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ITEM 2. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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References to “we”, “us”, “our”
or the “Company” are to AxonPrime Infrastructure Acquisition
Corporation, except where the context requires otherwise.
References to our “management” or our “management team” refer to
our officers and directors, and references to the “Sponsor” refer
to AxonPrime Infrastructure Sponsor LLC, a Delaware limited
liability company. The following discussion should be read in
conjunction with our unaudited condensed financial statements and
related notes thereto included elsewhere in this report.
Cautionary
Note Regarding Forward-Looking Statements
This Quarterly Report on Form
10-Q includes forward-looking statements. These forward-looking
statements are based on our current expectations and beliefs
concerning future developments and their potential effects on us.
There can be no assurance that future developments affecting us
will be those that we have anticipated. These forward-looking
statements involve a number of risks, uncertainties (some of which
are beyond our control) or assumptions, and actual results, events
or performance may be materially different from those expressed or
implied by these forward-looking statements. Our forward-looking
statements include, but are not limited to, statements regarding
our or our management team’s expectations, hopes, beliefs,
intentions, plans or strategies regarding the future. In addition,
any statements that refer to projections, forecasts or other
characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements. The words
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intends,” “may,” “might,” “plan,” “possible,” “potential,”
“predict,” “project,” “should,” “would” and similar expressions may
identify forward-looking statements, but the absence of these words
does not mean that a statement is not forward-looking. Factors that
might cause or contribute to actual
results, events or performance differing from such
forward-looking statements include, but are not limited to, those
set forth in the Risk Factors section of the Company’s registration
statement on Form S-1, as amended, and the Company’s final
prospectus for our initial public offering (“IPO”) filed with the
SEC on August 16, 2021 (“Final Prospectus”). The following
discussion should be read in conjunction with our unaudited
condensed financial statements and related notes thereto included
elsewhere in this report.
Overview
We are a blank check company
formed under the laws of the State of Delaware on April 1, 2021 for
the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or other similar
business combination (the “Business Combination”) with one or more
businesses. We intend to effectuate our Business Combination using
cash from the proceeds of our IPO, our capital stock, debt or a
combination of cash, stock and debt. We are an emerging growth
company and, as such, we are subject to all of the risks associated
with emerging growth companies.
Results of
Operations
Our entire activity from
inception up to June 30, 2022, was related to our formation and the
IPO. Since the IPO, our activity has been limited to the evaluation
of business combination candidates, and we will not be generating
any operating revenues until the closing and completion of our
initial business combination. We expect to generate small amounts
of non-operating income in the form of interest income from the
proceeds derived from the Initial Public Offering. We expect to
incur increased expenses as a result of being a public company (for
legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses. We expect our expenses to
increase substantially after this period.
For the three months ended June
30, 2022, we had a net income of $1,553,125, which was comprised of
operating costs of $479,990, accrued income of $216,449 from
investments in our Trust Account, $50,000 of franchise tax expense
and $1,866,666 of unrealized gain on fair value changes of
warrants. The operating expenses were primarily due to fees to
professionals such as the auditors, legal counsel and consultants,
and insurance expenses.
For the six months ended June 30,
2022, we had a net income of $3,489,714, which was comprised of
operating costs of $920,584, accrued income of $226,965 from
investments in our Trust Account, $100,000 of franchise tax expense
and $4,283,333 of unrealized gain on fair value changes of
warrants. The operating expenses were primarily due to fees to
professionals such as the auditors, legal counsel and consultants,
and insurance expenses.
Liquidity and
Going Concern
As of June 30, 2022, the Company
had $35,375 in its operating bank account and working capital
deficit of $786,636. To date, the Company’s liquidity needs have
been satisfied through a payment of $25,000 from the Sponsor to
cover certain expenses on behalf of the Company in exchange for the
issuance of the Founder Shares, a loan of approximately $121,000
pursuant to the Note issued to the Sponsor, and the net proceeds
from the consummation of the Private Placement not held in the
Trust Account. The Company fully repaid the Note on September 8,
2021. In addition, in order to finance transaction costs in
connection with a Business Combination, the Company’s officers,
directors and Initial Shareholders may, but are not obligated to,
provide the Company Working Capital Loans. As of June 30, 2022,
there were no Working Capital Loans outstanding.
In connection with the Company's
assessment of going concern considerations in accordance with
Financial Accounting Standard Board's Accounting Standards Update
("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's
Ability to Continue as a Going Concern," the Company has until
August 17, 2023, to consummate the initial Business Combination. It
is uncertain that the Company will be able to consummate the
initial 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, 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 17, 2023.
The Company intends to complete the initial Business Combination
before the mandatory liquidation date. However, there can be no
assurance that the Company will be able to consummate any business
combination by August 17, 2023.
Off-Balance
Sheet Arrangements
As of June 30, 2022, and December
31, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have
any commitments or contractual obligations.
Contractual
Obligations
Administrative Services Agreement
Commencing on the date the
Company’s securities were first listed, the Company agreed to pay
the Sponsor a total of $10,000 per month for office space,
secretarial and administrative services provided to the members of
the Company’s management team. Upon completion of the initial
Business Combination or the Company’s liquidation, the Company will
cease paying these monthly fees. The Company recognized
approximately $30,000 and $60,000 in connection with such services
for the three and six months ended June 30, 2022 in other operating
expenses in the accompanying statements of operations, and which
remains included in accrued expenses in the balance sheets.
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 in each
case holders of their component securities, as applicable) will be
entitled to registration rights pursuant to a registration rights
agreement signed on the closing date of the Initial Public
Offering, 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 three demands, excluding
short form 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
consummation 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 Company will bear the expenses
incurred in connection with the filing of any such registration
statements.
Underwriting
Agreement
The underwriter was paid a cash
underwriting discount of 2.00% of the gross proceeds of the Initial
Public Offering, or $3,000,000, in connection with the Initial
Public Offering. In addition, the underwriter is entitled to a
deferred fee of three and half percent (3.50%) of the gross
proceeds of the Initial Public Offering, or $5,250,000. The
deferred fee will become payable to the underwriter 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.
The underwriter’s over-allotment
option was not exercised and expired on September 26, 2021.
Critical
Accounting Policies and Estimates
The preparation of unaudited
condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the unaudited condensed financial statements, and income
and expenses during the periods reported. Actual results could
materially differ from those estimates. The Company has identified
the following as its critical accounting policies:
Warrant
Liabilities
The Company accounts for warrants
as either equity-classified or liability-classified instruments
based on an assessment of the warrant’s specific terms and
applicable authoritative guidance in FASB ASC 480, Distinguishing
Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and
Hedging (“ASC 815”). The assessment considers whether the warrants
are freestanding financial instruments pursuant to ASC 480, meet
the definition of a liability pursuant to ASC 480, and whether the
warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to the
Company’s own common stock, among other conditions for equity
classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance
and as of each subsequent quarterly period end date while the
warrants are outstanding.
For issued or modified warrants
that meet all of the criteria for equity classification, the
warrants are required to be recorded as a component of additional
paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity
classification, the warrants are required to be recorded at their
initial fair value on the date of issuance, and each balance sheet
date thereafter. Changes in the estimated fair value of the
warrants are recognized as a non-cash gain or loss on the
statements of operations. The fair value of the private warrants
were estimated using a Monte Carlo simulation model-based approach.
The measurements of fair market value of the Public Warrants were
initially estimated using a Monte Carlo simulation model-based
approach. As of June 30, 2022, the Public warrants are calculated
based on the market price of the Public Warrants, which trade under
the ticker symbol APMIW. As of June 30, 2022, the Public warrants
have transferred to a Level 2 fair value measurement.
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 FASB ASC Topic 480 “Distinguishing Liabilities
from Equity.” The shares of Class A common stock subject to
mandatory redemption (if any) are classified as liability
instruments and are measured at fair value. Conditionally
redeemable shares of Class A common stock (including Class A common
stock that feature redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) are
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 the
occurrence of uncertain future events. Accordingly, as of June 30,
2022 and December 31, 2021, 15,000,000 shares of Class A common
stock subject to possible redemption are presented as temporary
equity, outside of the stockholders’ deficit section of the
Company’s balance sheets.
Net Income
(Loss) Per Share of Common Stock
The Company complies with
accounting and disclosure requirements of FASB ASC Topic 260,
“Earnings Per Share”. Net income (loss) per common stock is
computed by dividing net income (loss) by the weighted average
number of shares of common stock outstanding for the period. The
Company has two classes of shares, which are referred to as Class A
common stock and Class B common stock. Income and losses are shared
pro rata between the two classes of shares. Accretion associated
with the redeemable shares of Class A common stock is excluded from
earnings per share as the redemption value approximates fair value.
Weighted average shares were reduced for the effect of an aggregate
of 562,500 shares of Class B common stock that were forfeited
because the over-allotment option was not exercised by the
underwriter.
The calculation of diluted income
(loss) 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 8,333,333 shares of Class A common stock in
the aggregate. At June 30, 2022, 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. As a result, diluted net income (loss) per
common stock is the same as basic net income (loss) per common
stock for the periods presented.
JOBS Act
The JOBS Act contains provisions
that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an “emerging growth
company” and under the JOBS Act will be allowed to comply with new
or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We are electing to
delay the adoption of new or revised accounting standards, and as a
result, we may not comply with new or revised accounting standards
on the relevant dates on which adoption of such standards is
required for non-emerging growth companies. As a result, our
condensed financial statements may not be comparable to companies
that comply with new or revised accounting pronouncements as of
public company effective dates.
Additionally, we are in the
process of evaluating the benefits of relying on the other reduced
reporting requirements provided by the JOBS Act. Subject to certain
conditions set forth in the JOBS Act, if, as an “emerging growth
company,” we choose to rely on such exemptions we may not be
required to, among other things, (i) provide an auditor’s
attestation report on our system of internal controls over
financial reporting pursuant to Section 404, (ii) provide all of
the compensation disclosure that may be required of non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and
Consumer Protection Act, (iii) comply with any requirement that may
be adopted by the PCAOB regarding mandatory audit firm rotation or
a supplement to the auditor’s report providing additional
information about the audit and the condensed financial statements
(auditor discussion and analysis), (iv) disclose certain executive
compensation related items such as the correlation between
executive compensation and performance and comparisons of the CEO’s
compensation to median employee compensation and (v) comply with
the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute
payments not previously approved. These exemptions will apply for a
period of five years following the completion of our IPO or until
we are no longer an “emerging growth company,” whichever is
earlier.
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ITEM 3. |
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
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As of June 30, 2022, we were not
subject to any market or interest rate risk. Following the
consummation of our IPO, the net proceeds of our IPO, including
amounts in the Trust Account, have been invested in U.S. government
treasury bills, notes or bonds with a maturity of 180 days or less
or in certain money market funds that invest solely in U.S.
treasuries. Due to the short-term nature of these investments, we
believe there will be no associated material exposure to interest
rate risk.
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ITEM 4. |
CONTROLS AND PROCEDURES.
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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 June 30, 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 Controls Over Financial Reporting
During the 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.
PART II.
OTHER INFORMATION
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ITEM 1. |
LEGAL PROCEEDINGS.
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None.
Factors that could cause our
actual results to differ materially from those in this Quarterly
Report on Form 10-Q include any of the risk factors described in
our Annual Report on Form 10-K filed with the SEC on March 31,
2022. Any of these factors could result in a significant or
material adverse effect on our business, results of operations or
financial condition. Additional risk factors not currently known to
us or that we currently deem immaterial may also impair our
business, results of operations or financial condition. As of the
date of this Quarterly Report on Form 10-Q, there have been no
material changes to the risk factors disclosed in the Annual Report
on Form 10-K filed with the SEC on March 31, 2022.
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ITEM 2. |
UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.
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On April 9, 2021, one of our
founders purchased an aggregate of 8,625,000 shares of our Class B
common stock (“founder shares”) for an aggregate offering price of
$25,000 at an average purchase price of approximately $0.003 per
share. On April 19, 2021, the founder shares were assigned to our
Sponsor for the same purchase price that was initially paid by one
of our founders. In July 2021, our Sponsor returned to us, for no
consideration, an aggregate of 4,312,500 founder shares, which were
canceled, resulting in an aggregate of 4,312,500 founder shares
outstanding and held by our initial shareholders (562,500 of which
are subject to forfeiture by our Sponsor). On July 6, 2021, our
Sponsor transferred 25,000 founder shares to each of Muneer Satter,
William Ulrich, and Richard Spencer, our independent director
nominees, (for a total of 75,000 founder shares) at their original
purchase price. In connection with the IPO, certain qualified
institutional buyers or institutional accredited investors (in
addition to related investment vehicles controlled by or affiliated
with these investors) that are not affiliated with us, our Sponsor,
our directors or any member of our management (the “Institutional
Anchor Investors”) purchased an aggregate of $127,900,000 of Units
(in each case, subject to a minimum of $8.5 million of Units) in
the IPO. In connection with the closing of the IPO, our Sponsor
sold an amount up to 75,000 founder shares to each Institutional
Anchor Investor at their original purchase price (for a total of
650,000 founder shares). The number of founder shares issued was
determined based on the expectation that the founder shares would
represent 20% of the outstanding common stock upon completion of
the IPO. Such securities were issued in connection with our
organization in reliance on the private offering exemption from
registration contained in Section 4(a)(2) of the Securities
Act.
The founder shares will
automatically convert into shares of our Class A common stock at
the time of the Company’s initial business combination on a
one-for-one basis, subject to adjustment as set forth in the Final
Prospectus.
On August 17, 2021, we
consummated our IPO of 15,000,000 Units at a price of $10.00 per
Unit, generating total gross proceeds of $150,000,000. Morgan
Stanley & Co. LLC acted as sole book-running manager. The
securities sold in the offering were registered under the
Securities Act on a registration statement on Form S-1, as amended
(Registration No. 333-257777). The offering has been completed and
all of the Units registered pursuant to the registration statement,
other than the Units underlying the underwriter’s over-allotment
option, were sold. The registration statement became effective on
August 12, 2021. The Company granted the underwriter a 45-day
option from the date of the Final Prospectus to purchase up to
2,250,000 additional Units to cover over-allotments, if any, at the
IPO price, less underwriting discounts and commissions. Following
the expiration of the underwriter’s over-allotment option, an
aggregate of 3,750,000 founder shares were issued and outstanding
as of June 30, 2022 (reflecting the forfeiture by our Sponsor of
562,500 founder shares).
Simultaneously with the
consummation of the IPO, we consummated the Private Placement of
3,333,333 Private Warrants at a price of $1.50 per Private Warrant,
generating total proceeds of $5,000,000, to the Sponsor. Such
securities were issued in reliance on the private offering
exemption from registration contained in Section 4(a)(2) of the
Securities Act. Substantially concurrently with the closing of the
Private Placement, one of the Institutional Anchor Investors
purchased Private Warrants from the Sponsor, in an aggregate amount
of 66,666 Private Warrants, at the same price per Private Warrant
paid by our Sponsor for such warrants.
A total of $150,000,000 composed
of proceeds from the IPO and the sale of Private Warrants was
placed in the Trust Account.
We paid a total of $3,000,000 in
underwriting discounts and commissions and $453,625 for other costs
and expenses related to the IPO, in addition to an estimated
additional $80,000 in other offering expenses that will be paid. In
addition, the underwriter agreed to defer $5,250,000 in
underwriting discounts and commissions.
For a description of the net
proceeds and the use of the proceeds generated in our IPO, see Part
I, Item 2 of this Form 10-Q, which is incorporated in this Part II,
Item 2 by reference.
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ITEM 3. |
DEFAULTS UPON SENIOR
SECURITIES.
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None.
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ITEM 4. |
MINE SAFETY DISCLOSURES.
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Not applicable.
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ITEM 5. |
OTHER INFORMATION.
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None.
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Exhibit
Number
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Description
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Certification of Principal
Executive Officer Pursuant to Securities Exchange Act Rules
13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
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|
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Certification of Principal
Financial Officer Pursuant to Securities Exchange Act Rules
13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
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|
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Certification of Principal
Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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|
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Certification of Principal
Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS*
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Inline XBRL Instance Document –
the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL
document.
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101.SCH*
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Inline XBRL Taxonomy Extension
Schema Document.
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101.CAL*
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Inline XBRL Taxonomy Extension
Calculation Linkbase Document.
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101.DEF*
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Inline XBRL Taxonomy Extension
Definition Linkbase Document.
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101.LAB*
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Inline XBRL Taxonomy Extension
Label Linkbase Document.
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101.PRE*
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Inline XBRL Taxonomy Extension
Presentation Linkbase Document.
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104*
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Cover Page Interactive Data File
(the cover page XBRL tags are embedded within the Inline XBRL
document, which is contained in Exhibit 101).
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* Filed herewith.
** Furnished herewith.
PART III
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.
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AXONPRIME INFRASTRUCTURE ACQUISITION CORPORATION
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Date: August 23, 2022
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/s/ Dinakar Singh
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Dinakar Singh
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Chief Executive Officer and Principal Financial
Officer
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(Duly Authorized and Principal Executive Officer)
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32