UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
For the transition period from to
Commission file number:
(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)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The | ||||
| The |
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.
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 November 14, 2024, there were
ESH ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ESH ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Cash – restricted | ||||||||
| Due from Sponsor | ||||||||
| Prepaid expenses | ||||||||
| Prepaid insurance – current portion | ||||||||
| Total Current Assets | ||||||||
| Long-term prepaid insurance | ||||||||
| Investments held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Franchise tax payable | ||||||||
| Income taxes payable | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and Contingencies | ||||||||
| COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION | ||||||||
| Class A common stock subject to possible redemption, | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
ESH ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Franchise tax expense | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Interest earned on investments held in Trust Account | ||||||||||||||||
| Total other income | ||||||||||||||||
| Income before provision for income taxes | ||||||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Basic weighted average shares outstanding, Class A common stock | ||||||||||||||||
| Basic net income per share | $ | $ | $ | $ | ||||||||||||
| Diluted weighted average shares outstanding, Class A common stock | ||||||||||||||||
| Diluted net income per share | $ | $ | $ | $ | ||||||||||||
| Basic weighted average shares outstanding, Class B common stock | ||||||||||||||||
| Basic net income per share | $ | $ | $ | $ | ||||||||||||
| Diluted weighted average shares outstanding, Class B common stock | ||||||||||||||||
| Diluted net income per share | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
ESH ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Retained | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
| Balance – January 1, 2024 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2024 (unaudited) | ||||||||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – June 30, 2024 (unaudited) | ||||||||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | — | — | — | — | ||||||||||||||||||||||||
| Balance – September 30, 2024 (unaudited) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance – January 1, 2023(1) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2023(1) (unaudited) | ( | ) | ||||||||||||||||||||||||||
| Sale of | — | — | ||||||||||||||||||||||||||
| Fair value of rights included in Public units | — | — | ||||||||||||||||||||||||||
| Allocated value of transaction costs to Class A shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Issuance of Representative Shares | — | |||||||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – June 30, 2023(1) (unaudited) | ( | ) | ||||||||||||||||||||||||||
| Remeasurement of Class A common stock subject to possible redemption | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – September 30, 2023(1) (unaudited) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
ESH ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on investments held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Prepaid insurance – current portion | ( | ) | ||||||
| Long-term prepaid insurance | ( | ) | ||||||
| Due from Sponsor | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Franchise tax payable | ( | ) | ||||||
| Income taxes payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash into Trust Account | ( | ) | ||||||
| Cash withdrawn from Trust Account to pay franchise and income taxes | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of Units, net of underwriting discounts paid | ||||||||
| Proceeds from sale of Private Placements Warrants | ||||||||
| Repayment of promissory note - related party | ( | ) | ||||||
| Payment of offering costs | ( | ) | ( | ) | ||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net Change in Cash and Restricted Cash | ( | ) | ||||||
| Cash and Restricted Cash – Beginning of period | ||||||||
| Cash and Restricted Cash – End of period | $ | $ | ||||||
| Cash and Restricted Cash – End of period | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Cash and Restricted Cash – End of period | $ | $ | ||||||
| Supplementary cash flow information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Offering costs included in accrued expenses | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
ESH Acquisition Corp. (the “Company”) was incorporated as a Delaware corporation on November 17, 2021. The Company was incorporated for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities that the Company has not yet identified (the “Initial Business Combination”).
As of September 30, 2024, the Company had not commenced any operations. All activity for the period from November 17, 2021 (inception) through September 30, 2024 relates to the Company’s formation and the initial public offering (the “IPO”), which is described below, and subsequent to the IPO, identifying a target company for the Initial Business Combination. The Company will not generate any operating revenues until after the completion of the Initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds held in the Trust Account (defined below). The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s
IPO was declared effective on June 13, 2023. On June 16, 2023, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the
Company consummated the sale of
Transaction costs amounted to $
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of its IPO and the sale of Private Placement Warrants, although substantially
all of the net proceeds are intended to be applied generally toward consummating the Initial Business Combination. The Company’s
Initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least
Following the closing of the IPO on June 16, 2023,
an amount of $
The Company will provide holders of the Company’s
outstanding Public Shares sold in the IPO (the “Public Stockholders”) with the opportunity to redeem all or a portion
of their Public Shares upon the completion of the Initial Business Combination either (i) in connection with a stockholder meeting called
to approve the Initial Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of the Initial Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public
Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially
anticipated to be $
5
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
The Public Shares are recorded at a redemption
value and classified as temporary equity in accordance with Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”).
The Company will proceed with an Initial Business Combination if the Company has net tangible assets of at least $
Notwithstanding the foregoing, the Amended and
Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act),
will be restricted from redeeming its shares with respect to more than an aggregate of
The Initial Stockholders will agree not to propose
an amendment to the Certificate of Incorporation (A) in a manner that would affect the substance or timing of the Company’s obligation
to redeem
The Company will hold a special meeting of stockholders
on December 3, 2024 to, among other things, vote on a proposal to amend the Company’s amended and restated certificate of incorporation
to extend the date by which the Company must consummate a business combination (the “Extension Amendment Proposal”).
If passed, the Extension Amendment Proposal will allow the Company to, at its discretion, exercise up to twelve monthly extensions to
the date by which the Company must consummate a business combination, from December 16, 2024 until as late as December 16, 2025, or, if
it fails to consummate a business combination during such time, cease its operations and redeem or repurchase
If the Extension Amendment Proposal is not approved, the Company will have only 18 months from the closing of the IPO (the “Combination Period”), or until December 16, 2024, to complete the Initial Business Combination.
If the Company is unable to complete an 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 (which interest shall be net of taxes
payable, and less up to $
On July 20, 2023, the Company issued a press release announcing that, on July 21, 2023, the Units would no longer trade, and that the Company’s common stock and rights, which together comprise the Units will commence trading separately. The common stock and rights will be listed on the Nasdaq Global Market and trade with the ticker symbols “ESHA,” and “ESHAR,” respectively. This is a mandatory and automatic separation, and no action was required by the holders of Units.
6
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
The Initial Stockholders will not be entitled
to liquidation rights with respect to the Founder Shares if the Company fails to complete an Initial Business Combination within the Combination
Period. However, if the Initial Stockholders should acquire Public Shares in or after the IPO, they will be entitled to liquidating distributions
from the Trust Account with respect to such Public Shares if the Company fails to complete an Initial Business Combination within the
Combination Period. The underwriters will agree to waive their rights to the Marketing Fee (see Note 6) held in the Trust Account in the
event the Company does not complete an Initial Business Combination within the Combination Period and, in such event, such amounts will
be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the
event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including
Trust Account assets) will be only $
Risks and Uncertainties
Management is currently evaluating the impact of the current global economic uncertainty, rising interest rates, high inflation, high energy prices, supply chain disruptions, the Israel-Hamas conflict and the Russia-Ukraine war (including the impact of any sanctions imposed in response thereto) and has concluded that while it is reasonably possible that any of these events could have a negative effect on the Company’s financial position, results of operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude, or the extent to which they may negatively impact the Company’s business and its ability to complete an Initial Business Combination.
Going Concern Consideration
As of September 30, 2024, the Company had cash
of $
Until the consummation of an Initial Business Combination, the Company will be using the funds held outside the Trust Account for identifying and evaluating target businesses, performing due diligence on prospective target businesses, paying for travel expenditures, reviewing corporate documents and material agreements of prospective target businesses, and structuring, negotiating and completing an Initial Business Combination.
In order to finance transaction costs in connection
with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors
may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company
completes an Initial Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
event that the Initial Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to
repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for
the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect
to such loans. The Working Capital Loans would either be repaid upon consummation of an Initial Business Combination, without interest,
or, at the lender’s discretion, up to $
In connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unable to complete an Initial Business Combination by December 16, 2024, then the Company will cease all operations except for the purpose of liquidating. The date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management plans to consummate an Initial Business Combination prior to the mandatory liquidation date. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after December 16, 2024.
7
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on April 1, 2024. The interim results for the three 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 periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Cash - Restricted
Cash that is encumbered or otherwise restricted
as to its use is included in cash – restricted. As of September 30, 2024 and December 31, 2023, the balance was $
Investments Held in Trust Account
At September 30, 2024 and December 31, 2023, all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. treasury securities. The investments held in Trust Account are classified as trading securities. Trading securities are presented on the condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on investments held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
8
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the FASB ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature.
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Company’s financial instruments are classified as either Level 1, Level 2, or Level 3. These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Offering Costs
Offering costs consisted of legal, accounting, and other costs incurred through the condensed balance sheet date that were directly related to the IPO. Upon completion of the IPO, offering costs were allocated to the separable financial instruments issued in the IPO based on a relative fair value basis, compared to total proceeds received. Offering costs allocated to the warrants were charged to equity. Offering costs allocated to the Class A common stock were charged against the carrying value of Class A common stock subject to possible redemption upon the completion of the IPO.
Class A Common Stock Subject to Possible Redemption
The Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, or if there is a stockholder vote or tender offer in connection with the Company’s Initial Business Combination. In accordance with ASC 480-10-S99, the Company classifies Public Shares subject to redemption outside of permanent equity as the redemption provisions are not solely within the control of the Company. The Public Shares sold as part of the Units in the IPO were issued with other freestanding instruments (i.e., Public Rights), and as such, the initial carrying value of Public Shares classified as temporary equity is the allocated proceeds determined in accordance with ASC 470-20. The Company recognizes changes in redemption value immediately as they occurs and will adjust the carrying value of redeemable shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable shares will result in charges against additional paid-in capital and retained earnings. Accordingly, at September 30, 2024 and December 31, 2023, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
The Company’s Class A common stock features
certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain
future events.
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Rights | ( | ) | ||
| Class A common stock issuance costs | ( | ) | ||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption, December 31, 2023 | ||||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Class A common stock subject to possible redemption, September 30, 2024 | $ |
9
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
Derivative Financial Instruments
The Company evaluates its equity-linked financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815, “Derivatives and Hedging.” For derivative financial instruments that are classified as liabilities, the derivative instrument is initially recognized at fair value with subsequent changes in fair value recognized in the statements of operations each reporting period. The classification of derivative instruments, including whether such instruments should be classified as liabilities or as equity, is evaluated at the end of each reporting period. The Company accounted for the rights issued in connection with the IPO and the warrants issued in connection with the Private Placement as equity-classified instruments in accordance with ASC 815 as they did not meet the liability criteria (i.e., cashless exercises).
Income Taxes
The Company follows the asset and liability method
of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets were
deemed de minimis as of September 30, 2024 and December 31, 2023. As of September 30, 2024 and December 31, 2023, the Company’s
deferred tax asset had a full valuation allowance recorded against it. The 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.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company has been subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
10
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
Net Income Per Share of Common Stock
The Company has two classes of shares, which are
referred to as Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares.
The Company has not considered the effect of the rights and warrants sold in the IPO and the Private Placement to purchase an aggregate
of
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
| Basic net income per share | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Basic weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| Basic net income per share | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | |||||||||||||||||||||||||
| Diluted net income per share | ||||||||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||||||||
| Allocation of net income | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | ||||||||||||||||||||||||||||||||
| Diluted net income per share | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
11
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the IPO, the Company sold
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the
Sponsor, I-Bankers and Dawson James purchased an aggregate of
Each whole Private Placement Warrant is exercisable
for
The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the Initial business Combination.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On December 17, 2021, the Sponsor subscribed to
purchase
12
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
The Initial Stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (A) one year after the completion of the Initial Business Combination or (B) the date on which the Company completes a liquidation, merger, stock exchange or other similar transaction after the Initial Business Combination that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property (the “Lock-Up”).
Notwithstanding the foregoing, if the last sale
price of the Class A common stock equals or exceeds $
Related Party Loans
Promissory Note to Sponsor
On December 17, 2021 and as amended on May 9,
2023, the Sponsor agreed to loan the Company up to $
Due from Sponsor
At the closing of the IPO on June 16, 2023, a
portion of the proceeds from the sale of the Private Placement Warrants in the amount of $
Working Capital Loan
In addition, in order to finance transaction costs
in connection with an Initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If
the Company completes an Initial Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust
Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account.
In the event that an Initial Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account
to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except
for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect
to such loans. The Working Capital Loans would either be repaid upon consummation of an Initial Business Combination, without interest,
or, at the lender’s discretion, up to $
Administrative Services Agreement
The Company entered into an agreement, commencing
on June 13, 2023 through the earlier of consummation of the Initial Business Combination and the Company’s liquidation, to reimburse
an affiliate of the Company’s officers $
13
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential partner businesses and performing due diligence on suitable Initial Business Combinations. Any such payments prior to an Initial Business Combination will be made using funds held outside the Trust Account.
For the three and nine months ended September
30, 2024, the Company incurred and paid $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration and Stockholder Rights
The holders of Founder Shares, Private Placement Warrants (and underlying securities) and Private Placement Warrants that may be issued upon conversion of Working Capital Loans (and any underlying securities) are entitled to registration rights pursuant to a registration rights agreement signed at the consummation of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
On June 16, 2023, the Company issued to I-Bankers
The Representative Shares have been deemed compensation by Financial Industry Regulatory Authority (“FINRA”) and were therefore subject to a Lock-Up for a period of 180 days immediately following the commencement of sales in the IPO. Pursuant to FINRA Rule 5110(e)(1), these securities were not subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the commencement of sales in the IPO, nor were they permitted to be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales in the IPO, except to any underwriters and selected dealer participating in the offering and their bona fide officers or partners.
The underwriters were also entitled to an underwriting
discount of $
Initial Business Combination Marketing Agreement
The Company entered into the Marketing Agreement
with the underwriters, I-Bankers and Dawson James to assist the Company in holding meetings with the stockholders to discuss the potential
Initial Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested
in purchasing the Company’s securities in connection with the Initial Business Combination, assist the Company in obtaining stockholder
approval for the Initial Business Combination and assist the Company with its press releases and public filings in connection with the
Initial Business Combination. Pursuant to the Initial Business Combination Marketing Agreement, the Company will pay I-Bankers and Dawson
James, collectively,
14
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
NOTE 7. STOCKHOLDERS’ EQUITY
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
Holders of the Class B common stock will have
the right to appoint all of the Company’s directors prior to an Initial Business Combination. On any other matter submitted to a
vote of the Company’s stockholders, holders of the Class A common stock and holders of the Class B common stock will vote together
as a single class, except as required by law or stock exchange rule; provided, that the holders of Class B common stock will be entitled
to vote as a separate class to increase the authorized number of shares of Class B common stock. Each share of common stock will have
The shares of Class B common stock will automatically
convert into shares of the Company’s Class A common stock at the time of the Company’s Initial Business Combination on a one-for-one
basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further
adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess
of the amounts offered and related to the closing of the Initial Business Combination, the ratio at which shares of Class B common stock
shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class
B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class
A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
Rights — At September 30,
2024 and December 31, 2023, there were
Warrants — At September
30, 2024 and December 31, 2023, there were
Each Private Placement Warrant entitles the registered
holder to purchase one share of the Class A common stock at a price of $
15
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the Initial Business Combination, the Company will use its reasonable best efforts to file, and within 60 business days after the closing the Initial Business Combination, to have declared effective, a registration statement relating to the shares of Class A common stock issuable upon exercise of the Private Placement Warrants and to maintain the effectiveness of such registration statement, and a current Prospectus relating to those shares of Class A common stock until the Private Placement Warrants expire. Notwithstanding the above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of the Private Placement Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrants. Once the Private Placement Warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; |
| ● | at
a price of $ |
| ● | upon not less than 30 days’ prior written notice of redemption (the “30-day Redemption Period”) to each warrant holder; and |
| ● | if,
and only if, the last reported sale price of the Class A common stock equals or exceeds $ |
The Company may not redeem the Private Placement
Warrants when a holder may not exercise such warrants. The Company has established the last of the redemption criterion discussed above
to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing
conditions are satisfied and the Company issues a notice of redemption of the Private Placement Warrants, each warrant holder will be
entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A common stock may
fall below the $
If the Company calls the Private Placement Warrants for redemption as described above, management will have the option to require any holder that wishes to exercise their warrant to do so on a “cashless basis”. In determining whether to require all holders to exercise their Private Placement Warrants on a “cashless basis,” the Company will consider, among other factors, the cash position, the number of Private Placement Warrants that are outstanding and the dilutive effect on the stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the Private Placement Warrants. If the Company takes advantage of this option, all holders of the Private Placement Warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
NOTE 8. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).
16
ESH ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(UNAUDITED)
At September 30, 2024 and December 31, 2023, assets
held in the Trust Account were comprised of $
| September 30, | December 31, | |||||||||||
| Description | Level | 2024 | 2023 | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account – U.S. Treasury Securities Money Market Fund | 1 | $ | $ | |||||||||
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the condensed balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On November 5, 2024, the Company filed a Proxy Statement seeking to obtain stockholder approval, among other things, approval of the Extension Amendment Proposal — to amend the Company’s amended and restated certificate of incorporation, as amended, to extend the date by which the Company has to consummate a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses for up to 12 additional one-month periods after December 16, 2024 (and ultimately no later than December 16, 2025). The scheduled meeting of stockholders to vote on the proposals stated within the Proxy Statement will be held on December 3, 2024.
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to ESH Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to ESH Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Initial Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Initial Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on November 17, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities. We intend to effectuate the Initial Business Combination using cash from the proceeds of the IPO and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an Initial Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from November 17, 2021 (inception) through September 30, 2024 were organizational activities, those necessary to prepare for the IPO, described below, and identifying a target company for the Initial Business Combination. We do not expect to generate any operating revenues until after the completion of the Initial Business Combination. We generate non-operating income in the form of interest income on investments held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2024, we had a net income of $1,059,413 , which consists of interest income on investments held in the Trust Account of $1,588,812, offset by operating costs of $156,771, provision for income taxes of $322,628, and franchise tax expense of $50,000.
18
For the three months ended September 30, 2023, we had a net income of $898,220, which consists of interest income on investments held in the Trust Account of $1,522,943, offset by operating costs of $192,915, provision for income taxes of $381,808, and franchise tax expense of $50,000.
For the nine months ended September 30, 2024, we had a net income of $3,218,561, which consists of interest income on investments held in the Trust Account of $4,724,702, offset by operating costs of $550,758, provision for income taxes of $804,765, and franchise tax expense of $150,618.
For the nine months ended September 30, 2023, we had a net income of $910,249, which consists of interest income on investments held in the Trust Account of $1,700,010, offset by operating costs of $235,785, provision for income taxes of $401,037, and franchise tax expense of $152,939.
Liquidity and Capital Resources
On June 16, 2023, we consummated the IPO of 11,500,000 Units at $10.00 per Unit, which includes the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at $10.00 per Unit, generating gross proceeds of $115,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 7,470,000 Private Placement Warrants at a price of $1.00 per warrant, in a private placement to the Sponsor and I-Bankers Securities, Inc. and Dawson James, generating gross proceeds of $7,470,000.
Following the IPO, the full exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $116,725,000 ($10.15 per Unit) was placed in the Trust Account. We incurred $5,368,092 in IPO related costs, consisting of $2,300,000 of cash underwriting discount, $2,239,466 fair value of Representative Shares, and $828,626 of other offering costs.
For the nine months ended September 30, 2024, cash used in operating activities was $1,183,275. Net income of $3,218,561 was affected by interest earned on investments held in the Trust Account of $4,724,702. Changes in operating assets and liabilities provided $322,866 of cash for operating activities.
For the nine months ended September 30, 2023, cash used in operating activities was $707,205. Net income of $910,249 was affected by interest earned on investments held in the Trust Account of $1,700,010. Changes in operating assets and liabilities provided $82,556 of cash for operating activities.
As of September 30, 2024, we had investments held in the Trust Account of $123,794,068 (including $7,069,068 of interest income) consisting of U.S. Treasury securities. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2024, we have withdrawn $931,000 interest earned from the Trust Account of which $843,149 was used to pay taxes.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete the Initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete the Initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2024, we had cash of $1,460,218. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete the Initial Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with the Initial Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete the Initial Business Combination, we would repay such loaned amounts. In the event that the Initial Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant, at the option of the lender. The warrants would be identical to the Private Placement Warrants.
19
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating the Initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to the Initial Business Combination. Moreover, we may need to obtain additional financing either to complete the Initial Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of the Initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Initial Business Combination.
We have determined that mandatory liquidation, should the Initial Business Combination not occur by December 16, 2024, and potential subsequent dissolution, raise substantial doubt about our ability to continue as a going concern for a reasonable period of time which is considered to be one year from the date of the issuance of the financial statements. The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of one of our officers a monthly fee of $5,000 for office space, utilities, secretarial support and other administrative and consulting services. We began incurring these fees on June 13, 2023 and will continue to incur these fees monthly until the earlier of the completion of the Initial Business Combination and our liquidation.
In addition, the Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential partner businesses and performing due diligence on suitable Initial Business Combinations. Any such payments prior to an Initial Business Combination will be made using funds held outside the Trust Account.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or $2.3 million in the aggregate, which was paid upon the closing of the IPO.
We entered into an Initial Business Combination marketing agreement (the “Marketing Agreement”) with the underwriters, I-Bankers and Dawson James, to assist us in holding meetings with the stockholders to discuss the potential Initial Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with the Initial Business Combination, assist us in obtaining stockholder approval for the Initial Business Combination and assist us with its press releases and public filings in connection with the Initial Business Combination. Pursuant to the Marketing Agreement, we will pay I-Bankers and Dawson James, collectively, 3.5% of the gross proceeds of the IPO, or $4.03 million in the aggregate (the “Marketing Fee”). The Marketing Fee will become payable to I-Bankers and Dawson James from the amounts held in the Trust Account solely in the event that we complete an Initial Business Combination with a target introduced to us by I-Bankers.
20
Critical Accounting Policies and Estimates
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. As of September 30, 2024, we have not identified any critical accounting policies, while we have identified a critical accounting estimate below:
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified in temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2024 and December 31, 2023, 11,500,000 shares of Class A common stock are presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheets. As of September 30, 2024 and December 31, 2023, Class A common stock subject to possible redemption amounts to $122,820,627 and $119,068,570, respectively.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2024 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form 10-K filed with the SEC. As of the date of this Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On June 16, 2023, we consummated the Initial Public Offering of 11,500,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at $10.00 per Unit, generating total gross proceeds of $115,000,000. I-Bankers Securities, Inc and IB Capital LLC acted as joint book-running managers, with Dawson James Securities, Inc. acting as co-manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form S-1 (No. 333-265226). The Securities and Exchange Commission declared the registration statements effective on June 13, 2023.
Simultaneous with the consummation of the Initial Public Offering, the Sponsor, I-Bankers Securities, Inc. and Dawson James, consummated the private placement warrants of an aggregate of 7,470,000 warrants at a price of $1.00 per warrant, generating total proceeds of $7,470,000. Each Unit consists of one share of Class A common stock and one right. Each whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Of the gross proceeds received from the Initial Public Offering, the full exercise of the over-allotment option and the Private Placement Warrants, an aggregate of $116,725,000 was placed in the Trust Account.
We incurred transaction costs amounting to $5,368,092 consisting of $2,300,000 of cash underwriting discount, $2,239,466 fair value of representative shares, and $828,626 of other offering costs.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
During the three and nine months ended September
30, 2024, no director or Section 16 officer
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| (1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on June 20, 2023 and incorporated by reference herein. |
| (2) | Previously filed as an exhibit to our Quarterly Report on Form 10-Q filed on November 14, 2023 and incorporated by reference herein. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ESH Acquisition Corp. | ||
| Date: November 14, 2024 | By: | /s/ James Francis |
| Name: | James Francis | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 14, 2024 | By: | /s/ Jonathan Morris |
| Name: | Jonathan Morris | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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