UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                  

Commission File No. 001-40756

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

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). Yes ☒  No ☐

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.

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 ☒  No ☐

As of May 15, 2023, there were 1,117,022 shares of the Class A Common Stock, par value $0.0001 per share, and 3,162,500 shares of the Class B Common Stock, par value $0.0001 per share, of the Company issued and outstanding.

MINORITY EQUALITY OPPORTUNITIES ACQUISITION INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

MINORITY EQUALITY OPPORTUNITIES ACQUISITION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MINORITY EQUALITY OPPORTUNITIES ACQUISITION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MINORITY EQUALITY OPPORTUNITIES ACQUISITION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2022

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MINORITY EQUALITY OPPORTUNITIES ACQUISITION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MINORITY EQUALITY OPPORTUNITIES ACQUISITION INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Advances from target

In relation to the Business Combination with Digerati, Digerati has agreed to fund operating expenses. As of March 31, 2023 and December 31, 2023 $699,167 and $449,167, respectively, was recorded as an advance from target.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Company,” “Minority Equality Opportunities Acquisition Inc.,” “our,” “us” or “we” refer to Minority Equality Opportunities Acquisition Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Except as required by law, we assume no duty to update or revise any forward-looking statements.

Overview

We are a blank check company incorporated on February 18, 2021 as a Delaware corporation and formed 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”).

Our sponsor is Minority Equality Opportunities Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our initial public offering was declared effective on August 25, 2021. On August 30, 2021, we consummated our initial public offering (the “Initial Public Offering”) of 12,650,000 Units, which included the full exercise by the underwriters of the over-allotment option to purchase an additional 1,650,000 Units, at $10.00 per Unit, generating gross proceeds of $126,500,000. Transaction costs amounted to $8,998,713, consisting of $2,403,500 of underwriting fees, $4,554,000 of deferred underwriting fees, $586,779 of other offering costs, and $1,454,434 of the fair value of the representative’s common stock. Of the $8,998,713 aggregate transaction costs, $741,209 was allocated to expense associated with the warrant liability.

We issued 158,125 shares of Class A common stock, with a fair value of $1,454,434, to Maxim, the representative of the underwriters, which is deemed compensation by FINRA and therefore subject to a lock-up for a period of 180 days immediately following the commencement of sales of the IPO. Additionally, Maxim has agreed not to transfer, assign or sell any such shares until the completion of our initial Business Combination. In addition, Maxim has agreed (i) to waive its redemption rights with respect to such shares in connection with the completion of our initial Business Combination and (ii) to waive its rights to liquidating distributions from the trust account with respect to such shares if we fail to complete our initial Business Combination on or prior to May 30, 2023.

Simultaneously with the closing of the IPO, we consummated the sale of an aggregate of 6,027,500 warrants (the “Private Placement Warrants”) at a price of $1.00 per warrant in a private placement to our Sponsor and to Maxim Partners LLC, generating gross proceeds to us of $6,027,500. A total of 5,395,000 Private Placement Warrants were issued to the Sponsor and a total of 632,500 Private Placement Warrants were issued to Maxim Partners LLC.

Upon the closing of the Initial Public Offering and the Private Placement, an amount of $128,397,500 ($10.15 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and will only be invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to our company to pay our 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 our initial Business Combination; (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our certificate of incorporation: (i) to modify the substance or timing of our obligation to redeem 100% of the public shares if we do not complete the initial Business Combination on or prior to May 30, 2023; or (ii) with respect to any other material provision relating to stockholders’ rights or pre-Business Combination activity; and (c) the redemption of the public shares if we are unable to complete the initial Business Combination on or prior to May 30, 2023, subject to applicable law. In connection with the Extension Meeting, the holders of 11,691,103 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result of such redemptions, approximately $120.8 million (approximately $10.33 per share), representing approximately 92% of the assets held in the Trust Account prior to such redemptions, was removed from the Trust Account to pay such holders.

Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.

We will have until May 30, 2023 to complete the initial Business Combination. Pursuant to our amended and restated certificate of incorporation and the trust agreement entered into between us and Continental Stock Transfer & Trust Company, each as amended in connection with the Extension Meeting, a deposit in the amount of $83,333.33 must be made into the Trust Account for each month extended during the six month period from November 30, 2022 to May 30, 2023. Our sponsor and its affiliates or designees are not obligated to fund the trust account to extend the time for us to complete our initial Business Combination. If we are unable to complete the initial Business Combination on or prior to May 30, 2023, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, 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 us to pay the franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and the board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless if we fail to complete the initial Business Combination on or prior to May 30, 2023.

Business Combination Agreement

On August 30, 2022, we entered into the Business Combination Agreement with Digerati Technologies, Inc. (“Digerati”) and MEOA Merger Sub, Inc. (“Merger Sub”). The Business Combination Agreement and the transactions contemplated thereby were approved by the board of directors of each of our company and Digerati. The Business Combination Agreement provides for, among other things, the merger of Merger Sub with and into Digerati, with Digerati as the surviving company in the merger and, after giving effect to such merger, Digerati becoming our wholly-owned subsidiary. In addition, we will be renamed Verve Technologies Corporation upon the consummation of the Business Combination. References herein to “New Digerati” are references to our company following the closing of the Business Combination.

In accordance with the terms and subject to the conditions of the Business Combination Agreement, at the effective time of the merger contemplated by the Business Combination Agreement (the “Effective Time”), based on an implied equity value of Digerati of $71,080,810: (i) each share of our Class A common stock and Class B common stock issued and outstanding immediately prior to the Effective Time will become one share of New Digerati Common Stock; (ii) each share of the common stock of Digerati outstanding as of immediately prior to the Effective Time (which, for the avoidance of doubt, will include shares of the common stock of Digerati issued upon the exercise of those certain warrants to purchase shares of the common stock of Digerati that were issued to Post Road Special Opportunity Fund II LP and Post Road Special Opportunity Fund II Offshore LP (together, the “Post Road Warrant”) and upon the conversion of Digerati’s outstanding shares of Series B Preferred Stock and Series C Preferred Stock, which exercise and conversions shall occur prior to the Effective Time) will be automatically cancelled and extinguished and converted into a right to receive shares of New Digerati Common Stock; (iii) each share of capital stock of Merger Sub issued and outstanding as of immediately prior to the Effective Time will be automatically cancelled and extinguished and converted into one share of New Digerati Common Stock; (iv) all vested and unvested options to purchase Digerati common stock will be assumed by our company and thereafter be settled or exercisable for shares of New Digerati Common Stock; (v) each warrant to purchase shares of Digerati common stock (other than the Post Road Warrant, which shall be exercised prior to the Effective Time) will be assumed by our company and thereafter be a warrant to purchase shares of New Digerati Common Stock (provided, however, that those certain warrants to purchase up to 13,534,535 shares of the common stock of Digerati that Digerati issued to four (4) bridge lenders in November and December 2022 (the “Bridge Loan Warrants”) (although they will be assumed by our company) are not part of the implied equity value of Digerati); and (vi) each share of Digerati preferred stock that will remain outstanding after the Effective Time will be assumed by our company and thereafter be convertible into shares of New Digerati Common Stock.

On February 14, 2023, the parties to the Business Combination Agreement amended the Business Combination Agreement (the “February Amendment”) to increase the implied equity value of Digerati from $68,680,807 to $71,080,810 to give effect to the issuance by Digerati to Maxim, immediately prior to the closing of the Business Combination, of such number of shares of the common stock of Digerati as would be exchanged for an aggregate of 240,000 shares of New Digerati Common Stock upon the closing of the Business Combination as partial compensation for financial advisory services that Maxim provided to Digerati in connection with the Business Combination. The February Amendment also clarified that the shares of the common stock of Digerati underlying the Bridge Loan Warrants would not be part of the implied equity value of Digerati of $71,080,810, and it clarified that none of the shares underlying any of the convertible promissory notes of Digerati that are outstanding upon the closing of the Business Combination are part of the implied equity value of Digerati of $71,080,810.

On February 24, 2023, the parties to the Business Combination Agreement further amended the Business Combination Agreement to, among other things, extend the Termination Date (as defined in the Business Combination Agreement) from February 25, 2023 to April 28, 2023.

On February 24, 2023, the parties to the Business Combination Agreement further amended the Business Combination Agreement to, among other things, extend the Termination Date from April 28, 2023 to May 30, 2023.

The Business Combination is expected to close in the second calendar quarter of 2023, following the receipt of the required approval by our stockholders and the fulfillment of other customary closing conditions.

Recent Developments

On August 30, 2022, an affiliate of our sponsor funded an extension loan in the amount of $1,265,000 and caused such amount to be deposited into the Trust Account in order provide additional time for our company to complete an initial business combination. The loan is unsecured and non-interest bearing. If we complete an initial business combination on or prior to May 30, 2023, we will, at the option of our sponsor (or its affiliate), (i) repay the extension loan out of the proceeds of our Trust Account that are released to our company, or (ii) convert a portion or all of the loan into warrants to purchase shares of our common stock at a price of $1.00 per warrant, which warrants will be identical to the Private Placement Warrants issued to our sponsor at the time of our IPO. If we do not complete our initial business combination on or prior to May 30, 2023, we will only repay the extension loan from funds held outside of our Trust Account.

On September 3, 2021, an affiliate of our sponsor funded a working capital loan in the amount of up to $500,000. The loan is unsecured and non-interest bearing. If we complete an initial business combination on or prior to May 30, 2023, we will, at the option of our sponsor (or its affiliate), (i) repay the loan out of the proceeds of our Trust Account that are released to our company, or (ii) convert a portion or all of the loan into warrants to purchase shares of our common stock at a price of $1.00 per warrant, which warrants will be identical to the Private Placement Warrants issued to our sponsor at the time of our IPO. If we do not complete our initial business combination on or prior to May 30, 2023, we will only repay the working capital loan from funds held outside of our Trust Account.

At the Extension Meeting, our stockholders approved an amendment to our amended and restated certificate of incorporation to extend the date by which we must consummate an initial business combination from November 30, 2022 up to six (6) one-month extensions to May 30, 2023. We filed a certificate of amendment to our amended and restated certificate of incorporation on November 29, 2022 with the Secretary of State of the State of Delaware to effect such extension. As per such extension, an additional $83,333.33 must be deposited into the Trust Account for each month extended. As of the date of this report, an aggregate of $500,000 has been deposited into the Trust Account in connection with six one-month extensions. The funds for such extensions were provided by Digerati pursuant to an agreement dated November 9, 2022 between MEOA and Digerati whereby, among other things, Digerati agreed to provide up to $500,000 to be deposited into the Trust Account to extend the business combination period up to six times (for a total extension of six months from November 30, 2022). 

Liquidity, Capital Resources and Going Concern Considerations

As of March 31, 2023, we had $225,474 in cash and working capital deficit of $3,160,446.

Our liquidity needs up to March 31, 2023 had been satisfied through a capital contribution from our Sponsor of $25,000 for the founder shares and the loan under an unsecured promissory note from our Sponsor of up to $300,000. After consummation of the IPO on August 30, 2021, we had approximately $1.6 million in our operating bank account, and working capital of approximately $0.8 million. On September 3, 2021, the Sponsor agreed to provide us with loans in such amounts as may be required to fund our working capital requirements up to an aggregate of $500,000. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, provide us Working Capital Loans.

On February 28, 2022, March 21, 2022, and September 19, 2022, the Sponsor (or an affiliate of the Sponsor) agreed to loan to us $174,000, $163,000, and $163,000, respectively, as part of the Working Capital Loans. The promissory notes are non-interest bearing and payable upon consummation of our initial Business Combination. At the lender’s discretion, the promissory notes may be repayable in warrants of the post Business Combination entity at a price of $1.00 per warrant. As of March 31, 2023 and December 31, 2022, there was $500,000 and $500,000 of borrowings, respectively. We assessed the provisions of the convertible promissory notes under ASC 815-15. The derivative component of the obligations is initially valued and classified as derivative liabilities with an offset to a discount on the promissory notes. To calculate the value of the embedded derivative the Monte Carlo Model was utilized to fair value the underlying warrants and the compound option. The fair value of the conversion feature was zero at the dates of issuance and at March 31, 2023.

Based on the foregoing, management believes that we will not have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or May 30, 2023. Over this time period, we 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.

We are within 12 months of our mandatory liquidation date as of the time of filing of this Quarterly Report on Form 10-Q. In connection with our assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have until May 30, 2023 to consummate a Business Combination. It is uncertain that we will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of our company. Management has determined that insufficient working capital and the mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern.

These condensed consolidated 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.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic and the Russian military action in Ukraine and has concluded that while it is reasonably possible that the virus and/or such military action could have a negative effect on our financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of the condensed consolidated financial statements included in this report. The condensed consolidated financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty.

Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.

Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.

Results of Operations

As of March 31, 2023, we had not commenced any operations. All activity for the period from February 18, 2021 (inception) through March 31, 2023 relates to our formation and the Initial Public Offering and search for a target for our initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We 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. We expect to incur increased 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 March 31, 2023, we had net income of $11,786, which included interest income earned on cash held in Trust Account of $109,190 and change in fair value of warrant liabilities of $278,719, offset by formation and operating costs of $359,703 and provision for income tax of $16,420.

For the three months ended March 31, 2022, we had net income of $3,976,791, which included a change in fair value of warrant liabilities of $4,326,744 and interest income earned on cash held in Trust Account of $8,287, offset by formation and operating costs of $358,240.

Contractual Obligations

We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.

Administrative Services Agreement

On August 25, 2021, we entered into an Administrative Support Agreement (the “Support Agreement”) with Sphere 3D Corp. (“Sphere”), an affiliate of our Sponsor, pursuant to which we agreed that, commencing on the date that our securities were first listed on the NASDAQ Capital Market, we would pay to Sphere $10,000 per month for office space, utilities and secretarial and administrative support services. Upon the earlier of the completion of the initial Business Combination or our liquidation, we will cease paying such monthly fees. The Support Agreement was amended on May 16, 2022, at which time we and Sphere agreed that, notwithstanding anything in the Support Agreement to the contrary, the monthly payment referenced in clause (i) of the Support Agreement shall, beginning with respect to the monthly period that began on February 26, 2022 and ended on March 25, 2022, and continuing thereafter until the earlier of the consummation of our initial business combination or our liquidation, accrue without interest thereon and be due and payable on the earlier of the consummation of our initial business combination or our liquidation. The Support Agreement was further amended on January 17, 2023 to provide that we would pay to Sphere an amount equal to $100,000 to be applied against accrued payments under the Support Agreement plus up to an additional amount equal to $25,000 to be applied against any remaining accrued payments, with the balance to be applied against future fees under the Support Agreement.

Registration Rights Agreement

The holders of the founder shares, representative’s common stock, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the founder shares) will be entitled to registration rights pursuant to a registration rights agreement dated August 25, 2021, requiring us to register such securities for resale (in the case of the founder shares, only after conversion to Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. Notwithstanding the foregoing, the underwriters may not exercise their demand and “piggyback” registration rights after five and seven years after the effective date of the registration statement for the IPO and may not exercise their demand rights on more than one occasion.

Underwriting Agreement

The underwriter had a 45-day option from the date of the IPO to purchase up to an aggregate of 1,650,000 additional Units at the public offering price less the underwriting commissions to cover over-allotments, if any. On August 30, 2021, the underwriter fully exercised its over-allotment option.

The underwriter is entitled to a deferred underwriting discount of 3.6% of the gross proceeds of the Initial Public Offering, which included the exercise of the over-allotment option, or $4,554,000, held in the Trust Account upon the completion of our initial Business Combination subject to the terms of the underwriting agreement. On August 30, 2022, the Company amended the underwriting agreement to reflect a commission value equal to the product of (i) $4,554,000 and (ii) 1 minus the quotient resulting by dividing the percentage of redemptions by 2. Additionally, the payment of the deferred underwriting commission shall be paid in cash but shall be subordinate to the payments of up to $2,500,000 of Sponsor loans to the Company and up to $2,500,000 of debt repayment to other parties.

Financial Advisory Agreements

In November 2021, we entered into agreements with PGP Capital Advisors and Vaughan Capital Advisors whereby such entities would provide financial advisory services to our company. Pursuant to such agreements, we would pay monthly fees to such advisors in the aggregate amount of $25,000 and would reimburse such advisors for their out-of-pocket costs and expenses. We also agreed to pay to such advisors an aggregate success fee upon the closing of a business combination transaction equal to the sum of: (i) three percent of the transaction value of the target company in such business combination up to $100 million, plus (ii) two percent of the transaction value of the target company greater than $100 million up to $200 million, plus (iii) one percent of the transaction value of the target company above $200 million. The success fee shall be reduced by the monthly fees previously paid to the financial advisors. The financial advisors shall have the option to receive an equivalent dollar amount of warrants and/or shares of our Class A common stock in lieu of cash up to twenty percent of the success fee payable.

On August 30, 2022, we amended the agreements with our financial advisors to provide for a $40,000 retainer payment to be paid within forty-five (45) days following the amendment and to provide that if the proposed Business Combination with Digerati closes, the advisors shall be entitled to an aggregate success fee upon the closing of the Business Combination equal to two percent of the transaction value of Digerati up to $100 million, with such success fee to be reduced by the aggregate amount of all payments to the advisors prior to the closing.

Recent Accounting Pronouncements

Management does not believe that any other recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.

Critical Accounting Policies  

Offering Costs

We comply with the requirements of ASC 340-10-S99-1. Deferred offering costs consists of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related to the Public Offering.  Offering costs are allocated to the separable financial instruments to be issued in the IPO based on a relative fair value basis, compared to total proceeds received.  Upon closing of the IPO on August 30, 2021, offering costs associated with warrant liabilities were expensed, and offering costs associated with the Class A common stock were charged to temporary equity. Transaction costs amounted to $8,998,713, of which $741,209 were allocated to expense associated with the warrant liability.

Convertible Instruments

The Company accounts for its promissory notes that feature conversion options in accordance with ASC No. 815, Derivatives and Hedging Activities (“ASC No. 815”). ASC No. 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

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 either within the control of the holder or subject to possible 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 feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2023, the 958,897 shares of Class A common stock is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of our balance sheets. There was no change to redemption value at March 31, 2023 since the incurred taxes exceed the interest earned inception to date. The dissolution expense of $100,000 is not included in the redemption value of the shares subject to possible redemption since it is only taken into account in the event of our liquidation. In connection with the Extension Meeting, stockholders holding 11,691,103 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As a result of such redemptions, approximately $120.8 million (approximately $10.33 per share), representing approximately 92% of the assets held in the Trust Account prior to such redemptions, was removed from the Trust Account to pay such holders.

Net Income Per Common Stock

We have two classes of shares, Class A common stock and Class B common stock. Earnings and losses are shared pro rata between the two classes of shares. We have not considered the effect of the outstanding warrants to purchase 18,677,500 shares of Class A common stock in the calculation of diluted income per share, since their exercise is contingent upon future events. As a result, diluted net income per common stock is the same as basic net income per common stock for the periods. 

Derivative Financial Instruments

We evaluated the financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Warrant Liability

We evaluated the Public Warrants and Private Placement Warrants to be issued in the IPO (collectively, “Warrants”) in accordance with ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Equity” and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants will be recorded as derivative liabilities on the balance sheets and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the statements of operations in the period of change.

Off-Balance Sheet Arrangements

As of March 31, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Inflation

We do not believe that inflation had a material impact on our business, revenues or operating results during the period presented.

Emerging Growth Company Status

We are 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 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. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, 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 our condensed consolidated 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Item 4. Controls and Procedures.

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.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2023, 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 officer concluded that during the period covered by this report, our disclosure controls and procedures were not effective.

Specifically, management’s determination was based on the following material weaknesses which existed as of March 31, 2023. Since inception in 2021 to the present, we did not effectively segregate certain accounting duties due to the small size of our accounting staff. In addition, we restated our financial statements as of August 25, 2021 regarding the classification of redeemable Class A Shares, which constitutes a material weakness in our internal control over financial reporting. Regarding the restatement of our balance sheet included in our Form 8-K, as filed with the SEC on September 3, 2021, certain redemption provisions not solely within our control require common stock subject to possible redemption to be classified outside of permanent equity. We had previously classified a portion of the Class A common stock in permanent equity. We restated our financial statements to classify all Class A common stock as temporary equity and any related impact, as the threshold in our charter would not change the nature of the underlying shares as redeemable and thus would be required to be disclosed outside of permanent equity. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Notwithstanding the determination that our internal control over financial reporting was not effective, as of March 31, 2023, and that there were material weaknesses as identified in this Quarterly Report, we believe that our condensed consolidated financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered hereby in all material respects.

To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate and understand the nuances of the complex accounting standards that apply to our condensed consolidated financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party service providers. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2023, 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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to material litigation proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their corporate capacity.

Item 1A. Risk Factors.

Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 that was filed with the Securities and Exchange Commission on March 27, 2023 (the “2022 Form 10-K”). Other risks that we do not presently know about or that we presently believe are not material could also adversely affect us. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the 2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Sales of Unregistered Securities

None.

Use of Proceeds

On August 30, 2021, we consummated the initial public offering (the “IPO”) of 12,650,000 units, which included the full exercise of the underwriter’s option to purchase up to an additional 1,650,000 units at the initial public offering price to cover over-allotments. The units sold in the IPO and the full exercise of the over-allotment option sold at an offering price of $10.00 per unit, generating total gross proceeds of $126,500,000. Maxim Group LLC acted as sole book-running manager of the IPO. The securities in the IPO were registered under the Securities Act of 1933, as amended (the “Securities Act”), on a Registration Statement on Form S-1 (No. 333-258241) that was declared effective by the Commission on August 25, 2021 (the “IPO Registration Statement”).

Simultaneously with the closing of the IPO, we consummated the sale of 6,027,500 Private Placement Warrants to the Sponsor and to Maxim Partners LLC (5,395,000 Private Placement Warrants to the Sponsor and 632,500 Private Placement Warrants to Maxim Partners LLC) at a price of $1.00 per Private Placement Warrant, generating total gross proceeds of $6,027,500. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

Simultaneous with the closing of the IPO, we issued 158,125 shares of Class A Common Stock to the underwriter as compensation under the Underwriting Agreement (the “Representative’s Shares”). The issuance of the Representative’s Shares was registered under the Securities Act on the IPO Registration Statement.

Of the gross proceeds received from the IPO, including the full exercise of the over-allotment option, and the Private Placement Warrants, $128,397,500 was placed in the trust account.

We paid a total of $2,403,500 in underwriting discounts and commissions, excluding a deferred underwriting discount of $4,554,000, the fair value of the Representative’s Shares of $1,454,434, and $586,779 for other offering costs related to the IPO.

In connection with a special meeting of our stockholders that was held on November 29, 2022, the holders of 11,691,103 shares of our Class A Common Stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result of such redemptions, approximately $120.8 million (approximately $10.33 per share), representing approximately 92% of the assets held in the trust account prior to such redemptions, was removed from the trust account to pay such holders.

There has been no material change in the planned use of the proceeds from the IPO and the private placement as is described in the final prospectus included in the IPO Registration Statement.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

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.

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