The accompanying notes are an integral part of the unaudited condensed financial statements.
The accompanying notes are an integral part of the unaudited condensed financial statements.
The accompanying notes are an integral part of the unaudited condensed financial statements.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note
1 — Description of Organization and Business Operations
OmniLit
Acquisition Corp. (the “Company”) was incorporated in Delaware 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 has not selected any specific business-combination target and it has not, nor has anyone on the Company’s behalf, initiated
any substantive discussions, directly or indirectly, with any business-combination target.
As
of March 31, 2023, the Company had not commenced any operations other than searching for a business combination after our Initial Public
Offering (as defined below). All activity for the period from May 20, 2021 (inception) through March 31, 2023 relates to the Company’s
formation, the Initial Public Offering and, subsequent to the Initial Public Offering, 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 will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived
from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The
registration statement for the Initial Public Offering was declared effective by the U.S. Securities and Exchange Commission (the “SEC”)
on November 8, 2021 (the “Effective Date”). On November 12, 2021, the Company completed its initial public offering (the
“Initial Public Offering” or “IPO”) of 14,375,000 units (“Units”), including the issuance of 1,875,000
Units as a result of the underwriters’ exercise in full of their over-allotment option at an offering price of $10.00 per Unit,
generating gross proceeds of $143,750,000 which is discussed in Note 3.
Simultaneously
with the closing of the IPO, the Company consummated a private placement (the “Private Placement”) of 6,201,750 warrants
to OmniLit Sponsor LLC, a Delaware limited liability company and the Company’s sponsor (the “Sponsor”), 575,000 warrants
to Imperial Capital, LLC, a Delaware limited liability company (“Imperial Capital”), and 143,750 warrants to I-Bankers Securities,
Inc., a Texas corporation (“I- Bankers”), (together, the “Private Placement Warrants”), each at a price of $1.00
per Private Placement Warrant, generating total proceeds of $6,920,500, which is described in Note 4.
Transaction
costs amounted to $8,333,135, consisting of $2,875,000 of underwriting discount, $5,031,250 of deferred underwriting discount, and $426,884
of other offering costs. In addition, $1,579,046 of cash was held outside of the Trust Account (as defined below) and is available for
working capital purposes.
The
Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least
80% of the balance in the Trust Account (as defined below) (net of taxes payable) at the time of the signing of an agreement to enter
into the Business Combination. However, the Company will only complete the Business Combination if the post-Business Combination company
owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target
sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment
Company Act”). There is no assurance that the Company will be able to successfully effect the Business Combination.
Upon
the closing of the Initial Public Offering, a total of $146,625,000 ($10.20 per Unit) of the net proceeds from the IPO and the Private
Placement was deposited in a trust account (“Trust Account”) and invested in U.S. government securities, within the meaning
set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company
that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the
Company. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its
franchise and income tax obligations (less up to $100,000 of interest to pay dissolution expenses), the proceeds from the IPO and the
sale of the Private Placement Warrants will not be released from the Trust Account until the earliest of: (a) the completion of the Business
Combination; (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s
certificate of incorporation; and (c) the redemption of the Company’s public shares if the Company is unable to complete the Business
Combination within 15 months from the closing of the IPO (or up to 21 months from the closing of the IPO, if the Company extend the period
of time to consummate a business combination, as described in more detail in our final prospectus related to our IPO filed with the SEC
on November 10, 2021 (the “Prospectus”)), subject to applicable law. The proceeds deposited in the Trust Account could become
subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public
stockholders.
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 Business Combination either: (i) in connection with a stockholder meeting called to approve the Business Combination; or (ii)
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 its discretion. The stockholders will be entitled to redeem their shares
for a pro rata portion of the amount then on deposit in the Trust Account (initially approximately $10.20 per share, plus any pro rata
interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
All
of the public shares contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s
liquidation, if there is a stockholder vote or tender offer in connection with the initial Business Combination and in connection with
certain amendments to the Company’s amended and restated memorandum and articles of association.
In
accordance with SEC and its guidance on redeemable equity instruments, which has been codified in Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 480-10-S99, redemption provisions not solely within
the control of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the public
shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of common stock classified
as temporary equity will be the allocated proceeds determined in accordance with FASB ASC 470-20. The public shares are subject to FASB
ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) 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 (ii) 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 has elected to recognize this change immediately.
On December 21, 2022, the Company held a special meeting
of stockholders in lieu of an annual meeting of stockholders (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 12, 2023 to November 12, 2023 (the
“Combination Period”), or such earlier date as determined by the Company’s board of directors.
On January 26, 2022, the Company held a special meeting
of stockholders. At the Meeting, the Company’s stockholders approved an amendment to the Company’s Second Amended and Restated
Certificate of Incorporation to provide for the right of a holder of Class B common stock of the Company to convert into Class A common
stock of the Company on a one-for-one basis prior to the closing of an initial Business Combination. On
January 31, 2023, OmniLit Sponsor LLC voluntarily converted 1,000,00 shares of Class B common stock of the Company it held as of such
date into 1,000,000 shares of Class A common stock of the Company in accordance with the Charter. As a result of the foregoing and the
results of the Meeting described above, the Company has an aggregate of 2,348,049 shares of Class A common stock and 3,791,667 shares
of Class B common stock.
Initial
Business Combination
The
Company has up to 24 months from the closing of the Initial Public Offering (or up to 24 months from the closing of the IPO to
consummate the Business Combination (the “Combination Period”) after a 9 month extension voted on in a Special Meeting
on December 21, 2022. However, if the Company is unable to complete the Business Combination within the Combination Period, the
Company will redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the Trust Account, 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 its franchise and income taxes obligations and less up to $100,000
of interest to pay dissolution expenses, divided by the number of then outstanding public shares, subject to applicable law and as
further described in this registration statement of which the Prospectus forms a part, and then seek to dissolve and
liquidate.
The
Sponsor, officers, and directors have agreed: (i) to waive their redemption rights with respect to their founder shares and public shares
in connection with the completion of the Business Combination; (ii) to 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 certificate of incorporation;
and (iii) to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company
fails to complete the Business Combination within the Combination Period.
The
Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products
sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality
or similar agreement, or business-combination agreement, reduce the amount of funds in the Trust Account to below the lesser of: (i)
$10.20 per public share; and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the
Trust Account, if less than $10.20 per share due to reductions in the value of the trust assets, less taxes payable, provided that such
liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to
the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s
indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. However, the Company
has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor
has sufficient funds to satisfy its indemnity obligations and believe that the Sponsor’s only assets are securities of the Company.
Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.
Liquidity
and Going Concern Consideration
As
of March 31, 2023, the Company had cash on hand of $7,072 held
outside of the Trust Account available for working capital purposes. As of December 31, 2022, the Company had cash on hand of
$117,506 held outside of the Trust Account available for working capital purposes. The Trust reimbursed the Cash account $0 for
franchise tax payments. In addition, Sponsor has provided a Commitment Letter to the Company to provide access to $100,000 of
additional working capital, if needed, for operations prior to a Business Combination.
The
Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating our business.
However, if the 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, the Company may have insufficient funds available to operate our business
prior to a Business Combination. Moreover, the Company may need to obtain additional financing either to complete a Business Combination
or because the Company becomes obligated to redeem a significant number of public shares upon consummation of a Business Combination,
in which case the Company may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance
with applicable securities laws, the Company would only complete such financing simultaneously with the completion of a Business Combination.
If the Company is unable to complete a Business Combination because it does not have sufficient funds available, the Company will be
forced to cease operations and liquidate the Trust Account. In addition, following a Business Combination, if cash on hand is insufficient,
the Company may need to obtain additional financing in order to meet its obligations.
The Company is a Special Purpose Acquisition Corporation
with a scheduled liquidation date of November 12, 2023. The Company plans to complete the transaction before the liquidation date. In
connection with the Special Purpose Acquisition Corporation’s assessment of going concern considerations in accordance with ASC
Topic 205-40 Presentation of Financial Statements - Going Concern, although the Company intends to consummate a Business Combination on
or before November 12, 2023, management has determined that the mandatory liquidation deadline less than 12 months away, should a Business
Combination not occur and an extension is not requested by the Sponsor, raises 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
after November 12, 2023.
Based
on the foregoing, management believes that the Company will have insufficient working capital and borrowing capacity to meet its needs
through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will
be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates,
performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with
or acquire, and structuring, negotiating and consummating the Business Combination.
Risks
and Uncertainties
Management is currently evaluating the impact of the
COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on
the Company’s financial position and/or search for a target company, the specific impact is not readily determinable as of the date
of the unaudited condensed financial statement. The unaudited condensed financial statement does not include any adjustments that might
result from the outcome of this uncertainty.
In February 2022, The Russian Federation and Belarus
commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have
instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on
the world economy are not determinable as of the date of these condensed unaudited financial statements. The specific impact on the Company’s
financial condition, results of operations, and cash flows is also not determinable as of the date of these condensed unaudited financial
statements.
Note
2 — Significant Accounting Policies
Basis
of Presentation
The accompanying unaudited condensed
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of
the SEC. Certain information or footnote disclosures normally included in unaudited condensed financial statements prepared in accordance
with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly,
they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations,
or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting
of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows
for the periods presented.
The accompanying unaudited condensed financial statements should be read
in conjunction with the Company’s Annual Report on Form 10-K for the period ended December 31, 2022, as filed with the SEC on January
30, 2023. The interim results for the three month periods ended March 31, 2023 are not necessarily indicative of the results to be expected
for the year ending December 31, 2023, or for any future period.
Emerging
Growth Company Status
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (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) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use
of Estimates
The preparation of unaudited condensed financial statements in conformity
with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements. Making estimates requires
management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and
accordingly the actual results could differ significantly from those significant estimates. It is at least reasonably possible that the
estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial
statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming
events. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of March 31, 2023 and December 31, 2022.
Marketable
Securities Held in Trust Account
At
March 31, 2023 and December 31, 2022, substantially all of the assets held in the Trust Account were held in money market funds, which
are primarily invested in treasury securities. The Company’s portfolio of investments is comprised of U.S. government securities,
within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof.
When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified
as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments
are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value
at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain
on investments held in the Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values
of investments held in the Trust Account are determined using available market information.
Concentration
of credit risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution
which, at times may exceed the Federal depository insurance coverage of $250,000. At March 31, 2023, the Company had not experienced
losses on this account.
Offering
Costs
The
Company complies with the requirements of Accounting Standards Codification (“ASC”) 340-10-S99-1 and SEC Staff Accounting
Bulletin (“SAB”) Topic 5A-” Expenses of Offering”. Offering costs consist of legal, accounting, underwriting
discount and other costs that are directly related to the IPO. Accordingly, offering costs associated with the IPO totaled $8,333,135,
consisting of $2,875,000 of underwriting discount, $5,031,250 of deferred underwriting discount and $426,885 of other offering costs
were recorded as a charge in accumulated deficit. As of March 31, 2023 deferred underwriting discount is $500,000
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its shares of Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480
“Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) is classified
as a liability instrument and is measured at fair value. Conditionally redeemable shares of Class A common stock (including shares that
feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within the Company’s control) is classified as temporary equity. At all other times, shares of Class A common
stock are classified as stockholders’ equity. The Company’s shares of Class A common stock feature certain redemption rights
that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly,
shares of Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’
equity section of the Company’s balance sheet.
All
of the 14,375,000 Class A common stock sold as part of the Units in the IPO contain a redemption feature which allows for the redemption
of such public shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection
with the Business Combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles
of association. In accordance with the accounting treatment for redeemable equity instruments, which has been codified in ASC 480-10-S99,
redemption provisions not solely within the control of the Company require Class A common stock subject to redemption to be classified
outside of permanent equity. Therefore, all Class A common stock have been classified outside of permanent equity.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to
equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock
are affected by charges against additional paid in capital and accumulated deficit. At March 31, 2021 and December 31, 2022, the Class
A common stock reflected in the balance sheet are reconciled in the following table:
Schedule of Reconciliation of Class A Ordinary Shares
| |
3/31/2023 | | |
12/31/2022 | |
| |
| | |
| |
Gross proceeds | |
$ | 13,919,834 | | |
$ | 146,625,000 | |
| |
| | | |
| | |
Less: | |
| | | |
| | |
Proceeds
allocated to Public Warrants at issuance | |
| - | | |
| - | |
Redeemable
common stock issuance costs | |
| - | | |
| - | |
NRA issuance
cost | |
| - | | |
| (1,011,984 | ) |
Redemption | |
| - | | |
| (133,917,056 | ) |
| |
| | | |
| | |
Add | |
| | | |
| | |
Accretion of Carrying value to redemption value | |
| 80,789 | | |
| 2,223,875 | |
Common stock subject to redemption | |
$ | 14,000,624 | | |
$ | 13,919,834 | |
Fair
Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates
the carrying amounts represented in the unaudited condensed financial statement, primarily due to its short-term nature.
Fair
Value Measurements
Fair
value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction
between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). 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. In some
circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In
those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level
input that is significant to the fair value measurement. |
Accounting
for Warrants
The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’
specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment
considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant
to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments
are indexed to the Company’s own common stocks and whether the instrument holders could potentially require “net cash settlement”
in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires
the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments
are outstanding. Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement
qualify for equity accounting treatment.
Income
Taxes
The Company accounts for income taxes under ASC 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 unaudited condensed 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 carry forwards. 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.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more- likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition.
The
Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized
tax benefits and no amounts accrued for interest and penalties as of March 31, 2023. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or material deviation from its position.
The
Company has identified the United States and Florida as its only “major” tax jurisdictions.
The
Company is subject to potential income tax examinations by federal and state taxing authorities. These potential examinations may include
questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and
state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change
over the next twelve months.
OmniLit Acquisition Corp.
Provision for Income Taxes
For the Period Ended
March 31, 2023 and the Year Ended December 31, 2022
Schedule of Income Tax Benefit
| |
March 31, 2023 | | |
Year Ended December 31, 2022 | |
| |
| | |
| |
Current taxes | |
$ | 27,427 | | |
$ | 445,793 | |
Deferred taxes | |
| - | | |
| - | |
Income tax expense | |
| 27,427 | | |
| 445,793 | |
Effective tax rate | |
| -14.81 | % | |
| 34.47 | % |
The
accompanying notes are an integral part of the unaudited condensed financial statements
Our
effective tax rate was (14.81)% for
the three months ended March 31, 2023, 34.47%
for the year ended December 31, 2022. The effective tax rate differs from the statutory tax rate of 21%
for the three months ended March 31, 2023 and year ended December 31, 2022, due to changes in the valuation allowance on the deferred
tax assets.
New
Law and Changes
On
August 16, 2022, the Inflation Reduction (the IR) Act was signed into law, which, beginning in 2023, will impose a 1% excise tax on public
company stock buybacks. The company is assessing the potential impact of the Act.
The
IR Act imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The
total taxable value of shares repurchased is reduced by the fair market value of and newly issued shares during the taxable year. Redemption
rights are ubiquitous to nearly all SPACs. Shareholders have the ability to require the SPAC to repurchase their shares prior to the
merger in what is known as a redemption right, essentially getting their money back. There are two possible scenarios in which redemption
rights come into play. First, they can be exercised by the shareholders themselves because they are exiting the transaction, or second,
they can be triggered because the SPAC did not find a target with which to merge. There will certainly need to be more clarity from the
Internal Revenue Service on the application of the excise tax to SPAC redemptions. Until there is further guidance from the IRS, the
Company will continue to access the potential impact of the IR Act. Based on our preliminary assessment, we do not expect a material
impact on our consolidated unaudited condensed financial statements.
Net
Income Per Common Stock
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. 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 stock. The warrants are exercisable to purchase 14,108,000 shares of Class A common stock in the aggregate
and were excluded from diluted earnings per share for the period ended March 31, 2023 because the warrants are contingently exercisable,
and the contingencies have not yet been met. As a result, diluted income per share is the same as basic income per share for the period
from January 1 through March 31, 2023. Remeasurement associated with the redeemable shares of Class A common stock to redemption value
is excluded from earnings per share as the redemption value approximates fair value.
For
the Three Months Ended March 31, 2023 and March 31, 2022, net income per common stock is as follows:
Schedule of Net Income (loss) Per Common Share
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
| |
Three Months Ended
March 31, 2023 | | |
Three Months Ended
March 31, 2022 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net income (loss) per share | |
| | | |
| | | |
| | | |
| | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Allocation of net income (loss) | |
$ | (70,164 | ) | |
$ | (142,483 | ) | |
$ | (128,938 | ) | |
$ | (42,979 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 2,025,827 | | |
| 4,113,889 | | |
| 14,375,000 | | |
| 4,791,667 | |
Basic and diluted net income (loss) per share | |
$ | (0.03 | ) | |
$ | (0.03 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
Recent
Accounting Pronouncements
In
August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging —Contracts in Entity’ Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’ Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments
by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required
for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation
in certain areas. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023, with early adoption
permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-
06 on its financial statements.
The
Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently
adopted would have a material effect on the accompanying balance sheet.
Note
3 — Public Offering
On
November 12, 2021, the Company completed its IPO of 14,375,000 units, including the issuance of 1,875,000 Units as a result of the underwriters’
exercise in full of their over-allotment option at an offering price of $10.00 per Unit, generating gross proceeds of $143,750,000. Each
Unit consists of one Class A common stock and one-half of one redeemable warrant. Each whole public warrant entitles the holder to purchase
one Class A common stock at a price of $11.50 per share. Each public warrant will become exercisable on the later of 30 days after the
completion of the initial Business Combination or 12 months from the closing of the IPO and will expire five years after the completion
of the initial Business Combination, or earlier upon redemption or liquidation.
The
underwriters were paid a cash underwriting discount of $2,875,000,
or $0.20
per Unit, of the gross proceeds of the IPO. Additionally,
the underwriters will be entitled to a deferred underwriting discount of $500,000
of the gross proceeds of the IPO held in the
Trust Account upon the completion of the Company’s initial Business Combination subject to the terms of the underwriting agreement.
Commencing
January 24, 2022, holders of the Units sold in the Initial Public Offering may elect to separately trade the Class A common stock and
Public Warrants included in the Units. Those Units not separated will continue to trade on the Nasdaq Global Market under the symbol
“OLITU,” and the common stock and Public Warrants that are separated will trade on the Nasdaq Global Market under the symbols
“OLIT” and “OLITW,” respectively.
Note
4 — Private Placement
Simultaneously
with the closing of the IPO, the Company completed a private placement of an aggregate of 6,920,500 Private Placement Warrants at a price
of $1.00 per Private Placement Warrant, generating total gross proceeds of $6,920,500. A portion of the proceeds from the sale of the
Private Placement Warrants were added to the net proceeds from the IPO held in the Trust Account.
The
Private Placement Warrants will be identical to the warrants sold in the Initial Public Offering, except that the Private Placement Warrants:
(i) may not (including the Class A common stock issuable upon exercise of these warrants), subject to certain limited exceptions, be
transferred, assigned, or sold by the holders until 30 days after the completion of the Business Combination; and (ii) will be entitled
to registration rights.
The
Company’s Sponsor has agreed: (i) to waive its redemption rights with respect to its founder shares and public shares in connection
with the completion of the Business Combination; (ii) to waive its redemption rights with respect to its founder shares and public shares
in connection with a stockholder vote to approve an amendment to the Company’s certificate of incorporation: (A) to modify the
substance or timing of the Company’s obligation to redeem 100% of its public shares if the Company does not complete its Business
Combination within 15 months from the closing of the IPO (or up to 21 months from the closing of the IPO, if the Company extends the
period of time to consummate a business combination, as described in more detail in the Prospectus); or (B) with respect to any other
provision relating to stockholders’ rights or pre-initial business-combination activity; and (iii) to waive its rights to liquidating
distributions from the Trust Account with respect to its founder shares if the Company fails to complete its Business Combination within
15 months from the closing of the IPO (or up to 21 months from the closing of the IPO, if the Company extends the period of time to consummate
a business combination, as described in more detail in the Prospectus). In addition, the Company’s Sponsor has agreed to vote any
founder shares held by them and any public shares purchased during or after the IPO (including in open market and privately negotiated
transactions) in favor of the Business Combination.
Note
5 — Related Party Transactions
Related
Party Payable
Since
our inception our Sponsor has advanced an aggregate of $363,995 on our behalf to cover certain expenses (the “Advances”).
The Advances were repaid upon the consummation of the Initial Public Offering from funds not held in the Trust Account.
Promissory
Note — Related Party
On
June 10, 2021, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate
principal amount of $300,000 to be used for a portion of the expenses of the Initial Public Offering. In July, 2021, $ was advanced
to the Company in accordance with the terms of the agreement. This loan was non-interest bearing, unsecured and due at the earlier of
December 31, 2021, or the closing of the Initial Public Offering. The loan was repaid upon the closing of the Initial Public Offering
out of the offering proceeds that has been allocated for the payment of offering expenses (other than underwriting commissions).
Related
Party Loans
In
order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain
of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Such Working Capital Loans would be convertible into private placement-equivalent warrants at a price of $1.00
per warrant (which, for example, would result in the holders being issued 1,500,000 warrants if $1,500,000 of notes were so converted),
at the option of the lender. Such warrants would be identical to the private placement warrants, including as to exercise price, exercisability
and exercise period. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside
the Trust account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. As of March 31, 2023, no Working Capital Loans have been made to the Company.
Founder
Shares
On
May 20, 2021, the Company issued Class B shares in an aggregate amount of 4,312,500 as
founder shares to our Sponsor. On September 27, 2021, our Sponsor forfeited 718,750 founder
shares for no consideration. On November 1, 2021, the Company effected a
1 1/3 for 1 forward stock split on our
founder shares and as a result our Sponsor holds 4,791,667 founder
shares for an aggregate purchase price of $25,000 in
cash, or approximately $0.005 per
share, in connection with formation. The Sponsor has agreed not to transfer, assign or sell its founder shares until the earlier of:
(i) one year after the date of the consummation of the Business Combination; or (ii) the date on which the Company consummates a
liquidation, merger, stock exchange, or other similar transaction that results in all of its stockholders having the right to
exchange their shares of Class A common stock for cash, securities, or other property. Notwithstanding the foregoing, if the closing
price of the Company’s Class A common stock equals or exceeds $12.00 per
share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days
within any 30-trading day period commencing 60 days after the Business Combination, the founder shares will no longer be subject to
such transfer restrictions. On January 26, 2022, the Company held a special meeting of stockholders. At the Meeting, the
Company’s stockholders approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation
to provide for the right of a holder of Class B common stock of the Company to convert into Class A common stock of the Company on a
one-for-one basis prior to the closing of an initial Business Combination. On January 31,
2023, OmniLit Sponsor LLC voluntarily converted 1,000,00 shares of Class B common stock of the Company it held as of such date into
1,000,000 shares of Class A common stock of the Company in accordance with the Charter. As a result of the foregoing and the results
of the Meeting described above, the Company has an aggregate of 3,791,667 shares of Class B common stock.
Commitment
Letter
On
March 31, 2022, the Sponsor provided a Commitment Letter to the Company to provide access to $100,000 of additional working capital,
if needed, for operations prior to a Business Combination. As of March 31, 2023, no funds have been provided from the Commitment Letter.
Note
6 — Commitments and Contingencies
Registration
Rights
The
holders of the founder shares, Private Placement Warrants, shares of Class A common stock underlying the Private Placement Warrants,
and warrants (including underlying securities) that may be issued upon conversion of working capital loans will have registration rights
to require the Company to register a sale of any of its securities held by them pursuant to a registration rights agreement to be 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 “piggy-back”
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 Initial Public Offering and may not exercise their demand rights on more than one occasion.
Underwriters
Agreement
On
November 12, 2021, the underwriters were paid a cash underwriting discount of $2,875,000,
or $0.20
per Unit, of the gross proceeds of the IPO. An
additional fee of $500,000
in the aggregate will be payable to the underwriters
for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account
solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Right
of First Refusal
Subject
to certain conditions, the Company granted Imperial Capital, for a period beginning on the closing of the Initial Public Offering and
ending 12 months after the date of the consummation of the Business Combination, a right of first refusal to provide investment banking
and/or financial advisory services in connection with certain future transaction until the earlier of (x) the date of the consummation
of our initial business combination and (y) 18 months from the closing of the IPO. In accordance with FINRA Rule 5110(g)(6), such right
of first refusal shall not have a duration of more than three years from the effective date of the registration statement of which the
Prospectus forms a part.
Note
7 — Stockholders’ Deficit
Recapitalization
— On November 1, 2021, the Company effected a recapitalization whereby a 1 1/3 for 1 forward stock split of its Class B
common stock was completed so that the Sponsor owns an aggregate of founder shares.
Preferred
Stock — The Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each.
At March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.
Class
A Common Stock — The Company is authorized to issue a total of 100,000,000 shares
of Class A common stock at par value of $0.0001 each.
Holders of the Company’s Class A common stock are entitled to one vote for each share. At March 31, 2023, there were zero
shares of Class A common stock issued and outstanding, excluding 1,348,049 of
Class A common stock subject to possible redemption, which are presented as temporary equity. At December 31, 2022, there were zero shares
of Class A common stock issued and outstanding, excluding 14,375,000 of
Class A common stock subject to possible redemption, which are presented as temporary equity. On January 26, 2022, the
Company held a special meeting of stockholders. At the Meeting, the Company’s stockholders approved an amendment to the
Company’s Second Amended and Restated Certificate of Incorporation to provide for the right of a holder of Class B common
stock of the Company to convert into Class A common stock of the Company on a one-for-one basis prior to the closing of an initial
Business Combination. On January 31, 2023, OmniLit Sponsor LLC voluntarily converted 1,000,00
shares of Class B common stock of the Company it held as of such date into 1,000,000 shares of Class A common stock of the Company
in accordance with the Charter. As a result of the foregoing and the results of the Meeting described above, the Company has an
aggregate of 3,791,667 shares of Class B common stock.
Class
B Common Stock — The Company is authorized to issue a total of 20,000,000
shares of Class B common stock at par value of $0.0001
each. At March 31, 2023 there were 3,791,667
shares of Class B common stock issued and outstanding. At December 31, 2022, there were 4,791,667
shares of Class B common stock issued and outstanding. On January 26, 2022, the Company held a special meeting of stockholders. At
the Meeting, the Company’s stockholders approved an amendment to the Company’s Second Amended and Restated Certificate
of Incorporation to provide for the right of a holder of Class B common stock of the Company to convert into Class A common stock of
the Company on a one-for-one basis prior to the closing of an initial Business Combination. On
January 31, 2023, OmniLit Sponsor LLC voluntarily converted 1,000,00 shares of Class B common stock of the Company it held as of
such date into 1,000,000 shares of Class A common stock of the Company in accordance with the Charter. As a result of the foregoing
and the results of the Meeting described above, the Company has an aggregate of 3,791,667 shares of Class B common
stock.
The
Company’s initial stockholder has agreed not to transfer, assign, or sell any of its founder shares until the earlier of: (i) one
year after the date of the consummation of the Business Combination; or (ii) the date on which the Company consummates a liquidation,
merger, stock exchange, or other similar transaction that results in all of its 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 stockholder with respect to any founder shares. Notwithstanding the foregoing, if the closing price of
the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations, and the like) for any 20 trading days within any 30-trading day period commencing 60 days after the Business Combination,
the founder shares will no longer be subject to such transfer restrictions. Any permitted transferees will be subject to the same restrictions
and other agreements of the Company’s initial stockholder with respect to any founder shares.
The
shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time of its
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 Company’s registration statement and related to
the closing of the 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, 25% of the sum of the total number of all
shares of common stock outstanding upon the completion of the IPO plus all shares of Class A common stock and equity-linked securities
issued or deemed issued in connection with the Business Combination (excluding any shares or equity-linked securities issued, or to be
issued, to any seller in the Business Combination or any private placement- equivalent units issued to the Sponsor, its affiliates, or
certain of officers and directors upon conversion of working capital loans made to the Company).
Holders
of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to
a vote of the Company’s stockholders, with each share of common stock entitling the holder to one vote.
On January 26, 2022, the Company held a special meeting
of stockholders. At the Meeting, the Company’s stockholders approved an amendment to the Company’s Second Amended and Restated
Certificate of Incorporation to provide for the right of a holder of Class B common stock of the Company to convert into Class A common
stock of the Company on a one-for-one basis prior to the closing of an initial Business Combination. On
January 31, 2023, OmniLit Sponsor LLC voluntarily converted 1,000,00 shares of Class B common stock of the Company it held as of such
date into 1,000,000 shares of Class A common stock of the Company in accordance with the Charter. As a result of the foregoing and the
results of the Meeting described above, the Company has an aggregate of 3,791,667 shares of Class B common stock.
Warrants
— At March 31, 2023 there were 7,187,500 Public Warrants and 6,920,500 Private Placement Warrants outstanding.
Each
whole warrant entitles the holder thereof to purchase one share of the Company’s Class A common stock at a price of $11.50 per
share, subject to adjustment as discussed herein. In addition, if: (A) the Company issues additional shares of Class A common stock or
equity-linked securities for capital raising purposes in connection with the closing of its Business Combination at an issue price or
effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined
in good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s sponsor or its affiliates,
without taking into account any founder shares held by the Company’s sponsor or its affiliates, prior to such issuance) (the “Newly
Issued Price”); (B) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and
interest thereon, available for the funding of the Business Combination on the date of the consummation of the Business Combination (net
of redemptions); and (C) the volume weighted average trading price of the Company’s common stock during the 20 trading day period
starting on the trading day prior to the day on which the Company consummates the Business Combination (such price, the “Market
Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115%
of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under
“Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and
the Newly Issued Price.
The
warrants will become exercisable on the later of 12 months from the closing of the IPO, or 30 days after the completion of its Business
Combination and will expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier
upon redemption or liquidation.
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 is current. 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 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.
Once
the warrants become exercisable, the Company may call the warrants for redemption (excluding the Private Placement Warrants):
|
● |
in whole and not in part; |
|
● |
at a price of $0.01 per
warrant; |
|
● |
upon not less than 30 days’
prior written notice of redemption to each warrant holder; and |
|
● |
if, and only if, the reported
last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company
send the notice of redemption to the warrant holders. |
|
● |
if, and only if, there
is a current registration statement in effect with respect to the shares of Class A common stock underlying such warrants. |
If
the Company calls the warrants for redemption as described above, the management will have the option to require any holder that wishes
to exercise its warrant to do so on a “cashless basis.” If the management takes advantage of this option, all holders of
warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient
obtained by dividing: (A) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference
between the exercise price of the warrants and the “fair market value” (defined below); by (B) the fair market value. The
“fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending
on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
The
exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances, including
in the event of a stock dividend, extraordinary dividend, or the Company’s recapitalization, reorganization, merger, or consolidation.
However, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices.
Note
8 — Fair Value Measurements
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of March
31, 2023 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
Schedule of the Fair Value Valuation Techniques
Assets: | |
Level | | |
March 31, 2023 | | |
December 31, 2022 | |
Marketable securities held in Trust Account | |
| 1 | | |
$ | 14,147,100 | | |
$ | 14,011,070 | |
Transfers
to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were no transfers between levels for the period
from May 20, 2021 (inception) through March 31, 2023.
Level
1 instruments include investments in mutual funds invested in government securities. The Company uses inputs such as actual trade data,
benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Note
9 — Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date the unaudited condensed financial statements were available to be issued.
On April 5, 2023, OmniLit Sponsor LLC voluntarily
converted 3,000,000 shares of Class B common stock of the Company it held as of such date into 3,000,000 shares of Class A common stock
of the Company in accordance with the Charter. As a result of the foregoing and the Meetings described above, the Company has an aggregate
of 5,348,049 shares of Class A common stock and 791,667 shares of Class B common stock.
On May 9, 2023, OmniLit entered into
an Agreement and Plan of Merger (the “Business Combination Agreement”) with Syntec Optics, Inc., a Delaware corporation.
Please see Form 8-K and Form S4 both dated May 10, 2023 filed with the SEC for more information.