Business context and reporting period
The supplied filing is Colombier Acquisition Corp.’s unaudited Form 10-Q for the quarter ended September 30, 2021; it does not identify PSQ Holdings, Inc. as the registrant. Colombier was a blank-check company formed to pursue a business combination and had not begun operating activities. It completed its IPO in June 2021 and had until June 11, 2023 to complete a business combination.
Financial performance and position
- Revenue: No operating revenue; the company stated it would not generate operating revenue until after a business combination.
- Net income: $4.77 million for the quarter and $3.78 million from inception through September 30. Quarterly income primarily reflected a $5.14 million gain from the change in fair value of warrant liabilities; formation and operating costs were $331,519. The filing provides no meaningful operating margin comparison.
- Cash flow: Net cash used in operating activities was $913,835 from inception through September 30. Cash at quarter-end was $921,140.
- Assets and liquidity: Total assets were $174.14 million, including $172.50 million in Trust Account securities. The company reported working capital of approximately $1.5 million, including an adjustment for franchise tax payable.
- Debt and liabilities: No long-term debt or related-party loans were outstanding. Liabilities included $6.47 million of warrant liabilities and $6.04 million of deferred underwriting fees, payable only if a business combination is completed.
- Equity and shares: All 17.25 million public Class A shares, valued at $172.50 million, were classified as temporary equity subject to possible redemption; 4.31 million Class B shares were outstanding.
Material changes and unusual items
The company revised its prior financial-statement presentation after determining that all public shares should have been classified as temporary equity. The revision reclassified equity to redeemable Class A shares and changed prior-period earnings-per-share presentation. Management said the impact was not material to previously presented financial statements.
Warrant fair-value accounting materially affected reported income: the warrant liability fell from its initial measurement, generating a noncash gain. The company also reported a $1.90 million third-quarter accretion of redeemable shares in the statement of changes in stockholders’ deficit.
Outlook, risks and contingencies
Management believed available working capital and borrowing capacity would be sufficient through the earlier of a business combination or one year from the filing, but warned that higher-than-estimated search and transaction costs could leave insufficient operating funds. Additional financing might be needed to complete a transaction or address substantial share redemptions. No assurance was given that a business combination would be completed. If none is completed by June 11, 2023, public shares are generally to be redeemed from the Trust Account and warrants may expire worthless. COVID-19-related uncertainty was identified as a potential impediment to operations and deal completion. The company reported no legal proceedings and no material changes to the risk factors in its IPO prospectus.
Important facts to verify
- Confirm the filing entity: the source is for Colombier Acquisition Corp., not PSQ Holdings, Inc.
- Reconcile Trust Account disclosures: the balance sheet reports $172.50 million at September 30, while MD&A says $1.24 million was withdrawn for working capital and the notes describe that amount as an IPO overfunding transfer to the operating account.
- Check the use-of-proceeds disclosure, which says an aggregate of $150 million was placed in trust, against the financial statements and other disclosures reporting $172.50 million after the over-allotment.
- Assess earnings quality: reported profit depended largely on noncash warrant-liability remeasurement rather than operating revenue or cash generation.
- Review the revised temporary-equity and EPS presentation, and the substantial potential redemptions and transaction-financing needs.