities | ||||
| Warrant liabilities at December 31, 2023 | $ | |||
| Change in fair value of warrant liabilities | ( | ) | ||
| Warrant liabilities at March 31, 2024 | $ | |||
| Change in fair value of warrant liabilities | ||||
| Warrant liabilities at June 30, 2024 | $ | |||
| Change in fair value of warrant liabilities | ( | ) | ||
| Warrant liabilities at September 30, 2024 | $ | |||
| Warrant | ||||
| Liabilities | ||||
| Warrant liabilities at December 31, 2022 | $ | |||
| Change in fair value of warrant liabilities | ||||
| Warrant liabilities at March 31, 2023 | $ | |||
| Change in fair value of warrant liabilities | ||||
| Warrant liabilities at June 30, 2023 | $ | |||
| Change in fair value of warrant liabilities | ||||
| Warrant liabilities at September 30, 2023 | $ | |||
18
The change in the fair value of the warrant liabilities, measured using Level 3 inputs, for the years ended December 31, 2023 is summarized as follows:
| Warrant | ||||
| Liabilities | ||||
| Warrant liabilities at December 31, 2022 | $ | |||
| Change in fair value of warrant liabilities | ||||
| Transfer to Level 3 from Level 2 | ||||
| Warrant liabilities at December 31, 2023 | $ | |||
During the year ended December
31, 2023, there was a transfer of $
Note 8 — Warrant Liabilities
As of September 30, 2024
and December 31, 2023, there were
Each whole warrant entitles
the holder to purchase
The warrants will become exercisable on the later of 30 days after the completion of the initial Business Combination or 12 months from the closing of this offering and will expire at 5:00 p.m., New York City time on the warrant expiration date, which is years after the completion of the initial Business Combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to the Company and not placed in the Trust Account.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying the Company’s obligations described below with respect to registration. No warrant will be exercisable, and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
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 best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 52nd day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public 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 elect, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
19
Redemption of warrants
when the price per share of Class A common stock equals or exceeds $
Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described herein with respect to the Private Placement Warrants):
| ● | in whole and not in part; | |
| ● | at a price of $ | |
| ● | 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 reported last sale price of the Class A common stock equals or exceeds $ |
Note 9 — Stockholders’ Deficit
Preferred Stock
The Company is authorized
to issue
Class A Common Stock
The Company is authorized
to issue
Class B Common Stock
The Company is authorized
to issue
On February 27, 2023, the
Company issued an aggregate of
20
The remaining share of Class B
common stock will automatically convert into shares of Class A common stock at the time of the 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 as provided herein. 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 in the IPO 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,
Note 11 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the condensed consolidated balance sheet date up to the date that the condensed consolidated financial statements were issued. Based on this review, besides the event below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
Resignation of a Director
On January 31, 2025, Mr. Francis Knuettel II, resigned as a Board member and as a member of our Audit Committee. Mr. Knuettel II had no disagreements with the Company on any matter related to the Company’s operations, policies or practices.
Appointment of Directors
On February 1, 2025 the Company appointed David Kane as a Director and Chair of the Audit Committee, and Jessica Assaf as a Director and Chair of the Compensation Committee.
2025 Charter Amendment Shareholder Meeting
On February 13, 2025, the Company held a special meeting of stockholders (the “2025 Meeting”). At the 2025 Meeting, the Company’s stockholders approved an amendment to the Company’s fourth amended and restated certificate of incorporation (the “Charter Amendment”) to extend the date by which the Company must consummate its initial business combination from February 15, 2025 to February 15, 2026 or such earlier date as determined by the Company’s board of directors. The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on February 17, 2025.
In connection with the extension
on February 13, 2025, stockholders holding
Business Combination Agreement
On February 28, 2025, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among (i) the Company (together with its successors, the “Purchaser”), (ii) Relativity Holdings Inc., a Delaware corporation and a wholly owned subsidiary of the Purchaser (“Pubco”), (iii) Relativity Purchaser Merger Sub II Inc., a company to be formed in the Cayman Islands and a wholly owned subsidiary of Pubco (the “Merger Sub” and the Merger Sub, collectively with the Purchaser and Pubco, the “Purchaser Parties”), (iv) Instinct Brothers Co., Ltd, a corporation organized under the laws of Japan (an “Operating Company” and “Target Company”) and its shareholder ( “Seller”), (vi) Tomoki Nagano (“Founder”), (vii) Relativity Acquisition Sponsor, LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time (as defined below) for the stockholders of Pubco (other than the Seller) in accordance with the terms and conditions of this Agreement (the “Purchaser Representative”), and (viii) Tomoki Nagano in the capacity as the representative from and after the date hereof for the Seller in accordance with the terms and conditions of this Agreement (the “Seller Representative”).
Promissory Note
On January 24, 2025, the Company entered into a promissory note (“Instinct Note”) with Instinct Bio Technical
Company Pte Ltd. (“Instinct”) pursuant to which Instinct agreed to loan the Company an aggregate principal amount of up to
$
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “us,” “our” or “we” refer to Relativity Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q (the “Report”).
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, terminology such as “may,” “should,” “expect,” “intend,” “will,” “estimate,” “anticipate,” “believe,” “predict,” “project,” “target,” “budget,” “forecast,” “could,” “continue,” “plan,” or “potentially” or the negatives of these terms or variations of them or similar terminology, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank-check company incorporated as a Delaware corporation on April 13, 2021, for the purposes of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We may pursue an initial business combination target in any business or industry.
Recent Developments
On February 13, 2024, we held the 2024 Special Meeting, at which our stockholders approved the (i) Second Extension and (ii) Trust Agreement Amendment. In connection with the vote to approve the Second Extension, Public Stockholders holding 90,054 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $1.02 million (approximately $11.32 per Public Share) was removed from the Trust Account to pay such holders, leaving $715,760.63 in the Trust Account.
In connection with the Second Extension, we issued the Second Extension Promissory Note in the aggregate principal amount of up to $42,498 to SVES LLC, pursuant to which SVES LLC agreed to loan us up to $42,498. Under the terms of the Second Extension Promissory Note, SVES LLC (or its affiliates or permitted designees) shall deposit $3,541.50 per month (approximately $0.056 per Public Share that was not redeemed in connection with the vote to approve the Second Extension) into the Trust Account for each calendar month (commencing on February 15, 2024 and ending on the 15th day of each subsequent month) until February 15, 2025, or portion thereof, that is needed to complete a Business Combination, for up to an aggregate of $42,498. The Second Extension Promissory Note bears no interest and is repayable in full upon the date of the consummation of the SVES Business Combination. On May 15, 2024, the SVES Business Combination was mutually terminated and as part of that termination the Second Extension Promissory Note to SVES LLC was completely extinguished.
Following the approval by our stockholders of the Trust Agreement Amendment at the 2024 Special Meeting, on February 13, 2024, we instructed Continental to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at Morgan Stanley, with Continental continuing to act as trustee, until the earlier of the consummation of our initial Business Combination or our liquidation. As a result, following the liquidation of investments in the Trust Account, the remaining proceeds from the Initial Public Offering and Private Placement are no longer invested in U.S. government securities or money market funds.
We confidentially submitted a draft of the SVES Registration Statement to the SEC on February 14, 2024. As the SVES Business Combination was terminated the SVES Registration Statement will be withdrawn.
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Business Combinations
On February 13, 2023, we entered into the SVES Business Combination Agreement by and among the SVES Business Combination Parties, which has been amended by the (i) SVES Business Combination Agreement Amendment, (ii) SVES Business Combination Agreement Second Amendment, (iii) SVES Business Combination Agreement Third Amendment and (iv) SVES Business Combination Agreement Fourth Agreement. Pursuant to the SVES Business Combination Agreement, subject to the terms and conditions set forth therein, (a) the Merger Sub will merge with and into our Company, with our Company surviving such merger as a wholly-owned subsidiary of Pubco, and (b) each Seller will contribute all of its ownership interests in each SVES entity to Pubco in exchange for aggregate consideration in the amount of $632,000,000 to be paid in the common stock of Pubco valued at $10.00 per share of common stock. At the Closing, each of our Public Warrants shall be converted into one Pubco public warrant and each of our Private Placement Warrants shall be converted into one Pubco private warrant, in each case with such Pubco warrant having substantially the same terms and conditions as set forth in the respective Warrants, except that in each case they shall represent the right to acquire shares of Pubco common stock in lieu of shares of our Class A Common Stock.
On March 20, 2023, the parties entered into the First Amendment to the Business Combination Agreement to extend the date to conduct additional due diligence on the Target Companies from 5:00 p.m. on March 15, 2023 to 5:00 p.m. on April 7, 2023.
On April 19, 2023, the parties entered into the Second Amendment to the Business Combination Agreement to extend the date to conduct additional due diligence on the Target Companies from 5:00 p.m. on April 7, 2023 to 5:00 p.m. on May 1, 2023.
On August 11, 2023, the parties entered into the Third Amendment to the Business Combination Agreement, pursuant to which the parties amended the Business Combination Agreement in order to, among other things, (i) extend the Due Diligence Period and the date of the required delivery of disclosure schedules to August 31, 2023, (ii) provide for the Redemption Limitation Amendment Proposal in this proxy statement/prospectus to approve an amendment to Relativity’s Current Charter to eliminate the requirement that Relativity retain at least $5,000,001 of net tangible assets following the redemption of Public Shares in connection with the Business Combination, and to further amend the closing condition in the Business Combination such that Relativity would not be required to retain at least $5,000,001 of net tangible assets following the redemption of Public Shares in the event the Redemption Limitation Amendment Proposal is approved, and (iii) extend the Outside Date to February 15, 2024.
On February 14, 2024, the parties entered into the Fourth Amendment to the Business Combination Agreement (the “Fourth BCA Amendment”) pursuant to which the parties amended the Business Combination Agreement in order to extend the date by which any of the conditions to the Closing set forth in the Business Combination Agreement must be satisfactorily performed or waived to November 14, 2024.
On May 15, 2024, the SVES Business Combination was mutually terminated by the Parties as per the termination clause in the SVES Business Combination Agreement.
On February 28, 2025, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among (i) the Company (together with its successors, the “Purchaser”), (ii) Relativity Holdings Inc., a Delaware corporation and a wholly owned subsidiary of the Purchaser (“Pubco”), (iii) Relativity Purchaser Merger Sub II Inc., a company to be formed in the Cayman Islands and a wholly owned subsidiary of Pubco (the “Merger Sub” and the Merger Sub, collectively with the Purchaser and Pubco, the “Purchaser Parties”), (iv) Instinct Brothers Co., Ltd, a corporation organized under the laws of Japan (an “Operating Company” and “Target Company”) and its shareholder ( “Seller”), (vi) Tomoki Nagano (“Founder”), (vii) Relativity Acquisition Sponsor, LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time (as defined below) for the stockholders of Pubco (other than the Seller) in accordance with the terms and conditions of this Agreement (the “Purchaser Representative”), and (viii) Tomoki Nagano in the capacity as the representative from and after the date hereof for the Seller in accordance with the terms and conditions of this Agreement (the “Seller Representative”).
Founder Share Conversion
On February 27, 2023, we issued an aggregate of 3,593,749 shares of Class A Common Stock to our Sponsor, A.G.P., George Syllantavos and Anastasios Chrysostomidis, the holders of the Founder Shares, upon the conversion of an equal number of shares of Class B Common Stock in the Founder Share Conversion. These shares of Class A Common Stock are subject to the same restrictions as applied to the Class B Common Stock before the Founder Share Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial Business Combination as described in the IPO Registration Statement. Following the Founder Share Conversion, our Sponsor was the beneficial owner of 3,033,905 shares of Class A Common Stock and one share of Class B Common Stock. The Sponsor then transferred 533,525 shares of Class A Common Stock to certain members of the Sponsor.
Subsequent to those transfers and the Founder Sharer Conversion, the Sponsor currently holds 2,500,380 shares of Class A Common Stock and one share of Class B Common Stock, as well as 653,750 shares of Class A Common Stock that are part of Private Placement Units that were acquired by the Sponsor in the Private Placement.
Results of Operations
As of September 30, 2024, we had not commenced any operations. All activity for the period from April 13, 2021 (inception) through September 30, 2024, relates to our formation and initial public offering and identifying a target company for a business combination. We will not generate any operating revenues until after the completion of a business combination, at the earliest. We generated non-operating income in the form of interest income from the proceeds derived from the initial public offering and placed in the trust account.
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For the three months ended September 30, 2024, we had net income of $242,417, which consists of gain from extinguishment of promissory note of $249,985, income from investment in trust account of $8,059 and a change in the fair value of warrant liability of $86,041, offset by formation and operating costs of $100,563 and provision for income taxes of $1,105.
For the nine months ended September 30, 2024, we had net loss of $196,776, which consists of formation and operating costs of $627,354 and provision for income taxes of $28,474, offset by and gain from extinguishment of promissory note of $360,114, a change in the fair value of warrant liability of $66,879 and income from investment in trust account of $32,059.
For the three months ended September 30, 2023, we had net loss of $648,782, which consists of formation and operating costs of $667,382, provision for income taxes of $3,754, offset by income from investment in trust account of $22,354.
For the nine months ended September 30, 2023, we had net loss of $2,314,982, which consists of a decrease in the fair value of warrant liability of $254,731, provision for income taxes of $9,299 and formation and operating costs of $2,109,560, offset by income from investment in trust account of $58,608.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial Business Combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, including resurgences and the emergence of new virus variants, and geopolitical instability, such as the military conflict in Ukraine and the Middle East. We 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 our business and our ability to complete an initial Business Combination.
Liquidity, Capital Resources and Going Concern
As of September 30, 2024, the Company had $41,946 in its operating bank account and a working capital deficit of $1,918,849.
On February 15, 2022, we consummated the Initial Public Offering of 14,375,000 Units, including 1,875,000 Units pursuant to the exercise of the underwriters’ over-allotment option in full, at $10.00 per Unit, generating gross proceeds of $143,750,000.
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 653,750 Private Placement Units in the Private Placement to our Sponsor at a price of $10.00 per Private Placement Unit, generating total gross proceeds of $6,537,500.
Transaction costs amounted to $3,890,326, consisting of $1,437,500 of underwriting commissions, $1,972,398 of the excess of the fair value of Class B Common Stock issued to the Initial Public Offering underwriter over the share subscription receivable and $480,428 of other offering costs.
Following the closing of our Initial Public Offering, $146,625,000.00 from the net proceeds of the sale of the Units in our Initial Public Offering and the sale of the Private Placement Units in the Private Placement was placed in the Trust Account maintained by Continental, as trustee. In connection with our 2022 Special Meeting held on December 21, 2022, stockholders holding 14,221,705 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in our Trust Account. As a result, approximately $146 million (approximately $10.29 per Public Share) was removed from the Trust Account to pay such holders. On February 13, 2024, the Company announced that it had extended the date by which it has to consummate a Business Combination from February 15, 2024 to February 15, 2025 (the “Combination Period”). In connection with the extension on February 13, 2024, stockholders holding 90,054 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $1.02 million (approximately $11.32 per Public Share) was removed from the Trust Account to pay such holders and approximately $720,000 will remain in the Trust Account. Following the redemptions, the Company had 63,241 Public Shares outstanding. As of September 30, 2024 and December 31, 2023, approximately $758,902 and $1,746,543 remained in the trust account.
In connection with the redemptions of Public Shares, a total of approximately $25,000 was deducted from our Trust Account in order to pay taxes prior to the 2024 Special Meeting.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, to complete our initial Business Combination. We may withdraw interest to pay our taxes and liquidation expenses if we are unsuccessful in completing a Business Combination. We may pay our franchise taxes from funds from the Initial Public Offering held outside of the Trust Account or from interest earned on the funds held in the Trust Account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account reduced by our operating expense and franchise taxes. We expect the interest earned on the amount in the Trust Account will be sufficient to pay our income taxes. To the extent that our equity 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.
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Further, our Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required for Working Capital Loans. If we complete a Business Combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans, but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into Units at a price of $10.00 per unit at the option of the lender. The units would be identical to the Private Placement Units. At September 30, 2024 and December 31, 2023, no such Working Capital Loans were outstanding.
On August 10, 2023, we issued the SVES Promissory Note to SVES LLC under which SVES LLC agreed to extend us $300,000 for working capital purposes. The SVES Promissory Note is non-interest bearing and payable on the closing of the SVES Business Combination. In the event the SVES Business Combination is not consummated, the SVES Promissory Note shall be null and void and we shall not have any obligation to the payee. As of September 30, 2024 and, SVES LLC had funded $98,588 on the promissory note and had $201,412 available for withdrawal. Due to the termination of the SVES Business Combination, on May 15, 2024, the SVES Promissory Note is null and void.
On July 15, 2024, the Company entered into a promissory note (“Mazaii Note”) with Mazaii Corp Ltd. pursuant to which Mazaii agreed to loan the Company an aggregate principal amount of up to $250,000. The Mazaii note is non-interest bearing and payable on the date on which the Company consummates a Business Combination. In the event a Business Combination Agreement is not consummated, the Mazaii note shall be null and void and the Company shall not have any obligation to the Payee hereunder. The exclusivity period of the LOI expired on September 12, 2024 by which time both parties had chosen to not proceed. As a result, the Mazaii Note became null and void.
The Company 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 a 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 Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Further, we have determined that if we are unable to complete a Business Combination within the Combination Period, then we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board of Directors, dissolve and liquidate. The date for mandatory liquidation and subsequent dissolution as well as our working capital deficit raise substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after the applicable extension date.
We pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support, pursuant to the Administrative Support Agreement. Upon completion of our initial Business Combination or our liquidation, we will cease paying these monthly fees. For the three and nine months ended September 30, 2024 and 2023, we incurred $30,000 and $90,000 of administrative service fees.
Pursuant to the Business Combination Marketing Agreement, we engaged A.G.P. as an advisor in connection with the Business Combination to assist us in holding meetings with our stockholders to discuss the potential 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, and assist us with our press releases and public filings in connection with the Business Combination. We will pay A.G.P. a fee in cash for such services upon the consummation of the initial Business Combination in an amount equal to 3.5% of the gross proceeds of the Initial Public Offering, or $5,031,250 in the aggregate; however, no fee will be due if we do not complete an initial Business Combination.
In connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements—Going Concern,” the Company has until February 15, 2026 (absent any extensions of such period, pursuant to the terms described above) to consummate the proposed Business Combination. It is uncertain whether the Company will be able to consummate the proposed Business Combination by this date. If a Business Combination is not consummated by this date, unless that time is extended (as provided above, or pursuant to a stockholder vote), there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate by February 15, 2026. The Company intends to complete the proposed Business Combination before the end of the Combination Period. However, there can be no assurance that the Company will be able to consummate any Business Combination by the end of the Combination Period.
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Subsequent Events
Resignation of a Director
On January 31, 2025, Mr. Francis Knuettel II, resigned as a Board member and as a member of our Audit Committee. Mr. Knuettel II had no disagreements with the Company on any matter related to the Company’s operations, policies or practices.
Appointment of Directors
On February 1, 2025 the Company appointed David Kane as a Director and Chair of the Audit Committee, and Jessica Assaf as a Director and Chair of the Compensation Committee.
On February 13, 2025, the Company held a special meeting of stockholders (the “2025 Meeting”). At the 2025 Meeting, the Company’s stockholders approved an amendment to the Company’s fourth amended and restated certificate of incorporation (the “Charter Amendment”) to extend the date by which the Company must consummate its initial business combination from February 15, 2025 to February 15, 2026 or such earlier date as determined by the Company’s board of directors. The Company filed the Charter Amendment with the Secretary of State of the State of Delaware on February 17, 2025.
In connection with the extension on February 13, 2025, stockholders holding 753 Public Shares exercised their right to redeem such shares for a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $7,530 (approximately $11.96 per Public Share) was removed from the Trust Account to pay such holders and approximately $760,000 remained in the Trust Account.
On February 28, 2025, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) by and among (i) the Company (together with its successors, the “Purchaser”), (ii) Relativity Holdings Inc., a Delaware corporation and a wholly owned subsidiary of the Purchaser (“Pubco”), (iii) Relativity Purchaser Merger Sub II Inc., a company to be formed in the Cayman Islands and a wholly owned subsidiary of Pubco (the “Merger Sub” and the Merger Sub, collectively with the Purchaser and Pubco, the “Purchaser Parties”), (iv) Instinct Brothers Co., Ltd, a corporation organized under the laws of Japan (an “Operating Company” and “Target Company”) and its shareholder ( “Seller”), (vi) Tomoki Nagano (“Founder”), (vii) Relativity Acquisition Sponsor, LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time (as defined below) for the stockholders of Pubco (other than the Seller) in accordance with the terms and conditions of this Agreement (the “Purchaser Representative”), and (viii) Tomoki Nagano in the capacity as the representative from and after the date hereof for the Seller in accordance with the terms and conditions of this Agreement (the “Seller Representative”).
Promissory Note
On January 24, 2025, the Company entered into a promissory note (“Instinct Note”) with Instinct Bio Technical Company Pte Ltd. (“Instinct”) pursuant to which Instinct agreed to loan the Company an aggregate principal amount of up to $400,000. The Instinct Note is non-interest bearing and payable on the date on which the Company consummates a Business Combination. In the event a Business Combination Agreement is not consummated, the Instinct Note shall be null and void and the Company shall not have any obligation to Instinct hereunder. As of the date of the issuance of this Quarterly Report, $175,000 has been funded to the Company.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our 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. We have 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, we 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 our financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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Critical Accounting Estimates
This Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based on our financial statements and the notes thereto contained elsewhere in this Report, which have been prepared in accordance with U.S. GAAP. The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Making estimates requires Management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which Management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. We determined the more significant accounting estimates included in our financial statements is the determination of the fair value of derivative financial instruments.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with FASB ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, such as our Warrants, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations contained elsewhere in this Report. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
The valuation of our Public Warrants is based on a traded market. Our Private Placement Warrants are valued using a Monte Carlo options pricing model which utilizes assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. We estimate the volatility of our Common Stock based on projected volatility of comparable public companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the Warrants is based on Management assumptions regarding the timing and likelihood of completing a Business Combination. The dividend rate is based on the historical rate, which we anticipate to remain at zero.
The estimates used to calculate the fair value of our derivative assets and liabilities change at each balance sheet date based on our stock price and other assumptions described above. If our assumptions change or we experience significant volatility in our stock price or interest rates, the fair value calculated from one balance sheet period to the next could be materially different.
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Recent Accounting Standards
In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 will become effective for Annual periods beginning after December 15, 2024. The Company is still reviewing the impact of ASU 2023-09.
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023 and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact this ASU may have on its condensed consolidated financial statements and related disclosures.
In August 2020, FASB issued ASU No. 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2020-06 effective as of April 13, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its condensed consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2024 and December 31, 2023, we did not have any off-balance sheet arrangements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2024, pursuant to Rule 13a-15(b) or Rule 15d-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of September 30, 2024, our disclosure controls and procedures were not operating effectively as of the end of the period covered by this report, due to a material weakness for the timely close and filing of regulatory filings.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There have been no changes to our internal control over financial reporting during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 1A. Risk Factors.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, as of the date of this Report, except as set forth below, there have been no material changes to the risk factors previously disclosed in the Company’s (i) most recent prospectus for the initial public offering as filed with the February 14, 2022, (ii) its Annual Report on Form 10-K filed with the SEC on March 31, 2023 and September 16, 2024, and (iii) its Quarterly Reports on Form 10-Q filed with the SEC on May 16, 2022, August 15, 2022, November 14, 2022, May 15, 2023 and August 14, 2023, respectively. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of potential target companies, which could make it more difficult for us to consummate the Business Combination.
Military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of potential target companies, and to other company or industry-specific, national, regional or international economic disruptions and economic uncertainty, any of which could make it more difficult for us to consummate the Business Combination.
A 1% U.S. federal excise tax may be imposed on us in connection with our redemptions of shares in connection with a business combination or other stockholder vote pursuant to which stockholders would have a right to submit their shares for redemption (a “Redemption Event”).
Pursuant to the Inflation Reduction Act of 2022, commencing in 2023, a 1% U.S. federal excise tax (the “Excise Tax”) is imposed on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The Excise Tax is imposed on the repurchasing corporation and not on its stockholders. The amount of the Excise Tax is equal to 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the Excise Tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. The U.S. Department of the Treasury (the “Treasury Department”) has authority to promulgate regulations and provide other guidance regarding the Excise Tax. In December 2022, the Treasury Department issued Notice 2023-2, indicating its intention to propose such regulations and issuing certain interim rules on which taxpayers may rely. Under the interim rules, liquidating distributions made by publicly traded domestic corporations are exempt from the Excise Tax. In addition, any redemptions that occur in the same taxable year as a liquidation is completed will also be exempt from such tax. Accordingly, redemptions of our public shares in connection with an extension of the Combination Period may subject us to the Excise Tax, unless one of the two exceptions above apply. Such redemptions would only occur if an extension of the Combination Period is approved by our stockholders and such extension is implemented by the board of directors.
If the deadline for us to complete a business combination (currently February 15, 2024) is extended, our public stockholders will have the right to require us to redeem their public shares. Any redemption or other repurchase may be subject to the Excise Tax. The extent to which we would be subject to the Excise Tax in connection with a Redemption Event would depend on a number of factors, including: (i) the fair market value of the redemptions and repurchases in connection with the Redemption Event, (ii) the nature and amount of any “PIPE” or other equity issuances in connection with the business combination (or otherwise issued not in connection with the Redemption Event but issued within the same taxable year of the business combination), (iii) if we fail to timely consummate a business combination and liquidate in a taxable year subsequent to the year in which a Redemption Event occurs and (iv) the content of any proposed or final regulations and other guidance from the Treasury Department. In addition, because the Excise Tax would be payable by us and not by the redeeming holders, the mechanics of any required payment of the Excise Tax remain to be determined. Any Excise Tax payable by us in connection with a Redemption Event may cause a reduction in the cash available to us to complete a business combination and could affect our ability to complete a business combination.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
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Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Report.
| * | Filed herewith. |
| ** | Furnished. |
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PART III
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.
| RELATIVITY ACQUISITION CORP. | ||
| Date: March 17, 2025 | By: | /s/ Tarek Tabsh |
| Name: | Tarek Tabsh | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: March 17, 2025 | By: | /s/ Steven Berg |
| Name: | Steven Berg | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
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