Form 10-Q Parabellum Acquisition For: Mar 31
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
Commission File Number:
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 20, 2022,
PARABELLUM ACQUISITION CORP,
Quarterly Report on Form 10-Q
Table of Contents
i
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
PARABELLUM ACQUISITION CORP.
Condensed Balance Sheets
March 31, 2022 | December 31, 2021 | |||||
(unaudited) | ||||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | | $ | | ||
Prepaid expenses |
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Total current assets | | | ||||
Prepaid expenses, noncurrent | — | | ||||
Operating right-of-use assets | | — | ||||
Marketable securities held in trust account | | | ||||
Total assets | $ | | $ | | ||
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Liabilities and Stockholders’ Deficit |
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Current liabilities: |
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Accounts payable and accrued expenses | $ | | $ | | ||
Accrued offering costs | | | ||||
Operating lease liabilities | | — | ||||
Deferred rent | — | | ||||
Total current liabilities | | | ||||
Warrant liability |
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Deferred underwriting fees payable |
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Total liabilities |
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Commitments and Contingencies (Note 7) |
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Class A common stock, $ | | | ||||
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Stockholders’ Deficit |
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Preferred stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Deficit |
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Total Liabilities and Stockholders’ Deficit | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
PARABELLUM ACQUISITION CORP.
Condensed Statements of Operations
(Unaudited)
For the period from | ||||||
For the three | February 5, 2021 | |||||
months ended | (inception) through | |||||
March 31, 2022 |
| March 31, 2021 | ||||
General and administrative expenses | $ | | $ | | ||
Loss from operations | ( |
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Other income: |
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Change in fair value of warrant liability | | | ||||
Dividend and interest income | | | ||||
Total other income | | | ||||
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Net income (loss) | $ | | $ | ( | ||
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Weighted average shares outstanding of Class A common stock subject to possible redemption |
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Basic and diluted net income (loss) per share, Class A common stock subject to possible redemption (see Note 2) | |
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Weighted average shares outstanding of Class B common stock | |
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Basic and diluted net income (loss) per share, Class B (see Note 2) | |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
2
PARABELLUM ACQUISITION CORP.
Condensed Statements of Stockholders’ Equity (Deficit)
For the three months ended March 31, 2022 and for the period from February 5, 2021 (inception) through
March 31, 2021
(unaudited)
Common Stock Subject to Possible | |||||||||||||||||||
Redemption | Common Stock | Additional | Total | ||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||||
Balance – December 31, 2021 | | $ | | | $ | | $ | — | $ | ( | $ | ( | |||||||
Accretion to redemption value of Class A common stock subject to possible redemption |
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Net income |
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Balance — March 31, 2022 |
| | $ | | | $ | | $ | — | $ | ( | $ | ( | ||||||
Common Stock Subject to Possible | |||||||||||||||||||
Redemption | Common Stock | Additional | Total | ||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Shareholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||||
Balance – February 5, 2021 | — | $ | — | | $ | | $ | | $ | | $ | | |||||||
Class B common stock issued to Sponsor | — | — | | | | — | | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance – March 31, 2021 | — | $ | — | | $ | | $ | | $ | ( | $ | | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
PARABELLUM ACQUISITION CORP.
Condensed Statements of Cash Flows
(Unaudited)
For the period from | ||||||
For the three | February 5, 2021 | |||||
months ended | (inception) through | |||||
| March 31, 2022 |
| March 31, 2021 | |||
Cash Flows from Operating Activities: |
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Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities |
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Change in fair value of warrant liability | ( | | ||||
Dividend and interest income earned in trust account | ( | | ||||
Change in operating right of use assets | | | ||||
Changes in current assets and liabilities: |
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Prepaid expenses | | | ||||
Accounts payable and accrued expenses |
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Operating lease liabilities | ( | | ||||
Net cash used in operating activities |
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Cash Flows from Financing Activities: |
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Proceeds from issuance of Promissory Note – related party |
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Proceeds from sale of Class B common stock to sponsor |
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Payment of offering costs |
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Net cash provided by (used in) financing activities |
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Net Change in Cash |
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Cash – beginning of period |
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Cash – end of period | $ | | $ | | ||
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Supplemental Disclosure of cash flow information: |
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Offering costs included in accrued offering costs | $ | | $ | | ||
Accretion of the dividends and interest earned in trust account | $ | | $ | | ||
Right-of-use asset acquired through operating lease upon adoption of ASC 842 | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
PARABELLUM ACQUISITION CORP.
Notes to Condensed Financial Statements
(unaudited)
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General
Parabellum Acquisition Corp. (the “Company”) is a blank check company incorporated in the state of Delaware on February 5, 2021. 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
As of March 31, 2022, the Company had not yet commenced operations. All activity for the period from February 5, 2021 (inception) through March 31, 2022 relates to the Company’s formation, the initial public offering (the “Initial Public Offering”) and activities necessary to identify a potential target 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 will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on September 27, 2021. On September 30, 2021, the Company consummated the Initial Public Offering of
Each Unit consists of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
An aggregate of nine qualified institutional buyers or institutional accredited investors’ groups (collectively, the “Anchor Investors”) were allocated and purchased a total of
In addition, subject to each Anchor Investor purchasing
Following the closing of the Initial Public Offering on September 30, 2021, and the exercise of the over-allotment option by the underwriter on October 15, 2021, an amount of $
5
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
As of the IPO Date, transaction costs amounted to $
As of October 15, 2021, transaction costs related to the exercise of the over-allotment option amounted to $
Business Combination
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 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. NYSE rules provide that the business combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (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 of 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to successfully effect a business combination.
The Company must complete
6
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
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 anticipated to be $
The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $
Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination in conjunction with a stockholder vote on an initial Business Combination pursuant to a proxy solicitation, 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
7
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
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 by March 30, 2023, (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 by March 30, 2023, 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, and (d) not to sell any of the Founder Shares or Public Shares to the Company in any tender offer the Company undertakes in connection with a proposed Business Combination.
The Company will have until March 30, 2023 to complete a Business Combination (the “Combination Window”). If the Company is unable to complete a Business Combination within the Combination Window, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 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 $
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 Window. 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 Combination within the Combination Window. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Window 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 the Initial Public Offering price per Unit ($
8
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
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 (1) $
Liquidity and Going Concern
As of March 31, 2022, the Company had $
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
9
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the period from February 5, 2021 (inception) through December 31, 2021 included in the Company’s 10-K as filed with the SEC on April 15, 2022. The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes- Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s 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 financial statement in conformity with U.S. GAAP requires 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 statement.
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. Accordingly, the actual results could differ significantly from those estimates.
Leases
On January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The Company assesses its contracts at inception to determine whether the contract contains a lease, including evaluation of whether the contract conveys the right to control an explicitly or implicitly identified asset for a period of time. At the adoption date, the Company recognized a $
10
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
Marketable Securities Held in Trust Account
At March 31, 2022, the assets held in the Trust Account were substantially held in U.S. Treasury Bills. These securities are presented on the condensed balance sheet at fair value at the end of each reporting period. Earnings on these securities is included in dividend and interest income in the accompanying Statement of Operations and is automatically reinvested. The fair value for these securities is determined using quoted market prices in active markets.
Through March 31, 2022, the Company did not withdraw any of interest income from the Trust Account to pay its tax obligations.
Offering Costs
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that were directly related to the Initial Public Offering. Offering costs amounted to $
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 common stock (including 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, 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, Class A common stock subject to possible redemption was accreted to its redemption value at the IPO and is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
11
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were
The provision for income taxes was deemed to be de minimis for the three months ended March 31, 2022 and for the period from February 5, 2021 (inception) through March 31, 2021.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, and U.S. Treasury Bills, which, at times, may exceed the Federal Depository Insurance Coverage of $
Fair Value of Financial Instruments
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.
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.
12
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
Warrant Liability
The Company accounts for warrants for shares of the Company’s Class A common stock that are not indexed to its own stock as liabilities at fair value on the balance sheet. The warrants will be re-evaluated for the proper accounting treatment at each reporting period and are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income (expense), net on the statement of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the Class A common stock warrants. At that time, the portion of the liability related to the Class A common stock warrants will be reclassified to additional paid-in capital (Notes 8 and 9).
Risks and Uncertainties
Management is currently monitoring 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 this financial statement. This financial statement does not include any adjustments that might result from the outcome of this uncertainty.
Net Income (Loss) Per Share of Common Stock
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of Common shares outstanding during the period. Weighted average shares for the period from February 5, 2021 (inception) through March 31, 2021 were previously reduced for the effect of an aggregate of
The Company’s statements of operations include a presentation of net income (loss) per share subject to redemption in a manner similar to the two-class method of income per share. With respect to the accretion of the Class A Shares subject to possible redemption and consistent with ASC 480-10-S99-3A, the Company deemed the fair value of the Class A Common shares subject to possible redemption to approximate the contractual redemption value and the accretion has no impact on the calculation of net income per share.
The Company’s Public Warrants (see Note 3) and Private Placement Warrants could potentially be exercised or converted into common shares and then share in the earnings of the Company. However, these warrants were excluded when calculating diluted net income (loss) per share because the warrants were anti-dilutive as their exercise price was in excess of the average Class A common stock price over the period presented. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the period presented.
A reconciliation of net income per share is as follows for the three months ended March 31, 2022:
| Class A Common Stock subject to |
| Class B | |||
possible redemption | Common Stock | |||||
Allocation of undistributable income | $ | |
| $ | | |
Net Income to Common shares | | | ||||
Weighted average shares outstanding, basic and diluted |
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Basic and diluted net income per share | | | ||||
13
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
A reconciliation of net loss per share is as follows for the period from February 5, 2021 (inception) through March 31, 2021:
Class B | |||
Common Stock | |||
Allocation of undistributable losses |
| $ | ( |
Net Loss to Common shares | ( | ||
Weighted average shares outstanding, basic and diluted | | ||
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Basic and diluted net loss per share | — | ||
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, which establishes new accounting and disclosure requirements for leases. ASU No. 2016-02 requires lessees to classify most leases as either finance or operating leases and to initially recognize a lease liability and right-of-use asset. The Company adopted ASU 2016-02 on January 1, 2022 using the effective date approach to recognize and measure leases as of the adoption date. The Company has elected to utilize the available practical expedient to not separate lease components from non-lease components as well as the package of practical expedients that allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. As a result of the adoption of this guidance, the Company recorded a non-cash transaction to recognize on January 1, 2022 lease liabilities totaling $
We do not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our condensed financial statements.
3. INITIAL PUBLIC OFFERING
On September 30, 2021, the Company completed the Initial Public Offering whereby the Company sold
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PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
No fractional shares will be issued upon exercise of the Public Warrants. If, upon exercise of the Public Warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of Class A common stock to be issued to the Public Warrant holder. Each Public Warrant will become exercisable on the later of
On October 20, 2021, the Company announced that the holders of the Company’s Units may elect to separately trade the securities underlying such Units which commenced on October 26, 2021. Any Units not separated will continue to trade on the NYSE under the symbol “PRBM.U.” Any underlying shares of Class A common stock and warrants that are separated will trade on the Nasdaq under the symbols “PRBM,” and “PRBM.WS,” respectively.
4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
5. RELATED PARTY TRANSACTIONS
Founder Shares
On March 10, 2021, the Sponsor paid $
15
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
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: (A)
In addition, subject to each Anchor Investor purchasing
Administrative Services Agreement
The Company entered into an agreement, commencing on September 27, 2021 to pay the Sponsor a total of $
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. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
6. LEASES
The Company is obligated under a noncancelable operating lease for its office space in Campbell, California, expiring in May 2023 (the “Campbell Lease”). In addition, the Company is required to share in certain taxes and operating expenses of the Campbell Lease.
16
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
The Company recorded a non-cash transaction to recognize on January 1, 2022 lease liabilities totaling $
The following table reconciles the undiscounted lease liabilities to the total lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2022:
Undiscounted lease liabilities for years ending December 31, |
|
| |
2022 (remaining) | $ | | |
2023 |
| | |
Total undiscounted lease liabilities |
| | |
Less effects of discounting |
| ( | |
Total lease liability, current portion | $ | |
7. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any 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) will be entitled to registration rights pursuant to a registration and shareholder rights agreement dated as of September 27, 2021, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to
Underwriter’s Agreement
The Company granted the underwriter a 45-day option to purchase up to
The underwriter received a cash underwriting discount of $
17
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
8. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company is authorized to issue
Class A Common Stock — The Company is authorized to issue up to
Class B Common Stock — The Company is authorized to issue up to
Only holders of Class B common stock will have the right to vote on the election of directors prior to the Business Combination. 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 offered in the prospectus dated September 27, 2021 and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
9. WARRANTS
The Company has
The Company has accounted for the Warrants issued in connection with the Initial Offering in accordance with the guidance contained in ASC 815-40. Such guidance provides that, because the Warrants do not meet the criteria for equity treatment thereunder, each Warrant must be recorded as a liability. Accordingly, the Company classifies each warrant as a liability at its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the Warrant liability will be adjusted to fair value, with the change in fair value recognized in the company’s statement of operations.
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)
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PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
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.
The Company has agreed that as soon as practicable, but in no event later than business days after the closing of a Business Combination, it 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.
Redemption of warrants when the price per Class A common stock equals or exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the reported last sale price of the Class A common stock equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class A common stock equals or exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
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PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
| ● | if, and only if, the last reported sale price of Class A common stocks equals or exceeds $ |
| ● | if, and only if, the last reported sale price of our Class A common stocks is less than $ |
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Window and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public 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 its initial Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private Placement Warrants will and the common shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until
20
PARABELLUM ACQUISITION CORP.
Notes to Unaudited Condensed Financial Statements
(Unaudited)
10. FAIR VALUE MEASUREMENTS
The following tables presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
| March 31, | |||
Description | Level |
| 2022 | ||
Assets: |
|
|
|
| |
Cash held in Trust Account |
| 1 | $ | | |
Liabilities: |
|
|
|
| |
Warrant liability- Public Warrants | 1 | $ | | ||
Warrant liability- Private Placement Warrants |
| 2 | $ | | |
December 31, | |||||
Description |
| Level |
| 2021 | |
Assets: |
|
|
|
| |
Marketable securities held in Trust Account |
| 1 | $ | | |
Liabilities: |
|
|
|
| |
Warrant liability – Public Warrants |
| 1 | $ | | |
Warrant liability – Private Placement Warrants |
| 2 | $ | | |
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. For the three months ended March 31, 2022, the Company recognized a gain on the change in fair value of the warrant liability in the unaudited condensed statement of operations resulting from a decrease in the fair value of the warrant liabilities of $
The estimated fair value of the Company’s outstanding Public Warrants as of March 31, 2022 and December 31, 2021, was determined based on the market price of the Public Warrants as of March 31, 2022, as the Public Warrants were separately listed and traded in an active market during the period.
The estimated fair value of the Private Placement Warrants classified as a Level 2 measurement as of March 31, 2022 and December 31, 2021, as all of the significant inputs to the valuation model used to estimate the fair value of the Private Placement Warrants became directly or indirectly observable from the listed Public Warrants.
There were
11. SUBSEQUENT EVENTS
The Company did not identify any subsequent events that require adjustment or disclosure in the financial statements.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
References in this report (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” refer to Parabellum Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Founder” refer to Parabellum Acquisition Partners, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek,” “may,” “might,” “plan,” “possible,” “potential,” “should, “would” and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for our initial public offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company, incorporated in the State of Delaware on February 5, 2021 and 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. We have not identified an acquisition target. We intend to effectuate our initial Business Combination using cash from the proceeds from the sale of Public Units in our Offering, the sale of the Private Placement Warrants to our Sponsor, our common equity or any preferred equity that we may create in accordance with the terms of our charter documents, debt, or a combination of cash, common or preferred equity and debt. The Public Units sold in the Offering each consisted of one share of Class A common stock, and three - quarters (3/4) of one redeemable warrant to purchase one share of Class A common stock (no fractional shares will be issued upon exercise of the warrants). The Private Placement Warrants were substantially similar to the Public Units sold in the Offering, but for certain differences in the warrants included in each of them. For clarity, the warrants included in the Public Units are referred to herein as the “public warrants,” and the warrants included in the Private Placement Warrants are referred to herein as the “private warrants.”
The issuance of additional shares of any class of common stock or the creation of one or more classes of preferred stock during our initial Business Combination:
| ● | may significantly dilute the equity interest of investors in the Offering who would not have pre-emption rights in respect of any such issue; |
| ● | may subordinate the rights of holders of any class of common stock if the rights, preferences, designations and limitations attaching to the preferred shares are senior to those afforded our shares of Class A common stock; |
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| ● | could cause a change in control if a substantial number of shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; |
| ● | may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and |
| ● | may adversely affect prevailing market prices for our shares of Class A common stock. |
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after our initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
| ● | our inability to obtain necessary additional financing if any document governing such debt contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | our inability to pay dividends on our shares of common stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
We expect to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.
23
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date. From February 5, 2021 (inception) through March 31, 2022, our only activities have been organizational activities, those necessary to prepare for the Public Offering and to identify a target business for the Business Combination. We do not expect to generate any operating revenues until after completion of our initial Business Combination. We expect to generate non-operating income in the form of interest income on cash and marketable securities held in the Trust Account at JP Morgan Chase Bank, N.A. in New York, New York with Continental Stock Transfer & Trust Company acting as trustee, which was funded after the Public Offering to hold an amount of cash and marketable securities equal to the redemption amount of the Public Units sold in the Public Offering. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2022, we had net income of $3,554,992, which included $3,823,875 of other income related to the change in the fair value of the warrant liability and $26,237 of dividend and interest income earned in the trust account, offset by $295,120 in general and administrative expenses.
Liquidity and Capital Resources
As of March 31, 2022, we had cash of $775,326, and net working capital of $708,461. Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of common stock by the Sponsor and loans from our Sponsor.
On September 30, 2021, we consummated the Initial Public Offering of 12,500,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $125,000,000. On October 15, 2021, the underwriter exercised in full its over-allotment option to purchase additional 1,875,000 Units at a price of $10.00 per Unit. Simultaneously with the closing of the Initial Public Offering and the exercise of the over-allotment option by the underwriter, we consummated the sale of 6,600,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant generating gross proceeds of $6,600,000.
An aggregate of nine Anchor Investors were allocated and purchased a total of 11,137,500 Units or 77.5% of the outstanding Units following the Initial Public Offering and exercise of the over-allotment option by the underwriter, for gross proceeds of approximately $111.4 million.
In addition, subject to each Anchor Investor purchasing 100% of the Units allocated to it, in connection with the closing of the Initial Public Offering, the Sponsor sold a portion of Founder Shares to each Anchor Investor, or an aggregate of 495,000 Founders Shares to all Anchor Investors. The Company estimated the aggregate fair value of these Founder Shares attributable to Anchor Investors to be approximately $2.93 million, or $5.93 per share. Simultaneously with the exercise of the over-allotment option by the underwriter, the Company sold the additional total of 112,500 Founder Shares to the Anchor Investors. The Company estimated the aggregate fair value of these Founder Shares to be approximately $667,125, or $5.93 per share.
Following the closing of the Initial Public Offering on September 30, 2021 and the exercise of the over-allotment option by the underwriter on October 15, 2021, an amount of $145,187,500 ($10.10 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 the Trust Account.
As of the IPO Date, transaction costs amounted to $10,343,978, consisting of $2,500,000 of underwriting fees, $4,375,000 of deferred underwriting fees, $2,930,399 representing the aggregate fair value of Founder Shares sold to Anchor Investors and $538,579 of other offering costs. The Company’s remaining cash after payment of the Initial Public Offering costs is held outside the Trust Account for working capital purposes. Of the total transaction costs of $10,343,978 as of the IPO date, $9,809,375 was allocated to the Class A common stock and $534,603 was allocated to the Public Warrants.
24
As of October 15, 2021, transaction costs related to the exercise of the over-allotment option amounted to $1,941,520, consisting of $375,000 of underwriting fees, $656,250 of deferred underwriting fees, $680,802 representing the aggregate fair value of Founder Shares sold to Anchor Investors, and $229,468 of other offering costs. Of the total transaction costs of $1,941,520 related to the exercise of the over-allotment option, $1,865,801 was allocated to the Class A common stock and $75,719 was allocated to the Public Warrants.
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.
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 an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. 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 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.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of undertaking in-depth due diligence and negotiating our initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to consummate our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our business combination. If we are unable to complete our business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
As described more fully in Note 1 to the Financial Statements if the Company is unable to obtain approval for an extension of the deadline or complete a Business Combination by March 30, 2023, then the Company will cease all operations except for the purpose of liquidating. The Company has until March 30, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by the specified period. If a Business Combination is not consummated by March 30, 2023, there will be a mandatory liquidation and subsequent dissolution. The date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern one year from the date that these financial statements are issued. 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.
25
Critical Accounting Policies and Estimates
The Company prepares its financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect reported amounts. Estimations are considered critical accounting estimates based on, among other things, its impact on the portrayal of the Company’s financial condition, results of operations, or liquidity, as well as the degree of difficulty, subjectivity, and complexity in its deployment. Critical accounting estimates address accounting matters that are inherently uncertain due to unknown future resolution of such matters. Management routinely discusses the development, selection, and disclosure of each critical accounting estimates. There have been no significant changes to the Company’s policies, estimates and assumptions during the three-months ended March 31, 2022, except as noted below. Reference should be made to the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for a full description of other significant accounting policies.
Recent Accounting Standards
In February 2016, the FASB issued ASU No. 2016-02, which establishes new accounting and disclosure requirements for leases. ASU No. 2016-02 requires lessees to classify most leases as either finance or operating leases and to initially recognize a lease liability and right-of-use asset. The Company adopted ASU 2016-02 on January 1, 2022 using the effective date approach to recognize and measure leases as of the adoption date. The Company has elected to utilize the available practical expedient to not separate lease components from non-lease components as well as the package of practical expedients that allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. As a result of the adoption of this guidance, the Company recorded a non-cash transaction to recognize on January 1, 2022 lease liabilities totaling $76,141 and right-of-use-assets totaling $72,007, which will be amortized over the remaining terms of the lease.
Management does not believe that other any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
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Item 4. Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are 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 our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Changes in Internal Control over Financial Reporting
During our most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers or directors in their corporate capacity.
Item 1A. Risk Factors.
As of the date of this Quarterly Report on Form 10-Q, we supplement the risk factors disclosed in our Annual Report on Form 10-K that was filed with the SEC on April 15, 2022 with the following risk factors. Any of these factors disclosed in our Annual Report on Form 10-K or herein could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
There is substantial doubt about our ability to continue as a “going concern.”
As of March 31, 2022, we had $775,326 in our operating bank accounts. We have incurred, and expect to continue to incur, significant costs in pursuit of an initial Business Combination. Management’s plans to address this need are discussed under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our plans to raise capital and to consummate our initial Business Combination may not be successful. The initial deadline for us to complete our initial business combination is March 30, 2023. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this report do not include any adjustments that might result from our inability to continue as a going concern.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Use of Proceeds
On September 30, 2021, the Company consummated the Initial Public Offering of 12,500,000 units (the “Public Units”). On October 15, 2021, the Company completed the issuance of an additional 1,875,000 Public Units as a result of the Underwriters’ partial exercise of their over-allotment option. The Public Units were sold at a price of $10.00 per Public Unit, generating gross proceeds to the Company of $143,750,000.
Simultaneously with the consummation of our Initial Public Offering and full exercise of the over-allotment option by the underwriters, we consummated the private placement of 6,600,000 warrants in the aggregate (the “Private Placement Warrants”) to the sponsor, at a price of $1.00 per private placement warrant. The sale of the private placement warrants in connection with our IPO and subsequent over-allotment option exercise generated gross proceeds of $6,600,000.
Of the gross proceeds received from the Initial Public Offering, including the full exercise of the over-allotment option to purchase additional Public Units, and the Private Placement Warrants, $145,187,500 was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the Private Placement Warrants are 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 selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account.
Transaction costs related to the Initial Public Offering amounted to $10,343,978, consisting of $2,500,000 of underwriting fees, $4,375,000 of deferred underwriting fees, $2,930,399 representing the aggregate fair value of Founder Shares sold to Anchor Investors and $538,579 of other offering costs. The underwriters’ exercise of their full over-allotment option generated an additional $1,941,520, consisting of $375,000 of underwriting fees, $656,250 of deferred
28
underwriting fees, $680,802 representing the aggregate fair value of Founder Shares sold to Anchor Investors, and $229,468 of other offering costs. In addition, as of March 31, 2022, $775,326 of cash was held outside of the Trust Account and is available for working capital purposes.
There has been no material change in the planned use of the proceeds from the initial public offering and private placement as is described in our final prospectus related to the Initial Public Offering.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
29
Item 6. Exhibits.
Exhibit | Description | |
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL 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 within the Inline XBRL document) |
* | Filed herewith |
30
SIGNATURES
Pursuant to the requirements 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.
Company Name | ||
Date: May 23, 2022 | By: | /s/ Narbeh Derhacobian |
Narbeh Derhacobian | ||
Chief Executive Officer, President and Secretary (Principal Executive Officer) | ||
Date: May 23, 2022 | By: | /s/ Ron Shelton |
Ron Shelton | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
31
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