UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-41030
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APEIRON CAPITAL INVESTMENT CORP. |
(Exact name of registrant as specified in its charter) |
Delaware |
| 86-1963522 |
(State or other jurisdiction of |
| (I.R.S. Employer |
| | |
175 Federal Street, Suite 875 |
| 02110 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (617) 279-0045 |
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units, each consisting of one share of Class A common stock and one-half of one redeemable Warrant |
|
Shares of Class A common stock, $0.0001 par value, included |
|
Redeemable Warrants included as part of the Units |
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
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.
| | | |
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) . ☐
The aggregate market value of the outstanding shares of the registrant’s Class A common stock, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the closing price for the Class A common stock on June 30, 2022, as reported on the New York Stock Exchange was $172,155,000.
As of March 29, 2023, 1,502,203 shares of Class A common stock, par value $0.0001 per share, and 4,312,500 shares of the Company’s Class B common stock, par value $0.0001 per share, of the registrant issued and outstanding.
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report (as defined below), including, without limitation, statements under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act (as defined below) and Section 21E of the Exchange Act (as defined below). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. Such statements include, but are not limited to, any statements relating to our ability to consummate any acquisition or other business combination and any other statements that are not statements of current or historical facts. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:
| ● | our ability to complete our initial business combination (as defined below), including the GIO World Health Business Combination (as defined below); |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements; |
| ● | our potential ability to obtain additional financing to complete our initial business combination; |
| ● | our pool of prospective target businesses; |
| ● | the ability of our officers and directors to generate a number of potential acquisition opportunities; |
| ● | our public securities’ potential liquidity and trading; |
| ● | the lack of a market for our securities; |
| ● | the lack of a listing on a national securities exchange for our securities; |
| ● | the use of proceeds not held in the trust account (as defined below) or available to us from interest income on the trust account balance; or |
| ● | our financial performance. |
The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Unless otherwise stated in this Report, or the context otherwise requires, references to:
| ● | “2022 Special Meeting” are to the Company’s special meeting in lieu of annual meeting of stockholders held on December 21, 2022; |
| ● | “ASC” are to the FASB (as defined below) Accounting Standards Codification; |
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| ● | “ASU” are to the FASB Accounting Standards Update; |
| ● | “amended and restated certificate of incorporation” are to our amended and restated certificate of incorporation, as amended; |
| ● | “Cantor” are to Cantor Fitzgerald & Co., the representative of the underwriters, and the sole book-running manager of our initial public offering (as defined below); |
| ● | “board of directors,” “board” or “directors” are to the board of directors of the Company (as defined below); |
| ● | “business combination” are to a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses; |
| ● | “Class A common stock” are to the shares of Class A common stock of the Company, par value $0.0001 per share; |
| ● | “Class B common stock” are to the shares of Class B common stock of the Company, par value $0.0001 per share; |
| ● | “Combination Period” are to the approximately 21-month period, from the closing of the initial public offering to August 14, 2023 (or such earlier date as determined by the board of directors), that the Company has to consummate a business combination; |
| ● | “common stock” are to the Class A common stock and the Class B common stock; |
| ● | “Company,” “our Company,” “we” or “us” are to Apeiron Capital Investment Corp., a Delaware corporation; |
| ● | “Continental” are to Continental Stock Transfer & Trust Company, trustee of our trust account and warrant agent of our public warrants (as defined below); |
| ● | “DGCL” are to the Delaware General Corporation Law; |
| ● | “DWAC System” are to the Depository Trust Company’s Deposit/Withdrawal At Custodian System; |
| ● | “Exchange Act” are to the Securities Exchange Act of 1934, as amended; |
| ● | “Extension” are to the extension approved at the 2022 Special Meeting, pursuant to which the deadline by which the Company had to complete its business combination was extended from February 12, 2023 to August 14, 2023; |
| ● | “FASB” are to the Financial Accounting Standards Board; |
| ● | “FINRA” are to the Financial Industry Regulatory Authority; |
| ● | “founder shares” are to the shares of Class B common stock initially purchased by our sponsor (as defined below) in the private placement (as defined below) and the shares of Class A common stock that will be issued upon the automatic conversion of the shares of Class B common stock at the time of our business combination as described herein (for the avoidance of doubt, such Class A common stock will not be “public shares” (as defined below)); |
| ● | “GAAP” are to the accounting principles generally accepted in the United States of America; |
| ● | “GIO World Health” are to GIO World Health, Limited, a private company formed under the laws of England and Wales; |
| ● | “GIO World Health Business Combination” are to the other agreements and transactions contemplated by the GIO World Health Business Combination Agreement (as defined below); |
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| ● | “GIO World Health Business Combination Agreement” are to the Business Combination Agreement, dated as of March 8, 2023, as it may be amended or supplemented from time to time, between the Company and GIO World Health; |
| ● | “GIO World Health Registration Statement” are to the Registration Statement on Form S-4 to be filed with the SEC (as defined below) at a future date; |
| ● | “IFRS” are to the International Financial Reporting Standards, as issued by the International Accounting Standards Board; |
| ● | “initial public offering” or “IPO” are to the initial public offering that was consummated by the Company on November 12, 2021; |
| ● | “initial stockholders” are to our sponsor and any other holders of our founder shares prior to our initial public offering (or their permitted transferees); |
| ● | “Investment Company Act” are to the Investment Company Act of 1940, as amended; |
| ● | “JOBS Act” are to the Jumpstart Our Business Startups Act of 2012; |
| ● | “management” or our “management team” are to our executive officers and directors; |
| ● | “Marcum” are to Marcum LLP, our independent registered public accounting firm; |
| ● | “NYSE” are to the New York Stock Exchange; |
| ● | “PCAOB” are to the Public Company Accounting Oversight Board (United States); |
| ● | “private placement” are to the private placement of warrants that occurred simultaneously with the closing of our initial public offering; |
| ● | “private placement warrants” are to the warrants initially issued to our sponsor and Cantor in the private placement; |
| ● | “public securities” are to our public shares, public warrants, and units (as defined below); |
| ● | “public shares” are to the shares of Class A common stock sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market); |
| ● | “public stockholders” are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” will only exist with respect to such public shares; |
| ● | “public warrants” are to the redeemable warrants sold as part of the units in our initial public offering (whether they were subscribed for in our initial public offering or purchased in the open market), to the private placement warrants if held by third parties other than our sponsor (or permitted transferees), and to any private placement warrants issued upon conversion of working capital loans (as defined below) that are sold to third parties that are not initial purchasers or executive officers or directors (or permitted transferees), in each case, following the consummation of our business combination; |
| ● | “Registration Statement” are to the Registration Statement on Form S-1 initially filed with the SEC (as defined below) on June 24, 2021, as amended, and declared effective on November 8, 2021 (File No. 333-257369); |
| ● | “Report” are to this Annual Report on Form 10-K for the fiscal year ended December 31, 2022; |
| ● | “Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002; |
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| ● | “SEC” are to the U.S. Securities and Exchange Commission; |
| ● | “Securities Act” are to the Securities Act of 1933, as amended; |
| ● | “SPACs” are to special purpose acquisition companies; |
| ● | “sponsor” are to Apeiron Capital Sponsor, LLC, a Delaware limited liability company; |
| ● | “trust account” are to the U.S.-based trust account in which a portion from the net proceeds of the sale of the units in the initial public offering and the private placement warrants was placed following the closing of the initial public offering; |
| ● | “units” are to the units sold in our initial public offering, which consist of one public share and one-half of one public warrant; and |
| ● | “working capital loans” are to funds that, in order to provide working capital or finance transaction costs in connection with a business combination, the initial stockholders or an affiliate of the initial stockholders or certain of the Company’s directors and officers may, but are not obligated to, loan the Company. |
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PART I
Item 1. Business.
Overview
We are an early-stage blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a business combination with one or more businesses. While we may pursue an initial business combination target in any stage of its corporate evolution or in any industry or sector, we have focused our search on companies in the healthcare and health science, financial technology, media, gaming and financial services (“FTMG”) and the wealth-advisory and asset management industries. Our management team has experience sourcing, acquiring, growing and monetizing companies in these industries. We believe this experience makes us well suited to identify, source, negotiate and execute an initial business combination with the ultimate goal of pursuing attractive risk-adjusted returns for our stockholders.
Initial Public Offering and Extension
On November 12, 2021, we consummated our initial public offering of 17,250,000 units. Each unit consists of one share of Class A common stock of the Company, and one-half of one redeemable warrant of the Company, with each warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per whole share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $172,500,000.
Simultaneously with the closing of the initial public offering, we completed the private sale of an aggregate of 8,200,000 warrants to our sponsor and Cantor at a purchase price of $1.00 per private placement warrant, generating gross proceeds of $8,200,000.
A total of $175,950,000, comprised of $167,750,000 of the proceeds from the initial public offering and $8,200,000 of the proceeds of the sale of the private placement warrants was placed in the trust account maintained by Continental, acting as trustee. At December 31, 2022, substantially all of the assets held in the Trust Account were held in cash.
On December 21, 2022, the Company’s stockholders approved, the Extension extending the date by which the Company must consummate its initial business combination from February 12, 2023 to August 14, 2023 (or such earlier date as determined by the board of directors). If the Company’s initial business combination is not completed by the end of the Combination Period, then the Company’s existence will terminate, and the Company will distribute the amounts in the trust account as provided in the Company’s amended and restated certificate of incorporation. In connection with the Extension, the Company’s stockholders holding 15,747,797 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As a result, $162,131,529 (approximately $10.30 per share) was removed from the trust account to pay such holders, with $716,610 of the redemptions being paid in 2023. Following such redemptions in connection with the Extension, the Company has 1,502,203 public shares outstanding.
GIO World Health Business Combination
On March 8, 2023, we entered into the GIO World Health Business Combination Agreement with GIO World Health, our sponsor, in the capacity as Purchaser Representative thereunder (the “Purchaser Representative”), certain shareholders of GIO World Health party thereto holding an aggregate of 98.703% of the issued and outstanding ordinary shares of GIO World Health (the “Signing Sellers” and together with any additional shareholders of GIO World Health who become a party to the GIO World Health Business Combination Agreement thereafter by signing a joinder agreement after the effectiveness of the registration statement for the transaction but prior to the closing of the transactions contemplated thereby, the “Sellers”); and Deven Patel, in the capacity as representative of the Sellers after the Closing for purposes of the GIO World Health Business Combination Agreement (the “Seller Representative”). The transactions contemplated by the GIO World Health Business Combination Agreement, including the issuance of our securities thereunder, are referred to herein as the “GIO World Health Business Combination”.
GIO World Health is a stem cell-based life science company with plans to distribute selective products and services globally, and may also pursue FDA approval for more advanced therapies. GIO World Health is planning to mass produce the Red Blood Cells (RBCs) from stem cells in a bioreactor to solve the blood shortage problem. Furthermore, GIO World Health also plans to provide proprietary stem cell-based therapies through their Longevity (“Anti-Aging”) clinics, which are expected to commence in the second half of 2023 with continuing expansion efforts in subsequent years. The clinics will focus initially on targeted non-U.S. locations and utilize the role of stem cells in anti-aging treatments. GIO World Health senior management have an extensive track record of having
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provided anti-aging treatments to patients outside of the U.S. Expansion to non-U.S. locations is intended to utilize local partners to help expedite corporate growth. Another stream of revenue is expected from GIO World Health’s “Active Cosmetics” line of products that leverage their stem cell technology. GIO World Health will offer a range of skin care products that will help improve vascularization to skin and healing of inflammation-injured cells. Their products will focus initially on the “Active Cosmetics” category including: anti-wrinkle, facial serum, daytime skin cream, under eye anti-wrinkle serum, high-end cream and hair vitality formulation. GIO World Health intends to seek strategic partnerships to help streamline product branding and distribution. GIO World Health also currently expects to have a revenue stream in the future to be derived from the development of a cost-effective disease-free universal donor (O negative) alternative to donor blood.
Pursuant to the GIO World Health Business Combination Agreement, upon the closing the GIO World Health Business Combination (the “Closing”), the Sellers will sell us, and we will purchase from the Sellers, all of the capital shares of GIO World Health owned by the Sellers (the “Purchased Shares”) in exchange for newly issued shares of Class A common stock. Any GIO World Health options, warrants and other convertible securities outstanding and not converted prior to the Closing will be terminated as of the Closing.
Pursuant to the terms of the GIO World Health Business Combination Agreement, the consideration to be delivered to the holders of GIO World Health ordinary shares in connection with the GIO World Health Business Combination (the “Consideration”) will be a number of newly issued shares of Class A common stock with an aggregate value equal to $250.0 million multiplied by a percentage (the “Purchased Share Percentage”) equal to (i) the total number of Purchased Shares, divided by (ii) the total number of issued and outstanding capital shares of GIO World Health, with each share of Class A common stock valued for such purposes at the price per share paid to holders of our Class A common stock who elect to redeem their shares of Class A common stock for a pro rata portion of our trust account in connection with the Closing.
In addition to the Consideration deliverable at the Closing, after the Closing, certain of the Sellers (the “Earnout Sellers”) will be entitled to receive from us additional shares of Class A Common Stock in an amount up to 54,000,000 shares multiplied by the Purchase Share Percentage (the “Earnout Shares”) in the event certain metrics are satisfied during the period commencing on the Closing and ending on the fifth anniversary of the Closing (the “Earn-Out Period”). Specifically:
| ● | in the event that, and upon the date during the Earn-Out Period on which, the volume-weighted average trading price of our Class A common stock on the principal securities exchange or securities market on which such shares are traded for any twenty trading days within any thirty consecutive trading day period (the “Trading Price”) is greater than or equal to $12.50, the Earnout Sellers will be entitled to receive an aggregate of 15,000,000 Earnout Shares multiplied by the Purchased Share Percentage; |
| ● | in the event that, and upon the date during the Earn-Out Period on which, the Trading Price is greater than or equal to $15.00, the Earnout Sellers will be entitled to receive an aggregate of 18,000,000 additional Earn-Out Shares multiplied by the Purchased Share Percentage; and |
| ● | if, at any time during the Earn-Out Period and upon the date on which, the Trading Price is greater than or equal to $17.50, the Earnout Sellers will be entitled to receive an aggregate of 21,000,000 additional Earn-Out Shares multiplied by the Purchased Share Percentage. |
For more information about the GIO World Health Business Combination, see the GIO World Health Registration Statement and our Current Report on Form 8-K filed with the SEC on March 14, 2023.
Other than as specifically discussed, this Report does not assume the closing of the GIO World Health Business Combination.
Management Team and Board of Directors
It is the job of our sponsor and management team to complete our initial business combination. Our management team is led by Joel Shulman, our Chief Executive Officer, Grant Grigorian, our Chief Financial Officer, and Eva Adosoglou, our Chief Operating Officer, who have many years of experience in the healthcare and health science, FTMG and the wealth-advisory and asset management industries, which evaluate a large array of sectors and associated companies.
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We believe our management team is well-positioned to identify and evaluate businesses within the healthcare and health science, FTMG and wealth-advisory and asset management industries that would benefit from being a public company and from access to our expertise. We believe we can achieve this mission by utilizing our team’s extensive experience in growing and operating companies within these industries as well as our broad network of contacts in these industries.
Business Strategy
Our acquisition strategy focuses broadly on the healthcare and health science and FTMG industries with an emphasis on the Financial Technology (“FinTech”) and Gaming categories. The markets are experiencing strong growth driven by the rising investment interest within the broader retail market. This domestic growth, coupled with an expanding international user base, provides potentially strong adoption rates and enhanced revenue generation.
We believe our management team has a strong combination of deal structuring and entrepreneurial growth experience to address the specific needs of our target market. Our management team’s substantial technical expertise together with its deep understanding of the underlying technology path and business adoption cycle are derived from many years of successful operating experience. The team has been involved in various private companies that have exited via IPO.
Members of our team have worked together for over 30 years around the world in roles such as founders, finance and technology executives as well as board directors. This experience has allowed our team to develop a pipeline of proprietary deal flow based upon our relationships with many C-Level executives/founders, former employees/associates, as well as deal partners across an array of high-net-worth individuals, venture capital, and private/public equity groups. We believe our management team’s experience, entrepreneurial insights, and deal flow pipeline will allow us to generate accretive value for our stakeholders over a reasonable time period.
We seek an initial business target in a high-growth industry, including financial services, FinTech, media, and gaming. Each of these categories has contributed to explosive growth in various aspects of the investment process. Popular social media platforms have grown exponentially due to issues related to the pandemic and are either directly or indirectly related to growth aspects in the investment experience. Likewise, innovative FinTech and retail platforms have been created to ease the brokerage and online trading customer experience, including a gaming component that improves customer loyalty and revenue growth. Growth in FinTech has been especially pronounced among recent entrants to the market, including retail traders who embrace active management in lieu of traditional passive indices. These new users have contributed to the rise in Robo advisory services, which is expected to grow at a compound annual growth rate of 21% by 2023. By 2023, Robo advisories are projected to hold as much as $2.5 trillion assets under management (“AUM”), representing 147 million users. The transaction value of the global mobile payments market was $3.7 trillion in 2019, and it is expected to reach a value of $12,407.5 billion by 2025, registering a compound annual growth rate of 23.8% over the forecast period 2020 – 2025.
We also seek initial business combination targets in wealth-advisory and asset management. FinTech has been instrumental to the transformation of financial services infrastructure and delivery. We believe the adaptability and innovation of FinTech makes the sector well positioned to realize growth potential. Recent data showcases that there is a wider acceptance of online financial activities among the masses. The digital payments market is the largest segment within the FinTech space and accounts for more than 80% of global FinTech revenues. The payment and settlements of FinTech provide opportunities for financial institutions to innovate and transform their offerings. The global market for financial advisory estimated at $82.3 billion in the year 2020, is projected to reach a revised size of $124.4 billion by 2027, growing at a compound annual growth rate of 6.1% over the period 2020-2027. The FinTech markets in the Asia-Pacific and Americas regions are currently the largest, with both having around 40% of the global market share.
Along with the rise in consumer users in the marketplace, significant improvements are also being made with advanced financial tools. FinTech offers solutions for Institutional IT system upgrade, accounting & tax, transfer payments, and personal finance management.
Regulatory Challenges
We are targeting established companies with existing revenues experiencing a strong growth trajectory. We expect that the target company will have a diversified customer base and is successfully selling well-developed technologies and services into new market segments created as part of the previously discussed technology trends. These companies will likely be category leaders in their
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industry segment. The ideal candidate will have capabilities that are complementary to our own, allowing us to create an entity with a flexible platform facilitating a variety of interrelated products and services.
We have leveraged and will continue to leverage our team’s relationships with experienced executive teams and VCs/private sponsors, which we believe can be enhanced with our team’s business development assistance. Our management team has extensive relationships in the entrepreneurship, FinTech, and asset management communities as well as Harvard University, University of Chicago, Babson College, and other alumni networks. These individuals have deep technical abilities and can assess market and product risk with substantial business development and operational skills to scale a business globally.
Our initial focus has been on U.S. companies, but we are also considering European, Asian and other global entities that have established a proven business model and can use capital to scale rapidly. We have utilized and will continue to utilize our team’s significant experience and relationships to work with top venture firms looking to efficiently scale their winning portfolio companies and partner with private equity firms looking to build further business value in the technology industry.
We believe our management team has a competitive advantage as a result of its experience identifying and developing emerging market disruptive leaders, entrepreneurial initiatives, and leading global technology companies. The team has strengths in company operations, business, and corporate development as well as mergers and acquisitions coupled with the application of technologies in Fortune 500 enterprise accounts. Our team has substantial deal experience and has worked cooperatively with targets and companies to develop and execute financings on a primary and secondary basis, using different parts of the capital structure and financial structuring to support dividend recapitalizations and other corporate financing strategies to maximize the returns to stakeholders.
We believe that the deep technical expertise and entrepreneurial experience in both financial technology and innovative applications will allow us to capitalize and partner with management teams looking to build companies. We believe our combined experience including technical expertise will enable us to offer public investors and target company stakeholders a differentiated approach to accelerating growth in key global markets by helping management enhance operational efficiency and scale. In the last decade, members of our management team have been in initial public offerings for multiple exchange-traded funds. They have also been involved in seeding early-stage founders and helping raise the initial Series A funding while also running the companies to access the public markets through an initial public offering. In addition, they have executed secondary offerings and recapitalization strategies to serve the specific needs and goals of founders and early investors.
Members of our management team have participated in a number of innovative technological developments, including:
| ● | Initiating live, global online video chartered financial analyst education courses (since 1998) in over 100 countries around the world along with 24/7 video streaming via a secured portal. |
| ● | Implementing simultaneous, online testing with immediate scoring and custom analytics enabling thousands of participants to calibrate strengths and target weak areas prior to a major examination |
| ● | Implementing online mortgage applications and worked with Fannie Mae, Freddie Mac, Sears Mortgage, PNC, and Rock Financial in their earliest stages. We believe this work pioneered and facilitated the later development and success of popular online mortgage companies |
Furthermore, we have extensive experience in executing mergers, acquisitions, joint ventures, and partnerships in financial services and technology. We have been involved in developing new technologies, products, and markets across multiple geographies. This has included working with and developing technology ventures and integrating them into larger enterprises. The management team also has extensive operational experience. This operational expertise includes developing strategic priorities, allocating resources aligned with these priorities, and identifying short and long-term goals and performance measurements to manage their achievement. We also have many years of financial planning experience (business planning, budgeting, cash planning, and financial controls) that maintains focus on achieving business goals and helps to ensure resources are being managed appropriately. Overall, the team is diverse and has direct experience living and working globally. We believe this diverse, comprehensive experience will result in differing ideas and perspectives that enable a more holistic analysis of opportunities.
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Business Combination Criteria
Our business combination criteria has not been limited to a particular industry or geographic sector, however, given the experience of our management team and board, we have focused our search on companies in the healthcare and health science, FTMG and wealth-advisory and asset management industries.
We have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses, including GIO World Health. We have used and will continue to use these criteria and guidelines in evaluating initial business combination opportunities, but we may decide to enter into our initial business combination with a target business that only meets some, but not all of these criteria and guidelines.
Size: We are focused on companies that alone, or through a strategic combination with another company, have a most recent enterprise valuation above $150 million. We believe at this scale we can most effectively apply the experience and resources of the management team to accelerate growth and enhance profitability.
Stage: From late stage venture through mature enterprise buyout.
Location: We are searching for attractive target acquisition opportunities globally, with an emphasis on companies in North America and Europe.
Focus: We target companies in the healthcare and health science and FTMG industries globally. Within those broader sectors, we will concentrate on companies that are aligned to the secular trends of digitization, data-centricity and broader technology adoption and positioned for strong growth that can be enhanced through partnership with our management team.
Management Capability: We target companies with strong management teams that are capable of scaling to operate successfully on a global basis. Our management team is committed to providing support, guidance and, where necessary, additional management talent to assist the target company in executing its value creation strategy and achieving its vision.
Differentiation: We are looking for potential acquisitions that have powerful competitive advantages, strong innovation capabilities and an adaptive management team committed to a positive culture grounded in strong values, including the importance of diversity and inclusion while serving the interests of a broader set of stakeholders.
Benefit from being a Public Company: We are looking for companies that can benefit greatly from becoming a public company and the associated public profile and broader access to capital.
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management team may deem relevant. In the event that we find an opportunity that has characteristics more compelling to us than the characteristics described above, we would pursue such an opportunity.
Competitive Strengths
We seek to leverage the following sources of competitive strength in seeking to achieve our business strategy:
| ● | Management team’s industry knowledge and contacts. |
| ● | Deal flow and business development resources available from our sponsor and its affiliates. |
| ● | Management team’s experience and reputation in sourcing opportunities. |
| ● | Extensive relationships within the private equity community (a likely source of deal flow). |
| ● | Management team’s demonstrated ability to create value for their stockholders. |
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| ● | Strong track record of operational excellence. |
Our Acquisition, Investment and Post-Closing Process
In evaluating prospective business combinations, we conduct a thorough due diligence review process that encompasses, among other things: an analysis of overall industry and competitive conditions, a review of historical financial and operating data, meetings with incumbent management and employees, interaction with third-parties who are industry experts, on-site inspection of facilities and assets, discussion with customers and suppliers, legal and other reviews as we deem appropriate. We also utilize the expertise of our management team and our sponsor’s and its affiliates’ resources in analyzing and evaluating operating plans, financial projections and determining the appropriate return expectations given the risk profile of the target business as well as the suitability of the target to become a public company.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers, or directors, subject to certain approvals and consents. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor, officers, or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or another independent firm that commonly renders fairness opinions that our initial business combination is fair to us from a financial point of view.
Our Business Combination Process
Members of our management team may directly or indirectly own our founders shares, common stock and/or private placement warrants following our initial public offering, and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors were to be included by a target business as a condition to any agreement with respect to our initial business combination.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations to present the opportunity to such entity, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We believe, however, that the fiduciary duties or contractual obligations of our officers or directors will not materially affect our ability to complete our initial business combination, as we believe any such opportunities presented would be smaller than what we are interested in, in different fields than what we would be interested in, or that our obligations are to entities that are not themselves in the business of engaging in business combinations. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our officers and directors may become an officer or director of another SPAC with a class of securities intended to be registered under the Exchange Act, even before we have entered into a definitive agreement regarding our initial business combination.
Initial Business Combination
We anticipate structuring our initial business combination either (i) in such a way so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other reasons. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this
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case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination.
For more information on the GIO World Health Business Combination, please see “GIO World Health Business Combination” above.
Status as a Public Company
We believe our structure as a public company makes us an attractive business combination partner to target businesses. As a public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination with us. Following an initial business combination, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. A target business can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our shares of Class A common stock (or shares of a new holding company) or for a combination of our shares of Class A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers.
Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more expeditious and cost effective method to becoming a public company than the typical initial public offering. The typical initial public offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road show efforts that may not be present to the same extent in connection with an initial business combination with us.
Furthermore, once a proposed initial business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business combination, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our structure and our management team’s backgrounds make us an attractive business partner, some potential target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed initial business combination, negatively.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to 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 our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) (a) December 31, 2026, (b) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, or (c) the last day of the fiscal year in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
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Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the prior June 30th, or (2) our annual revenues exceed $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30.
Financial Position
With funds available for an initial business combination, after payment of $9,075,000 of deferred underwriting fees before fees and expenses associated with initial business combination, of $16,182,549 as of December 31, 2022, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, there can be no assurance that third party financing will be available to us.
Effecting Our Initial Business Combination
We are not presently engaged in, and we will not engage in, any operations until we consummate our initial business combination. We will effectuate our initial business combination using cash from the proceeds of our initial public offering and the private placement of the private placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of our initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. In addition, we are targeting businesses larger than we could acquire with the net proceeds of our initial public offering and the sale of the private placement warrants, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously with the completion of our initial business combination. In the case of an initial business combination funded with assets other than the trust account assets, our proxy materials or tender offer documents disclosing the initial business combination would disclose the terms of the financing and, only if required by law, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with our initial business combination.
Sources of Target Businesses
Target business candidates have been and may continue to be brought to our attention from various unaffiliated sources, including investment bankers and investment professionals. Target businesses have been and may continue to be brought to our attention by such unaffiliated sources as a result of being solicited by us by calls or mailings. These sources may also continue to introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read our prospectus in connection with our initial public offering or this Report and know what types of businesses we are targeting. Our officers and directors, as well as our sponsor and their affiliates, may also continue to bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we may continue to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors and our sponsor and their respective industry and business contacts as well as their affiliates. We may engage the services of professional firms or other individuals that specialize in business acquisitions, in which event we may pay a finder’s fee, consulting fee, advisory fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue.
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Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors, or any entity with which our sponsor or officers are affiliated, be paid any finder’s fee, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation by the company prior to, or in connection with any services rendered for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). Although none of our sponsor, executive officers or directors, or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated initial business combination, we do not have a policy that prohibits our sponsor, executive officers or directors, or any of their respective affiliates, from negotiating for the reimbursement of out-of-pocket expenses by a target business. We have agreed to pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support, and we reimburse our sponsor for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination. Some of our officers and directors may enter into employment or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an initial business combination candidate.
We are not prohibited from pursuing an initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors or making the initial business combination through a joint venture or other form of shared ownership with our sponsor, officers or directors. While GIO World Health is not affiliated with our sponsor, executive officer or directors, in the event we do not consummate the GIO World Health Business Combination, and seek to complete our initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm or from another independent entity that commonly renders valuation opinions that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
Potential target companies with whom we may engage in discussions after the closing of the offering may have had prior discussions with other blank check companies, bankers in the industry and/or other professional advisors including blank check companies with which our executive officers or board of directors were affiliated. We may pursue transactions with such potential targets (i) if such other blank check companies are no longer pursuing transactions with such potential targets, (ii) if we become aware that such potential targets are interested in a potential initial business combination with us and (iii) if we believe such transactions would be attractive to our stockholders. If any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
Selection of a Target Business and Structuring of our Initial Business Combination
We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management has virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we are not permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations. We anticipate structuring our initial business combination either (i) in such a way so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination.
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To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, we are focusing our search for an initial business combination in a single industry. By completing our initial business combination with only a single entity, our lack of diversification may:
| ● | subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and |
| ● | cause us to depend on the marketing and sale of a single product or limited number of products or services. |
Limited Ability to Evaluate the Target’s Management Team
Although we closely scrutinize the management of a prospective target business, including the management team of GIO World Health, when evaluating the desirability of effecting our initial business combination with that business and plan to continue to do so if the GIO World Health Business Combination is not consummated and we seek other business combination opportunities, our assessment of the target business’ management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following an initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek stockholder approval for
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business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
Type of Transaction |
| Whether |
Purchase of assets | | No |
Purchase of stock of target not involving a merger with the company | | No |
Merger of target into a subsidiary of the company | | No |
Merger of the company with a target | | Yes |
For more information on the GIO World Health Business Combination, please see “GIO World Health Business Combination” above.
Permitted Purchases of our Securities
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers or their affiliates may purchase shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers or their affiliates may purchase in such transactions, subject to compliance with applicable law. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination.
The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our sponsor, officers, directors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such stockholder has already submitted a proxy with respect to our initial business combination. Our sponsor, officers, directors or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our sponsor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors
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and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchases are subject to such reporting requirements.
Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination, such as the GIO World Health Business Combination, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. As of December 31, 2022, the amount in the trust account was approximately $10.30 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. The redemption rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination.
For more information on the GIO World Health Business Combination, please see “GIO World Health Business Combination” above.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our 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 we will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. If we structure an initial business combination with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed initial business combination. We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or we choose to seek stockholder approval for business or other legal reasons.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
| ● | conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and |
| ● | file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. |
Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, we will not redeem any public shares unless our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
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If, however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
| ● | conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and |
| ● | file proxy materials with the SEC. |
In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial stockholders will count toward this quorum and pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote their founder shares and any public shares purchased during or after our initial public offering (including in open market and privately negotiated transactions) in favor of our initial business combination. As a result of the aggregate redemptions of public shares in connection with the Extension and the number of outstanding founder shares held by our initial stockholders, unless otherwise required under applicable law, we will not require the vote of the holders of any of the public shares sold in our initial public offering to be voted in favor of an initial business combination in order to have our initial business combination approved, as the founder shares now constitute more than a majority of the total outstanding shares of common stock. We intend to give not less than 10 days nor more than 60 days prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction.
Our amended and restated certificate of incorporation provides that we may not redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our 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 seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our initial public offering (the “Excess Shares”). Such restriction shall also be applicable to our affiliates. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding an aggregate of 15% or more of the shares sold in our initial public offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in our initial public offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination,
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particularly in connection with an initial business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Tendering Stock Certificates in Connection with Redemption Rights
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the meeting held to approve a proposed initial business combination by a date set forth in the proxy materials mailed to such holders or to deliver their shares to the transfer agent electronically using the DWAC System, at the holder’s option. The proxy materials that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have from the time we send out our proxy materials until the date set forth in such proxy materials to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $100.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial business combination, and a holder could simply vote against a proposed initial business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the initial business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the initial business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion of the initial business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the initial business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the proxy materials. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If our initial proposed initial business combination is not completed, we may continue to try to complete an initial business combination with a different target until August 14, 2023.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated certificate of incorporation provides that we will have until August 14, 2023, or approximately 21 months from the closing of our initial public offering, to complete our initial business combination. If we do not complete our initial business combination within such 15-month period, 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 our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of
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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 our 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 our warrants, which will expire worthless if we fail to complete our initial business combination by the end of the Combination Period.
Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination by the end of the Combination Period. However, if our sponsor, officers or directors acquire public shares in or after our initial public offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination by the end of the Combination Period.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by the end of the Combination Period or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment 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 our taxes divided by the number of then outstanding public shares. However, we may not redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.
If we do not consummate our initial business combination by the deadline set forth in our amended and restated certificate of incorporation, we expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $1,094,384 of proceeds held outside the trust account as of December 31, 2022, although we cannot assure you that there will be sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay taxes on interest income earned on the trust account balance, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our initial public offering and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.33. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.33. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we have sought and will continue to seek to have all vendors, service providers (other than our independent auditor), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver
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include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. Marcum, our independent registered public accounting firm, and the underwriters of our initial public offering will not execute agreements with us waiving such claims to the monies held in the trust account.
In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.20 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.20 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the trust account are reduced below (i) $10.20 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot assure you that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.20 per public share.
We seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. As of December 31, 2022, we have access to $16,182,549 from the proceeds of our initial public offering with which to pay any such potential claims. In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by the end of the Combination Period may be considered a liquidating distribution under Delaware law. Delaware law provides that if a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by the end of the Combination Period, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition
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of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we do not complete our initial business combination by the end of the Combination Period, 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 our 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 our 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. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following the end of the Combination Period and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers and auditors) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we have sought and will continue to seek to have all vendors, service providers (other than our independent auditor), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.20 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.30 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a stockholder vote to amend any provisions of our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to offer redemption rights in connection with any proposed initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by the end of the Combination Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, and (iii) the redemption of all of our public shares if we do not complete our business combination by the end of the Combination Period, subject to applicable law. In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the initial business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights as described above. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote.
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Competition
In identifying, evaluating and selecting a target business for our initial business combination, such as the GIO World Health Business Combination, we have encountered, and may continue to encounter, competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic business combinations. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses is limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Employees
We currently have 3 officers. These individuals are not obligated to devote any specific number of hours to our matters but they devote as much of their time as they deem necessary to our affairs and intend to continue doing so until we have completed our initial business combination. The amount of time they devote in any time period varies based on whether a target business has been selected for our initial business combination and the stage of the initial business combination process we are in. We do not intend to have any full-time employees prior to the completion of our initial business combination.
Periodic Reporting and Financial Information
Our units, Class A common stock and warrants are registered under the Exchange Act, and we have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, this Report contains financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential targets we may conduct an initial business combination with because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential business combination candidate will have financial statements prepared in accordance with GAAP or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.
We are required to evaluate our internal control procedures for the fiscal year ending December 31, 2022 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following November 12, 2026, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
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Item 1A. Risk Factors.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, below is a partial list of material risks, uncertainties and other factors that could have a material effect on the Company and its operations:
| ● | we are a blank check company with no revenue or basis to evaluate our ability to select a suitable business target; |
| ● | we may not be able to complete the GIO World Health Business Combination or any other our initial business combination in the prescribed time frame; |
| ● | our expectations around the performance of a prospective target business or businesses, such as GIO World Health, may not be realized; |
| ● | we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination; |
| ● | our officers and directors may have difficulties allocating their time between the Company and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination; |
| ● | we may not be able to obtain additional financing to complete our initial business combination, including the GIO World Health Business Combination, or reduce the number of stockholders requesting redemption; |
| ● | we may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time; |
| ● | you may not be given the opportunity to choose the initial business target or to vote on the initial business combination; |
| ● | trust account funds may not be protected against third party claims or bankruptcy; |
| ● | an active market for our public securities may not develop and you will have limited liquidity and trading; |
| ● | our securities are quoted on the OTC Pink marketplace and are thinly traded and have substantially less liquidity than the securities of many other SPACs, which may limit the ability of our stockholders to sell their securities and may increase the price volatility of our securities; |
| ● | the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination; |
| ● | our financial performance following a business combination with an entity may be negatively affected by their lack an established record of revenue, cash flows and experienced management; |
| ● | there may be more competition to find an attractive target for an initial business combination, which could increase the costs associated with completing our initial business combination and may result in our inability to find a suitable target; |
| ● | changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination; |
| ● | we may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability; |
| ● | we may engage one or more of our underwriters or one of their respective affiliates to provide additional services to us after the initial public offering, which may include acting as a financial advisor in connection with an initial business combination |
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| or as placement agent in connection with a related financing transaction. Our underwriters are entitled to receive deferred underwriting commissions that will be released from the trust account only upon completion of an initial business combination. These financial incentives may cause them to have potential conflicts of interest in rendering any such additional services to us after the initial public offering, including, for example, in connection with the sourcing and consummation of an initial business combination; |
| ● | we may attempt to complete our initial business combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all; |
| ● | our warrants are accounted for as derivative liabilities and are recorded at fair value upon issuance with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock or may make it more difficult for us to consummate an initial business combination; |
| ● | since our initial stockholders will lose their entire investment in us if our initial business combination is not completed (other than with respect to any public shares they may acquire during or after the initial public offering), and because our sponsor, officers and directors may profit substantially even under circumstances in which our public stockholders would experience losses in connection with their investment, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination; |
| ● | changes in laws or regulations or how such laws or regulations are interpreted or applied, or a failure to comply with any laws or regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations; |
| ● | the value of the founder shares following completion of our initial business combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of our common stock at such time is substantially less than $10.30 per share; |
| ● | resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business combination within the Combination Period, our public stockholders may receive only approximately $10.30 per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless; |
| ● | in March 2022, the SEC issued proposed rules relating to certain activities of SPACs. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with such proposals may increase our costs and the time needed to complete our initial business combination and may constrain the circumstances under which we could complete an initial business combination. The need for compliance with such proposals may cause us to liquidate the funds in the trust account or liquidate the Company at an earlier time than we might otherwise choose; |
| ● | if we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted. As a result, in such circumstances, unless we are able to modify our activities so that we would not be deemed an investment company, we may abandon our efforts to complete an initial business combination and instead liquidate the Company; |
| ● | to mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, we may, at any time, instruct the trustee to liquidate the investments held in the trust account and instead to hold the funds in the trust account in cash items until the earlier of the consummation of our initial business combination or our liquidation. As a result, following the liquidation of investments in the trust account, we would likely receive minimal interest, if any, on the funds held in the trust account, which would likely reduce the dollar amount our public stockholders would receive upon any redemption or liquidation of the Company; |
| ● | we may not be able to complete an initial business combination with certain potential target companies if a proposed transaction with the target company may be subject to review or approval by regulatory authorities pursuant to certain U.S. or foreign laws or regulations, including the Committee on Foreign Investment in the United States; |
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| ● | recent increases in inflation and interest rates in the United States and elsewhere could make it more difficult for us to consummate an initial business combination; |
| ● | military conflict in Ukraine or elsewhere may lead to increased price volatility for publicly traded securities, which could make it more difficult for us to consummate an initial business combination; |
| ● | a 1% U.S. federal excise tax may be imposed on us in connection with our redemptions of shares in connection with a business combination or other stockholder vote pursuant to which stockholders would have a right to submit their shares for redemption; |
| ● | If the funds held outside of our trust account are insufficient to allow us to operate until at least August 14, 2023, our ability to fund our search for a target business or businesses or complete an initial business combination may be adversely affected; and |
| ● | our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, since we will cease all operations except for the purpose of liquidating if we are unable to complete an initial business combination by August 14, 2023. |
Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations, or our prospects.
The funds in our operating account and our trust account are held in banks or other financial institutions. Our cash held in non-interest bearing and interest-bearing accounts would exceed any applicable Federal Deposit Insurance Corporation (“FDIC”) insurance limits. Should events, including limited liquidity, defaults, non-performance or other adverse developments occur with respect to the banks or other financial institutions that hold our funds, or that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, our liquidity may be adversely affected. For example, on March 10, 2023, the FDIC announced that Silicon Valley Bank had been closed by the California Department of Financial Protection and Innovation. Although we did not have any funds in Silicon Valley Bank or other institutions that have been closed, we cannot guarantee that the banks or other financial institutions that hold our funds will not experience similar issues.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on terms favorable to us in connection with a potential business combination, or at all, and could have material adverse impacts on our liquidity, our business, financial condition or results of operations, and our prospects. Our business may be adversely impacted by these developments in ways that we cannot predict at this time, there may be additional risks that we have not yet identified, and we cannot guarantee that we will be able to avoid negative consequences directly or indirectly from any failure of one or more banks or other financial institutions.
For the complete list of risks relating to our operations, see the section titled “Risk Factors” contained in our (i) Registration Statement, (ii) Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, June 30, 2022 and September 30, 2022, as filed with the SEC on May 9, 2022, August 8, 2022 and November 7, 2022, respectively, and (iii) Definitive Proxy Statement on Schedule 14A, as filed with the SEC on December 1, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial business combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
For risks related to GIO World Health and the GIO World Health Business Combination, please see the GIO World Health Registration Statement once filed.
Item 1B. Unresolved Staff Comments.
Not applicable.
21
Item 2. Properties.
Our executive offices are located at 175 Federal Street, Suite 875, Boston, Massachusetts 02110, and our telephone number is (617) 279-0045. The cost for our use of this space is included in the $10,000 per month fee we pay to our sponsor for office space, administrative and shared personnel support services. We consider our current office space adequate for our current operations.
Item 3. Legal Proceedings.
To the knowledge of our management team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 4. Mine Safety Disclosures.
Not applicable.
22
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
| (a) | Market Information |
Following our IPO, our units, public shares and public warrants were each traded on the NYSE under the symbols APN U, APN and APN W, respectively. Our units commenced public trading on November 9, 2021, and our public shares and public warrants commenced separate public trading on December 30, 2021.
On January 31, 2023, we received a written notice from the staff of the NYSE stating that we were not in compliance with Section 802.01B of the NYSE Listed Company Manual, which requires a listed company to maintain an average aggregate global market capitalization attributable to its publicly-held shares over a consecutive 30 trading day period of at least $40,000,000. Consequently, the public securities were delisted from the NYSE.
Following the delisting, our units, public shares and public warrants commenced trading on the OTC Pink marketplace under the symbols APNU, APNC and APNW, respectively. The OTC Pink is a significantly more limited market than the NYSE, and quotations on the OTC Pink may result in a less liquid market available for existing and potential stockholders to trade the public securities and could adversely affect the trading prices of the public securities.
| (b) | Holders |
On March 29, 2023, there was one holder of record of our units, one holder of record of shares of our Class A common stock and three holders of record of our warrants.
| (c) | Dividends |
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. The payment of any cash dividends subsequent to our initial business combination will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
| (d) | Securities Authorized for Issuance Under Equity Compensation Plans |
None.
| (e) | Recent Sales of Unregistered Securities |
None.
| (f) | Use of Proceeds from the Initial Public Offering |
For a description of the use of proceeds generated in our initial public offering and private placement, see Part II, Item 2 of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, as filed with the SEC on December 23, 2021. There has been no material change in the planned use of proceeds from our initial public offering and private placement as described in the Registration Statement. Our specific investments in our trust account may change from time to time.
| (g) | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
On December 21, 2022, we held the 2022 Special Meeting and approved, among other things, the Extension, which extended the date by which we must consummate a business combination from February 12, 2023 (which was 15 months from the closing of the initial public offering) to August 14, 2023 (or such earlier date as determined by the board). In connection with the Extension,
23
stockholders holding 15,747,797 public shares exercised their right to redeem such shares for a pro rata portion of the trust account. We paid cash in the aggregate amount of $162,131,529, or approximately $10.30 per share, to redeeming stockholders in connection with such redemptions, with $716,610 of the redemptions being paid in 2023.
The following table contains monthly information about the repurchases of our equity securities for the three months ended December 31, 2022:
| | | | | | | | | |
| | |
| | |
| |
| (d) Maximum |
| | | | | | | | | number (or |
| | | | | | | (c) Total number | | approximate dollar |
| | (a) Total | | | | | of shares (or units) | | value) of shares (or |
| | number of | | | | | purchased as part | | units) that may yet |
| | shares (or | | (b) Average price | | of publicly | | be purchased under | |
| | units) | | paid per share (or | | announced plans | | the plans or | |
Period |
| purchased |
| unit) |
| or programs |
| programs | |
October 1 – October 31, 2022 |
| — |
| | — |
| — |
| — |
| | | | | | | | | |
November 1 – November 30, 2022 |
| — |
| | — |
| — |
| — |
| | | | | | | | | |
December 1 – December 31, 2022 |
| 15,747,797 | | $ | 10.30 |
| — |
| — |
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward- looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the 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. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Report.
Overview
We are a blank check company formed under the laws of the State of Delaware on December 28, 2020 for the purpose of effectuating a business combination with one or more businesses. We intend to effectuate our business combination using cash from the proceeds of our initial public offering and the sale of the private placement warrants, our securities, debt or a combination of cash, securities and our debt. The Company originally had 15 months from the closing of the Initial Public Offering, or until February 12, 2023, to complete a Business Combination.
On December 21, 2022, we held the 2022 Special Meeting, at which our stockholders approved an amendment to our amended and restated certificate of incorporation to extend the date by which we must consummate its initial business combination from February 12, 2023 to August 14, 2023. In connection with the Extension, stockholders holding 15,747,797 shares of Class A common stock exercised their right to redeem their shares for a pro rata portion of the funds in the trust account. Following the redemptions, we have 1,502,203 public shares outstanding. This resulted in approximately $162,131,529 being paid from the trust account, with $716,610 of the redemptions being paid in 2023.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Recent Developments
Following our IPO, our units, public shares and public warrants were each traded on the NYSE under the symbols APN U, APN and APN W, respectively. Our units commenced public trading on November 9, 2021, and our public shares and public warrants commenced separate public trading on December 30, 2021.
On January 31, 2023, we received a written notice from the staff of the NYSE stating that we were not in compliance with Section 802.01B of the NYSE Listed Company Manual, which requires a listed company to maintain an average aggregate global market capitalization attributable to its publicly-held shares over a consecutive 30 trading day period of at least $40,000,000. Consequently, the public securities were delisted from the NYSE.
Following the delisting, our units, public shares and public warrants commenced trading on the OTC Pink marketplace under the symbols APNU, APNC and APNW, respectively. The OTC Pink is a significantly more limited market than the NYSE, and quotations on the OTC Pink may result in a less liquid market available for existing and potential stockholders to trade the public securities and could adversely affect the trading prices of the public securities.
On March 8, 2023, we entered into the GIO World Health Business Combination Agreement with GIO World Health, the Purchaser Representative, the Signing Sellers, and the Seller Representative, pursuant to which, subject to the terms and conditions set
25
forth therein, we will acquire all of the issued and outstanding shares of GIO World Health owned by the Sellers in exchange for the Sellers receiving shares of our Class A common stock, resulting in GIO World Health becoming our subsidiary.
GIO World Health is a stem cell-based life science company with plans to distribute selective products and services globally, and may also pursue FDA approval for more advanced therapies. GIO World Health is planning to mass produce the Red Blood Cells (RBCs) from stem cells in a bioreactor to solve the blood shortage problem. Furthermore, GIO World Health also plans to provide proprietary stem cell-based therapies through their Longevity (“Anti-Aging”) clinics, which are expected to commence in the second half of 2023 with continuing expansion efforts in subsequent years. The clinics will focus initially on targeted non-U.S. locations and utilize the role of stem cells in anti-aging treatments. GIO World Health senior management have an extensive track record of having provided anti-aging treatments to patients outside of the U.S. Expansion to non-U.S. locations is intended to utilize local partners to help expedite corporate growth. Another stream of revenue is expected from GIO World Health’s “Active Cosmetics” line of products that leverage their stem cell technology. GIO World Health will offer a range of skin care products that will help improve vascularization to skin and healing of inflammation-injured cells. Their products will focus initially on the “Active Cosmetics” category including: anti-wrinkle, facial serum, daytime skin cream, under eye anti-wrinkle serum, high-end cream and hair vitality formulation. GIO World Health intends to seek strategic partnerships to help streamline product branding and distribution. GIO World Health also currently expects to have a revenue stream in the future to be derived from the development of a cost-effective disease-free universal donor (O negative) alternative to donor blood.
For more information on GIO World Health and the GIO World Health Business Combination, please see “Item 1. Business”.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from December 28, 2020 (inception) through December 31, 2022 were organizational activities, those necessary to prepare for our initial public offering, described below, and identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our business combination. We generate non-operating income in the form of interest income on marketable securities 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 in connection with searching for, and completing, a business combination.
For the year ended December 31, 2022, we had net income of $6,582,898, which consisted of the change in fair value of warrant liabilities of $6,057,000 and interest earned on marketable securities held in the trust account of $2,318,006, offset by operating and formation costs of $1,203,615 and provision for income taxes of $588,493.
For the period from January 1, 2021 (commencement of operations) through December 31, 2021, we had net income of $486,473, which consisted of the change in fair value of warrant liabilities of $1,087,250 and interest earned on marketable securities held in the trust account of $2,082, offset by transaction costs associated with our initial public offering of $368,544 and operating and formation costs of $234,315.
Liquidity and Capital Resources
On November 12, 2021, we consummated our initial public offering of 17,250,000 units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 2,250,000 units, at $10.00 per unit, generating gross proceeds of $172,500,000. Simultaneously with the closing of our initial public offering, we consummated the sale of 8,200,000 private placement warrants at a price of $1.00 per private placement warrant in the private placement to the sponsor and Cantor, the representative of the underwriters of our initial public offering (the “Underwriters”), generating gross proceeds of $8,200,000.
Following our initial public offering on November 12, 2021, including the full exercise of the over-allotment option, and the private placement, a total of $175,950,000 (or $10.20 per unit) was placed in the trust account. We incurred $12,644,008 in our initial public offering related costs, including $3,000,000 of underwriting fees, net of reimbursement, net of reimbursement, $9,075,000 of deferred underwriting fees, and $569,008 of other offering costs.
For the year ended December 31, 2022, cash used in operating activities was $329,808. Net income of $6,582,898 was affected by the change in fair value of warrant liabilities of $6,057,000 and interest earned on marketable securities held in the trust account of $2,318,006. Changes in operating assets and liabilities used $1,462,300 of cash for operating activities.
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For the period from January 1, 2021 (commencement of operations) through December 31, 2021, cash used in operating activities was $454,420. Net income of $486,473 was affected by the change in fair value of warrant liabilities of $1,087,250, interest earned on marketable securities held in the trust account of $2,082, and transaction costs associated with the initial public offering of $368,544. Changes in operating assets and liabilities used $220,105 of cash for operating activities.
As of December 31, 2022, we had cash held in the trust account of $16,182,549 (including approximately $1,647,468 of interest earned). Interest income on the balance in the trust account may be used by us to pay taxes. During the year ended December 31, 2022, we had withdrawn $672,620 from the trust account to pay franchise and income taxes and paid $161,414,919 for redemptions in connection with the Extension.
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 deferred underwriting commissions and income taxes payable), to complete our business combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our 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 December 31, 2022, we had cash of $1,094,384. 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 a business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our 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 a business combination, we would repay such loaned amounts. In the event that a 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 working capital loans may be convertible into warrants of the post-business combination entity at a price of $1.00 per warrant. The warrants would be identical to the private placement warrants.
We may need to raise additional capital through loans or additional investments from our sponsor, stockholders, officers, directors, or third parties. Our officers, directors and sponsor may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through one year from the date of the financial statements contained elsewhere in this Report if a business combination is not consummated. The financial statements contained elsewhere in this Report 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.
In connection with our assessment of going concern considerations in accordance with ASU Topic 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we have until August 14, 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 the Company. Management has determined that the liquidity condition and mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after August 14, 2023.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations or other long-term liabilities, other than an agreement to pay our sponsor a total of up to $10,000 per month for office space, utilities and secretarial and administrative support. We began incurring these fees on November 8, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation.
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The underwriters of our initial public offering are entitled to a deferred fee of (i) $0.50 per unit of the initial 15,000,000 units sold in our initial public offering, or $7,500,000 in the aggregate, and (ii) $0.70 per unit sold pursuant to the over-allotment option, or up to an aggregate of $1,575,000. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP 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 financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the warrants issued in connection with our initial public offering in accordance with the guidance contained in ASC Topic 815-40-15-7D, “Derivatives and Hedging,” under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations.
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 ASC Topic 480, “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as 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, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of our balance sheets.
Net Income per Common Share
Net income per common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. We apply the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
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 financial statements.
Factors That May Adversely Affect our Results of Operations
Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, the ongoing effects of the COVID-19 pandemic, including resurgences and the emergence of new variants, and geopolitical instability, such as the military conflict in Ukraine. We 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 our business and our ability to complete an initial business combination.
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Item 7A. 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 8. Financial Statements and Supplementary Data.
Reference is made to pages F-1 through F-20 comprising a portion of this Report, which are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), 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 Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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Management’s Annual Report on Internal Controls over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2022. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did maintain effective internal control over financial reporting as of December 31, 2022.
This Report does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
There have been no changes to our internal control over financial reporting during the most recent quarter of the fiscal year ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
As of the date of this Report, our directors and officers are as follows:
Name |
| Age |
| Position |
Dr. Joel Shulman | | 56 | | Chairman and Chief Executive Officer |
Eva Adosoglou | | 32 | | Chief Operating Officer |
Grant Grigorian | | 60 | | Chief Financial Officer |
Kevin Cramton | | 62 | | Director |
Charles Aggouras | | 55 | | Director |
Jeffrey Mortimer | | 58 | | Director |
The experience of our directors and executive officers is as follows:
Dr. Joel M. Shulman has served as our Chairman and Chief Executive Officer since inception. He also serves as the founder, managing director, and CIO of ERShares, a global asset manager with over 40 years of experience investing in entrepreneurial publicly-listed companies. His more than 25 years of research at Babson College and author of a top-rated business book developed while at Harvard University, led to the formation of a proprietary investment model and the Entrepreneur Factor. Dr. Shulman previously founded and sold The Shulman Review, a CFA test-prep company that trained thousands of investment professionals in many countries around the world. He has provided consulting services to the World Bank and helped facilitate capital market development in Central Asian states. Dr. Shulman appears frequently in the media on Fox Business, CNBC, Yahoo Finance, Bloomberg, WSJ, Barrons and Forbes. He holds a Ph.D in Finance, CFA charter holder, and has an MPA from Harvard University. Dr. Shulman is well-qualified to serve as a Director due to his extensive experience professionally managing portfolios and consulting for major companies and the World Bank.
Eva Adosoglou has served as our Chief Operating Officer since inception. Since the beginning of 2020, she has served as COO and Chief Investment Strategist of ERShares, where she oversees portfolio investment strategies, innovative strategic initiatives, and overall operations. From May 2018 to September 2018, Ms. Adosoglou worked as an Innovation Manager for Wirecard GMBH. From December 2016 to April 2018, she worked as a Portfolio Analyst and Program Manager, Strategic Projects, for Incadea/COX Automotive Inc. From September 2011 to May 2013, she was a Financial Auditor and Analyst for PwC. Ms. Adosoglou is a Fulbright scholar and is a winner of multiple Entrepreneurship and Leadership competitions. She regularly appears on CNBC, Bloomberg TV, FOX Business and Yahoo Finance and is often quoted in the financial press with her perspective on the global economy, financial markets, technology trends and entrepreneurial companies. She holds a B.A. from Athens University of Economics and Business and a M.S. from Boston University.
Grant Grigorian has served as our Chief Financial Officer since inception. Since August 2021, Mr. Grigorian has served as Chief Financial Officer of CarSaver, an automotive retailing technology company. He is an internationally experienced finance leader having lived and worked on 5 continents. From June 1987 to May 2017, he served in various positions at Ford Motor Company (NYSE: F), including CFO positions in Ford’s South African and Argentina operations and as a global controller for vehicle development program finance. He served in Ford Treasury during the height of the financial crisis in 2009, driving affiliates to develop cash preservation plans and actions to mobilize cash to the U.S. or other markets. Mr. Grigorian also served as strategy and business development lead for Ford’s Asia Pacific region, a position that included relationship management and negotiation with Ford’s Chinese and Japanese joint venture partners. He has also served on the boards of a number of Ford affiliates and joint ventures, including serving as an audit committee member and chairman. From May 2018 to September 2018, he served as COO/CFO of CarSaver. Mr. Grigorian has been CFO for National Automotive Experts/NWAN, a vehicle warranty distribution and administration company, from April 2019 to October 2020.
Kevin Cramton has served as one of our independent directors since November 2021. Mr. Cramton has served in CEO and Executive Chairman roles at 5 different businesses including technology companies in multiple geographies. Since December 2019, he has served as the Chairman and CEO of Tribar Technologies Inc., a manufacturer of automotive components. From January 2016 to August 2017, Mr. Cramton served as Executive Chairman of Atlantix Global Systems. From 2012 to 2015, he served as CEO of
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CARDONE Industries. From September 2011 to August 2012, he served as CEO to Revstone Industries, LLC (“Revstone”). In December 2012, Revstone filed for Chapter 11 bankruptcy. From 2009 to 2011, he served as Executive Chairman of Niles Co. Ltd. He has extensive M&A experience executing about 50 transactions with an enterprise value of $25 billion. He led Ford’s M&A activities for 5 years and has worked in private equity since January 2007. Mr. Cramton also has significant tech and financial services experiences, including overseeing Ford’s venture capital portfolio of technology assets and working in Ford’s Financial Service businesses. He has wide ranging Board experience at many different companies including multiple business sectors and geographies. Mr. Cramton served as a director of Southern AG Carriers Inc., a freight and logistics company, from June 2019 until the company was sold in 2022. Since March 2017, he has served on the audit committee of Helmerich and Payne (NYSE:HP), a public oil and gas drilling company. Since August 2017, he has served as a director of TSM MFG. CO., INC. He previously served on the board of Asahi Tec, a Japanese company that previously traded on the Tokyo Stock Exchange. Mr. Cramton is well-qualified to serve as a Director due to his extensive Board experience at many companies across multiple business sectors and geographies.
Charles Aggouras has served as one of our independent directors since November 2022. He has served as President and Chief Executive Officer of GFC Development Inc., a general contracting, real estate development and investment firm, since 1998. He has more than 25 years of extensive real estate, financial and entrepreneurial experience to all facets of the commercial and residential real estate market. As a registered representative, he has performed financial advisory, portfolio management, estate, and retirement planning services for various financial institutions. He received a BSBA degree in Accounting and Financing from Suffolk University in 1990. Mr. Aggouras is well-qualified to serve as a Director due to his more than 25 years of extensive real estate, financial and entrepreneurial experience.
Jeffrey Mortimer has served as one of our independent directors since November 2021. Mr. Mortimer started Dragonfly Asset Management in January, 2023. From June 2012 to July 2022, Mr. Mortimer served as the Director of Investment Strategy for BNY Mellon Wealth Management (NYSE: BK) and chaired its Investment Strategy Committee. Mr. Mortimer worked in various positions for Charles Schwab Investment Management (NYSE: SCHW) from September 1997 to July 2010, eventually becoming Chief Investment Officer. From 1986 to 1996, he also worked in several small, financial planning firms, serving high net worth clients, endowments, and families. Mr. Mortimer has received a Bachelor of Science degree in finance from Babson College and a Master of Business Administration from the University of Chicago Graduate School of Business. He is a CFA charter holder. Mr. Mortimer is well-qualified to serve as a Director due to his more than 30 years of experience in the financial services industry, including his experience at large, established financial institutions.
Number and Terms of Office of Officers and Directors
We currently have four directors. Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. At the 2022 Special Meeting, Charles Aggouras was elected as the Class I director of our board, the term of which will expire at our annual meeting of stockholders to be held in 2025. The term of office of the second class of directors, consisting of Jeff Mortimer, will expire at the annual meeting of stockholders to be held in 2023. The term of office of the third class of directors, consisting of Joel Shulman and Kevin Cramton, will expire at the annual meeting of stockholders to be held in 2024.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Pursuant to an agreement entered into in connection with our initial public offering, our sponsor, upon and following consummation of an initial business combination, will be entitled to nominate three individuals for election to our board of directors, as long as the sponsor holds any securities covered by the registration and shareholder rights agreement.
Committees of the Board of Directors
Our board of directors has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee.
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Audit Committee
We have established an audit committee of the board of directors. Kevin Cramton, Charles Aggouras and Jeffrey Mortimer serve as members of our audit committee, and Kevin Cramton chairs the audit committee. All members of our audit committee are independent of and unaffiliated with our sponsor and our underwriters.
Each member of the audit committee is financially literate and our board of directors has determined that Kevin Cramton qualifies as an “audit committee financial expert” as defined in applicable SEC rules and has accounting or related financial management expertise.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
| ● | assisting board oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm’s qualifications and independence, and (4) the performance of our internal audit function and independent registered public accounting firm; the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us; |
| ● | pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; reviewing and discussing with the independent registered public accounting firm all relationships the auditors have with us in order to evaluate their continued independence; |
| ● | setting clear policies for audit partner rotation in compliance with applicable laws and regulations; obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (1) the independent registered public accounting firm’s internal quality-control procedures and (2) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; |
| ● | meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent auditor, including reviewing our specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; |
| ● | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
| ● | reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the FASB, the SEC or other regulatory authorities. |
Compensation Committee
We have established a compensation committee of the board of directors. Jeffrey Mortimer and Kevin Cramton serve as members of our compensation committee. Under applicable SEC rules, all the directors on this committee must be independent. Our board of directors has determined that each of Jeffrey Mortimer and Kevin Cramton are independent and Jeffrey Mortimer chairs the compensation committee.
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We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
| ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s and Chief Financial Officer’s compensation evaluating our Chief Executive Officer’s and Chief Financial Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer and Chief Financial Officer based on such evaluation; |
| ● | reviewing and making recommendations to our board of directors with respect to the compensation, and any incentive compensation and equity based plans that are subject to board approval of all of our other officers; |
| ● | reviewing our executive compensation policies and plans; |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; |
| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
| ● | producing a report on executive compensation to be included in our annual proxy statement; and |
| ● | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Notwithstanding the foregoing, as indicated above, other than the payment to our sponsor of $10,000 per month for office space, utilities and secretarial and administrative support and reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, has been or will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by the NYSE and the SEC.
Nominating and Corporate Governance Committee
We have established a nominating and corporate governance committee of the board of directors and Jeffrey Mortimer and Charles Aggouras serve as members of our nominating and corporate governance committee.
Our board of directors has determined that each of Messrs. Mortimer and Aggouras is independent and Mr. Aggouras chairs the nominating and corporate governance committee.
The primary purposes of our nominating and corporate governance committee is to assist the board in:
| ● | identifying, screening and reviewing individuals qualified to serve as directors and recommending to the board of directors candidates for nomination for election at the annual meeting of stockholders or to fill vacancies on the board of directors; |
| ● | developing and recommending to the board of directors and overseeing implementation of our corporate governance guidelines; |
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| ● | coordinating and overseeing the annual self-evaluation of the board of directors, its committees, individual directors and management in the governance of the Company; and |
| ● | reviewing on a regular basis our corporate governance and recommending improvements as and when necessary. |
The nominating and corporate governance committee is governed by a charter that empowers our nominating and corporate governance committee to recommend to the board of directors candidates for nomination for election at the annual meeting of stockholders.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics applicable to our directors, officers and employees. We have filed a copy of our form of the Code of Business Conduct and Ethics and our audit committee and compensation committee charters as exhibits to this Report. You will be able to review this document by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Business Conduct and Ethics and the charters of the committees will be provided without charge upon request from us. If we make any amendments to our Code of Business Conduct and Ethics other than technical, administrative or other non-substantive amendments, or grant any waiver, including any implicit waiver, from a provision of the Code of Business Conduct and Ethics applicable to our principal executive officer, principal financial officer principal accounting officer or controller or persons performing similar functions requiring disclosure under applicable SEC rules, we will disclose the nature of such amendment or waiver on our website. The information included on our website is not incorporated by reference into this Report or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
Item 11. Executive Compensation.
None of our officers has received any cash compensation for services rendered to us. We pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. No compensation of any kind, including any finder’s fee, reimbursement or consulting fee, has been or will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. We do not have a policy that prohibits our sponsor, executive officers or directors, or any of their respective affiliates, from negotiating for the reimbursement of out-of-pocket expenses by a target business. Our audit committee reviews on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates. Any such payments prior to an initial business combination has been and will be made using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate
35
employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information regarding the beneficial ownership of our common stock as of March 29, 2023 based on information obtained from the persons named below, with respect to the beneficial ownership of common stock, by:
| ● | each person known by us to be the beneficial owner of more than 5% of our outstanding common stock; |
| ● | each of our executive officers and directors that beneficially owns our common stock; and |
| ● | all our executive officers and directors as a group. |
In the table below, percentage ownership is based on 5,814,703 shares of our common stock, consisting of (i) 1,502,203 shares of our Class A common stock and (ii) 4,312,500 shares of our Class B common stock, issued and outstanding as of March 29, 2023. On all matters to be voted upon holders of the shares of Class A common stock and shares of Class B common stock vote together as a single class, unless otherwise required by applicable law. Currently, all of the shares of Class B common stock are convertible into Class A common stock on a one-for-one basis.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the private placement warrants as these warrants are not exercisable within 60 days of the date of this Report.
| | | | | | | | | | | |
| | Class A Common Stock | | Class B Common Stock | | Approximate |
| ||||
| | Number of | | | | Number of | | | | Percentage |
|
| | Shares | | Approximate | | Shares | | Approximate | | of Outstanding | |
| | Beneficially | | Percentage | | Beneficially | | Percentage | | Common | |
Name and Address of Beneficial Owner (1) |
| Owned |
| of Class |
| Owned |
| of Class |
| Stock | |
Apeiron Capital Sponsor, LLC (2) | | — | | — | | 4,312,500 | | 100 | % | 74.2 | % |
Joel Shulman (3) | | — | | — | | 4,312,500 | | 100 | % | 74.2 | % |
Eva Adosoglou (3) |
| — |
| — |
| — |
| — |
| — | |
Grant Grigorian (3) |
| — |
| — |
| — |
| — |
| — | |
Kevin Cramton (3) |
| — |
| — |
| — |
| — |
| — | |
Charles Aggouras (3) |
| — |
| — |
| — |
| — |
| — | |
Jeffrey Mortimer (3) |
| — |
| — |
| — |
| — |
| — | |
All executive officers and directors as a group (six individuals) (3) |
| — |
| — |
| 4,312,500 |
| 100 | % | 74.2 | % |
| | | | | | | | | | | |
Other 5% Stockholders |
| — |
| — |
| — |
| — |
| — | |
Spring Creek Capital, LLC (4) |
| 200,000 |
| 13.3 | % | — |
| — |
| 3.4 | % |
Castle Creek Arbitrage, LLC (5) |
| 125,300 |
| 8.3 | % | — |
| — |
| 2.2 | % |
AQR Arbitrage, LLC (6) |
| 91,007 |
| 6.1 | % | — |
| — |
| 1.6 | % |
| (1) | Unless otherwise noted, the business address of each of the following entities or individuals is c/o 175 Federal Street, Suite 875, Boston, MA 02110. |
| (2) | Our sponsor is the record holder of such shares. Our Sponsor is controlled by Joel Shulman, our Chief Executive Officer. As such, he has voting and investment discretion with respect to the common stock held of record by our sponsor and may be deemed to have shared beneficial ownership of the common stock held directly by our sponsor. |
| (3) | Each of these individuals holds a direct or indirect interest in our sponsor. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. |
| (4) | Based on a Schedule 13G filed with the SEC on February 10, 2023 by Spring Creek Capital, LLC (“Spring Creek”), SCC Holdings, LLC, KIM, LLC, Koch Investments Group, LLC, Koch Investments Group Holdings, LLC and Koch Industries (collectively with |
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| Spring Creek, the “Koch Parties”) with respect to 200,000 shares owned by Spring Creek. The principal business address for the Koch Parties is 4111 E. 37th Street North, Wichita, KS 67220. |
| (5) | Based on a Schedule 13G filed with the SEC on February 13, 2023 by Castle Creek Arbitrage, LLC (“Castle Creek”), Mr. Allan Weine, CC ARB West, LLC (“ARB West”), and CC Arbitrage, Ltd. (“CC Arbitrage,” and together with Castle Creek, Mr. Weine and ARB West, the “CC Parties”)), with respect to (i) 120,000 shares owned by ARB West and (ii) 5,300 shares owned by CC Arbitrage. The principal business address for the CC Parties is 111 W. Beaver Creek Blvd PO Box 3500 Avon, CO 81620. |
| (6) | Based on a Schedule 13G filed with the SEC on February 14, 2023 by AQR Capital Management, LLC (“AQR Capital Management”), AQR Capital Management Holdings, LLC (“AQR Capital Holdings”), and AQR Arbitrage, LLC (“AQR Arbitrage,” and together with AQR Capital Management and ACQ Capital Holdings, the “AQR Parties”) with respect to 91,007 shares owned by AQR Arbitrage. The principal business address for the AQR Parties is One Greenwich Plaza, Greenwich, CT 06830. |
Securities Authorized for Issuance under Equity Compensation Plans
None.
Changes in Control
For more information on the GIO World Health Business Combination, please see “Item 1. Business”.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
On February 5, 2021, our sponsor purchased 5,750,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.006 per share (as adjusted to reflect the return of 1,437,500 founder shares in August 2021), to cover certain of our offering costs. In August 2021, our sponsor returned to us, at no cost, an aggregate of 1,437,500 founder shares which we cancelled, resulting in an aggregate of 4,312,500 founder shares outstanding and held by our sponsor. The founder shares included an aggregate of up to 562,500 shares subject to forfeiture by the sponsor to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the sponsor would collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the initial public offering. Due to the underwriters’ full exercise of its over-allotment option at the initial public offering, no founder shares remain subject to forfeiture. The founder shares (including the Class A common stock is issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder. As a result of the redemptions of our public shares that occurred in connection with the Extension, our sponsor now owns approximately 74.2% of our issued and outstanding common stock.
Our sponsor and Cantor purchased an aggregate of 8,200,000 private placement warrants at a price of $1.00 per warrant ($8,200,000 in the aggregate) in the private placement generating gross proceeds of $8,200,000. Each private placement warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share. The private placement warrants (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until 30 days after the completion of our initial business combination.
If any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such other entity. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
We pay our sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Other than the foregoing, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, has been or will be paid by us to our sponsor, officers and directors, or any affiliate of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of an initial business combination (regardless of the type of transaction that it is). However, these individuals are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. We do not have a policy that prohibits our sponsor, executive officers or directors, or any of their respective affiliates, from negotiating for the reimbursement of out-of-pocket expenses by a target business. Our audit committee reviews on a quarterly basis
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all payments that were made to our sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that are reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
In order to finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us working capital on a non-interest bearing basis as may be required. If we complete an 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, including as to exercise price, exercisability and exercise period. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.
We have entered into a registration and shareholder rights agreement with respect to the private placement warrants, the warrants issuable upon conversion of working capital loans (if any) and the shares of Class A common stock issuable upon exercise of the foregoing and upon conversion of the founder shares.
In addition, for as long as the private placement warrants are held by Cantor or its designees or affiliates, they will be subject to the lock-up and registration rights limitations imposed by FINRA Rule 5110 and may not be exercised after five years from the commencement of sales of our initial public offering.
Director Independence
An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Kevin Cramton, Charles Aggouras and Jeffrey Mortimer are “independent directors” pursuant to applicable SEC rules. Our independent directors have regularly scheduled meetings at which only independent directors are present.
Item 14. Principal Accountant Fees and Services.
The following is a summary of fees paid or to be paid to Marcum, for services rendered.
Audit Fees
Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements, quarterly financial statements, and services that are normally provided by Marcum in connection with regulatory filings. The aggregate fees billed by Marcum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Current Report on Form 8-K, filed with the SEC on November 18, 2021 in connection with our initial public offering, Forms 10-Q for the respective periods and other required filings with the SEC for the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021 totaled $89,317 and $124,630 (inclusive of the IPO), respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees
Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not
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required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay Marcum any audit-related fees for the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021.
Tax Fees
We did not pay Marcum for tax planning and tax advice for the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021.
All Other Fees
We did not pay Marcum for any other services for the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
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PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a)The following documents are filed as part of this Report:
(1)Financial Statements3
| Page |
Report of Independent Registered Public Accounting Firm (PCAOB ID # 688) | F-1 |
F-2 | |
F-3 | |
F-4 | |
F-5 | |
F-6 |
(2)Financial Statement Schedules
All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes thereto beginning on page F-1 of this Report.
(3)Exhibits
We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits that are incorporated herein by reference can be inspected on the SEC website at www.sec.gov.
Item 16. Form 10-K Summary.
Not applicable.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Apeiron Capital Investment Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Apeiron Capital Investment Corp. (the “Company”) as of December 31, 2022 and 2021, the related statements of operations, changes in stockholders’ deficit and cash flows for the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a Business Combination and the Company’s cash and working capital as of December 31, 2022 are not sufficient to complete its planned activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2021.
New York, NY
March 29, 2023
PCAOB ID #688
F-1
APEIRON CAPITAL INVESTMENT CORP.
BALANCE SHEETS
| | | | | | |
|
| December 31, | ||||
|
| 2022 |
| 2021 | ||
ASSETS |
| | | | | |
Cash | | $ | 1,094,384 | | $ | 751,572 |
Prepaid expenses | | | 177,083 | | | 234,215 |
Total Current Assets | | | 1,271,467 | | | 985,787 |
| | | | | | |
Prepaid expenses | | | — | | | 177,083 |
Cash and marketable securities held in Trust Account | | | 16,182,549 | | | 175,952,082 |
TOTAL ASSETS | | $ | 17,454,016 | | $ | 177,114,952 |
| |
| | |
| |
LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT | |
|
| |
|
|
Current liabilities - Accrued expenses | | $ | 830,785 | | $ | 191,193 |
Income taxes payable | | | 588,493 | | | — |
Mandatorily redeemable common stock liability | | | 716,610 | | | — |
Total Current Liabilities | | | 2,135,888 | | | 191,193 |
| | | | | | |
Warrant liabilities | |
| 2,523,750 | |
| 8,580,750 |
Deferred underwriting fee payable | |
| 9,075,000 | |
| 9,075,000 |
Total liabilities | |
| 13,734,638 | |
| 17,846,943 |
| |
|
| |
|
|
COMMITMENTS AND CONTINGENCIES (Note 6) | |
|
| |
|
|
Class A common stock subject to possible redemption; $0.0001 par value; 100,000,000 shares authorized; at December 31, 2022 and 2021, 1,502,203 and 17,250,000 shares at $10.24 and $10.20 per share redemption value, respectively | | | 15,381,820 | | | 175,950,000 |
| |
|
| |
|
|
STOCKHOLDERS’ DEFICIT | |
|
| |
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | |
| — |
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 4,312,500 shares issued and outstanding | |
| 431 | |
| 431 |
Additional paid-in capital | |
| — | |
| — |
Accumulated deficit | |
| (11,662,873) | |
| (16,682,422) |
Total Stockholders’ Deficit | |
| (11,662,442) | |
| (16,681,991) |
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ DEFICIT | | $ | 17,454,016 | | $ | 177,114,952 |
The accompanying notes are an integral part of the financial statements.
F-2
APEIRON CAPITAL INVESTMENT CORP.
STATEMENTS OF OPERATIONS
| | | | | | |
| | | | |
| For the Period |
| | | | |
| from January 1, |
| | | | |
| 2021 |
| | | |
| (Commencement of | |
| | For the Year | |
| Operations) | |
| | Ended | |
| through December | |
|
| December 31, 2022 |
|
| 31, 2021 | |
| | | | | | |
Operating and formation costs | | $ | 1,203,615 |
| $ | 234,315 |
Loss from operations | | | (1,203,615) | | | (234,315) |
| | | | | | |
Other income (expense): | | | | | | |
Interest earned on marketable securities held in Trust Account | | | 2,318,006 | | | 2,082 |
Change in fair value of warrant liabilities | | | 6,057,000 | | | 1,087,250 |
Transaction costs associated with the Initial Public Offering | | | — | | | (368,544) |
Other income, net | | | 8,375,006 | | | 720,788 |
| | | | | | |
Income before provision for income taxes | | | 7,171,391 | | | 486,473 |
Provision for income taxes | | | (588,493) | | | — |
Net income | | $ | 6,582,898 | | $ | 486,473 |
| |
| | | | |
Weighted average Class A shares outstanding, basic | |
| 16,730,842 | | | 2,569,149 |
Basic net income per Class A common share | | $ | 0.31 | | $ | 0.08 |
Weighted average Class B shares outstanding, basic | |
| 4,312,500 | | | 3,833,777 |
Basic net income per Class B common share | | $ | 0.31 | | $ | 0.08 |
Weighted average Class A shares outstanding, diluted | | | 16,730,842 | | | 2,569,149 |
Diluted net income per Class A common share | | $ | 0.31 | | $ | 0.07 |
Weighted average Class B shares outstanding, diluted | | | 4,312,500 | | | 4,312,500 |
Diluted net income per Class B common share | | $ | 0.31 | | $ | 0.07 |
The accompanying notes are an integral part of the financial statements.
F-3
APEIRON CAPITAL INVESTMENT CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2022 AND FOR THE PERIOD FROM JANUARY 1, 2021 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 2021
| | | | | | | | | | | | | | | | | | | |
| | Class A | | Class B | | Additional | | | | | Total | ||||||||
| | Common Stock | | Common Stock | | Paid-in | | Accumulated | | Stockholders’ | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |||||
Balance – January 1, 2021 (commencement of operations) | | — | | $ | — | | — | | $ | — | | $ | — | | $ | — | | $ | — |
|
| | |
| | | | | | | |
| | |
| | |
| |
Issuance of Class B common stock to Initial Stockholders | | — | | | — | | 4,312,500 | | | 431 | | | 24,569 | | | — | | | 25,000 |
| | | | | | | | | | | | | | | | | | | |
Proceeds received in excess of fair value of 8,200,000 Private Placement Warrants, net of offering costs | | — | | | — | | — | | | — | | | 3,362,000 | | | — | | | 3,362,000 |
| | | | | | | | | | | | | | | | | | | |
Accretion of Class A common stock to redemption amount | | — | | | — | | — | | | — | | | (3,386,569) | | | (17,168,895) | | | (20,555,464) |
| | | | | | | | | | | | | | | | | | | |
Net income |
| — | |
| — | | — | | | — | |
| — | |
| 486,473 | |
| 486,473 |
| | | | | | | | | | | | | | | | | | | |
Balance – December 31, 2021 | | — | | | — | | 4,312,500 | | | 431 | | | — | | | (16,682,422) | | | (16,681,991) |
| | | | | | | | | | | | | | | | | | | |
Accretion of Class A common stock to redemption amount | | — | | | — | | — | | | — | | | — | | | (1,563,349) | | | (1,563,349) |
| | | | | | | | | | | | | | | | | | | |
Net income |
| — | |
| — | | — | | | — | |
| — | |
| 6,582,898 | |
| 6,582,898 |
| | | | | | | | | | | | | | | | | | | |
Balance – December 31, 2022 |
| — | | $ | — | | 4,312,500 | | $ | 431 | | $ | — | | $ | (11,662,873) | | $ | (11,662,442) |
The accompanying notes are an integral part of the financial statements.
F-4
APEIRON CAPITAL INVESTMENT CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 2021 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 2021 AND FOR THE YEAR ENDED DECEMBER 31, 2022
| | | | | | |
|
| | | | For the Period | |
| | | | | from January 1, | |
| | | | | 2021 | |
| | | | | (Commencement | |
| | For the Year | | of Operations) | ||
| | Ended | | through | ||
| | December 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Cash Flows from Operating Activities: |
| | | |
| |
Net income | | $ | 6,582,898 | | $ | 486,473 |
Adjustments to reconcile net income to net cash used in operating activities: | |
| | |
| |
Interest earned on marketable securities held in Trust Account | | | (2,318,006) | | | (2,082) |
Change in fair value of warrant liabilities | | | (6,057,000) | | | (1,087,250) |
Transaction costs associated with the Initial Public Offering | | | — | | | 368,544 |
Changes in operating assets and liabilities: | |
|
| |
|
|
Prepaid expenses | | | 234,215 | | | (411,298) |
Accrued expenses | |
| 639,592 | |
| 191,193 |
Income taxes payable | | | 588,493 | | | — |
Net cash used in operating activities | |
| (329,808) | |
| (454,420) |
| | | | | | |
Cash Flows from Investing Activities: | | | | | | |
Investment of cash in Trust Account | | | — | | | (175,950,000) |
Cash withdrawn from Trust Account to pay franchise and income taxes | | | 672,620 | | | — |
Cash withdrawn from Trust Account in connection with redemption | | | 161,414,919 | | | — |
Net cash provided by (used in) investing activities | | | 162,087,539 | | | (175,950,000) |
| |
|
| |
|
|
Cash Flows from Financing Activities: | |
|
| |
|
|
Proceeds from issuance of Class B common stock to Sponsor | |
| — | |
| 25,000 |
Proceeds from sale of Units, net of underwriting discounts paid | | | — | | | 169,500,000 |
Proceeds from sale of Private Placement Warrants | | | — | | | 8,200,000 |
Proceeds from promissory note – related party | |
| — | |
| 226,638 |
Repayment of promissory note – related party | |
| — | |
| (226,638) |
Payment of offering costs | |
| — | |
| (569,008) |
Redemption of common stock | | | (161,414,919) | | | — |
Net cash (used in) provided by financing activities | |
| (161,414,919) | |
| 177,155,992 |
| |
|
| |
|
|
Net Change in Cash | |
| 342,812 | |
| 751,572 |
Cash – Beginning of period | |
| 751,572 | |
| — |
Cash – End of period | | $ | 1,094,384 | | $ | 751,572 |
| |
| | |
| |
Non-Cash investing and financing activities: | | | | | | |
Accretion to redemption value | | $ | 1,563,349 | | $ | 20,555,464 |
Deferred underwriting fee payable | | $ | — | | $ | 9,075,000 |
The accompanying notes are an integral part of the financial statements.
F-5
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS, AND LIQUIDITY
Apeiron Capital Investment Corp. (the “Company”) is a blank check company incorporated in Delaware on December 28, 2020. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
All activity through December 31, 2022, relates to the Company’s formation, the initial public offering (the “Initial Public Offering”), which is described below, and identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the marketable securities held in the Trust Account (as defined below).
The registration statement for the Company’s Initial Public Offering was declared effective on November 8, 2021. On November 12, 2021, the Company consummated the Initial Public Offering of 17,250,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriters of their over-allotment option in the amount of 2,250,000 Units, at $10.00 per Unit, generating gross proceeds of $172,500,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 8,200,000 warrants (each, a “Private Placement Warrant” and, collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Apeiron Capital Sponsor, LLC (the “Sponsor”) and Cantor Fitzgerald & Co. (“Cantor”), generating gross proceeds of $8,200,000, which is described in Note 4.
Transaction costs amounted to $12,644,008, consisting of $3,000,000 of underwriting fees, $9,075,000 of deferred underwriting fees and $569,008 of other offering costs.
Following the closing of the Initial Public Offering on November 12, 2021, an amount of $175,950,000 ($10.20 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below.
The Company’s 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. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (as defined below) (less any deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a 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 in the Trust Account (initially $10.20 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the
F-6
Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or don’t vote at all.
Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination, (b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within 15 months from the closing of the Initial Public Offering and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company originally had 15 months from the closing of the Initial Public Offering, or until February 12, 2023 to complete a Business Combination. On December 21, 2022, the Company held a special meeting in lieu of the 2022 annual meeting of stockholders. At the meeting, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to extend the date by which the company must consummate its initial business combination from February 12, 2023 to August 14, 2023 (the “Combination Period”). In connection with the meeting, stockholders holding 15,747,797 shares of Class A common stock of the Company exercised their right to redeem their shares for a pro rata portion of the funds in the Trust Account. Following redemptions, the Company has 1,502,203 Public Shares outstanding. This resulted in $162,131,530 being paid from the Trust Account, with $716,610 of the redemptions being paid in 2023. If the Company is unable to complete a 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 earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (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), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s 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 Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business
F-7
Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in 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 assets remaining available for distribution will be less than $10.20 per Public Share.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.20 per Public Share or (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.20 per Public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Going Concern
As of December 31, 2022, the Company had $1,094,384 in its operating bank accounts, $16,182,549 in cash held in the Trust Account to be used for a Business Combination or to repurchase or redeem its common stock in connection therewith and a working capital deficit of $63,692, which excludes franchise and income taxes payable as such amounts can be paid from the interest earned in the Trust Account. As of December 31, 2022, approximately $1,647,468 of the amount held in the Trust Account represented interest income, which is available to pay the Company’s tax obligations. During the year ended December 31, 2022, the Company had withdrawn $672,620 from the Trust Account to pay franchise and income taxes and $161,414,919 for redemption payments.
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company may need to raise additional capital through loans or additional investments from its Sponsor, stockholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through one year from the date of these financial statements if a Business Combination is not consummated. These 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 the Company be unable to continue as a going concern.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard’s Board (“FASB”) Accounting Standards Update (“ASU”) Topic 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until August 14, 2023 to consummate a Business Combination. It is uncertain that the Company 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 the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after August 14, 2023.
F-8
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s 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 these financial statements. The financial statements 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 Department”) 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 Department. 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.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
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
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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 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 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 financial statements and the reported amounts of expenses during the reporting periods.
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 financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and, 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 did not have any cash equivalents as of December 31, 2022 and 2021.
Marketable Securities Held in Trust Account
At December 31, 2022, substantially all of the assets held in the Trust Account were held in cash. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in the Trust Account are included in interest earned on marketable securities held in the Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable Class A common stock (including Class A common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. 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 occurrence of uncertain future events. Accordingly, at December 31, 2022 and 2021, Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable Class A common stock are affected by charges against additional paid in capital (to the extent available) and accumulated deficit.
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At December 31, 2022 and 2021, the Class A common stock reflected in the balance sheet is reconciled in the following table:
| | | |
Gross proceeds |
| $ | 172,500,000 |
Less: | |
|
|
Proceeds allocated to Public Warrants | | | (4,830,000) |
Class A common stock issuance costs | | | (12,275,464) |
Plus: | |
|
|
Accretion of carrying value to redemption value | | | 20,555,464 |
Class A common stock subject to redemption, December 31, 2021 | | | 175,950,000 |
Less: | | | |
Redemptions | | | (161,414,919) |
Mandatorily redeemable common stock liability | | | (716,610) |
Plus: | | | |
Accretion of carrying value to redemption value | | | 1,563,349 |
Class A common stock subject to redemption, December 31, 2022 | | $ | 15,381,820 |
Income Taxes
The Company accounts for income taxes under ASC Topic 740, “Income Taxes.” ASC Topic 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC Topic 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of December 31, 2022 and 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it.
ASC Topic 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 Topic 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 nounrecognized tax benefits and no amounts accrued for interest and penalties as of December 30, 2022 and 2021. 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 is 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.
Net income per share of Common Stock
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share”. Net income per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 16,825,000 shares of Class A common stock in the aggregate. As of December 31, 2022 and 2021, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company.
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The following table reflects the calculation of basic and diluted net loss per common stock (in dollars, except per share amounts):
| | | | | | | | | | | | |
| | | | | | | | For the Period from | ||||
| | | | | | | | January 1, 2021 | ||||
| | | | | | | | (commencement of | ||||
| | For the Year Ended | | operations) through | ||||||||
| | December 31, 2022 | | December 31, 2021 | ||||||||
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| Class A |
| Class B |
| Class A |
| Class B | ||||
Basic net income per common stock | | | | | | | |
| | |
| |
Numerator: | | | | | | | |
| | |
| |
Allocation of net income, as adjusted | | $ | 5,233,837 | | $ | 1,349,061 | | $ | 195,195 | | $ | 291,278 |
Denominator: | | | | | | | |
| | |
| |
Basic weighted average shares outstanding | | | 16,730,842 | | | 4,312,500 |
| | 2,569,149 |
| | 3,833,777 |
Basic net income per common stock | | $ | 0.31 | | $ | 0.31 | | $ | 0.08 | | $ | 0.08 |
| | | | | | | | | | | | |
Diluted net income per common stock | | | | | | | |
|
| |
|
|
Numerator: | | | | | | | |
|
| |
|
|
Allocation of net income, as adjusted | | $ | 5,233,837 | | $ | 1,349,061 | | $ | 181,617 | | $ | 304,856 |
Denominator: | | | | | | | |
|
| |
|
|
Diluted weighted average shares outstanding | | | 16,730,842 | | | 4,312,500 | |
| 2,569,149 | |
| 4,312,500 |
Diluted net income per common stock | | $ | 0.31 | | $ | 0.31 | | $ | 0.07 | | $ | 0.07 |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal Deposit Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on these accounts.
Derivative Financial Instruments
The Company evaluates its 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 and re-valued at each reporting date, with changes in the fair value reported in the statement of operations. Derivative assets and liabilities are classified in the balance sheet 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.
Offering Costs
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering”. Offering costs consist of underwriting, legal, accounting and other expenses incurred through the Initial Public Offering that are directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities are expensed as incurred and presented as non-operating expenses. Offering costs amounted to $12,644,008, of which $12,275,464 were charged to stockholders’ deficit upon the completion of the Initial Public Offering and $368,544 were charged to operations.
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Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature, except for the warrant liabilities (see Note 10.)
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Warrant Liabilities
The Company accounts for the warrants issued in connection with the Initial Public Offering and the private placement in accordance with the guidance contained in ASC Topic 815 “Derivatives and Hedging” whereby under that provision the warrants do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the warrant instrument as a liability at fair value and adjust the instruments to fair value at each reporting period. This liability will be re-measured at each balance sheet date until the warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statements of operations.
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 financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 17,250,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 2,250,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of the Company’s Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per whole share (see Note 8).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor and Cantor, the representative of the underwriters purchased an aggregate of 8,200,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $8,200,000, in a private placement. Each Private Placement Warrant is exercisable to purchase one Class A common stock at a
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price of $11.50 per share, subject to adjustment (see Note 8). A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On February 5, 2021, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. On August 4, 2021, the Sponsor returned to the Company, at no cost, an aggregate of 1,437,500 Founder Shares which were cancelled, resulting in an aggregate of 4,312,500 Founder Shares outstanding and held by the Sponsor. The Founder Shares included an aggregate of up to 562,500 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment option was not exercised in full. Since the underwriters exercised their over-allotment option in full, no founder shares remain subject to forfeiture.
The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (1) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 180 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Administrative Services Agreement
The Company entered into an agreement, commencing on November 8, 2021 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay the Sponsor a total $10,000 per month for office space, utilities and secretarial and administrative support. For the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021, the Company incurred $120,000 and $20,000 in fees for these services, which is included in the accrued expenses in the accompanying balance sheet.
Promissory Note — Related Party
On February 5, 2021, the Sponsor issued an unsecured promissory note to the Company (as amended, the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and was payable on the earlier of March 31, 2022, or the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $226,638 was repaid at the closing of the Initial Public Offering on November 12, 2021.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a 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 a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. At December 31, 2022 and 2021, there are no Working Capital Loans outstanding.
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NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on November 8, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of the 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) are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of our Class A common stock). The holders of the majority of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred fee of (i) $0.50 per Unit of the initial 15,000,000 Units sold in the Initial Public Offering, or $7,500,000 in the aggregate, and (ii) $0.70 per Unit sold pursuant to the over-allotment option, or up to an aggregate of $1,575,000. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
NOTE 7. STOCKHOLDERS’ DEFICIT
Preferred Stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At December 31, 2022 and 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue up to 100,000,000 shares of Class A, $0.0001 par value common stock. Holders of the Company’s common stock are entitled to one vote for each share. At December 31, 2022 and 2021, there were no shares of Class A common stock issued or outstanding, excluding 1,502,203 and 17,250,000, respectively, subject to possible redemption as presented in temporary equity.
Class B Common Stock — The Company is authorized to issue up to 10,000,000 shares of Class B, $0.0001 par value common stock. Holders of the Company’s common stock are entitled to one vote for each share. At December 31, 2022 and 2021, there were 4,312,500 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to 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 issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which the shares of Class B common stock will convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the issued and outstanding shares of our Class B common stock agree to waive such anti-dilution 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, 20% of the sum of all shares of common stock issued and outstanding upon the completion of the Initial Public Offering, plus all shares of our Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).
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NOTE 8. WARRANTS
At December 31, 2022 and 2021, there were 8,625,000 Public Warrants issued and outstanding. Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the consummation of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, or the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. |
If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be
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required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or its affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company completes a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
At December 31, 2022 and 2021, there were 8,200,000 Private Placement Warrants issued and outstanding. The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 9. INCOME TAX
The Company’s net deferred tax assets at December 31, 2022 and 2021 is as follows:
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| December 31, | ||||
|
| 2022 |
| 2021 | ||
Deferred tax assets (liability) |
| |
|
| |
|
Net operating loss carryforward | | $ | — | | $ | 6,360 |
Startup/Organization Expenses | |
| 346,878 | |
| 42,409 |
Total deferred tax assets (liability) | | | 346,878 | | | 48,769 |
Valuation Allowance | |
| (346,878) | |
| (48,769) |
Deferred tax assets (liability) | | $ | — | | $ | — |
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The income tax provision for the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021 consists of the following:
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| December 31, | ||||
|
| 2022 |
| 2021 | ||
Federal | | | | | | |
Current | | $ | 452,356 | | $ | |
Deferred | | | (217,865) | | | (48,769) |
| | | | | | |
State | | | | | | |
Current | | $ | 136,137 | | $ | — |
Deferred | | | (80,244) | | | — |
| | | | | | |
Change in valuation allowance | | | 298,109 | | | 48,769 |
| | | | | | |
Income tax provision | | $ | 588,493 | | $ | — |
As of December 31, 2022 and 2021, the Company had $0 and $30,284 of U.S. federal and state net operating loss carryovers available to offset future taxable income.
In assessing the realization of the deferred tax assets (liability), management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the year ended December 31, 2022 and for the period from January 1, 2021 (commencement of operations) through December 31, 2021, the change in the valuation allowance was $298,109 and $48,769, respectively.
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2022 and 2021 is as follows:
| | | | | | | |
|
| December 31, | | ||||
|
| 2022 |
| 2021 | | ||
Statutory federal income tax rate | | | 21.0 | % | | 21.0 | % |
State taxes, net of federal tax benefit | | | 6.3 | % | | 0.0 | % |
Prior year true up | | | (0.2) | % | | 0.0 | % |
Transaction costs associated with the Initial Public Offering | | | 0.0 | % | | 15.9 | % |
Change in fair value of warrant liabilities | | | (23.1) | % | | (46.9) | % |
Meals and entertainment | | | 0.0 | % | | 0.0 | % |
Valuation allowance | | | 4.2 | % | | 10.0 | % |
Income tax provision | | | 8.2 | % | | 0.0 | % |
The Company files income tax returns in the U.S. federal jurisdiction and Massachusetts. The Company’s tax returns for the year ended December 31, 2021 remain open and subject to examination.
F-18
NOTE 10. FAIR VALUE
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2022 and 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| | | | | | | | |
|
| |
| December 31, | ||||
Description |
| Level |
| 2022 |
| 2021 | ||
Assets: |
|
|
| |
|
| |
|
Marketable securities held in Trust Account |
| 1 | | $ | 16,182,549 | | $ | 175,952,082 |
| | | | | | | | |
Liabilities: |
|
|
| |
|
| |
|
Warrant liability – Public Warrants | | 1 | | $ | 1,293,750 | | $ | — |
Warrant liability – Public Warrants | | 3 | | | — | | $ | 4,398,750 |
Warrant liability – Private Placement Warrants |
| 3 | | $ | 1,230,000 | | $ | 4,182,000 |
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statement of operations.
The Company utilized a Monte Carlo simulation model to value the Public Warrants and the Private Placement Warrants at each balance sheet date, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liabilities are determined using Level 3 inputs. Inherent in pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 1 due to the use of an observable market quote in an active market.
The following table provides the significant inputs to the Monte-Carlo method for the fair value of the Public Warrants and Private Placement Warrants:
| | | | | | | |
| | Public and Private | | | | | |
| | Warrants | | Private Warrants | | ||
| | December 31, | | December 31, | | ||
|
| 2021 |
| 2022 | | ||
Stock price | | $ | 9.83 | | $ | 10.26 | |
Exercise price | | $ | 11.50 | | $ | 11.50 | |
Dividend yield | | | — | % |
| — | % |
Expected term (in years) | | | 5.86 | |
| 5.62 | |
Volatility | | | 8.7 | % | | 5.90 | % |
Risk-free rate | | | 1.33 | % |
| 3.90 | % |
F-19
The following table provides quantitative information regarding the Level 3 fair value measurements:
| | | | | | | | | |
|
| Public |
| | |
|
| ||
| | Warrant | | Private Warrant | | Total Warrant | |||
|
| Liabilities |
| Liabilities |
| Liabilities | |||
Fair value as of January 1, 2021 |
| | — |
| | — | | $ | — |
Initial measurement on November 12, 2021 |
| | 4,830,000 |
| | 4,838,000 | |
| 9,668,000 |
Change in fair value | | | (431,250) | | | (656,000) | | | (1,087,250) |
Fair value as of December 31, 2021 |
| | 4,398,750 |
| | 4,182,000 | |
| 8,580,750 |
Transfer to Level 1 | | | (4,398,750) | | | — | | | (4,398,750) |
Change in fair value | | | — | | | (2,952,000) | | | (2,952,000) |
Fair value as of December 31, 2022 | | $ | — | | $ | 1,230,000 | | $ | 1,230,000 |
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the year ended December 31, 2022 was $4,398,750, when the Public Warrants were separately listed and traded. For the period from January 1, 2021 through December 31, 2021, there were no transfers from Level 3.
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than the below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On January 31, 2023, we received a written notice from the staff of the NYSE stating that we were not in compliance with Section 802.01B of the NYSE Listed Company Manual, which requires a listed company to maintain an average aggregate global market capitalization attributable to its publicly-held shares over a consecutive 30 trading day period of at least $40,000,000. Consequently, the public securities were delisted from the NYSE.
F-20
EXHIBIT INDEX4
Exhibit No. |
| Description |
1.1 | | |
2.1 | | |
3.1 | | |
3.2 | | Amendment to Amended and Restated Certificate of Incorporation. (4) |
3.3 | | |
4.1 | | |
4.2 | | |
4.3 | | |
4.4 | | |
4.5 | | |
10.1 | | |
10.2 | | |
10.3 | | |
10.4 | | |
10.5 | | |
10.6 | | |
10.7 | | |
10.8 | | |
10.9 | | |
10.10 | | |
10.11 | | |
14 | | |
31.1 |
| |
31.2 |
| |
32.1 |
| |
32.2 |
| |
99.1 | | |
99.2 | | |
99.3 | | |
101.INS |
| Inline XBRL Instance Document.* |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document.* |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document.* |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document.* |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document.* |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document.* |
104 |
| Cover Page Interactive Data File (Embedded as Inline XBRL document and contained in Exhibit 101).* |
* Filed herewith.
** Furnished herewith
(1) | Incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-257369), filed with the SEC on June 24, 2021, as amended. |
(2) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 12, 2021.
(3) Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 22, 2022.
(4) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 23, 2022.
(5) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on March 14, 2023.
40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
March 29, 2023 | APEIRON CAPITAL INVESTMENT CORP. | |
| | |
| By: | /s/ Joel Shulman |
| Name: | Joel Shulman |
| Title: | Chairman and Chief Executive Officer |
| | (Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| ||||
Name |
| Position |
| Date |
|
|
| ||
/s/ Joel Shulman |
| Chairman of the Board and Chief Executive Officer |
| March 29, 2023 |
Joel Shulman |
| (Principal Executive Officer) |
|
|
|
|
| ||
/s/ Grant Grigorian |
| Chief Financial Officer |
| March 29, 2023 |
Grant Grigorian |
| (Principal Financial and Accounting Officer) |
|
|
|
|
| ||
/s/ Kevin Cramton |
| Director |
| March 29, 2023 |
Kevin Cramton |
|
|
|
|
|
|
| ||
/s/ Jeffrey Mortimer |
| Director |
| March 29, 2023 |
Jeffrey Mortimer |
|
|
|
|
|
|
| ||
/s/ Charles Aggouras |
| Director |
| March 29, 2023 |
Charles Aggouras |
|
|
|
|
41
