UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
For the transition period from______ to______
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including zip code)
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) |
| Name of each exchange on which registered | |
The | ||||
The | ||||
The |
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
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As
of May 14, 2024, there were
ACHARI VENTURES HOLDINGS CORP. I
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
i
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
ACHARI VENTURES HOLDINGS CORP. I
CONDENSED CONSOLIDATED BALANCE SHEETS
March
31, (Unaudited) | December 31, 2023 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total current assets | ||||||||
OTHER ASSETS | ||||||||
Cash held in Trust Account | ||||||||
TOTAL ASSETS | $ | $ | ||||||
LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Income taxes payable | ||||||||
Notes payable - related party | ||||||||
Excise tax liability | ||||||||
Total current liabilities | ||||||||
Derivative warrant liabilities | ||||||||
Deferred underwriting fee payable | ||||||||
Total liabilities | ||||||||
COMMITMENTS AND CONTINGENCIES (NOTE 6) | ||||||||
REDEEMABLE COMMON STOCK | ||||||||
Common stock subject to possible redemption: | ||||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Preferred stock, $ | ||||||||
Common stock; $ | ||||||||
Accumulated Deficit | ( | ) | ( | ) | ||||
Total stockholders’ deficit | ( | ) | ( | ) | ||||
LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS’ DEFICIT | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
ACHARI VENTURES HOLDINGS CORP. I
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED
March
31, 2024 | March
31, 2023 | |||||||
OPERATING EXPENSES | ||||||||
General and administrative | $ | $ | ||||||
Franchise tax | ||||||||
Total operating expenses | ||||||||
OTHER INCOME | ||||||||
Interest and dividend income on cash and marketable securities held in Trust Account | ||||||||
Change in fair value of derivative warrant liabilities | ( | ) | ( | ) | ||||
Total other income | ||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ||||
Income tax provision | ( | ) | ( | ) | ||||
NET LOSS | $ | ( | ) | $ | ( | ) | ||
Weighted average shares outstanding of Common stock | ||||||||
$ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ACHARI VENTURES HOLDINGS CORP. I
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED
MARCH 31, 2024
(UNAUDITED)
Common stock (excluding 550,941 shares subject to possible redemption) | Additional paid-in | Accumulated | Total stockholders’ | |||||||||||||||||
Shares | Amount | capital | deficit | deficit | ||||||||||||||||
Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Remeasurement of redeemable shares to redemption value | ( | ) | ( | ) | ||||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||
Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) |
FOR THE THREE MONTHS ENDED
MARCH 31, 2023
(UNAUDITED)
Common stock (excluding 1,019,465 shares subject to possible redemption) | Additional
paid-in | Accumulated | Total stockholders’ | |||||||||||||||||
Shares | Amount | capital | deficit | deficit | ||||||||||||||||
Balance, January 1, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Remeasurement of redeemable shares to redemption value | - | ( | ) | ( | ) | |||||||||||||||
Excise duty in connection with redemption of redeemable shares | - | ( | ) | ( | ) | |||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED
March
31, 2024 | March
31, 2023 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Interest and dividend income on cash and marketable securities held in Trust Account | ( | ) | ( | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Change in fair value of warrants | ||||||||
Prepaid expenses | ( | ) | ||||||
Accounts payable and accrued expenses | ||||||||
Income taxes payable | ( | ) | ||||||
Franchise tax payable | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Cash deposited in Trust Account | ( | ) | ||||||
Cash withdrawn from Trust account for taxes | ( | ) | ||||||
Cash withdrawal from Trust account in connection with Common Stock redemptions | ||||||||
Net cash (used in) provided by investing activities | ( | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Redemption of Common stock | ( | ) | ||||||
Notes payable - related party | ||||||||
Net cash provided by (used in) financing activities | ( | ) | ||||||
NET CHANGE IN CASH | ( | ) | ( | ) | ||||
CASH, BEGINNING OF PERIOD | ||||||||
CASH, END OF PERIOD | $ | $ | ||||||
Supplemental disclosure of noncash activities: | ||||||||
Common stock redemption payable | $ | $ | ||||||
Excise tax liability | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ACHARI VENTURES HOLDINGS CORP. I
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(Unaudited)
Note 1—Description of Organization and Business Operations
Achari Ventures Holdings Corp. I (the “Company”) was incorporated in Delaware on January 25, 2021. The Company is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of consummating an initial Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As
of March 31, 2024, the Company had not commenced any operations. All activity through March 31, 2024 relates to the Company’s formation,
its initial public offering (“Initial Public Offering”), and, subsequent to the Initial Public Offering, identifying a target
company for an initial Business Combination. The Company will not generate any operating revenues until after the completion of an initial
Business Combination, at the earliest. The registration statement for the Company’s Initial Public Offering was declared effective
on October 14, 2021. On October 19, 2021, the Company consummated the Initial Public Offering of
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of
Offering
costs for the Initial Public Offering amounted to $
Following
the closing of the Initial Public Offering, $
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward
consummating an initial Business Combination. There is no assurance that the Company will be able to complete an initial Business Combination
successfully. The Company must complete one or more Business Combinations having an aggregate fair market value of at least
The
Company will provide the 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 an initial Business Combination either (i) in connection with a stockholder
meeting called to approve the initial Business Combination or (ii) by means of a tender offer. The decision as to whether the Company
will seek stockholder approval of an initial Business Combination or conduct a tender offer will be made by the Company. 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 $
5
All
of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s
liquidation, if there is a stockholder vote or tender offer in connection with the Company’s initial Business Combination and in
connection with certain amendments to the Company’s Fifth Amended and Restated Certificate of Incorporation (as defined below).
In accordance with ASC 480-10-S99, redemption provisions not solely within the control of a company require Common Stock subject to redemption
to be classified outside of permanent equity. Given that the Public Shares were issued with other freestanding instruments (i.e., Public
Warrants (as defined in Note 3)), the initial carrying value of Common Stock classified as temporary equity was the allocated proceeds
determined in accordance with Accounting Standards Codification (“ASC”) 470-20. The Common Stock is subject to ASC 480-10-S99.
If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the
redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become
redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately
as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The
Company elected to recognize the changes immediately. While redemptions cannot cause the Company’s net tangible assets to fall
below $
Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s initial Business Combination. If the Company seeks stockholder approval of the initial Business Combination, the Company will proceed with an initial Business Combination if a majority of the shares voted are voted in favor of the initial Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Fifth Amended and Restated Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”) and file tender offer documents with the SEC prior to completing an initial Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with an initial Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving an initial Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding
the foregoing, the Fifth 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
The
Company’s Sponsor, officers and directors (the “Initial Stockholders”) agreed not to propose an amendment to the Fifth
Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem
If
the Company is unable to complete an initial Business Combination by
6
The
Initial Stockholders agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete an
initial Business Combination within the Combination Period in connection with the consummation of the Initial Public Offering. However,
if the Initial Stockholders decide to acquire Public Shares in addition to their Founder Shares, they will be entitled to liquidating
distributions from the Trust Account with respect to such Public Shares if the Company fails to complete an initial Business Combination
within the Combination Period. The underwriters agreed to waive their rights to its deferred underwriting commission (see Note 6) held
in the Trust Account in the event the Company does not complete an initial Business Combination within the Combination Period and, in
such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption
of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available
for distribution (including the Trust Account assets) will be only $
Business Combination Agreement with Vaso Corporation
Business Combination Agreement
The Company entered into a business combination agreement (the “Vaso Business Combination Agreement”), dated as of December 6, 2023, with Vaso Corporation, a Delaware corporation (“Vaso”), and Achari Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Achari (“Merger Sub”). The Vaso Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Vaso (the “Merger”), with Vaso surviving as a wholly-owned subsidiary of the Company (the “Surviving Company”). Upon the closing of the Vaso Business Combination Agreement (the “Closing”), it is anticipated that the Company will change its name to “Vaso Holding Corporation” (or an alternative name chosen by Vaso and reasonably acceptable to the Company).
The Merger and the other transactions contemplated by the Vaso Business Combination Agreement are hereinafter referred to collectively as the “Vaso Business Combination.”
The Vaso Business Combination Agreement and the transactions contemplated thereby were approved by the boards of directors of each of the Company, Vaso and Merger Sub.
In connection with the Vaso Business Combination, the Company filed a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”) on January 8, 2024 (Registration No. 333-276422) (the “Registration Statement”). On February 2, 2024, the Company received a comment letter from the SEC regarding the Registration Statement. The Company responded to the SEC’s comment letter and amended the Registration Statement on February 14, 2024, accordingly. On March 8, 2024, the Company received a second comment letter from the SEC regarding the Registration Statement. The Company responded to the SEC’s comment letter and amended the Registration Statement on April 9, 2024, accordingly. On April 22, 2024, the Company received a third comment letter from the SEC regarding the Registration Statement. The Company responded to the SEC’s comment letter and amended the Registration Statement on April 30, 2024, accordingly. On May 9, 2024, the Company received a fourth comment letter from the SEC regarding the Registration Statement. For additional information regarding the Vaso Business Combination, please see the Registration Statement, as amended.
Consideration and Structure
In accordance with the terms and subject to the conditions
of the Vaso Business Combination Agreement, at the effective time of the Merger (the “Effective Time”), (i) each share of
capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be automatically cancelled and extinguished
and converted into one share of common stock, par value $
7
Representations and Warranties; Covenants
The parties to the Vaso Business Combination Agreement have agreed to customary representations and warranties for transactions of this type. In addition, the parties to the Vaso Business Combination Agreement agreed to be bound by certain customary covenants for transactions of this type, including, among others, covenants with respect to the conduct of the Company, Vaso and their respective subsidiaries during the period between execution of the Vaso Business Combination Agreement and Closing. The representations, warranties, agreements and covenants of the parties set forth in the Vaso Business Combination Agreement will terminate at Closing, except for those covenants and agreements that, by their respective terms, contemplate performance after Closing. Each of the parties to the Vaso Business Combination Agreement has agreed to use its reasonable best efforts to take or cause to be taken all actions and things necessary to consummate the Vaso Business Combination.
Conditions to Closing
The obligations of the Company and Vaso to consummate the Vaso Business Combination are subject to the fulfillment or waiver of certain closing conditions, including, but not limited to: (i) no order or law issued by any court of competent jurisdiction or other governmental entity or other legal restraint or prohibition preventing the consummation of the transactions contemplated by the Vaso Business Combination Agreement being in effect; (ii) the approval and adoption of the Vaso Business Combination Agreement and the transactions contemplated thereby by the requisite vote of the Company’s and Vaso’s stockholders; (iii) the registration statement/proxy statement to be filed by the Company relating to the Vaso Business Combination Agreement and the Vaso Business Combination becoming effective in accordance with the provisions of the Securities Act, no stop order being issued by the SEC and remaining in effect with respect to the registration statement/proxy statement to be filed by the Company relating to the Vaso Business Combination Agreement and the Vaso Business Combination, and no proceeding seeking such a stop order being threatened or initiated by the SEC and remaining pending; (iv) the Certificate of Merger having been accepted for filing by the Secretary of State of the State of Delaware; and (v) the absence of the occurrence of a material adverse effect on the part of the Company and/or Vaso.
Termination
The Vaso Business Combination Agreement may be terminated under customary and limited circumstances prior to the Closing, including, but not limited to: (i) by mutual consent of the Company and Vaso; (ii) by either the Company or Vaso if there is a law or governmental order in effect prohibiting the Vaso Business Combination; provided that this right shall not be available to the party whose breach of any of its representations, warranties, covenants or agreements under the Vaso Business Combination Agreement results in or is the primary cause of such law or governmental order; and (iii) by either the Company or Vaso if the Merger is not consummated on or before May 30, 2024, which date shall be extended automatically for up to thirty (30) days to the extent the parties to the Vaso Business Combination Agreement are continuing to work in good faith toward the Closing.
The foregoing description of the Vaso Business Combination Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Vaso Business Combination Agreement, a form of which is attached as Exhibit 2.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2024, and the terms of which are incorporated herein by reference.
The Vaso Business Combination Agreement contains representations, warranties and covenants that the respective parties thereto made to each other as of the date of such agreement or other specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the agreement among such parties and are subject to important qualifications and limitations agreed to by such parties in connection with negotiating such agreement. The representations, warranties and covenants in the Vaso Business Combination Agreement are also modified in important part by the underlying disclosure schedules, which are not filed publicly, and which are subject to a contractual standard of materiality different from that generally applicable to stockholders, and which were used for the purpose of allocating risk among the parties rather than establishing matters as facts. The Company and Vaso believe that these disclosure schedules do not contain information that is material to an investment or voting decision.
8
Other Agreements
Sponsor Letter Agreement
The
Vaso Business Combination Agreement contemplates that, at or prior to the Closing, the Sponsor, will enter into a Sponsor Letter Agreement
with the Company, Vaso and the other parties thereto (the “BCA Sponsor Letter Agreement”), which (among other things) outlines
the transfer of Founder Shares and Private Placement Warrants by the Sponsor to the Company, and also provides for guidelines of restrictions
and agreements regarding voting, redemption and disposition of these securities. Pursuant to the BCA Sponsor Letter Agreement, the Sponsor
is to return
The foregoing description of the BCA Sponsor Letter Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the BCA Sponsor Letter Agreement, a form of which is attached as Exhibit 10.1 to the Annual Report, and the terms of which are incorporated herein by reference.
Put Option Agreement
The
Vaso Business Combination Agreement contemplates that, simultaneously with the Closing, the Sponsor, the Company and Vaso will enter
into a Put Option Agreement (the “Put Option Agreement”), which (among other things) governs the transfer and exercise of
put options for certain shares and provides a framework for the transfer and exercise of these put options, outlining specific conditions
and procedures for their exercise. The Sponsor will then gain the right to put up to
The foregoing description of the Put Option Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Put Option Agreement, a form of which is attached as Exhibit 10.2 to the Annual Report, and the terms of which are incorporated herein by reference.
Amended and Restated Registration Rights Agreement
The Vaso Business Combination Agreement contemplates that, simultaneously with the Closing, the Company and certain security holders and/or executive officers and directors of the Company and Vaso will enter into an Amended and Restated Registration Rights Agreement (the “Amended and Restated Registration Rights Agreement”), which serves to register certain shares, such as Founder Shares and common shares underlying the Private Placement Warrants, for resale under the Securities Act. Such agreement details provisions for shelf registrations, including the filing of Registration Statements (Form S-1 Shelf or Form S-3 Shelf), maintaining shelf effectiveness, amendments and subsequent registrations for resale of registrable securities. Additionally, such agreements outline the Company’s obligations to facilitate the disposition of registrable securities, including preparing registration statements, obtaining qualifications under securities laws, ensuring prospectus accuracy, and indemnifying holders against losses arising from any inaccuracies in the offering documents.
The foregoing description of the Amended and Restated Registration Rights Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Amended and Restated Registration Rights Agreement, a form of which is attached as Exhibit 10.3 to the Annual Report, and the terms of which are incorporated herein by reference.
9
Lockup Agreement
In
connection with the Closing, certain security holders of the Company and Vaso will enter into a Lockup Agreement (the “Lockup Agreement”),
pursuant to which (among other things), such security holders will be subject to a proposed
The foregoing description of the Lockup Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Lockup Agreement, a form of which is attached as Exhibit 10.4 to the Annual Report, and the terms of which are incorporated herein by reference.
Director Indemnification Agreements
In connection with the Closing, each of the individuals designated to be members of the board of directors of the Company will enter into a Director Indemnification Agreement with the Company (collectively, the “Director Indemnification Agreements,” and each, a “Director Indemnification Agreement”).
The foregoing description of the Director Indemnification Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Director Indemnification Agreement, a form of which is attached as Exhibit 10.5 to the Annual Report, and the terms of which are incorporated herein by reference.
Vaso Support Agreement
Concurrently with the execution of the Vaso Business Combination Agreement, the Company, Vaso and certain security holders of Vaso have entered into support agreements committing them to vote in favor of the Vaso Business Combination (the “Support Agreements”), pursuant to which such security holders agreed to, among other things, (i) waive any appraisal rights or dissenter rights in connection with the Vaso Business Combination, and (ii) consent to and vote in favor of the Vaso Business Combination Agreement and the transactions contemplated thereby (including the Vaso Business Combination).
The foregoing description of the Support Agreements is subject to and qualified in its entirety by reference to the full text of the Support Agreement, a copy of which is attached as Exhibit 10.6 to the Annual Report, and the terms of which are incorporated herein by reference.
Extension of Deadline to Consummate an Initial Business Combination
On
December 22, 2022, the Company reconvened a special meeting of the Company’s shareholders (the “December 2022 Special Meeting”),
which had initially been adjourned on December 19, 2022. At the reconvened December 2022 Special Meeting, the Company’s shareholders
approved (i) an amendment to the Company’s then-existing amended and restated certificate of incorporation, which amended an option
included in the Company’s then-existing amended certificate of incorporation, and which had provided the Company the ability to
extend the deadline by which the Company must consummate an initial Business Combination by up to three months, or from January 19, 2023
to April 19, 2023, to instead provide for an extension to consummate an initial Business Combination by up to six months, or from January
19, 2023 to July 19, 2023 (the “Original Amended Extended Date”) and (ii) an amendment to the Company’s Investment
Management Trust Agreement to provide that the Company may extend the time period to complete an initial Business Combination up to and
until the Original Amended Extended Date on a monthly basis, by, at the Company’s option, depositing into the Company’s Trust
Account the lesser of (x) $
10
On July 12, 2023, the Company’s shareholders
approved at a special meeting of the Company’s shareholders (the “July Special Meeting”) (i) an amendment to the Company’s
then-existing amended and restated certificate of incorporation, which amended an option included in the Company’s then-existing
amended and restated certificate of incorporation that provided the Company the ability to extend the deadline by which the Company must
consummate an initial Business Combination by up to six months, or from January 19, 2023 to July 19, 2023 (the “Second Amended Extended
Date”), to instead provide for an extension to consummate an initial Business Combination by up to an additional six months, or
from July 19, 2023 to January 19, 2024, and (ii) an amendment to the Company’s Amended and Restated Investment Management Trust
Agreement to provide that the Company may extend the time period to complete an initial Business Combination up to and until the Second
Amended Extended Date on a monthly basis, at the Company’s option, by depositing into the Company’s Trust Account the lesser
of (x) $
On July 17, 2023, the Sponsor transferred
On
December 18, 2023, the Company held a special meeting in lieu of an annual meeting of the Company’s shareholders (the “December
2023 Special Meeting”). At the Special Meeting, the Company’s shareholders approved (i) a proposal (the “December 2023
Charter Amendment Proposal”) to amend the Company’s Fourth Amended and Restated Certificate of Incorporation to revise the
Company’s then existing extension option, which provided that the Company had the option of extending the period by which it must
consummate an initial Business Combination by up to 12 months, from the original expiration date of January 19, 2023 (the “Original
Expiration Date”), to January 19, 2024 (the “Second Amended Extended Date”), to instead provide that the Company will
have the option to extend the period by which it must consummate an initial Business Combination by an additional six months, from the
Second Amended Extended Date, or from January 19, 2024, to July 19, 2024 (the “Third Amended Extended Date”), with such extension
option exercisable in six single-month increments (each such monthly extension option, a “Monthly Extension Option”), for
an additional six-month aggregate total extension period if each Monthly Extension Option is exercised, and with each such Monthly Extension
Option exercisable upon five calendar days’ advance notice prior to the applicable monthly deadline (such deadline for exercising
each such Monthly Extension Option being the 19th calendar day of each month); (ii) a proposal (the “Redemption Limitation Amendment
Proposal”) to amend the Company’s Fourth Amended and Restated Certificate of Incorporation to eliminate a limitation therein
providing that the Company shall not redeem Public Shares (as defined below) to the extent that such redemption would cause the Company’s
net tangible assets to be less than $
On April 15, 2024, the Company notified the Trustee that it was extending the time available to the Company to consummate its initial Business Combination, from April 19, 2024 to May 19, 2024 (the “Fourth Extension”), pursuant to and in accordance with the terms of the Company’s Fifth Amended and Restated Certificate of Incorporation and the Third Amended and Restated Trust Agreement. The Fourth Extension is the fourth of up to six (6) Monthly Extension Options permitted under the Company’s Fifth Amended and Restated Certificate of Incorporation and Third Amended and Restated Trust Agreement.
11
Pursuant
to the terms of the Company’s Fifth Amended and Restated Certificate of Incorporation and Third Amended and Restated Trust Agreement,
on April 18, 2024, with respect to the exercise of the Fourth Extension, the Company deposited $
Risks and Uncertainties
Management is continuing to evaluate the impact of the COVID-19 pandemic and the Company has concluded that while it is reasonably possible that COVID-19 could have a negative effect on identifying a target company for a Business Combination, the specific impact is not readily determinable as of the date of the condensed consolidated financial statements. Additionally, in February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these financial statements, and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these condensed consolidated financial statements. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
In order to mitigate the current uncertainty surrounding the implementation of the Inflation Reduction Act of 2022, the Company has decided that in the event that the Proposals are approved and implemented as described in the Definitive Proxy Statement, funds in trust, including any interest thereon, will not be used to pay for any excise tax liabilities with respect to any future redemptions that occur after December 31, 2022, and prior to or in connection with a Business Combination or liquidation of the Company and which result from the implementation of the Inflation Reduction Act of 2022.
Liquidity and Capital Resources
As
of March 31, 2024, the Company had cash of $
The Company originally had until January 19, 2023 to consummate its initial Business Combination, with an option to extend such deadline to April 19, 2023 by depositing certain funds into the Trust Account. On December 22, 2022, in the December 2022 Special Meeting of the Company’s shareholders, the Company adopted the Third Amended and Restated Certificate of Incorporation and Amended and Restated Investment Management Trust Agreement to provide for the Original Monthly Extension Options, which provide the deadline to consummate an initial Business Combination will be extended until, as further described in Note 1 of the condensed consolidated financial statements, July 19, 2023 (which is 21 months from the October 19, 2021 closing of the Initial Public Offering). On July 12, 2023, in the July Special Meeting of the Company’s shareholders, the Company adopted the Fourth Amended and Restated Certificate of Incorporation and Second Amended and Restated Investment Management Trust Agreement to provide for the July 2023 Monthly Extension Options, which provide the deadline to consummate an initial Business Combination will be extended until, as further described in Note 1 of the condensed consolidated financial statements, January 19, 2024 (which is 27 months from the October 19, 2021 closing of the Initial Public Offering). On December 18, 2023, in the December 2023 Special Meeting of the Company’s shareholders, the Company adopted the Fifth Amended and Restated Certificate of Incorporation and Third Amended and Restated Trust Agreement to provide for the Monthly Extension Options, which provide the deadline to consummate an initial Business Combination will be extended until, as further described in Note 1 of the condensed consolidated financial statements, July 19, 2024 (which is 33 months from the October 19, 2021 closing of the Initial Public Offering). Until the consummation of an initial Business Combination, the Company is and will continue to use the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the initial Business Combination. The Company may need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing.
12
Management has determined that the mandatory liquidation and subsequent dissolution described above, should the Company be unable to complete an initial Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern.
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the condensed consolidated financial statements. 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.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated 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 consolidated 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 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.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on March 29, 2024. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the period ending December 31, 2024 or for any future periods.
Emerging Growth Company
The Company is an emerging growth company as defined in Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which 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 an emerging growth 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 an 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 that is neither an emerging growth company nor an emerging growth company that 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 statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. Making estimates requires management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates. 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 condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from those estimates.
13
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did have any cash equivalents as of March 31, 2024 and December 31, 2023.
Cash held in the Trust Account
At March 31, 2024 and December 31, 2023, substantially all of the assets held in the Trust Account were held in cash. The proceeds held in the Trust Account were previously invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations until the 24-month anniversary of the Initial Public Offering, when, to mitigate the potential risk that we could be deemed to be an investment company under the Investment Company Act, we instructed the Trustee of the Trust Account to liquidate such investments and to hold such funds in cash or in interest-bearing demand deposit accounts at a national bank.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying unaudited condensed consolidated balance sheets, primarily due to their short-term nature, except for the derivative warrant liabilities (see Note 9).
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes” (“ASC 740”), 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.
ASC 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. There were unrecognized tax benefits as of March 31, 2024 and December 31, 2023. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. amounts were accrued for the payment of interest and penalties for the three months ended March 31, 2024 and year ended December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception. As of March 31, 2024 and December 31, 2023, the Company’s deferred tax asset had a full valuation allowance recorded against it.
The
Company’s effective tax rate expense is (
14
Common Stock Subject to Possible Redemption
The
Company accounts for its Common Stock subject to possible redemption in accordance with the guidance in ASC 480 “Distinguishing
Liabilities from Equity” (“ASC 480”). Shares of Common Stock subject to mandatory redemption (if any) are classified
as a liability instrument and are measured at fair value. Conditionally redeemable Common Stock (including Common Stock that features
redemption rights that are either within the control of the holder or subject to 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 Common Stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2024 and December 31, 2023,
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Common Stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable Common Stock are affected by charges against additional paid-in capital and accumulated deficit.
Gross proceeds | $ | |||
Less: | ||||
Proceeds allocated to Public Warrants | ( | ) | ||
Common Stock issuance costs | ( | ) | ||
Plus: Remeasurement of carrying value to redemption value | ||||
Common Stock subject to possible redemption as of December 31, 2021 | $ | |||
Less: | ||||
Redemption of Common Stock | ( | ) | ||
Common Stock redemption payable | ( | ) | ||
Plus: Remeasurement of carrying value to redemption value | ||||
Common Stock subject to possible redemption as of December 31, 2022 | $ | |||
Redemption of Common Stock | ( | ) | ||
Plus: Remeasurement of carrying value to redemption value | ||||
Common Stock subject to possible redemption as of December 31, 2023 | $ | |||
Plus: Remeasurement of carrying value to redemption value | ||||
Common Stock subject to possible redemption as of March 31, 2024 | $ |
Net loss per Common Stock
The
Company has one class of shares. Public Warrants (as defined below) (see Note 7) and Private Placement Warrants (see Note 4 and 8) to
purchase
15
For
the three months ended March 31 | ||||||||
2024 | 2023 | |||||||
Common Stock | ||||||||
Basic and diluted net loss per share: | ||||||||
Numerator: | ||||||||
Allocation of net loss, including remeasurement of temporary equity | $ | ( | ) | $ | ( | ) | ||
Denominator: | ||||||||
Weighted average shares outstanding | ||||||||
$ | ( | ) | $ | ( | ) |
Accounting for Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, ‘Derivatives and Hedging’ (“ASC 815”). The assessment considers whether the instruments are free-standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants qualify for equity accounting treatment and the Private Placement Warrants issued pursuant to the warrant agreement qualify for liability accounting treatment.
Recent Accounting Pronouncements
The Company has reviewed other recent accounting pronouncements and concluded that they are either not applicable to the Company or no material effect is expected on the financial statement as a result of future adoption.
Note 3 - Initial Public Offering
Pursuant
to the Initial Public Offering, the Company sold
Note 4 - Private Placement Warrants
On
October 19, 2021, simultaneously with the consummation of the Initial Public Offering, the Company consummated the issuance and sale
of
Note 5 - Related Party Transactions
Founder Shares
In
February 2021, the Sponsor paid an aggregate purchase price of $
16
The
Sponsor agreed that it will not transfer, assign or sell any Founder Shares until (1) with respect to
Related Party Loans
On
January 25, 2021, the Company issued an unsecured promissory note to the Sponsor (the “Unsecured Promissory Note”), pursuant
to which the Company borrowed up to an aggregate principal amount of $
On
July 18, 2023, the Company and the Sponsor entered into a non-interest-bearing loan agreement whereby the Company issued a promissory
note (the “Note”) to the Sponsor pursuant to which the Company may borrow up to $
In
addition, in order to finance transaction costs in connection with an initial Business Combination, the Sponsor or an affiliate of the
Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required
(the “Working Capital Loans”). If the Company completes an initial 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 an initial 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. As of March 31, 2024, and December 31, 2023, the Company had
Note 6 - Commitments and Contingencies
Registration Rights
The
holders of the Founder Shares, Private Placement Warrants and any warrants issued upon conversion of Working Capital Loans (and any shares
issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans)
are entitled to registration rights pursuant to an agreement entered into in connection with the Company’s Initial Public Offering
requiring the Company to register such securities for resale. The holders of a majority of these securities are entitled to make up to
17
Underwriting Agreement
The
Company granted the underwriters a
The
underwriters were paid a cash underwriting discount of $
Excise tax payable
The
Company held at the December 2022 Special Meeting, at which holders of
At
the July 2023 Special Meeting, the Company has been advised that holders of
Additionally,
at the December 2023 Special Meeting, the Company has been advised that holders of
Note 7 - Stockholders’ Deficit
Common
Stock - The Company is authorized to issue
Preferred
Stock - The Company is authorized to issue
18
Public
Warrants - 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)
Once the warrants become exercisable, the Company may redeem the Public Warrants:
● | in whole and not in part; |
● | at a price of $ |
● | at any time after the warrants become exercisable; |
● | upon not less than |
● | if, and only if, the reported last sale price of the Public Shares equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of Common Stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuance of Common Stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
As of March
31, 2024 and December 31, 2023, there were
19
Note 8 - Warrant Liabilities
Private Placement Warrants - The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the shares of Common Stock issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The exercise price and number of shares of Common Stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or the Company’s recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of shares of Common Stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In
addition, if the Company issues additional shares of Common Stock or equity-linked securities for capital raising purposes in connection
with the closing of a Business Combination at an issue price or effective issue price of less than $
As
of March 31, 2024 and December 31, 2023, there were
Note 9 - Fair Value Measurements
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
At March 31, 2024 and December 31, 2023, the investments held in the Trust Account were held in a cash.
20
March 31, 2024 | Level | Quoted Prices in Active Markets (Level 1) | Significant
Other Observable Inputs (Level 2) | Significant
Other Unobservable Inputs (Level 3) | ||||||||||
Marketable Securities | 1 | $ | ||||||||||||
Warrant Liability-Private Placement Warrants | 3 | $ |
Quoted Prices | Significant Other | Significant Other | ||||||||||||
in Active | Observable | Unobservable | ||||||||||||
December 31, 2023 | Level | Markets (Level 1) | Inputs
(Level 2) | Inputs
(Level 3) | ||||||||||
Marketable Securities | 1 | $ | ||||||||||||
Warrant Liability-Private Placement Warrants | 3 | $ |
The Company utilizes a Monte Carlo simulation model to value the warrants at each reporting period, with changes in fair value recognized in the statements of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a Monte Carlo pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its Common Stock based on industry historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company
anticipates to remain at zero.
March
31, 2023 | December
31, 2023 | |||||||
Stock Price | $ | $ | ||||||
Exercise Price | $ | $ | ||||||
Term (years) | ||||||||
Volatility | % | % | ||||||
Risk-Free Rate | % | % | ||||||
Dividend Yield | % | % |
Private Placement Warrants | ||||
Fair value as of December 31, 2023 | $ | |||
Change in fair value | ||||
Fair value as of March 31, 2024 |
Note 10 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the condensed consolidated balance sheet date up to the date that the condensed consolidated financial statements were available to be issued and has determined that there have been no events that have occurred that would require adjustments to the disclosures of the condensed consolidated financial statements.
On April 15, 2024, the Company notified the trustee of the Company’s Trust Account that it was exercising a Monthly Extension Option, extending the time available to the Company to consummate a Business Combination, from April 19, 2024 to May 19, 2024, pursuant to and in accordance with the terms of the Company’s Fourth Amended and Restated Certificate of Incorporation and the Company’s Trust Agreement. The Fourth Extension is the fourth of up to six (6) one-month Extensions permitted under the Company’s Fourth Amended and Restated Certificate of Incorporation and Trust Agreement.
Pursuant
to the terms of the Company’s Certificate of Incorporation and Trust Agreement, on April 15, 2024, with respect to the exercise
of the Fourth Extension, the Company deposited $
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to Achari Ventures Holdings Corp. I. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Achari Sponsor Holdings I LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s Form 10-K, filed with the Securities and Exchange Commission on March 29, 2024 (the “Annual Report”), and the condensed consolidated 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 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 Form 10-Q 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” and variations 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 Annual Report and our joint proxy statement/prospectus on Form S-4/A filed with the SEC on April 30, 2024 (Registration No. 333-276422). 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
Achari Ventures Holdings Corp. I was incorporated in Delaware on January 25, 2021. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, reorganization or other similar business transaction with one or more businesses that the Company has not yet identified (a “Business Combination”).
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial Business Combination will be successful.
Entry Into Business Combination Agreement with Vaso Corporation
Business Combination Agreement
The Company entered into a business combination agreement (the “Vaso Business Combination Agreement”), dated as of December 6, 2023, with Vaso Corporation, a Delaware corporation (“Vaso”), and Achari Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Achari (“Merger Sub”). The Vaso Business Combination Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Vaso (the “Merger”), with Vaso surviving as a wholly-owned subsidiary of the Company (the “Surviving Company”). Upon the closing of the Vaso Business Combination Agreement (the “Closing”), it is anticipated that the Company will change its name to “Vaso Holding Corporation” (or an alternative name chosen by Vaso and reasonably acceptable to the Company).
The Merger and the other transactions contemplated by the Vaso Business Combination Agreement are hereinafter referred to collectively as the “Vaso Business Combination.”
The Vaso Business Combination Agreement and the transactions contemplated thereby were approved by the boards of directors of each of the Company, Vaso and Merger Sub.
22
In connection with the Vaso Business Combination, the Company filed a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”) on January 8, 2024 (Registration No. 333-276422) (the “Registration Statement”). On February 2, 2024, the Company received a comment letter from the SEC regarding the Registration Statement. The Company responded to the SEC’s comment letter and amended the Registration Statement on February 14, 2024, accordingly. On March 8, 2024, the Company received a second comment letter from the SEC regarding the Registration Statement. The Company responded to the SEC’s comment letter and amended the Registration Statement on April 9, 2024, accordingly. On April 22, 2024, the Company received a third comment letter from the SEC regarding the Registration Statement. The Company responded to the SEC’s comment letter and amended the Registration Statement on April 30, 2024, accordingly. On May 9, 2024, the Company received a fourth comment letter from the SEC regarding the Registration Statement. For additional information regarding the Vaso Business Combination, please see the Registration Statement, as amended.
Consideration and Structure
In accordance with the terms and subject to the conditions of the Vaso Business Combination Agreement, at the effective time of the Merger (the “Effective Time”), (i) each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be automatically cancelled and extinguished and converted into one share of common stock, par value $0.01 per share, of the Surviving Company; and (ii) each share of common stock, par value $0.001 per share, of Vaso (each, a “Vaso Share”) (excluding any dissenting shares and any Vaso Shares held immediately prior to the Effective Time by Vaso as treasury stock) issued and outstanding as of immediately prior to the Effective Time shall be automatically cancelled and extinguished and converted into the right to receive a number of shares of the Company’s Common Stock, par value $0.0001 per share (the “Achari Shares”), in accordance with an exchange ratio equal to (i) the quotient of (a) $176,000,000, divided by (b) the fully-diluted shares of Vaso common stock outstanding on the date of the calculation, divided by (ii) $10.00. The Vaso Business Combination is expected to close in the second quarter of 2024, following the receipt of the required approval by the stockholders of the Company and Vaso.
Representations and Warranties; Covenants
The parties to the Vaso Business Combination Agreement have agreed to customary representations and warranties for transactions of this type. In addition, the parties to the Vaso Business Combination Agreement agreed to be bound by certain customary covenants for transactions of this type, including, among others, covenants with respect to the conduct of the Company, Vaso and their respective subsidiaries during the period between execution of the Vaso Business Combination Agreement and Closing. The representations, warranties, agreements and covenants of the parties set forth in the Vaso Business Combination Agreement will terminate at Closing, except for those covenants and agreements that, by their respective terms, contemplate performance after Closing. Each of the parties to the Vaso Business Combination Agreement has agreed to use its reasonable best efforts to take or cause to be taken all actions and things necessary to consummate the Vaso Business Combination.
Conditions to Closing
The obligations of the Company and Vaso to consummate the Vaso Business Combination are subject to the fulfillment or waiver of certain closing conditions, including, but not limited to: (i) no order or law issued by any court of competent jurisdiction or other governmental entity or other legal restraint or prohibition preventing the consummation of the transactions contemplated by the Vaso Business Combination Agreement being in effect; (ii) the approval and adoption of the Vaso Business Combination Agreement and the transactions contemplated thereby by the requisite vote of the Company’s and Vaso’s stockholders; (iii) the registration statement/proxy statement to be filed by the Company relating to the Vaso Business Combination Agreement and the Vaso Business Combination becoming effective in accordance with the provisions of the Securities Act, no stop order being issued by the SEC and remaining in effect with respect to the registration statement/proxy statement to be filed by the Company relating to the Vaso Business Combination Agreement and the Vaso Business Combination, and no proceeding seeking such a stop order being threatened or initiated by the SEC and remaining pending; (iv) the Certificate of Merger having been accepted for filing by the Secretary of State of the State of Delaware; and (v) the absence of the occurrence of a material adverse effect on the part of the Company and/or Vaso.
Termination
The Vaso Business Combination Agreement may be terminated under customary and limited circumstances prior to the Closing, including, but not limited to: (i) by mutual consent of the Company and Vaso; (ii) by either the Company or Vaso if there is a law or governmental order in effect prohibiting the Vaso Business Combination; provided that this right shall not be available to the party whose breach of any of its representations, warranties, covenants or agreements under the Vaso Business Combination Agreement results in or is the primary cause of such law or governmental order; and (iii) by either the Company or Vaso if the Merger is not consummated on or before May 30, 2024, which date shall be extended automatically for up to thirty (30) days to the extent the parties to the Vaso Business Combination Agreement are continuing to work in good faith toward the Closing.
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The foregoing description of the Vaso Business Combination Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Vaso Business Combination Agreement, a form of which is attached as Exhibit 2.1 to the Annual Report, and the terms of which are incorporated herein by reference.
The Vaso Business Combination Agreement contains representations, warranties and covenants that the respective parties thereto made to each other as of the date of such agreement or other specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the agreement among such parties and are subject to important qualifications and limitations agreed to by such parties in connection with negotiating such agreement. The representations, warranties and covenants in the Vaso Business Combination Agreement are also modified in important part by the underlying disclosure schedules, which are not filed publicly, and which are subject to a contractual standard of materiality different from that generally applicable to stockholders, and which were used for the purpose of allocating risk among the parties rather than establishing matters as facts. The Company and Vaso believe that these disclosure schedules do not contain information that is material to an investment or voting decision.
Other Agreements
Sponsor Letter Agreement
The Vaso Business Combination Agreement contemplates that, at or prior to the Closing, the Sponsor, will enter into a Sponsor Letter Agreement with the Company, Vaso and the other parties thereto (the “BCA Sponsor Letter Agreement”), pursuant to which (among other things) the Sponsor shall (a) upon the consummation of the Vaso Business Combination, forfeit certain amounts of Achari Shares and Private Placement Warrants with respect to such Achari Shares it holds such that, following such forfeiture, and other customary adjustments, Sponsor shall hold (i) 750,000 Achari Shares and (ii) 1,000,000 private placement warrants with respect to such Achari Shares immediately following the consummation of the Vaso Business Combination, (b) agree to be bound by certain restrictions on transfer with respect to the Achari Shares it holds for a period of twelve (12) months following the Closing, subject to certain specified exceptions, and (c) agree to amend and/or terminate certain provisions included in that certain letter agreement, dated as of October 14, 2021, previously entered into by Sponsor.
The foregoing description of the BCA Sponsor Letter Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the BCA Sponsor Letter Agreement, a form of which is attached as Exhibit 10.1 to the Annual Report, and the terms of which are incorporated herein by reference.
Put Option Agreement
The Vaso Business Combination Agreement contemplates that, simultaneously with the Closing, the Sponsor, the Company and Vaso will enter into a Put Option Agreement (the “Put Option Agreement”), pursuant to which (among other things) the Sponsor shall be granted by Vaso certain “put rights” with respect to the Achari Shares it shall continue to hold following the consummation of the Vaso Business Combination, which shall require Vaso to purchase such Achari Shares at certain agreed prices, as further described within the Put Option Agreement.
The foregoing description of the Put Option Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Put Option Agreement, a form of which is attached as Exhibit 10.2 to the Annual Report, and the terms of which are incorporated herein by reference.
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Amended and Restated Registration Rights Agreement
The Vaso Business Combination Agreement contemplates that, simultaneously with the Closing, the Company and certain security holders and/or executive officers and directors of the Company and Vaso will enter into an Amended and Restated Registration Rights Agreement (the “Amended and Restated Registration Rights Agreement”), with respect to the registration of the Achari Shares and private placement warrants with respect to such Achari Shares held by the Sponsor and/or certain members of the Sponsor following the consummation of the Vaso Business Combination.
The foregoing description of the Amended and Restated Registration Rights Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Amended and Restated Registration Rights Agreement, a form of which is attached as Exhibit 10.3 to the Annual Report, and the terms of which are incorporated herein by reference.
Lockup Agreement
In connection with the Closing, certain security holders of the Company and Vaso will enter into a Lockup Agreement (the “Lockup Agreement”), pursuant to which (among other things), such security holders shall be bound by certain “lock-up” provisions requiring that they will not transfer any Achari Shares that they will be issued in connection with the Vaso Business Combination for a period of twelve (12) months following the Closing, subject to customary exceptions.
The foregoing description of the Lockup Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Lockup Agreement, a form of which is attached as Exhibit 10.4 to the Annual Report, and the terms of which are incorporated herein by reference.
Director Indemnification Agreements
In connection with the Closing, each of the individuals designated to be members of the board of directors of the Company will enter into a Director Indemnification Agreement with the Company (collectively, the “Director Indemnification Agreements,” and each, a “Director Indemnification Agreement”).
The foregoing description of the Director Indemnification Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Director Indemnification Agreement, a form of which is attached as Exhibit 10.5 to the Annual Report, and the terms of which are incorporated herein by reference.
Vaso Support Agreement
Concurrently with the execution of the Vaso Business Combination Agreement, the Company, Vaso and certain security holders of Vaso (representing 44% of the outstanding shares) have entered into support agreements committing them to vote in favor of the Vaso Business Combination (the “Vaso Holders,” and such security holder support agreements, the “Support Agreements”), pursuant to which the Vaso Holders have agreed to, among other things, (i) waive any appraisal rights or dissenter rights in connection with the Vaso Business Combination and (ii) consent to and vote in favor of the Vaso Business Combination Agreement and the transactions contemplated thereby (including the Merger).
The foregoing description of the Support Agreements is subject to and qualified in its entirety by reference to the full text of the Support Agreement, a copy of which is attached as Exhibit 10.6 to the Annual Report, and the terms of which are incorporated herein by reference.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through March 31, 2024 were organizational activities and those necessary to prepare and complete the Initial Public Offering, described below, and since the Initial Public Offering, the search for a prospective initial Business Combination. We do not expect to generate any operating revenues until after the completion of an initial Business Combination, at the earliest. We expect to generate non-operating income in the form of interest income from the proceeds of the Initial Public Offering placed in a U.S.-based trust account (the “Trust Account”). We have incurred, and expect that we will continue 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 in connection with searching for, and completing, an initial Business Combination.
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For the three months ended March 31, 2024, we had a net loss of $530,117, which primarily consists of general and administrative expenses of $508,544, Delaware franchise taxes of $20,743, change in fair value of warrant liabilities of $67,767, income tax expense of $12,262 and offset by interest and dividend income of $79,139. General and administrative expenses include legal and professional charges of $388,922 mainly relating to our search for an initial Business Combination.
For the three months ended March 31, 2023, we had a net loss of $946,841, which primarily consisted of general and administrative expenses of $925,964, accrual of Delaware franchise taxes of $50,000, income tax expense of $13,413 change in fair value of warrant liabilities of $71,334 and offset by interest and dividend income from the Trust Account of $113,870.
Liquidity and Capital Resources
The registration statement for the Company’s Initial Public Offering was declared effective on October 14, 2021. On October 19, 2021, the Company consummated the Initial Public Offering of 10,000,000 units (“Units”), each of which consisted of one warrant and one share of Common Stock (the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $100,000,000 (as discussed in Note 3).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,133,333 Private Placement Warrants at a price of $0.75 per Private Placement Warrant in a private placement to the Sponsor, for gross proceeds of $5,350,000 which is described in Note 4.
Offering costs for the Initial Public Offering amounted to $6,101,730, consisting of $2,000,000 of underwriting fees, $3,500,000 of deferred underwriting fees payable (which are held in the Trust Account) and $601,730 of other costs. As described in Note 1, the $3,500,000 of deferred underwriting fee payable is contingent upon the consummation of an initial Business Combination, subject to the terms of the underwriting agreement. Following the closing of the Initial Public Offering, $101,500,000 ($10.15 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants was placed in a Trust Account.
For the three months ended March 31, 2024, there was $ 215,733 of cash used in operating activities, $ 66,113 of cash provided by investing activities and $ 243,975 of cash used in financing activities.
At March 31, 2024, we had $ 6,194,997 in the Trust Account in cash or in interest-bearing demand deposit accounts at a national bank. 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 income taxes payable), to complete our initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial 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.
At March 31, 2024, we had cash of $ 10,524 outside of the Trust Account. 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 an initial Business Combination.
In addition, in order to finance transaction costs in connection with an initial Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If our Sponsor makes any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at the price of $0.75 per warrant at the option of the Sponsor. Such warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. If the Company completes an initial 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 an initial 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. As of March 31, 2024, the Company had no borrowings under the Working Capital Loans.
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On July 18, 2023, the Company and the Sponsor entered into a non-interest bearing loan agreement whereby the Company issued a promissory note (the “July 2023 Promissory Note”) to the Sponsor pursuant to which the Company may borrow up to $1,500,000 in cash from time to time to fund working capital requirements, including with respect to the funding of Monthly Extension Options. The principal amount of the January 2023 Promissory Note issued by the Company to the Sponsor, dated January 19, 2023 (the “January 2023 Promissory Note”), was deemed transferred to the July 2023 Promissory Note and the parties thereto agreed that the January 2023 Promissory Note is extinguished and any and all liabilities associated with such January 2023 Promissory Note and such January 2023 Promissory Note itself have been terminated as of the date thereof. The current principal amount of the July 2023 Promissory Note is payable on the earlier of (a) the consummation of an initial Business Combination and (b) the date of the liquidation of the Company. If an initial Business Combination is not consummated, the July 2023 Promissory Note will be repaid solely to the extent that the Company has funds available to it outside of the Trust Account and all other amounts will be forfeited, eliminated or otherwise forgiven. As of March 31, 2024 and December 31, 2023, the amount outstanding under the Note was $825,975 and $582,000 respectively, as reflected on the Company’s balance sheet included herein under the caption ‘Note Payable-related party’.
On December 22, 2022, the Company reconvened a special meeting of the Company’s shareholders (the “December 2022 Special Meeting”), which had initially been adjourned on December 19, 2022. At the reconvened December 2022 Special Meeting, the Company’s shareholders approved (i) an amendment to the Company’s then-existing amended and restated certificate of incorporation, which amended an option included in the Company’s then-existing amended certificate of incorporation, and which had provided the Company the ability to extend the deadline by which the Company must consummate an initial Business Combination by up to three months, or from January 19, 2023 to April 19, 2023, to instead provide for an extension to consummate an initial Business Combination by up to six months, or from January 19, 2023 to July 19, 2023 (the “Original Amended Extended Date”) and (ii) an amendment to the Company’s Investment Management Trust Agreement to provide that the Company may extend the time period to complete an initial Business Combination up to and until the Original Amended Extended Date on a monthly basis, by, at the Company’s option, depositing into the Company’s Trust Account the lesser of (x) $100,000 and (y) $0.05 for each share of the Company’s Common Stock which remains outstanding as of the date of such monthly deposit (the “Original Monthly Extension Option”). The Original Monthly Extension Option was exercisable by the Company in six single-month increments. As of June 15, 2023, the Company had exercised each of the six Original Monthly Extension Options available to it.
On July 12, 2023, the Company’s shareholders approved at a special meeting of the Company’s shareholders (the “July Special Meeting”) (i) an amendment to the Company’s then-existing amended and restated certificate of incorporation, which amended an option included in the Company’s then-existing amended and restated certificate of incorporation that provided the Company the ability to extend the deadline by which the Company must consummate an initial Business Combination by up to six months, or from January 19, 2023 to July 19, 2023 (the “Second Amended Extended Date”), to instead provide for an extension to consummate an initial Business Combination by up to an additional six months, or from July 19, 2023 to January 19, 2024, and (ii) an amendment to the Company’s Amended and Restated Investment Management Trust Agreement to provide that the Company may extend the time period to complete an initial Business Combination up to and until the Second Amended Extended Date on a monthly basis, at the Company’s option, by depositing into the Company’s Trust Account the lesser of (x) $100,000 and (y) $0.05 for each share of the Company’s Common Stock which remains outstanding as of the date of such monthly deposit (the “July 2023 Monthly Extension Option”). The July 2023 Monthly Extension Option is exercisable by the Company in six single-month increments.
On July 17, 2023, our Sponsor transferred 927,600 shares of Common Stock issued by the Company to the Sponsor (the “Founder Shares”) to certain members of the Sponsor. As a result of such transfer, as of July 17, 2023, 1,572,400 Founder Shares were held directly by the Sponsor and 927,600 Founder Shares were held directly by certain members of the Sponsor.
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On December 18, 2023, the Company held a special meeting in lieu of an annual meeting of the Company’s shareholders (the “December 2023 Special Meeting”). At the Special Meeting, the Company’s shareholders approved (i) a proposal (the “December 2023 Charter Amendment Proposal”) to amend the Company’s Fourth Amended and Restated Certificate of Incorporation to revise the Company’s then existing extension option, which provided that the Company had the option of extending the period by which it must consummate an initial Business Combination by up to 12 months, from the original expiration date of January 19, 2023 (the “Original Expiration Date”), to January 19, 2024 (the “Second Amended Extended Date”), to instead provide that the Company will have the option to extend the period by which it must consummate an initial Business Combination by an additional six months, from the Second Amended Extended Date, or from January 19, 2024, to July 19, 2024 (the “Third Amended Extended Date”), with such extension option exercisable in six single-month increments (each such monthly extension option, a “Monthly Extension Option”), for an additional six-month aggregate total extension period if each Monthly Extension Option is exercised, and with each such Monthly Extension Option exercisable upon five calendar days’ advance notice prior to the applicable monthly deadline (such deadline for exercising each such Monthly Extension Option being the 19th calendar day of each month); (ii) a proposal (the “Redemption Limitation Amendment Proposal”) to amend the Company’s Fourth Amended and Restated Certificate of Incorporation to eliminate a limitation therein providing that the Company shall not redeem Public Shares (as defined below) to the extent that such redemption would cause the Company’s net tangible assets to be less than $5,000,001 following any such redemptions (the “Redemption Limitation”), in order to allow the Company to redeem Public Shares irrespective of whether the amount of such redemptions would breach the Redemption Limitation if the Company so chooses in its sole discretion; and (iii) a proposal (the “Trust Amendment Proposal”) to amend the Company’s Second Amended and Restated Investment Management Trust Agreement, dated July 12, 2023, by and between the Trustee and the Company (the “Second Amended and Restated Investment Management Trust Agreement”), to provide that the Second Amended Extended Date provided for in the Second Amended and Restated Investment Management Trust Agreement, upon which assets held in the Trust Account established in connection with the Company’s Initial Public Offering will be liquidated if it has not consummated an initial Business Combination, may be extended, at the Company’s option, and on a monthly basis, pursuant to the exercise of Monthly Extension Option(s), up to and until the Third Amended Extended Date of July 19, 2024; provided that, in order to exercise a single Monthly Extension Option, the Company must deposit into the Trust Account the lesser of (x) $100,000 and (y) $0.04 for each share of our Common Stock included in the Units which were sold in our Initial Public Offering and which remain outstanding on the date of such deposit. The Company entered into the Third Amended and Restated Investment Management Trust Agreement (the “Third Amended and Restated Trust Agreement”) on December 19, 2023 with Continental Stock Transfer & Trust Company. The Company’s Fifth Amended and Restated Certificate of Incorporation (the “Fifth Amended and Restated Certificate of Incorporation”) was deemed effective on December 19, 2023 and was promptly filed with the Delaware Secretary of State.
On April 15, 2024, the Company notified the Trustee that it was extending the time available to the Company to consummate its initial Business Combination, from April 19, 2024 to May 19, 2024 (the “Fourth Extension”), pursuant to and in accordance with the terms of the Company’s Fifth Amended and Restated Certificate of Incorporation and the Third Amended and Restated Trust Agreement. The Fourth Extension is the fourth of up to six (6) Monthly Extension Options permitted under the Company’s Fifth Amended and Restated Certificate of Incorporation and Third Amended and Restated Trust Agreement.
Pursuant to the terms of the Company’s Fifth Amended and Restated Certificate of Incorporation and Third Amended and Restated Trust Agreement, on April 18, 2024, with respect to the exercise of the Fourth Extension, the Company deposited $22,037.64 into the Company’s Trust Account in connection with the exercise of the Fourth Extension. Such deposit with respect to the Fourth Extension was made using funds held outside of the Company’s Trust Account and available to the Company to fund working capital requirements.
Nasdaq Continued Listing Requirements
On April 5, 2024, the Nasdaq Stock Market LLC (The Nasdaq Stock Market LLC, including any of the tiers thereof, “Nasdaq”) provided the Company with a delisting determination notice and, as a result, trading in the Company’s securities on Nasdaq was suspended effective with the open of the market on April 9, 2024. The Company’s securities are therefore currently eligible to trade only on the OTC Markets system. On April 19, 2024, the Company appealed Nasdaq’s delisting determination. Although currently, trading, if any, will occur only in the over-the-counter market, the Company will remain technically listed on Nasdaq pending the expiration of all Nasdaq review and appeal processes. The Company believes that it will be able to evidence compliance with Nasdaq’s initial listing requirements (and therefore also necessarily regain compliance with respect to all applicable continued listing requirements) upon the consummation of the Vaso Business Combination, with such compliance being a condition to the consummation of the Vaso Business Combination with Vaso. However, there can be no assurance that the Company will be able to satisfy Nasdaq’s initial listing requirements, or regain compliance with Nasdaq’s continued listing requirements, in a timely manner, or at all. If the Company’s securities are delisted from Nasdaq prior to the closing of the Vaso Business Combination, such delisting may delay, or ultimately prevent, the consummation of the Vaso Business Combination.
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To maintain the listing of the Company’s securities on Nasdaq prior, and subsequent to, the closing of the Vaso Business Combination, the Company must maintain certain financial, distribution, liquidity and stock price levels to satisfy Nasdaq’s continued listing requirements. The Company must, among other things, maintain a minimum bid price of $1.00 per share, a minimum amount of stockholders’ equity (generally $2,500,000) and a minimum number of holders of its securities (generally 300 public holders). The foregoing is a brief description of the Nasdaq continued listing requirements applicable to the Company’s securities (more detailed information about such requirements is set forth in Nasdaq Rule 5550) and the Company’s current status with respect to compliance therewith:
● | Listing Rule 5450(b)(2)(B). On January 22, 2023, the Company received a letter from Nasdaq indicating that the Company was not in compliance with Listing Rule 5450(b)(2)(B), requiring at least 1,100,000 “Publicly Held Shares.” The letter stated that the Company had 45 calendar days to submit a plan to regain compliance. The Company submitted such plan on March 9, 2023, and after review, on March 30, 2023, Nasdaq granted the Company an extension to regain compliance, until July 21, 2023. On June 22, 2023, the Company received a letter from Nasdaq indicating that the Company was not in compliance with Listing Rule 5450(b)(2)(B). On July 21, 2023, the Company filed a Form 8-K with the SEC disclosing, among other things, certain details regarding the Company’s beneficial ownership and outstanding common stock, and specifically disclosing that certain amounts of Founder Shares, which had been previously held directly by the Sponsor had been transferred to certain members of the Sponsor on July 17, 2023, in order for the Company to regain compliance with Listing Rule 5450(b)(2)(B). On August 7, 2023, the Company received a written notification from Nasdaq indicating that the Company had regained compliance under Listing Rule 5450(b)(2)(B), and accordingly, that such matter was closed. Please note that the Company and the Sponsor may undertake further actions in order to regain compliance with applicable continued listing requirements, which may include, but may not be limited to, further transfers of Founder Shares held by the Sponsor to individual members of the Sponsor, if necessary. For the avoidance of doubt, all Founder Shares previously transferred by the Sponsor to certain members of the Sponsor as described above, and any Founder Shares which may be transferred in a similar fashion in the future, are currently, and shall remain in the future, subject to all applicable transfer restrictions and other limitations as any Founder Shares which continue to be held directly by the Sponsor, and for the avoidance of doubt, no Founder Shares, whether held directly by the Sponsor, members of the Sponsor, or any other party, shall be eligible to receive liquidating distributions from the Trust Account under any circumstances, including in the event that the Company fails to complete an initial Business Combination, nor shall any such transfers (past or present) increase the overall amount of Founder Shares issued or in circulation, or in any way affect the Company’s public stockholders existing percentage ownership of the Company. As of the date hereof, 1,572,400 Founder Shares are held directly by the Sponsor and 927,600 Founder Shares are held directly by members of the Sponsor. On December 18, 2023, the Company received an additional letter from Nasdaq indicating that the Company was again deemed not in compliance with Listing Rule 5450(b)(2)(B), requiring at least 1,100,000 “Publicly Held Shares.” The letter stated that the Company had 45 calendar days to submit a plan to regain compliance. Upon further discussion with Nasdaq, all parties agreed the Company was not in violation of Listing Rule 5450(b)(2)(B), and the applicable letter was withdrawn. |
● | Listing Rule 5450(b)(2)(C). On February 24, 2023, the Company received a letter from Nasdaq indicating that the Company was not in compliance with Listing Rule 5450(b)(2)(C), requiring a “Market Value” of “Publicly Held Shares” of at least $15 million. The letter stated that the Company had 180 calendar days to regain compliance with Listing Rule 5450(b)(2)(C), or until August 23, 2023. On August 7, 2023, the Company received a written notification from Nasdaq indicating that the Company had regained compliance under Listing Rule 5450(b)(2)(C), and accordingly, that such matter was closed. |
● | Listing Rule 5250(c)(1). On April 24, 2023, the Company received a letter from Nasdaq indicating that the Company was not in compliance with Listing Rule 5250(c)(1), as a result of the Company’s delay in filing its Form 10-K for the year ended December 31, 2022. On April 25, 2023, the Company filed its Form 10-K for the year ended December 31, 2022 with the SEC. On April 25, 2023, the Company received a written notification from Nasdaq indicating that the Company had regained compliance under Listing Rule 5250(c)(1), and accordingly, that such matter was closed. On May 23, 2023, we received a letter from Nasdaq indicating that the Company was not in compliance with Listing Rule 5250(c)(1), as a result of the Company’s delay in filing its Form 10-Q for the period ended March 31, 2023. On May 26, 2023, the Company filed its Form 10-Q for the period ended March 31, 2023 with the Securities and Exchange Commission. On June 1, 2023, the Company received a written notification from Nasdaq indicating that the Company had regained compliance under Listing Rule 5250(c)(1), and accordingly, that such matter was closed. |
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● | Listing Rules 5450(b)(2)(A) and 5450(a)(2). On March 23, 2023, the Company received a letter from Nasdaq notifying the Company that, for the 30 consecutive trading days prior to the date of the letter, the Company’s common stock had traded at a value below the minimum $50,000,000 “Market Value of Listed Securities” (“MVLS”) requirement set forth in Listing Rule 5450(b)(2)(A). The letter stated that the Company had 180 calendar days, or until September 19, 2023, to regain compliance. On October 3, 2023, the Company had not regained compliance with the MVLS requirement because the Company’s MVLS was below the $50,000,000 minimum MVLS requirement for the proceeding 30 consecutive trading days and, as a result, the Company received a delisting determination letter from Nasdaq. On October 9, 2023, the Company received an additional letter from the Staff stating that on September 3, 2023, the Company was not in compliance with Nasdaq Listing Rule 5450(a)(2), and this matter served as an additional basis for delisting the Company’s securities. On December 7, 2023, the Company presented their plan of compliance to the Panel and requested an extension to regain compliance. On December 19, 2023, Nasdaq notified the Company that it had granted an extension, until April 2, 2024, for the Company and Vaso to complete the Vaso Business Combination (which necessarily would require regaining compliance with respect to applicable continued listing requirements). However, the Company and Vaso did not complete the Vaso Business Combination by April 2, 2024. On April 5, 2024, the Company received a letter from Nasdaq notifying the Company that because the Company and Vaso did not complete the Vaso Business Combination by April 2, 2024, the Company’s shares would be suspended from trading on the Nasdaq exchange as of the open of trading on April 9, 2024. The Company’s securities are therefore currently eligible to trade only on the OTC Markets system. On April 19, 2024, the Company appealed Nasdaq’s delisting determination. Although currently, trading, if any, will occur only in the over-the-counter market, the Company will remain technically listed on Nasdaq pending the expiration of all Nasdaq review and appeal processes. The Company believes that it will be able to evidence compliance with Nasdaq’s initial listing requirements (and therefore also necessarily regain compliance with respect to all applicable continued listing requirements) upon the consummation of the Vaso Business Combination, with such compliance being a condition to the consummation of the Vaso Business Combination. However, there can be no assurance that the Company will be able to satisfy Nasdaq’s initial listing requirements, or regain compliance with Nasdaq’s continued listing requirements, in a timely manner, or at all. If the Company’s securities are delisted from Nasdaq prior to the closing of the Vaso Business Combination, such delisting may delay, or ultimately prevent, the consummation of the Business Combination. |
In order to close the Vaso Business Combination, the Company will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are generally more rigorous than Nasdaq’s continued listing requirements discussed above. The Company believes that it will be able to evidence compliance with Nasdaq’s initial listing requirements (and therefore also necessarily regain compliance with respect to all applicable continued listing requirements discussed above) upon the consummation of the Vaso Business Combination, with such compliance being a condition to the consummation of the Vaso Business Combination. However, there can be no guarantee that the Company will be able to satisfy such initial listing requirements or continued listing requirements in a timely manner, or at all. For instance, in connection with satisfying the initial listing requirements, our stock price would generally be required to be at least $4.00 per share, our stockholders’ equity would generally be required to be at least $5.0 million, and we would be required to have a minimum of 300 round lot holders (with at least 50% of such round lot holders holding securities with a market value of at least $2,500) of our securities and we cannot assure you that we will be able to meet any of the foregoing requirements or any other of Nasdaq’s initial listing requirements at the time of the closing of our initial Business Combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2024. We do not participate in transactions that create relationships with entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
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Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. The underwriters of our Initial Public Offering are entitled to deferred underwriting commissions of $3,500,000 in the aggregate pursuant to the terms of the Underwriting Agreement entered into in connection with our Initial Public Offering. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination, subject to the terms of the underwriting agreement.
Emerging Growth Company
The Company is an “emerging growth company,” 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. We elected 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 such, our financial statements may not be comparable to companies that comply with public company effective dates applicable to other companies.
Critical Accounting Policies
The preparation of 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 condensed consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
Critical Accounting Estimates
Critical accounting estimates are estimates where (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company believes these to be estimates used as inputs in the valuation of the derivative warrant liability. These estimates are the probability of a successful initial Business Combination by July 19, 2024, and the implied volatility of the Public Warrants and Private Placement Warrants.
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Common Stock Subject to Possible Redemption
We account for our Common Stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common Stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable Common Stock (including Common Stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, Common Stock is classified as stockholders’ equity. Our Common Stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Common Stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our balance sheets. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Common Stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable Common Stock are affected by charges against additional paid in capital and accumulated deficit.
Net (loss) per Common Stock
Net loss per share is computed by dividing net income by the weighted average number of shares of Common Stock outstanding during the period. At March 31, 2024, the Company did not have any dilutive securities and/or other contracts that could, potentially, be exercised or converted into shares of Common Stock and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
Accounting for Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free-standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants qualify for equity accounting treatment and the Private Placement Warrants issued pursuant to the warrant agreement qualify for liability accounting treatment.
Recent Accounting Pronouncements
The Company has reviewed other recent accounting pronouncements and concluded that they are either not applicable to the Company or no material effect is expected on the financial statement as a result of future adoption.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to make disclosures under this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure 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 company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. 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, 2024. Based upon that evaluation, our officers concluded that, as of March 31, 2024, our disclosure controls and procedures were not effective due to a material weakness in internal controls over financial reporting related to accounting and valuation for complex financial instruments and disclosure of earnings per share (EPS) for the three months ended March 31, 2024.
To address these material weaknesses, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting and to provide processes and controls over the internal communications within the company, the Company’s financial advisors and the Company’s independent registered public accounting firm. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial statements. We plan to provide enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. Other than this issue, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 29, 2024 (our “Annual Report”), our joint proxy statement/prospectus on Form S-4/A filed with the SEC on April 30, 2024 (Registration No. 333-276422) (our “Joint Proxy Statement/Prospectus”), as may be further amended from time to time, and our other filings with the SEC. Any of these factors 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. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Annual Report, our Joint Proxy Statement/Prospectus or our other filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
All recent unregistered sales of securities have been previously reported.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During
the three months ended March 31, 2024, none of our directors or officers
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ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
* | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ACHARI VENTURES HOLDINGS CORP. I | ||
Date: May 15, 2024 | By: | /s/ Vikas Desai |
Name: | Vikas Desai | |
Title: | Chief Executive Officer and Director | |
(Principal Executive Officer) | ||
Date: May 15, 2024 | By: | /s/ Mitchell Hara |
Name: | Mitchell Hara | |
Title: | Chief Operating Officer and Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
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