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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 September 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 September 30, 2022, we had a net income of $1,338,239,
which was comprised of operating costs of $217,855, accrued income
of $682,181 from investments in our Trust Account, $50,000 of
franchise tax expense, $159,421 of income tax expense and
$1,083,334 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 three months ended September
30, 2021, we had net loss of $1,281,869, which consisted of $67,092
general and administrative expenses, a change in fair value of
derivative liabilities of $783,333, a warrant offering expense of
$289,574 and offering costs related to transferring founder shares
to anchor investors of $141,870.
For the nine
months ended September 30, 2022, we had a net income of $4,827,953,
which was comprised of operating costs of $1,138,439, accrued
income of $909,146 from investments in our Trust Account, $150,000
of franchise tax expense, $159,421 of income tax expense and
$5,366,667 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 period
from April 1, 2021 (inception) through September 30, 2021, we had
net loss of $1,283,799, which consisted of $69,022 general and
administrative expenses, a change in fair value of derivative
liabilities of $783,333, a warrant offering expense of $289,574 and
offering costs related to transferring founder shares to anchor
investors of $141,870.
Liquidity
and Going Concern
As of September
30, 2022, the Company had $35,275 in its operating bank account and
working capital deficit of $1,203,103. 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
September 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 September
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 $90,000 in connection with such services
for the three and nine months ended September 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 September 30, 2022, the Public warrants are
calculated based on the market price of the Public Warrants, which
trade under the ticker symbol APMIW.
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 September 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 September 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 September
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 September 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 September 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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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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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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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: November 18, 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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