Business context and reporting period
This unaudited Form 10-Q was filed by Colombier Acquisition Corp., a blank-check company, for the quarter ended March 31, 2023. It is not a report of PSQ Holdings’ operating results: Colombier had not begun operations and reported no operating revenue. The company had signed a merger agreement to acquire PublicSq. (PSQ Holdings, Inc.) and expected to change its name to PSQ Holdings, Inc. upon completion.
Financial results and position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating and formation costs | $1.549 million | $0.292 million |
| Interest on trust investments | $1.838 million | $0.011 million |
| Warrant fair-value change | $1.489 million loss | $2.866 million gain |
| Net income (loss) | $(1.652) million | $2.585 million |
| Net income (loss) per share | $(0.08) | $0.12 |
| Cash used in operating activities | $0.792 million | $0.383 million |
The year-over-year swing to a loss primarily reflects the warrant-liability remeasurement changing from a gain to a loss, alongside higher operating costs and income-tax expense. Margins are not meaningful for this pre-combination SPAC.
At March 31, 2023, cash outside the trust was $1.793 million, working capital was $0.681 million as adjusted by management, and trust investments totaled $174.397 million. Total liabilities were $10.833 million, including $2.519 million of warrant liabilities, $2.277 million of current liabilities, and a $6.038 million deferred underwriting fee payable upon a completed business combination. The filing reports no long-term debt. Stockholders’ deficit was $7.876 million; 17.25 million Class A shares were recorded as subject to possible redemption at $10.05 per share.
Operating cash outflow was partly offset by $2.389 million withdrawn from the trust for working capital and taxes; cash increased by $1.598 million during the quarter. Trust withdrawals included $1.0 million for working capital in January, $0.389 million for taxes, and $1.0 million for working capital in March.
Material changes and proposed transaction
- Operating and formation costs rose to $1.549 million from $0.292 million. Trust interest increased to $1.838 million from $0.011 million, while the warrant fair-value result moved from a $2.866 million gain to a $1.489 million loss.
- The February 27, 2023 merger agreement provides for $200 million of stock consideration to PublicSq. holders, subject to adjustment for PublicSq.’s closing debt net of cash. Eligible participants may receive up to 3 million additional shares if specified trading-price thresholds of $12.50, $15.00, and $17.50 are met during the five-year earnout period.
- The SPAC’s completion period was extended to September 11, 2023 after signing the merger agreement. The merger agreement also sets September 11, 2023 as the outside date, with a possible extension subject to its terms.
Outlook, risks, and controls
Management said it did not expect to need additional funds for operating expenditures, but noted that higher-than-expected transaction costs or substantial shareholder redemptions could require additional financing. Management stated that failure to complete a business combination by September 11, 2023 would require liquidation and dissolution; this deadline and potential liquidation raised substantial doubt about the company’s ability to continue as a going concern. No liquidation adjustments were recorded.
Key risks include failure to complete the merger on time or obtain required approvals, redemptions reducing cash available for the transaction, potential financing needs, and the possible 1% federal excise tax on certain share repurchases. Warrants could expire worthless if no business combination is completed. The filing also identifies market and geopolitical uncertainty as potential impediments to completing a transaction. No material changes to previously disclosed risk factors were reported.
Disclosure controls were concluded to be ineffective because of a material weakness in accounting for complex financial instruments. Management reported additional review and analysis for this filing and plans to strengthen review procedures, access to technical accounting expertise, and staffing. No material change in internal control over financial reporting during the quarter was reported.
After quarter-end, the company withdrew $0.546 million from trust interest for taxes on April 11, 2023 and filed an initial Form S-4 for the proposed combination on April 7, 2023. The filing reports no legal proceedings.
Important facts for investors to verify
- Whether the PublicSq. merger closed, and the status of required approvals, the Form S-4, and any extensions to the September 11, 2023 deadline.
- Expected redemptions, available trust cash, any financing or other transaction funding, and the final consideration adjustment for PublicSq.’s closing debt net of cash.
- Potential dilution from earnout shares, founder shares, warrants, and any financing securities, including the effect of sponsor forfeitures tied to redemptions.
- Trust balance, tax obligations, deferred underwriting fees, and any exposure to the stock-repurchase excise tax.
- Remediation of the material weakness in accounting for complex financial instruments and the resulting effectiveness of disclosure controls.