S-1 1 ea0207487-s1_spectaire.htm REGISTRATION STATEMENT

As filed with the Securities and Exchange Commission on June 7, 2024

Registration No. 333-                      

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

 

 

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

 

Spectaire Holdings Inc.
(Exact name of registrant as specified in its charter)

 

Delaware   3829   98-1578608
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

 

155 Arlington Street
Watertown, MA 02472
(508) 213-8991
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

Brian Semkiw
Chief Executive Officer
155 Arlington Street
Watertown, MA 02472
(508) 213-8991
(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies to:

Amy Bowler

Holland & Hart LLP

555 17th Street, Suite 3200

Denver, CO 80202

(303) 290-1086

 

 

 

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

  Accelerated filer
Non-accelerated filer   Smaller reporting company
      Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant will file a further amendment which specifically states that this Registration Statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement will become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 

 

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion
Preliminary Prospectus dated June 7, 2024.

 

PROSPECTUS

 

 

Spectaire Holdings Inc.

10,000,000 Shares of Common Stock

 

This prospectus relates to the resale of up to 10,000,000 shares of our common stock, par value $0.0001 per share (the “Common Stock”), of Spectaire Holdings Inc. (the “Company”), by YA II PN, LTD, (“Yorkville” or the “Selling Stockholder”).

 

The shares of Common Stock to which this prospectus relates have been or may be issued by us to Yorkville pursuant to a standby equity purchase agreement, dated as of May 17, 2024, by and between the Company and Yorkville (the “SEPA”). Such shares of Common Stock (the “Purchase Shares”) include (i) up to 9,766,356 shares of Common Stock that may be issued to Yorkville pursuant to the SEPA, and (ii) 233,644 shares of Common Stock we issued Yorkville, upon our execution of the SEPA, as partial consideration for its commitment to purchase shares of our Common Stock in one or more purchases that we may, in our sole discretion, direct them to make, from time to time.

 

We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of our Common Stock by the Selling Stockholder. However, we may receive up to $25,000,000 aggregate gross proceeds from sales of Common Stock we may elect to make to Yorkville pursuant to the SEPA prior to or after the date of this prospectus. See “The Standby Equity Facility” for a description of the SEPA and “Selling Stockholder” for additional information regarding Yorkville.

 

Yorkville may sell or otherwise dispose of the Common Stock described in this prospectus in a number of different ways and at varying prices. See “Plan of Distribution (Conflict of Interest)” for more information about how Yorkville may sell or otherwise dispose of the Common Stock pursuant to this prospectus. Yorkville is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”).

 

We will pay the expenses incurred in registering under the Securities Act the offer and sale of the shares of Common Stock to which this prospectus relates by the Selling Stockholder, including legal and accounting fees. See section titled “Plan of Distribution” beginning on page 85 of this prospectus.

 

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), and are subject to reduced public company reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.

 

Our Common Stock and Warrants are listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “SPEC” and “SPECW,” respectively. On June 3, 2024, the closing price of our Common Stock was $0.350 and the closing price for our Warrants was $0.0340.

 

Our business and investment in our securities involves significant risks. These risks are described in the section titled “Risk Factors” beginning on page 9 of this prospectus.

 

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is June 7, 2024.

 

 

 

 

TABLE OF CONTENTS

 

    Page
ABOUT THIS PROSPECTUS   ii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS   iii
PROSPECTUS SUMMARY   1
THE OFFERING   8
RISK FACTORS   9
THE STANDBY EQUITY PURCHASE AGREEMENT   30
USE OF PROCEEDS   35
DETERMINATION OF OFFERING PRICE   35
DIVIDEND POLICY   35
MARKET INFORMATION   35
KEY TRANSACTIONS   36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   42
BUSINESS   53
MANAGEMENT   65
EXECUTIVE AND DIRECTOR COMPENSATION   69
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS   74
PRINCIPAL STOCKHOLDERS   76
SELLING STOCKHOLDER   77
DESCRIPTION OF SECURITIES OF SPECTAIRE   78
SHARES ELIGIBLE FOR FUTURE SALE   83
PLAN OF DISTRIBUTION   85
LEGAL MATTERS   86
EXPERTS   86
WHERE YOU CAN FIND MORE INFORMATION   86
INDEX TO FINANCIAL STATEMENTS   F-1

 

i

 

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement on Form S-1 that we filed with the SEC to register the securities described in this prospectus for resale by the Selling Stockholder who may, from time to time, sell the securities described in this prospectus. We will not receive any proceeds from the sale of shares of Common Stock by the Selling Stockholder pursuant to this prospectus.

 

We may also file a prospectus supplement or post-effective amendment to the registration statement of which this prospectus forms a part that may contain material information relating to these offerings. The prospectus supplement or post-effective amendment may also add, update or change information contained in this prospectus with respect to that offering. If there is any inconsistency between the information in this prospectus and the applicable prospectus supplement or post-effective amendment, you should rely on the prospectus supplement or post-effective amendment, as applicable. Before purchasing any securities, you should carefully read this prospectus, any post-effective amendment, and any applicable prospectus supplement, together with the additional information described under the heading “Where You Can Find More Information.”

 

Neither we, nor the Selling Stockholder, have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus, any post-effective amendment, or any applicable prospectus supplement prepared by or on behalf of us or to which we have referred you. We and the Selling Stockholder take no responsibility for and can provide no assurance as to the reliability of any other information that others may give you. We and the Selling Stockholder will not make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus, any post-effective amendment and any applicable prospectus supplement to this prospectus is accurate only as of the date on its respective cover. Our business, financial condition, results of operations and prospects may have changed since those dates. This prospectus contains, and any post-effective amendment or any prospectus supplement may contain, market data and industry statistics and forecasts that are based on independent industry publications and other publicly available information. Although we believe these sources are reliable, we do not guarantee the accuracy or completeness of this information and we have not independently verified this information. In addition, the market and industry data and forecasts that may be included in this prospectus, any post-effective amendment or any prospectus supplement may involve estimates, assumptions and other risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” contained in this prospectus, any post-effective amendment and the applicable prospectus supplement. Accordingly, investors should not place undue reliance on this information.

 

We own or have rights to trademarks, trade names and service marks that we use in connection with the operation of our business. In addition, our name, logos and website name and address are our trademarks or service marks. Solely for convenience, in some cases, the trademarks, trade names and service marks referred to in this prospectus are listed without the applicable ®, ™ and SM symbols, but we will assert, to the fullest extent under applicable law, our rights to these trademarks, trade names and service marks. Other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

 

As used in this prospectus, unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “Registrant,” “NewCo,” and “Spectaire” refer to the consolidated operations of Spectaire Holdings Inc. and its subsidiaries. References to “PCCT” refer to the Company prior to the consummation of the Business Combination and references to “Legacy Spectaire” refer to Spectaire Inc. prior to the consummation of the Business Combination.

 

ii

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this prospectus, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this prospectus and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties and assumptions described under the section in this prospectus titled “Risk Factors.” These forward-looking statements are subject to numerous risks, including, without limitation, the following:

 

our ability to maintain the listing of the shares of Common Stock and Warrants on Nasdaq;

 

our ability to obtain financing on acceptable terms;

 

litigation, complaints, product liability claims and/or adverse publicity;

 

privacy and data protection laws, privacy or data breaches, or the loss of data;

 

the impact of changes in customer spending patterns, customer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability; and

 

other risks and uncertainties described in this registration statement, including those under the section entitled “Risk Factors.”

 

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.

 

You should read this prospectus completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

iii

 

 

PROSPECTUS SUMMARY

 

This summary highlights, and is qualified in its entirety by, the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information that may be important to you in making your investment decision. You should read this entire prospectus carefully, especially the “Risk Factors” section beginning on page 9 and our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our Common Stock or Warrants.

 

Overview

 

Spectaire is an industrial technology company whose core offering, AireCore, allows its customers to measure, manage, and potentially reduce carbon dioxide equivalent (CO2e) and other greenhouse gas emissions. AireCore is a fully integrated hardware, software, and data platform designed primarily for logistics and supply chain operators that uses mass spectrometry to directly measure and report emissions in real time. Companies currently face a “technology gap” between increasing requirements with respect to reporting and reducing emissions and lack of available technology to accurately measure and manage such emissions, which creates a no-win scenario. Spectaire’s asset-light, reasonably priced solution delivers a win-win-win for Spectaire, for its customers, and for the environment.

 

The research and development for AireCore’s mass spectrometry technology began more than 15 years ago at MIT, led by Spectaire’s Chief Technology Officer, Dr. Brian Hemond, and co-founder, Professor Ian Hunter. AireCore is protected by a robust patent portfolio and a lengthy research and development process. MIT has granted Spectaire an exclusive license for all of the intellectual property owned by MIT that underlies the AireCore and is a minority stockholder in Spectaire.

 

Companies are coming under increasing pressure from governments, customers, and the public to account for and reduce their emissions. We believe that, prior to our introduction of AireCore, there was no practical way to directly measure real-time transportation emissions. Instead of directly measuring their emissions, our potential customers currently estimate their emissions using emissions estimation calculators for transport and logistics that estimate based on fuel consumption, mileage, and vehicle weight. These estimates cannot accommodate the minute-to-minute, mile-to-mile variations that often drive significant differences between these estimates and actual emissions. As a result, these estimates have come under criticism for being inaccurate, simplistic, and - until now - impossible to verify. A pilot study conducted with our anchor customer, Mosolf, found that Mosolf’s emissions estimate calculated using CSN EN 16258, a publicly available and widely used emissions estimation standard, overstated its actual emissions by approximately 60%.

 

Spectaire’s AireCore patented micro mass spectrometer (MMS) solves this problem. Unlike conventional mass spectrometers, which typically have significant cost, size, power, and environmental requirements, AireCore uses a proprietary miniaturized and ruggedized analyzer, combined with solid state pump technology, to address mobile operation in harsh environments.

 

AireCoreis cloud-connected through mobile phone networks, enabling a continuous feed of emissions data. AireCore core software can also be upgraded over-the-air (OTA) smartphone-style, enabling a continuous roll-out of features and improvements.

 

We believe that AireCore is the world’s first and only device capable of addressing the technology gap between emissions requirements and emissions management technology by delivering real-time, accurate, and verifiable emissions measurements.

 

Business Combination

 

On January 16, 2023, PCCT entered into that certain Agreement and Plan of Merger (the “Merger Agreement”), with Perception Spectaire Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of PCCT (the “merger subsidiary”), and Legacy Spectaire, pursuant to which, on October 19, 2023, the merger subsidiary merged with and into Legacy Spectaire, with Legacy Spectaire surviving the merger as a wholly owned subsidiary of New Spectaire (together with the other transaction contemplated by the Merger Agreement, the “Business Combination”).

 

In connection with the consummation of the Business Combination, the Company changed its name from “Perception Capital Corp. II” to “Spectaire Holdings Inc.”

 

1

 

 

Information regarding certain of the Company’s material transactions is included in the section titled “Key Transactions.

 

Yorkville Standby Equity Facility

 

On May 17, 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with Yorkville pursuant to which the Company has the right to sell to Yorkville up to $25.0 million of its shares of Common Stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. In connection with the SEPA, the Company entered into a Registration Rights Agreement with Yorkville (the “Registration Rights Agreement”) pursuant to which it agreed to register for resale the Common Stock issued to Yorkville. Sales of shares of Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of Common Stock to Yorkville under the SEPA.

 

Upon the satisfaction of the conditions to Yorkville’s purchase obligation set forth in the SEPA, including having a registration statement registering the resale of the shares of Common Stock issuable under the SEPA declared effective by the Securities and Exchange Commission, the Company will have the right, but not the obligation, from time to time at its discretion until the SEPA is terminated to direct Yorkville to purchase a specified number of shares of common stock (“Advance”) by delivering written notice to Yorkville (“Advance Notice”). While there is no mandatory minimum amount for any Advance, it may not exceed the greater of (i) an amount equal to 100% of the average of the daily traded amount during the five consecutive trading days immediately preceding an Advance Notice, and (ii) 500,000 shares of Common Stock.

 

The shares of Common Stock purchased pursuant to an Advance delivered by the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of Common Stock during the three consecutive trading days commencing on the date of the delivery of the Advance Notice, other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on the subject trading day. The Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any sales to Yorkville. “VWAP” is defined as the daily volume weighted average price of the shares of common stock for such trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P.

 

Under applicable Nasdaq rules, in no event may the Company issue to Yorkville under the SEPA shares equal to greater than 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the SEPA (the “Exchange Cap”), unless (i) the Company obtains stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid by Yorkville for all of the shares of Common Stock that the Company directs Yorkville to purchase from the Company pursuant to the SEPA, if any, equals or exceeds the lower of (a) the official closing price of the Common Stock on Nasdaq immediately preceding the execution of the SEPA and (b) the average official closing price of the Common Stock on Nasdaq for the five consecutive trading days immediately preceding the execution of the SEPA, adjusted as required by Nasdaq so that the Exchange Cap limitation will not apply to issuances and sales of Common Stock pursuant to the SEPA (the “SEPA Floor Price”). In addition, the Company may not issue or sell any shares of Common Stock to Yorkville under the SEPA which, when aggregated with all other shares of Common Stock then beneficially owned by Yorkville and its affiliates (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 13d-3 thereunder), would result in Yorkville beneficially owning more than 4.99% of the outstanding shares of Common Stock.

 

The Company will control the timing and amount of any sales of shares of common stock to Yorkville. Actual sales of shares of common stock to Yorkville as an Advance under the SEPA will depend on a variety of factors to be determined by the Company from time to time, which may include, among other things, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for our business and operations.

 

2

 

 

The SEPA will automatically terminate on the earliest to occur of (i) the 36-month anniversary of the date of the SEPA or (ii) the date on which it has been fully performed. We have the right to terminate the SEPA at no cost or penalty upon five (5) trading days’ prior written notice to Yorkville, provided that there are no outstanding Advance Notices for which shares of common stock need to be issued. The Company and Yorkville may also agree to terminate the SEPA by mutual written consent. Neither the Company nor Yorkville may assign or transfer respective rights and obligations under the SEPA, and no provision of the SEPA may be modified or waived other than by an instrument in writing signed by both parties.

 

As consideration for Yorkville’s commitment to purchase the shares of common stock pursuant the SEPA, the Company paid Yorkville, (i) a structuring fee in the amount of $25,000 and (ii) a commitment fee equal to 233,644 shares, to be issued within three trading days of the date of the SEPA, and $125,000, to be paid on the three-month anniversary of the date of the SEPA.

 

The SEPA contains customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.

 

The net proceeds under the SEPA to the Company will depend on the frequency and prices at which the Company sells Common Stock to Yorkville. The Company expects that any proceeds received from such sales to Yorkville will primarily be used for investment in growth, debt repayment, working capital and general corporate purposes.

 

Notice of Failure to Satisfy a Continued Listing Rule or Standard 

 

On December 5, 2023, Spectaire received a letter (the “MVLS Letter”) from the Listing Qualifications Department of Nasdaq notifying Spectaire that, for the last 30 consecutive business days prior to the date of the MVLS Letter, Spectaire’s Market Value of Listed Securities (“MVLS”) was below the $50 million minimum MVLS requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Rule”). The MVLS Letter is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of Spectaire’s securities.

 

In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Spectaire had 180 calendar days, or until June 3, 2024 (the “First Compliance Date”), to regain compliance with the MVLS Rule. To regain compliance with the MVLS Rule, Spectaire’s MVLS must equal or exceed $50 million for a minimum of 10 consecutive business days at any time prior to the First Compliance Date.

 

Because Spectaire did not regain compliance with the MVLS Rule by the First Compliance Date, it received a delist determination from Nasdaq and will have a seven day period during which to appeal. Spectaire intends to appeal the delisting determination to a Hearings Panel. The MVLS Letter notes that Spectaire may be eligible to transfer the listing of its securities to the Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market).

 

On December 15, 2023, Spectaire received a letter (the “MVPHS Letter”) from the Listing Qualifications Department of Nasdaq notifying Spectaire that, for the last 30 consecutive business days prior to the date of the Letter, Spectaire’s Market Value of Publicly Held Securities (“MVPHS”) was below the $15 million minimum MVPHS requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(C) (the “MVPHS Rule”). The MVPHS Letter is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of Spectaire’s securities.

 

In accordance with Nasdaq Listing Rule 5810(c)(3)(D), Spectaire will have 180 calendar days, or until June 12, 2024 (the “Second Compliance Date”), to regain compliance with the MVPHS Rule. To regain compliance with the MVPHS Rule, Spectaire’s MVPHS must equal or exceed $15 million for a minimum of 10 consecutive business days at any time prior to the Second Compliance Date. If Spectaire regains compliance with the MVPHS Rule, Nasdaq will provide Spectaire with written confirmation and will close the matter.

 

3

 

 

In the event that Spectaire does not regain compliance with the MVPHS Rule by the Second Compliance Date, it will receive written notification that its securities are subject to delisting. At that time, Spectaire intends to appeal the delisting determination to a Hearings Panel. The MVPHS Letter notes that Spectaire may be eligible to transfer the listing of its securities to the Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market). Spectaire is monitoring its MVPHS and will consider its available options to regain compliance with the MVPHS Rule; however, there can be no assurance that Spectaire will be able to regain compliance with the MVPHS Rule.

 

On May 6, 2024, Spectaire received a letter (the “Letter”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days prior to the date of the Letter, the Company’s bid price was below the $1.00 per share minimum requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Rule”). The Letter is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s securities.

 

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company will have 180 calendar days, or until November 4, 2024 (the “Compliance Date”), to regain compliance with the Bid Price Rule. To regain compliance with the Bid Price Rule, the Company’s bid price must equal or exceed $1.00 per share for a minimum of 10 consecutive business days at any time prior to the Compliance Date. If the Company regains compliance with the Bid Price Rule, Nasdaq will provide the Company with written confirmation and will close the matter.

 

In the event that the Company does not regain compliance with the Bid Price Rule by the Compliance Date, it will receive written notification that its securities are subject to delisting. At that time, the Company may appeal the delisting determination to a Hearings Panel. The Letter notes that the Company may be eligible to transfer the listing of its securities to the Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market). The Company is monitoring its bid price and will consider its available options to regain compliance with the Bid Price Rule; however, there can be no assurance that the Company will be able to regain compliance with the Bid Price Rule.

 

The Letter is unrelated to the previously disclosed MVLS Letter received by the Company from Nasdaq on December 5, 2023 regarding the Company’s noncompliance with the Market Value of Listed Securities requirement for continued listing on The Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(A). The Letter is also unrelated to the previously disclosed MVPHS Letter received by the Company from Nasdaq on December 15, 2023 regarding the Company’s noncompliance with the Market Value of Publicly Held Shares requirement for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5810(c)(3)(D).

 

Summary Risk Factors

 

You should consider all the information contained in this prospectus in deciding how to vote for the Proposals presented herein. In particular, you should consider the risk factors described in the section entitled “Risk Factors” beginning on page 9. Such risks include, but are not limited to:

 

It is not possible to predict the actual number of shares we will sell under the SEPA to Yorkville, or the actual gross proceeds resulting from those sales.

 

Investors who buy shares at different times will likely pay different prices.

 

We are engaged in multiple transactions and offerings of our securities. Future resales and/or issuances of Common Stock, including pursuant to this prospectus may cause the market price of our shares to drop significantly.

 

We may use proceeds from sales of shares of our Common Stock made pursuant to the Purchase Agreement in ways with which you may not agree or in ways which may not yield a significant return.

 

The success of our business is dependent on our ability to keep pace with technological changes and competitive conditions in our industry, and our ability to effectively adapt our services as our customers react to technological changes and competitive conditions in their respective industries. We may not timely and effectively scale and adapt our existing technology, processes and infrastructure to meet the needs of our business.

 

4

 

 

The air quality measurement systems market is competitive. We expect to face increasing competition in many aspects of its business, which could cause our operating results to suffer.

 

We may be adversely affected by supply chain issues, including shortages of required electronic components and raw materials.

 

Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.

 

We may experience significant delays in the design, production and launch of our air quality measurement solutions, and we may be unable to successfully commercialize products on our planned timelines.

 

If demand for our services does not grow as expected, or develops more slowly than expected, our revenues may stagnate or decline, and our business may be adversely affected.

 

Defects in shipped products that give rise to returns or warranty or other claims could result in material expenses, diversion of management time and attention, adversely affected customer relationships and damage to our reputation.

 

We may be involved in legal proceedings, including intellectual property, anti-competition and securities litigation, employee-related claims, and regulatory investigations, which could, among other things, divert efforts of management and result in significant expense and loss of our intellectual property rights.

 

If we are unable to adequately protect or enforce our intellectual property rights, such information may be used by others to compete against us.

 

Certain software we use is from open-source code sources, which, under certain circumstances could materially adversely affect our business, financial condition and operating results.

 

If we fail to grow our business as anticipated, our operating results will be adversely affected. If we grow as anticipated but fail to manage our operations and costs accordingly, our business may be harmed and our results of operations may suffer.

 

We will continue to implement strategic initiatives designed to grow our business. These initiatives may prove more costly than we currently anticipate and we may not succeed in increasing our revenue in an amount sufficient to offset the costs of these initiatives and to achieve and maintain profitability.

 

Developments in alternative technologies may adversely affect the demand for our technology.

 

We compete against established market participants that have substantially greater resources than we have and against known and unknown market entrants who may disrupt our target markets.

 

We purchase a significant amount of the materials and components we use from a limited number of suppliers and if such suppliers become unavailable or inadequate, our customer relationships, results of operations, and financial condition may be adversely affected.

 

Our facilities, and our suppliers’ facilities and customers’ facilities, may be vulnerable to disruption due to natural or other disasters, public health crises, strikes and other events beyond our control.

 

If we do not maintain the correct level of inventory or if we do not adequately manage our inventory, we could lose sales or incur higher inventory-related expenses, which could negatively affect our operating results.

  

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Our operations could suffer if we are unable to attract and retain key management or other key employees.

 

Compliance or the failure to comply with current and future environmental, health and safety, product stewardship and producer responsibility laws or regulations could cause us significant expense.

 

An inability to successfully manage the procurement, development, implementation or execution of information technology systems, or to adequately maintain these systems and their security, as well as to protect data and other confidential information, may adversely affect our business and reputation.

 

If we experience a cybersecurity breach or disruption in its information systems, our business could be adversely affected.

 

Our current levels of insurance may not be adequate for our potential liabilities.

 

Because our industry is rapidly evolving, forecasts of market growth may not be accurate, and even if these markets achieve the forecasted growth, there can be no assurance that our business will grow at similar rates, or at all.

 

Our industry routinely experiences cyclical market patterns and our services are used across different end markets. A significant downturn in the industry or in any of these end markets could cause a meaningful reduction in demand for our services and harm our operating results.

 

Our limited operating history makes evaluating our current business and our future prospects difficult and may increase the risk of your investment.

 

In the future, we expect to be dependent on a limited number of customers and end markets. A decline in revenue from, or the loss of, any significant customer, could have a material adverse effect on our financial condition and operating results.

 

Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all. Our failure to raise capital when needed could harm our business, operating results and financial condition. Debt issued to raise additional capital may reduce the value of our Common Stock.

 

The issuance of additional shares of Common Stock or convertible securities could make it difficult for another company to acquire us, may dilute your ownership of us and could adversely affect the price of our Common Stock.

 

Future resales of our Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well.

 

We are an “emerging growth company.” The reduced public company reporting requirements applicable to emerging growth companies may make our Common Stock less attractive to investors.

 

Our management has limited experience in operating a public company.

 

Corporate Information

 

We were incorporated under as a Cayman Islands exempted company on January 21, 2021 under the name Perception Capital Corp II. Upon the closing of the Business Combination, we changed our name to Spectaire Holdings Inc. Our principal executive offices are located at 155 Arlington Street, Watertown, MA 02472, and our telephone number is (508) 213-8991. Our website address is www.spectaire.com. The information contained in, or accessible through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

 

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Implications of Being an Emerging Growth Company and Smaller Reporting Company

 

As a company with less than $1.235 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

 

the option to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus;

 

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”);

 

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

 

reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

 

exemptions from the requirements of holding a nonbinding advisory vote of stockholders on executive compensation, stockholder approval of any golden parachute payments not previously approved and having to disclose the ratio of the compensation of our chief executive officer to the median compensation of our employees.

 

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of the initial public offering of PPCT (the “PCCT IPO”). However, if (i) our annual gross revenue exceeds $1.235 billion, (ii) we issue more than $1.0 billion of non-convertible debt in any three-year period or (iii) we become a “large accelerated filer” (as defined in Rule 12b-2 under the Exchange Act) prior to the end of such five-year period, we will cease to be an emerging growth company. We will be deemed to be a “large accelerated filer” at such time that we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700.0 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act, for a period of at least 12 months and (c) have filed at least one annual report pursuant to the Exchange Act.

 

We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

 

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

We are also a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

 

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THE OFFERING

 

Issuer   Spectaire Holdings Inc.
     
Securities being offered by the Selling Stockholder   10,000,000 shares of Common Stock.
     
Offering Price   The Selling Stockholder may offer, sell, or distribute all or a portion of the shares registered hereby either through public or private transactions at prevailing market prices or at negotiated prices. See “Plan of Distribution.”
     
Shares of Common Stock outstanding prior to this offering   18,547,201 (as of June 3, 2024).
     
Shares of Common Stock outstanding after this offering   28,547,201 assuming that the Selling Stockholder sells all of the shares of Common Stock offered pursuant to this prospectus.
     
Terms of the Offering   The Selling Stockholder will determine when and how it sells the shares of Common Stock offered in this prospectus as described in “Plan of Distribution.”
     
Use of proceeds  

We will not receive any proceeds from the resale of shares of Common Stock included in this prospectus by Yorkville. However, we may receive up to $25.0 million in aggregate gross proceeds under the SEPA from sales of Common Stock that we may elect to make to Yorkville pursuant to the SEPA, if any, from time to time in our sole discretion.

 

We expect to use the net proceeds that we receive from sales of our Common Stock to Yorkville, if any, under the SEPA primarily for investment in growth, debt repayment, working capital and general corporate purposes. We have not yet determined the amount of net proceeds to be used specifically for any of the foregoing purposes. Accordingly, we retain broad discretion over the use of the net proceeds from the sale of our Common Stock under the SEPA. The precise amount and timing of the application of such proceeds will depend upon our liquidity needs and the availability and cost of other capital over which we have little or no control. As of the date hereof, we cannot specify with certainty the particular uses for the net proceeds. See the section titled “Use of Proceeds.”

     
Risk factors   You should carefully read the “Risk Factors” beginning on page 9 and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our Common Stock or Warrants.
     
Nasdaq symbol for our Common Stock   “SPEC.”

 

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RISK FACTORS

 

Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this prospectus or any prospectus supplement are not the only risks and uncertainties that we face. We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business, prospects, financial condition or operating results. The following discussion should be read in conjunction with our financial statements and the financial statements of the Company and notes to the financial statements included herein.

 

Unless the context otherwise requires, all references in this section to “we,” “us,” or “our” refers to the Company and its subsidiaries.

 

Risks Related to the SEPA

 

It is not possible to predict the actual number of shares we will sell under the SEPA to Yorkville, or the actual gross proceeds resulting from those sales.

 

On May 17, 2024, we entered into the SEPA with Yorkville, pursuant to which Yorkville has committed to purchase up to $25.0 million of shares of our Common Stock, subject to certain limitations and conditions set forth in the SEPA. The shares of our Common Stock that may be issued under the SEPA may be sold by us to Yorkville at our discretion from time to time for a period of up to 36 months, unless the SEPA is earlier terminated.

 

We generally have the right to control the timing and amount of any sales of our shares of Common Stock to Yorkville under the SEPA. Sales of our Common Stock, if any, to Yorkville under the SEPA will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Yorkville all, some or none of the shares of our Common Stock that may be available for us to sell to Yorkville pursuant to the SEPA.

 

Because the per share purchase price that Yorkville will pay for the Purchase Shares in any transaction that we may elect to effect pursuant to the SEPA will be determined by reference to the VWAP during the applicable period, respectively, on the applicable Purchase Date, as of the date of this prospectus, it is not possible for us to predict the number of shares of Common Stock that we will sell to Yorkville under the SEPA, the purchase price per share that Yorkville will pay for shares purchased from us under the SEPA, or the actual aggregate gross proceeds that we will receive from those purchases by Yorkville under the SEPA.

 

Although the SEPA provides that we may sell up to an aggregate of $25.0 million of our Common Stock to Yorkville, only 10,000,000 shares of our Common Stock are being registered under the Securities Act for resale by Yorkville under the registration statement that includes this prospectus. If it becomes necessary for us to issue and sell to Yorkville under the SEPA more than the 10,000,000 Purchase Shares being registered in order to receive aggregate gross proceeds equal to $25.0 million under the SEPA, we must first file with the SEC one or more additional registration statements to register such additional shares of our Common Stock, which the SEC must declare effective, in each case before we may elect to sell any additional shares of our Common Stock to Yorkville under the SEPA. Any issuance and sale by us under the SEPA of a substantial amount of shares of Common Stock could cause additional substantial dilution to our stockholders. The number of shares of our Common Stock ultimately offered for sale by Yorkville is dependent upon the number of shares of Common Stock, if any, we ultimately elect to sell to Yorkville under the SEPA.

 

Investors who buy shares at different times will likely pay different prices.

 

Pursuant to the SEPA, we will have discretion, subject to market demand, to vary the timing, prices and numbers of shares sold to Yorkville. If and when we do elect to sell shares of our Common Stock to Yorkville pursuant to the SEPA, after Yorkville has acquired such shares, Yorkville may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from Yorkville in this offering at different times will likely pay different prices for those shares and so may experience different levels of dilution, and in some cases substantial dilution, and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from Yorkville in this offering as a result of future sales made by us to Yorkville at prices lower than the prices such investors paid for their shares in this offering. In addition, if we sell a substantial number of shares to Yorkville under the SEPA, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with Yorkville may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.

 

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We are engaged in multiple transactions and offerings of our securities. Future resales and/or issuances of shares of Common Stock, including pursuant to this prospectus, may cause the market price of our shares to drop significantly and may dilute stockholders.

 

If all of the 10,000,000 shares offered for resale by Yorkville under this prospectus were issued and outstanding as of the date hereof (without taking into account the 19.99% Exchange Cap limitation), such shares would represent approximately 35.0% of the total number of outstanding shares of Common Stock and approximately 61.7% of the total number of outstanding shares of Common Stock held by non-affiliates of our company, in each case as of June 3, 2024.

 

Sales of a substantial number of our shares of Common Stock in the public market by Yorkville or by our other existing stockholders, or the perception that those sales might occur, could depress the market price of our shares of Common Stock and could impair our ability to raise capital through the sale of additional equity securities.

 

In addition to the shares being registered with this prospectus, Spectaire filed a registration statement with the SEC for purposes of registering the resale from time to time of up to 24,469,671 shares of Common Stock (representing approximately 61.9% of our issued and outstanding shares of Common Stock and approximately 70.4% of our issued and outstanding shares of Common Stock held by non-affiliates (in each case, assuming the exercise of all of our warrants)), which consists of (a) 6,133,344 shares of Common Stock issued in connection with the Business Combination, (b) 5,165,000 shares of Common Stock originally issued to the Sponsor, (c) 10,050,000 shares of Common Stock that are issuable upon the exercise of the Private Placement Warrants, (d) 670,874 shares of Common Stock issued to Polar pursuant to the Amended and Restated Polar Subscription Agreement, (e) 206,000 shares of Common Stock issued to Polar in connection with the Polar Forward Purchase Agreement, (f) 50,000 shares of Common Stock issued in the PIPE Investment, and (g) 2,194,453 shares of Common Stock that are issuable upon the exercise of the Arosa Warrant. Further, up to 11,500,000 shares of Common Stock are issuable upon the exercise of 11,500,000 warrants (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”) originally issued in the initial public offering of PCCT. Spectaire has also filed a registration statement with the SEC for purposes of registering the resale from time to time by Keystone Capital Partners, LLC, a Delaware limited liability company (“Keystone”) of up to 3,067,438 shares of Common Stock.

 

In addition, shares of our Common Stock issuable upon exercise or vesting of incentive awards under our incentive plans are, once issued, eligible for sale in the public market, subject to any lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144. Furthermore, shares of our Common Stock reserved for future issuance under our incentive plan may become available for sale in future.

 

The market price of shares of our Common Stock could drop significantly if the holders of the shares of Common Stock described above sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of shares of our Common Stock or other securities.

 

We may use proceeds from sales of shares of our Common Stock made pursuant to the SEPA in ways with which you may not agree or in ways which may not yield a significant return.

 

We have broad discretion over the use of proceeds from sales of shares of our Common Stock made pursuant to the SEPA, as described in the section entitled “Use of Proceeds,” and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. In addition, the ultimate use of the net proceeds may vary from the currently intended uses. The net proceeds may be used for corporate purposes that do not increase our operating results or enhance the value of our Common Stock.

 

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Sales of a substantial number of our securities in the public market by our existing securityholders could cause the price of our shares of Common Stock and Warrants to fall.

 

Sales of a substantial number of our shares of Common Stock or Warrants in the public market by our existing securityholders, or the perception that those sales might occur, could depress the market price of our shares of Common Stock and Warrants and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing market price of our shares of Common Stock and Warrants.

 

Our Warrants are exercisable for shares of our Common Stock, which exercises will increase the number of shares of Common Stock eligible for future resale in the public market and result in dilution to our existing stockholders.

 

The outstanding Warrants to purchase an aggregate of 21,550,000 shares of our Common Stock became exercisable on December 22, 2022. Each Warrant entitles the holder thereof to purchase one share of our Common Stock at a price of $11.50 per whole share. The Arosa Warrant to purchase an aggregate of 2,194,453 shares of our Common Stock became exercisable upon its issuance. The Arosa Warrant entitles the holder thereof to purchase up to 2,194,453 shares of Common Stock at an exercise price of $0.01 per share. Warrants may be exercised only for a whole number of shares of Common Stock. To the extent such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the then existing holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock.

 

On June 3, 2024, the closing price for our Common Stock was $0.350. If the price of our Common Stock remains below $11.50 per share, we believe Warrant holders will be unlikely to cash exercise their Warrants, resulting in little or no cash proceeds to us.

 

Risks Related to Our Business

 

The success of our business is dependent on our ability to keep pace with technological changes and competitive conditions in our industry, and our ability to effectively adapt our services as our customers react to technological changes and competitive conditions in their respective industries. We may not timely and effectively scale and adapt its existing technology, processes and infrastructure to meet the needs of its business.

 

The success of Spectaire’s business is dependent on our ability to keep pace with technological changes and competitive conditions in its industry, and our ability to effectively adapt our services as its customers react to technological changes and competitive conditions in their respective industries. Spectaire may not timely and effectively scale and adapt its existing technology, processes and infrastructure to meet the needs of its business. If we are unable to offer technologically advanced, high quality, quick turnaround, cost-effective manufacturing services that are differentiated from its competition, or if we are unable to adapt those services as its customers’ requirements change, demand for our services may decline.

 

Our operating results and financial condition may fluctuate from period to period and may fall below expectations in any particular period, which could adversely affect the market price of our Common Stock.

 

Spectaire’s operating results and financial condition have historically fluctuated, and our operating results and financial condition are expected to continue to fluctuate, from quarter-to-quarter and year-to-year due to a number of factors, many of which will not be within our control. Both Spectaire’s business and the air quality measurement systems industry are changing and evolving rapidly, and our historical operating results may not be useful in predicting our future operating results. If our operating results do not meet the guidance that it provides to the marketplace or the expectations of securities analysts or investors, the market price of Common Stock will likely decline. Fluctuations in Spectaire’s operating results and financial condition may be due to a number of factors, including:

 

the degree of market acceptance of its products and services;

 

its ability to compete with the competitors and new entrants into the markets in which it operates;

 

the mix of products and services that it sells during any period

 

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the timing of its sales and deliveries of its products to customers;

 

the geographic distribution of its sales;

 

changes in its pricing policies or those of its competitors, including its response to price competition;

 

changes in the amount that it spends to develop and manufacture new services or technologies;

 

changes in the amounts that it spends to promote its products and services;

 

changes in the cost of satisfying its warranty obligations and servicing its installed customer base;

 

expenses and liabilities resulting from litigation;

 

delays between its expenditures to develop and market new or enhanced technologies and services and the generation of revenue from those technologies and services;

 

unforeseen liabilities or difficulties in integrating acquisitions or newly acquired businesses;

 

disruptions to its information technology systems or third-party contract manufacturers;

 

general economic and industry conditions that affect customer demand;

 

the impact of the ongoing military conflict between Ukraine and Russia and the impact of related sanctions on the current rate of inflation rate; and

 

changes in accounting rules and tax laws.

 

In addition, our revenues and operating results may fluctuate from quarter-to-quarter and year-to-year due to its sales cycle and seasonality among its customers. Generally, we expect the air quality measurement systems market to be subject to the adoption and capital expenditure cycles of its customers. As a result, we expect to conduct a larger portion of its business during the first and fourth quarters of its fiscal year relative to the second and third quarters. Additionally, for more complex solutions, which may require additional facilities investment, potential customers may spend a substantial amount of time performing internal assessments prior to making a purchase decision. This may cause us to devote significant effort in advance of a potential sale without any guarantee of receiving any related revenues. As a result, revenues and operating results for future periods are difficult to predict with any significant degree of certainty, which could lead to adverse effects on our inventory levels and overall financial condition.

 

Due to the foregoing factors, and the other risks discussed in this prospectus, you should not rely on Spectaire’s historical operating results as an indicator of our future performance.

 

The air quality measurement systems market is competitive. Spectaire expects to face increasing competition in many aspects of its business, which could cause its operating results to suffer.

 

The air quality measurement systems market in which Spectaire operates, and in which we will operate, is fragmented and competitive. Spectaire competes for customers with a wide variety of producers of air quality measurement systems equipment that includes emissions measurement devices, as well as with providers of materials and services for this equipment. Some of Spectaire’s existing and potential competitors are researching, designing, developing and marketing other types of products and services that may render Spectaire’s existing or future products obsolete, uneconomical or less competitive. Existing and potential competitors may also have substantially greater financial, technical, marketing and sales, manufacturing, distribution and other resources than Spectaire, including name recognition, as well as experience and expertise in intellectual property rights and operating within certain international markets, any of which may enable them to compete effectively against Spectaire.

 

Future competition may arise from the development of allied or related techniques for equipment, materials and services that are not encompassed by Spectaire’s patents, from the issuance of patents to other companies that may inhibit Spectaire’s ability to develop certain products and from improvements to existing technologies.

 

Spectaire intends to continue its strategy of product development and distribution network expansion to enhance its competitive position to the extent practicable. But Spectaire cannot assure you that we will be able to maintain our current position or continue to compete successfully against current and future sources of competition. If Spectaire does not keep pace with technological change and introduce new products and technologies, demand for its products may decline, and its operating results may suffer.

 

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Customer relationships with emerging companies may present more risks than with established companies.

 

Customer relationships with emerging companies present special risks because Spectaire does not have an extensive services or customer relationship history. Spectaire’s credit risk on these customers, especially in trade accounts receivable and inventories, and the risk that these customers will be unable to fulfill indemnification obligations to Spectaire, is potentially increased. Although it has not yet done so, Spectaire has the option to offer these customers extended payment terms and other support and financial accommodations which may increase Spectaire’s financial exposure.

 

Spectaire may be adversely affected by supply chain issues, including shortages of required electronic components and raw materials.

 

Strategic and efficient component and materials purchasing is an aspect of Spectaire’s strategy. When prices rise, they may impact Spectaire’s margins and results of operations if we are not able to pass the price increases through to Spectaire’s customers or otherwise offset them. Some of the products Spectaire manufactures require one or more components that are only available from a single source. Some of these components or materials are subject to supply shortages from time to time. In some cases, supply shortages will substantially curtail production of all assemblies using a particular component. A supply shortage can also increase Spectaire’s cost of goods sold if Spectaire has to pay higher prices for components or materials in limited supply or cause Spectaire to have to reconfigure products to accommodate a substitute component or material. In the past there have been industry-wide conditions, natural disasters and global events that have caused component and material shortages. Spectaire’s production of a product could be negatively impacted by any quality, reliability or availability issues with any of our components and material suppliers. The financial condition of our suppliers could affect their ability to supply components or materials and their ability to satisfy any warranty obligations they may have, which could have a material adverse effect on Spectaire’s results of operations.

 

If a component or material shortage is threatened or anticipated, Spectaire may purchase its components or materials early to avoid a delay or interruption in its operations. Purchasing components or materials early may materially increase inventory carrying costs and may result in inventory obsolescence, which could materially adversely affect Spectaire’s results of operations. A component shortage may also require the use of second-tier vendors or the procurement of components or materials through new and untested brokers. These components or materials may be of lesser quality than those Spectaire has historically purchased and could result in material costs to bring such components or materials up to necessary quality levels or to replace defective ones.

 

Fluctuations in the cost and availability of raw materials, equipment, labor and transportation could cause manufacturing delays or increase Spectaire’s costs.

 

The price and availability of key raw materials and components used to offer our services may fluctuate significantly. Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil, currency fluctuations, and global demand trends. Any fluctuations in the cost and availability of any of Spectaire’s raw materials or other sourcing or transportation costs related to Spectaire’s raw materials or services could harm Spectaire’s gross margins and its ability to meet customer demand. If Spectaire is unable to successfully mitigate a significant portion of these service cost increases or fluctuations, Spectaire’s results of operations could be harmed.

 

Spectaire may experience significant delays in the design, production and launch of its air quality measurement solutions, and may be unable to successfully commercialize products on its planned timelines.

 

Several of Spectaire’s air quality measurement solutions are still under development. There are often delays in the design, testing, manufacture and commercial release of new products, and any delay in the launch of Spectaire’s products could materially damage its brand, business, growth prospects, financial condition and operating results. Even if we successfully complete the design, testing and manufacture for one or all of its products under development, it may fail to develop a commercially successful product on the timeline it expects for a number of reasons, including:

 

misalignment between the products and customer needs;

 

lack of innovation of the product;

 

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failure of the product to perform in accordance with the customer’s industry standards;

 

ineffective distribution and marketing;

 

delay in obtaining any required regulatory approvals;

 

unexpected production costs; or

 

release of competitive products.

 

Spectaire’s success in the market for the products it develops will depend largely on its ability to prove its products’ capabilities in a timely manner. Upon demonstration, Spectaire’s customers may not believe that its products and/or technology have the capabilities they were designed to have or that we believe they have. Furthermore, even if Spectaire successfully demonstrates its products’ capabilities, potential customers may be more comfortable doing business with another larger and more established company or may take longer than expected to make the decision to order Spectaire’s products. Significant revenue from new product investments may not be achieved for a number of years, if at all. If the timing of Spectaire’s launch of new products or of its customers’ acceptance of such products is different than our assumptions, Spectaire’s revenue and results of operations may be adversely affected.

 

If demand for Spectaire’s services does not grow as expected, or develops more slowly than expected, Spectaire’s revenues may stagnate or decline, and Spectaire’s business may be adversely affected.

 

Spectaire may not be able to develop effective strategies to raise awareness among potential customers of the benefits of its air quality measurement systems or Spectaire’s services may not address the specific needs or provide the level of functionality or economics required by potential customers. If mass spectrometry air quality measurement technology does not gain broader market acceptance as an alternative to conventional air quality monitoring, or does so more slowly than anticipated, or if the marketplace adopts air quality measurement technologies that differ from Spectaire’s technologies, Spectaire may not be able to increase or sustain the level of sales of Spectaire’s services, and its operating results would be adversely affected as a result.

 

Spectaire’s failure to meet its customers’ price expectations would adversely affect its business and results of operations.

 

Demand for Spectaire’s product lines is sensitive to price. Changes in Spectaire’s pricing strategies can have a significant impact on its business and ability to generate revenue. Many factors, including Spectaire’s production and personnel costs and its competitors’ pricing and marketing strategies, can significantly impact Spectaire’s pricing strategies. If Spectaire fails to meet its customers’ price expectations in any given period, demand for its products and product lines could be negatively impacted and its business and results of operations could suffer.

 

Spectaire has considered different pricing models for different products. For example, Spectaire may charge premium pricing based on delivery timelines and customizations. Such pricing models are still relatively new to some of Spectaire’s customers and may not be attractive to them, especially in regions where they are less common. If customers resist such pricing models, Spectaire’s revenue may be adversely affected and Spectaire may need to restructure the way in which it charges customers for its products.

 

Spectaire depends on a limited number of third-party contract manufacturers for substantially all of its manufacturing needs. If these third-party manufacturers experience any delay, disruption or quality control problems in their operations, Spectaire could lose market share and its brand may suffer.

 

Spectaire depends on third-party contract manufacturers for the production of its air quality measurement systems. While there are several potential manufacturers for most of these products, all of Spectaire’s products are, and all of Spectaire’s products will be, manufactured, assembled, tested and generally packaged by a limited number of third-party manufacturers. In most cases, Spectaire relies, and Spectaire will rely, on these manufacturers to procure components and, in some cases, subcontract engineering work. Such reliance on a limited number of contract manufacturers involves a number of risks, including:

 

Unexpected increases in manufacturing and repair costs;

 

inability to control the quality and reliability of finished products;

 

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inability to control delivery schedules;

 

potential liability for expenses incurred by third-party contract manufacturers in reliance on forecasts that later prove to be inaccurate;

 

potential lack of adequate capacity to manufacture all or a part of the products required; and

 

potential labor unrest affecting the ability of the third-party manufacturers to produce products.

 

If any of Spectaire’s third-party contract manufacturers experience a delay, disruption or quality control problems in their operations, including due to the COVID-19 or similar pandemic, or if a primary third-party contract manufacturer does not renew its agreement with Spectaire, Spectaire’s operations could be significantly disrupted and its product shipments could be delayed. Qualifying a new manufacturer and commencing volume production is expensive and time consuming. In addition, there is no assurance that a contract manufacturer can scale its production of Spectaire’s products at the volumes and in the quality that Spectaire will require. If a contract manufacturer is unable to do these things, Spectaire may have to move production for the products to a new or existing third-party manufacturer, which would take significant effort, and Spectaire’s business, results of operations and financial condition could be materially adversely affected.

 

As Spectaire contemplates moving manufacturing into different jurisdictions, it may be subject to additional significant challenges in ensuring that quality, processes and costs, among other issues, are consistent with its expectations. For example, while Spectaire expects its third-party contract manufacturers to be responsible for penalties assessed on Spectaire because of excessive failures of the products, there is no assurance that Spectaire will be able to collect such reimbursements from these manufacturers, which causes Spectaire to take on additional risk for potential failures of its products.

 

In addition, because Spectaire will use a limited number of third-party contract manufacturers, increases in the prices charged may have an adverse effect on its results of operations, as Spectaire may be unable to find a contract manufacturer who can supply it at a lower price. As a result, the loss of a limited source supplier could adversely affect Spectaire’s relationships with its customers and its results of operations and financial condition.

 

All of Spectaire’s products must satisfy safety and regulatory standards and some of its products must also receive government certifications. Spectaire’s third-party contract manufacturers will be primarily responsible for conducting the tests that support its applications for most regulatory approvals for its products. If Spectaire’s third-party contract manufacturers fail to timely and accurately conduct these tests, Spectaire may be unable to obtain the necessary domestic or foreign regulatory approvals or certifications to sell its products in certain jurisdictions. As a result, Spectaire would be unable to sell its products and its sales and profitability could be reduced, its relationships with its sales channel could be harmed and its reputation and brand would suffer.

 

Defects in shipped products that give rise to returns or warranty or other claims could result in material expenses, diversion of management time and attention, adversely affected customer relationships and damage to Spectaire’s reputation.

 

Spectaire’s air quality measurement devices are complex and may contain undetected defects or errors. This could result in delayed market acceptance of services Spectaire offers or claims from customers or others, which may result in litigation, increased end user warranty, support and repair or replacement costs, damage to Spectaire’s reputation and business, or significant costs and diversion of support and engineering personnel to correct the defect or error. Spectaire may from time to time become subject to warranty claims related to product quality issues that could lead Spectaire to incur significant expenses.

 

Spectaire attempts to include provisions in its agreements with customers that are designed to limit Spectaire’s exposure to potential liability for damages arising from defects or errors in its products. However, it is possible that these limitations may not be effective as a result of unfavorable judicial decisions or laws enacted in the future.

 

The sale and support of Spectaire’s products entails the risk of product liability claims. Any product liability claim brought against Spectaire, regardless of its merit, could result in material expense, diversion of management time and attention, damage to Spectaire’s business and reputation and brand, and cause Spectaire to fail to retain existing customers or to fail to attract new customers.

 

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Spectaire may be involved in legal proceedings, including intellectual property, anti-competition and securities litigation, employee-related claims and regulatory investigations, which could, among other things, divert efforts of management and result in significant expense and loss of Spectaire’s intellectual property rights.

 

Spectaire may be involved in legal proceedings, including cases involving Spectaire’s intellectual property rights and those of others, anti-competition and commercial matters, acquisition-related suits, securities class action suits, employee-related claims and other actions. From time to time, Spectaire may also be involved or required to participate in regulatory investigations or inquiries which may evolve into legal or other administrative proceedings. Litigation or settlement of such actions, regardless of their merit, or involvement in regulatory investigations or inquiries, can be costly, lengthy, complex and time consuming, diverting the attention and energies of Spectaire’s management and technical personnel.

 

From time to time, third parties may assert against Spectaire and Spectaire’s customers their intellectual property rights to technologies that are important to Spectaire’s business.

 

Many of Spectaire’s customer agreements and/or the laws of certain jurisdictions may require Spectaire to indemnify its customers or purchasers for third-party intellectual property infringement claims, including costs to defend those claims, and payment of damages in the case of adverse rulings. However, Spectaire’s suppliers may or may not be required to indemnify Spectaire should Spectaire or its customers be subject to such third-party claims. Claims of this sort could also harm Spectaire’s relationships with its customers and might deter future customers from doing business with Spectaire. If any pending or future proceedings result in an adverse outcome, Spectaire could be required to:

 

cease the sale of the infringing services, processes or technology or make changes to Spectaire’s services, processes or technology;

 

pay substantial damages for past, present and future use of the infringing technology, including up to treble damages if willful infringement is found;

 

pay fines or disgorge profits or other payments, or cease certain conduct, or modify Spectaire’s or Spectaire’s contracting or business practices, in connection with any unfavorable resolution of a governmental investigation;

 

expend significant resources to develop non-infringing technology;

 

license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;

 

enter into cross-licenses with Spectaire’s competitors, which could weaken Spectaire’s overall intellectual property portfolio and Spectaire’s ability to compete in particular product categories; or

 

relinquish intellectual property rights associated with one or more of Spectaire’s patent claims.

 

Any of the foregoing results could have a material adverse effect on Spectaire’s business, financial condition and results of operations.

 

In addition, Spectaire may be obligated to indemnify Spectaire’s current or former directors or employees, or former directors or employees of companies that Spectaire has acquired, in connection with litigation or regulatory investigations. These liabilities could be substantial and may include, among other things, the cost of defending lawsuits against these individuals, as well as stockholder derivative suits; the cost of government, law enforcement or regulatory investigations; civil or criminal fines and penalties; legal and other expenses; and expenses associated with the remedial measure, if any, which may be imposed.

 

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The projected financial and other information in this prospectus is forward looking and reflects numerous estimates, beliefs and assumptions, all of which are difficult to predict and many of which are beyond Spectaire’s control. If these assumptions prove to be incorrect, Spectaire’s actual operating results may be materially different from the forecasted results.

 

This registration statement contains projected financial and other information of Spectaire. The projected information in this prospectus is forward looking and reflects numerous estimates, beliefs and assumptions, including, but not limited to, general business, economic, regulatory, market and financial conditions, as well as assumptions about competition, future performance, and matters specific to Spectaire’s business, all of which are difficult to predict and many of which are beyond Spectaire’s control. Important factors that may affect actual results and results of Spectaire’s operations following the Business Combination, or could lead to such projections not being achieved include, but are not limited to: inability to grow sales of the AireCore MMS in Europe and North America, an evolving competitive landscape, rapid technological change, emissions regulation changes, successful management and retention of key personnel, unexpected expenses, and other risks and uncertainties relating to our business, industry, and general business and economic conditions as described in this “Risk Factors” section.

 

There can be no assurance that the projected financial and other information appearing elsewhere in this prospectus will be realized, and actual results may differ, and may differ materially, from those shown. The inclusion of the projected financial and other information in this prospectus should not be regarded as an indication that Spectaire, or any of its affiliates, officers, directors, advisors or other representatives considered or consider such projected information necessarily predictive of actual future events, and such projected information should not be relied upon as such. None of Spectaire or any of its affiliates, officers, directors, advisors or other representatives can give any assurance that actual results will not differ from such projections. None of Spectaire or any of its affiliates, officers, directors, advisors or other representatives has made or makes any representation to any stockholder or other person regarding the ultimate performance of Spectaire compared to the projected information or that forecasted results will be achieved. Accordingly, there can be no assurance that our financial condition or results of operations will be consistent with those set forth in the projected information, which could have an adverse impact on the market price of Common Stock or Spectaire’s financial position.

 

In addition, the projected financial and other information herein has not been independently verified or confirmed by any third party. In particular, such financial information has not been audited, reviewed, or examined by our auditors.

 

If Spectaire is unable to adequately protect or enforce its intellectual property rights, such information may be used by others to compete against Spectaire.

 

Spectaire has devoted substantial resources to the development of its technology and related intellectual property rights. Spectaire’s success and future revenue growth will depend, in part, on its ability to protect its intellectual property. Spectaire relies on a combination of registered and unregistered intellectual property. Spectaire protects its proprietary rights using patents, licenses, trademarks, trade secrets, confidentiality and assignment of invention agreements and other methods.

 

Despite Spectaire’s efforts to protect its proprietary rights, it is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose Spectaire’s technologies, inventions, processes or improvements. Spectaire cannot assure you that any of Spectaire’s existing or future patents or other intellectual property rights will not be challenged, invalidated or circumvented, or will otherwise provide Spectaire with meaningful protection. Spectaire’s pending patent applications may not be granted, and Spectaire may not be able to obtain foreign patents or pending applications corresponding to Spectaire’s U.S. patents. Even if foreign patents are granted, effective enforcement in foreign countries may not be available.

 

Spectaire’s trade secrets, know-how and other unregistered proprietary rights are a key aspect of its intellectual property portfolio. While Spectaire takes reasonable steps to protect its trade secrets and confidential information and enters into confidentiality and invention assignment agreements intended to protect such rights, such agreements can be difficult and costly to enforce or may not provide adequate remedies if violated, and Spectaire may not have entered into such agreements with all relevant parties. Such agreements may be breached, and trade secrets or confidential information may be willfully or unintentionally disclosed, including by employees who may leave Spectaire and join one of its competitors, or Spectaire’s competitors or other parties may learn of the information in some other way. The disclosure to, or independent development by, a competitor of any of Spectaire’s trade secrets, know-how or other technology not protected by a patent or other intellectual property system could materially reduce or eliminate any competitive advantage that Spectaire may have over such competitor.

 

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If Spectaire’s patents and other intellectual property do not adequately protect its technology, Spectaire’s competitors may be able to offer services similar to those offered by Spectaire. Spectaire’s competitors may also be able to develop similar technology independently or design around Spectaire’s patents and other intellectual property. Any of the foregoing events would lead to increased competition and reduce Spectaire’s revenue or gross margin, which would adversely affect Spectaire’s operating results.

 

If Spectaire attempts enforcement of its intellectual property rights, Spectaire may be subject or party to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation, regardless of merit, can be costly and disruptive to Spectaire’s business operations by diverting attention and energies of management and key technical personnel and by increasing Spectaire’s costs of doing business. Any of the foregoing could adversely affect Spectaire’s business and financial condition.

 

As part of any settlement or other compromise to avoid complex, protracted litigation, Spectaire may agree not to pursue future claims against a third party, including related to alleged infringement of Spectaire’s intellectual property rights. Part of any settlement or other compromise with another party may resolve a potentially costly dispute but may also have future repercussions on Spectaire’s ability to defend and protect its intellectual property rights, which in turn could adversely affect Spectaire’s business.

 

Certain software Spectaire uses is from open-source code sources, which, under certain circumstances, could materially adversely affect Spectaire’s business, financial condition and operating results.

 

Some of the software used to execute Spectaire’s services contains code from open-source sources, the use of which may subject Spectaire to certain conditions, including the obligation to offer such services for no cost or to make the proprietary source code involved in delivering those services publicly available. Further, although some open-source vendors provide warranty and support agreements, it is common for such software to be available “as-is” with no warranty, indemnity or support. Although Spectaire monitors its use of such open-source code to avoid subjecting its services to unintended conditions, such use, under certain circumstances, could materially adversely affect Spectaire’s business, financial condition and operating results and cash flow, including if Spectaire is required to take remedial action that may divert resources away from Spectaire’s development efforts.

 

If Spectaire fails to grow its business as anticipated, its operating results will be adversely affected. If Spectaire grows as anticipated but fails to manage its operations and costs accordingly, its business may be harmed and its results of operations may suffer.

 

Spectaire is expected to grow its business substantially. To this end, Spectaire has made significant investments in its business, including investments in infrastructure, technology, marketing and sales efforts. These investments include dedicated facilities expansion and increased staffing, both domestic and international. If Spectaire’s business does not generate the level of revenue required to support its investment, Spectaire’s net sales and profitability will be adversely affected.

 

Spectaire’s ability to effectively manage its anticipated growth and expansion of its operations will also require Spectaire to enhance its operational, financial and management controls and infrastructure, as well as its human resources policies and reporting systems. These enhancements and improvements will require significant capital expenditures, investments in additional headcount and other operating expenditures and allocation of valuable management and employee resources. Spectaire’s future financial performance and its ability to execute on its business plan will depend, in part, on Spectaire’s ability to effectively manage any future growth and expansion. There are no guarantees that Spectaire will be able to do so in an efficient or timely manner, or at all.

 

Spectaire continues to implement strategic initiatives designed to grow its business. These initiatives may prove more costly than Spectaire currently anticipates and Spectaire may not succeed in increasing its revenue in an amount sufficient to offset the costs of these initiatives and to achieve and maintain profitability.

 

Spectaire continues to make investments and implement initiatives designed to grow its business, including:

 

Investing in research and development;

 

expanding its sales and marketing efforts to attract new customers;

 

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investing in new applications and markets for its products;

 

investing in its manufacturing processes and partnerships to scale production;

 

protecting its intellectual property; and

 

investing in legal, accounting, human resources, and other administrative functions necessary to support its operations as a public company.

 

These initiatives may prove more expensive than Spectaire currently anticipates, and Spectaire may not succeed in increasing its revenue, if at all, in an amount sufficient to offset these higher expenses and to achieve and maintain profitability. Certain of the market opportunities Spectaire is pursuing are at an early stage of development, and it may be many years before the end markets it expects to serve generate demand for its products at scale. Spectaire’s revenue may be adversely affected for a number of reasons, including the development and market acceptance of new technology that competes with its AireCore™ and other air quality measurement offerings; its inability to create, validate, and manufacture at high volume, and ship product to customers; its inability to effectively manage its inventory or manufacture products at scale; its inability to enter new markets or help its customers adapt its products for new applications; or its failure to attract new customers or expand orders from existing customers or increasing competition. Furthermore, it is difficult to predict the size and growth rate of Spectaire’s target markets, customer demand for its products, commercialization timelines, the entry of competitive products or the success of existing competitive products and services. If Spectaire’s revenue does not grow, its ability to achieve and maintain profitability may be adversely affected, and the value of its business may significantly decrease.

 

As Spectaire acquires and invests in companies or technologies, it may not realize expected business or cost synergies or expected technological or financial benefits. Such acquisitions or investments could prove difficult to integrate, disrupt Spectaire’s business, dilute stockholder value and adversely affect Spectaire’s business, results of operations and financial condition.

 

Acquisitions involve numerous risks, any of which could harm Spectaire’s business and negatively affect its financial condition and results of operations. The success of acquisitions, including the success of Legacy Spectaire’s recent acquisition of microMS, Inc. (“microMS”), will depend in part on our ability to realize the anticipated business opportunities from combining the operations of acquired companies with Spectaire’s existing business in an efficient and effective manner. These integration processes could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect Spectaire’s ability to maintain relationships with customers, employees or other third parties, or Spectaire’s ability to achieve the anticipated benefits of any acquisition, and could harm Spectaire’s financial performance. If Spectaire is unable to successfully or timely integrate the operations of an acquired company, including microMS, with Spectaire’s existing business, Spectaire may incur unanticipated liabilities and be unable to realize the revenue growth, synergies and other anticipated benefits resulting from the acquisition, and Spectaire’s business, results of operations and financial condition could be materially and adversely affected.

 

Developments in alternative technologies may adversely affect the demand for Spectaire’s technology.

 

Significant developments in alternative technologies may materially and adversely affect Spectaire’s business, prospects, financial condition, and operating results in ways it does not currently anticipate. Existing and future air quality measurement or mass spectrometry technologies may emerge as customers’ preferred alternative to our solutions. Any failure by Spectaire to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay Spectaire’s development and introduction of new and enhanced products in the industries it serves, which could result in the loss of competitiveness of its solutions, decreased revenue and a loss of market share to competitors (or a failure to increase revenue and/or market share). Spectaire’s research and development efforts may not be sufficient to adapt to changes in technology. As technologies change, Spectaire’s plans to upgrade or adapt its solutions with the latest technology. However, Spectaire’s solutions may not compete effectively with alternative systems if Spectaire is not able to source and integrate the latest technology into its existing products.

 

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Spectaire competes against established market participants that have substantially greater resources than it and against known and unknown market entrants who may disrupt its target markets.

 

Spectaire’s target markets are highly competitive and it may not be able to compete effectively in the market against these competitors. Competitors may offer products at lower prices than Spectaire’s products, including pricing that Spectaire believes is below its cost, or may offer superior performing products. These companies will also compete with Spectaire indirectly by attempting to solve some of the same challenges with different technology. Established competitors in the market for these devices have significantly greater resources and more experience than Spectaire does. These competitors have commercialized technology that has achieved market adoption, strong brand recognition and may continue to improve in both anticipated and unanticipated ways. They may also have entered into commercial relationships with key customers and have built relationships and dependencies between themselves and those key customers.

 

In addition to the established market competitors, new competitors may be preparing to enter or are entering the market in which Spectaire competes, and in which Spectaire will compete, that may disrupt the commercial landscape of target markets in ways that Spectaire may not be able to prepare for, including customers of Spectaire’s products who may be developing their own competitive solutions. Spectaire does not know how close any of its current and potential competitors are to commercializing their similar products and services, if at all, nor what they intend to develop as part of their product roadmaps. The already competitive landscape of the air quality measurement systems market, along with both foreseeable and unforeseeable entries of competitors and similar technology from those competitors in Spectaire’s target markets, may result in pricing pressure, reduced margins and may impede its ability to increase the sales of its products or cause Spectaire to lose market share, any of which will adversely affect its business, results of operations and financial condition.

 

Spectaire’s manufacturing costs may increase and result in a market price for its products above the price that customers are willing to pay.

 

If the cost of manufacturing Spectaire’s products increases, Spectaire will be forced to charge its customers a higher price for the products in order to cover its costs and earn a profit. While Spectaire expects its products will benefit from continued cost reduction over time from scale and planned redesigns, there is no guarantee that these efforts will be successful, or that these savings would not be offset by additional required content. If the price of Spectaire’s products is too high, customers may be reluctant to purchase its products, especially if lower priced alternative products are available, and Spectaire may not be able to sell its products in sufficient volumes to recover its costs of development and manufacture or to earn a profit.

 

Spectaire purchases a significant amount of the materials and components it uses from a limited number of suppliers, and if such suppliers become unavailable or inadequate, its customer relationships, results of operations and financial condition may be adversely affected.

 

Spectaire’s manufacturing processes rely on many materials. Spectaire purchases a significant portion of its materials, components and finished goods used in its production facilities from a few suppliers, some of which are single-source suppliers. As certain materials are highly specialized, the lead time needed to identify and qualify a new supplier is typically lengthy and there is often no readily available alternative source. Spectaire does not generally have long-term contracts with its suppliers and substantially all of Spectaire’s purchases are on a purchase order basis. Suppliers may extend lead times, limit supplies, place products on allocation or increase prices due to commodity price increases, capacity constraints or other factors and could lead to interruption of supply or increased demand in the industry. Additionally, the supply of these materials may be negatively impacted by increased trade tensions between the U.S. and its trading partners, particularly China. In the event that Spectaire cannot obtain sufficient quantities of materials in a timely manner, at reasonable prices or of sufficient quality, or if Spectaire is not able to pass on higher materials costs to its customers, Spectaire’s business, financial condition and results of operations could be adversely impacted.

 

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Spectaire, its contract manufacturers and its suppliers may rely on complex machinery for production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.

 

Spectaire, its contract manufacturers and its suppliers may rely on complex machinery for the production, assembly and installation of Spectaire’s products, which will involve a significant degree of uncertainty and risk in terms of operational performance and costs. Spectaire’s production facilities and the facilities of its contract manufacturers and suppliers may suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of these components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of Spectaire’s control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on its business, prospects, financial condition or operating results.

 

Spectaire’s facilities, and its suppliers’ facilities and customers’ facilities, will be vulnerable to disruption due to natural or other disasters, public health crises, strikes and other events beyond Spectaire’s control.

 

A major earthquake, fire, tsunami, hurricane, cyclone or other disaster, such as a pandemic, major flood, seasonal storms, nuclear event or terrorist attack affecting Spectaire’s facilities or the areas in which they are located, or affecting those of Spectaire’s customers or third-party manufacturers or suppliers, could significantly disrupt Spectaire’s or its customers’ or suppliers’ operations and delay or prevent product shipment or installation during the time required to repair, rebuild or replace Spectaire’s damaged manufacturing facilities. These delays could be lengthy and costly. Additionally, customers may delay purchases until operations return to normal. Even if Spectaire is able to respond quickly to a disaster, the continued effects of the disaster could create uncertainty in Spectaire’s business operations. In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, labor strikes, war or the outbreak of epidemic diseases (including the outbreak of COVID-19 or similar pandemics) could have a negative effect on Spectaire’s operations and sales.

 

If Spectaire does not maintain the correct level of inventory or if it does not adequately manage its inventory, Spectaire could lose sales or incur higher inventory-related expenses, which could negatively affect its operating results.

 

To ensure the correct level of inventory supply, Spectaire will forecast inventory needs and expenses, place orders sufficiently in advance with its suppliers and manufacturing partners and manufacture products based on its estimates of future demand. Fluctuations in the adoption of its products may affect Spectaire’s ability to forecast its future operating results, including revenue, gross margins, cash flows and profitability. Spectaire’s ability to accurately forecast demand for its products could be affected by many factors, including the rapidly changing nature of its current target markets, the uncertainty surrounding the market acceptance and commercialization of its technology, the emergence of new markets, an increase or decrease in customer demand for its products or for products and services of its competitors, product introductions by competitors, the global COVID-19 pandemic, other health epidemics and outbreaks, and any associated work stoppages or interruptions, unanticipated changes in general market conditions and the weakening of economic conditions or consumer confidence in future economic conditions. Spectaire may face challenges acquiring adequate supplies to manufacture its products and Spectaire and its partners may not be able to manufacture its products at a rate necessary to satisfy the levels of demand, which would negatively affect Spectaire’s short-term and long-term growth. This risk may be exacerbated by the fact that Spectaire may not carry or be able to obtain from its suppliers a significant amount of inventory to satisfy short-term demand increases. If Spectaire fails to accurately forecast customer demand, Spectaire may experience excess inventory levels or a shortage of products available for sale.

 

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would adversely affect Spectaire’s financial results, including its gross margin, and have a negative effect on its brand. Conversely, if Spectaire underestimates customer demand for its products, Spectaire may not be able to deliver products to meet its requirements, and this could result in damage to its brand and customer relationships and adversely affect its revenue and operating results.

 

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Spectaire’s operations could suffer if Spectaire is unable to attract and retain key management or other key employees.

 

Spectaire believes its success has depended, and Spectaire’s success will continue to depend, on the efforts and talents of senior management and other key personnel. Spectaire’s executive team is critical to the management of Spectaire’s business and operations and will continue to be critical to the development of Spectaire’s strategy. Members of Spectaire’s existing senior management team may resign at any time. The loss of the services of any members of Spectaire’s senior management team could delay or prevent the successful implementation of Spectaire’s strategy or Spectaire’s commercialization of new services, or could otherwise adversely affect Spectaire’s ability to carry out its business plan. There is no assurance that if any senior executive leaves in the future, Spectaire will be able to rapidly replace him, her or them and transition smoothly towards his, her or their successor, without any adverse impact on Spectaire’s operations.

 

To support the continued growth of Spectaire’s business, Spectaire will also be required to effectively recruit, hire, integrate, develop, motivate, and retain additional new employees. High demand exists for senior management and other key personnel (including scientific, technical, engineering, financial, manufacturing, and sales personnel) in Spectaire’s industry, and there can be no assurance that Spectaire will be able to retain its current key personnel. Spectaire experiences intense competition for qualified personnel. While Spectaire intends to provide competitive compensation packages to attract and retain key personnel, some of its competitors for these employees have greater resources and more experience, which may make it difficult for Spectaire to compete successfully for key personnel. All of Spectaire’s U.S. employees are at-will employees, meaning that they may terminate their employment relationship with Spectaire at any time, and their knowledge of Spectaire’s business and industry would be extremely difficult to replace. It may be difficult for Spectaire to restrict its competitors from benefiting from the expertise that Spectaire’s former employees or consultants developed while working for Spectaire.

 

Spectaire will require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

 

Historically, Spectaire’s primary sources of liquidity have been contributions from founders or other investors. Spectaire reported an operating loss of $2.0 million for the three months ended March 31, 2024 and $4.3 million for the three months ended March 31, 2023. Spectaire reported negative cash flows from operations of $2.7 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, Spectaire had an aggregate unrestricted cash balance of $31 thousand, a net working capital deficit of $27.9 million, and an accumulated deficit of $29.7 million. For the year ended December 31, 2023, Spectaire reported an operating loss of $16.7 million and negative cash flows from operations of $7.4 million. As of December 31, 2023, Spectaire had an aggregate unrestricted cash balance of $0.3 million, a net working capital deficit of $25.4 million, and accumulated deficit of $27.2 million.

 

While the Company will continue to evaluate potential sources of funding, the Company may not be able to raise additional capital on terms acceptable to it or at all. If the Company is unable to raise additional capital when desired, the Company may be required to modify, delay or abandon some of its planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on the Company’s business, operating results, financial condition and ability to achieve its intended business objectives.

 

Compliance or the failure to comply with current and future environmental, health and safety, product stewardship and producer responsibility laws or regulations could cause Spectaire significant expense.

 

Spectaire will be subject to a variety of federal, state, local and foreign environmental, health and safety, product stewardship and producer responsibility laws and regulations, including those arising from global pandemics or relating to the use, generation, storage, discharge and disposal of hazardous chemicals used during its manufacturing process, those governing worker health and safety, those requiring design changes, supply chain investigation or conformity assessments and those relating to the recycling or reuse of products it manufactures. If Spectaire fails to comply with any present or future regulations or obtain in a timely manner any needed permits, Spectaire could become subject to liabilities, and could face fines or penalties, the suspension of production, or prohibitions on services it provides. In addition, such regulations could restrict Spectaire’s ability to expand its facilities or could require it to acquire costly equipment, or to incur other significant expenses, including expenses associated with the recall of any non-compliant product or with changes in Spectaire’s operational, procurement and inventory management activities.

 

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Certain environmental laws impose liability for the costs of investigation, removal and remediation of hazardous or toxic substances on an owner, occupier or operator of real estate, or on parties who arranged for hazardous substance treatment or disposal, even if such person or company was unaware of, or not responsible for, contamination at the affected site. Soil and groundwater contamination may have occurred at or near, or may have arisen from, some of Spectaire’s facilities. In certain instances where contamination existed prior to Spectaire’s ownership or occupation of a site, landlords or former owners have retained some contractual responsibility for contamination and remediation. However, failure of such persons to perform those obligations could result in Spectaire being required to address such contamination. As a result, Spectaire may incur clean-up costs in such potential removal or remediation efforts. In other instances, Spectaire may be responsible for clean-up costs and other liabilities, including the possibility of claims due to health risks by both employees and non-employees, as well as other third-party claims in connection with contaminated sites.

 

In addition, there is an increasing governmental focus around the world on global warming and environmental impact issues, which may result in new environmental, health and safety regulations that may affect Spectaire, its suppliers or its customers. This could cause Spectaire to incur additional direct costs for compliance, as well as increased indirect costs resulting from its customers, suppliers or both incurring additional compliance costs that get passed on to Spectaire. These costs may adversely impact Spectaire’s operations and financial condition.

 

An inability to successfully manage the procurement, development, implementation or execution of IT systems, or to adequately maintain these systems and their security, as well as to protect data and other confidential information, may adversely affect Spectaire’s business and reputation.

 

As a complex company, Spectaire is heavily dependent on its IT systems to support its customers’ requirements and to successfully manage its business. Any inability to successfully manage the procurement, development, implementation, execution, or maintenance of such systems, including matters related to system and data security, cybersecurity, privacy, reliability, compliance, performance and access, as well as any inability of these systems to fulfill their intended purpose, could have an adverse effect on Spectaire’s business. See “If Spectaire experiences a cybersecurity breach or disruption in its information systems, Spectaire’s business could be adversely affected.” below.

 

Spectaire is subject to increasing expectations and data security requirements from its customers, including those related to the U.S. Federal Acquisition Regulation, U.S. Defense Federal Acquisition Regulation Supplement, and U.S. Cybersecurity Maturity Model Certification. In addition, Spectaire will be required to comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in various jurisdictions. For example, the European Union’s General Data Protection Regulation, and similar legislation in other jurisdictions in which Spectaire will operate, imposes additional obligations on companies regarding the handling of personal data and provide certain individual privacy rights to persons whose data is stored. Compliance with customer expectations and existing, proposed and recently enacted laws and regulations can be costly; any failure to comply with these expectations and regulatory standards could subject Spectaire to legal and reputational risks. Misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against Spectaire by governmental entities or others, fines and penalties, damage to Spectaire’s reputation and credibility and could have a negative impact on Spectaire’s business and results of operations.

 

If Spectaire experiences a cybersecurity breach or disruption in its information systems, Spectaire’s business could be adversely affected.

 

Malicious actors may be able to penetrate Spectaire’s network and misappropriate or compromise Spectaire’s confidential information or that of third parties, create system disruptions or cause shutdowns. Malicious actors also may be able to develop and deploy viruses, worms and other malicious software programs that attack Spectaire’s platform or otherwise exploit any security vulnerabilities of Spectaire’s platform. While Spectaire will employ a number of protective measures, including firewalls, network infrastructure vulnerability scanning, anti-virus and endpoint detection and response technologies, these measures may fail to prevent or detect attacks on Spectaire’s systems due at least in part to the frequent evolving nature of cybersecurity attacks. Although these measures are designed to maintain the confidentiality, integrity and availability of Spectaire’s information and technology systems, there is no assurance that these measures will detect all threats or prevent a cybersecurity attack in the future, which could adversely affect Spectaire’s business, reputation, operations or services.

 

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In addition, the costs to Spectaire to eliminate or mitigate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and, if Spectaire’s efforts to address these problems are not successful, could result in interruptions, delays, cessation of service and loss of existing or potential customers that may impede Spectaire’s sales, manufacturing, distribution or other critical functions.

 

Spectaire relies on its information technology systems to manage numerous aspects of its business and a disruption of these systems could adversely affect its business.

 

Spectaire relies on its information technology systems to manage numerous aspects of its business, including purchasing products from its suppliers, providing procurement and logistic services, shipping products to its customers, managing its accounting and financial functions (including its internal controls) and maintaining its research and development data. Spectaire’s information technology systems are an essential component of its business and any disruption could significantly limit its ability to manage and operate its business efficiently. A failure of Spectaire’s information technology systems to perform properly could disrupt Spectaire’s supply chain, product development and customer experience, which may lead to increased overhead costs and decreased sales and have an adverse effect on Spectaire’s reputation and its financial condition. The hardware and software that Spectaire utilizes in Spectaire’s services may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation or security of the services.

 

In addition, a substantial portion of Spectaire’s employees have conducted work remotely, making Spectaire more dependent on potentially vulnerable communications systems and making Spectaire more vulnerable to cyberattacks. Although Spectaire takes steps and incurs significant costs to secure its information technology systems, including its computer systems, intranet and internet sites, email and other telecommunications and data networks, such security measures may not be effective and its systems may be vulnerable to damage or interruption. Disruption to Spectaire’s information technology systems could result from power outages, computer and telecommunications failures, computer viruses, cyber-attack or other security breaches, catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war and terrorism.

 

Spectaire’s current levels of insurance may not be adequate for Spectaire’s potential liabilities.

 

Spectaire maintains insurance to cover potential exposure for most claims and losses, including potential product and non-product related claims, lawsuits and administrative proceedings seeking damages or other remedies arising out of its commercial operations. However, Spectaire’s current insurance coverage is subject to various exclusions, self-retentions and deductibles. Spectaire may be faced with types of liabilities that are not covered under Spectaire’s current insurance policies, such as environmental contamination or terrorist attacks, or that exceed Spectaire’s current or future policy limits. Even a partially uninsured claim of significant size, if successful, could have an adverse effect on Spectaire’s financial condition.

 

In addition, Spectaire may not be able to continue to obtain insurance coverage on commercially reasonable terms, or at all, Spectaire’s existing policies may be cancelled or otherwise terminated by the insurer, or the companies that Spectaire acquires may not be eligible for certain types or limits of insurance. Maintaining adequate insurance and successfully accessing insurance coverage that may be due for a claim can require a significant amount of Spectaire’s management’s time, and Spectaire may be forced to spend a substantial amount of money in that process.

 

Because Spectaire’s industry is and will continue to be rapidly evolving, forecasts of market growth may not be accurate, and even if these markets achieve the forecasted growth, there can be no assurance that Spectaire’s business will grow at similar rates, or at all.

 

Market opportunity estimates and growth forecasts included in this prospectus are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The forecasts and estimates in this prospectus relating to the expected size and growth of the markets for air quality measurement systems technology may prove to be inaccurate. Even if these markets experience the forecasted growth described in this prospectus, Spectaire may not grow its business at similar rates, or at all. Spectaire’s future growth is subject to many factors, including market adoption of Spectaire’s products and services, which is subject to many risks and uncertainties. Accordingly, the forecasts and estimates of market size and growth described in this prospectus, including the estimate that Spectaire’s total addressable market size exceeds $95 billion based on a bottom-up build of fleet sizes in the United States and Europe, should not be taken as indicative of Spectaire’s future growth.

 

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Global economic, political and social conditions and uncertainties in the markets that Spectaire will serve may adversely impact Spectaire’s business.

 

Spectaire’s performance will depend on the financial health and strength of its customers, which in turn will be dependent on the economic conditions of the markets in which Spectaire and its customers operate. A decline in the global economy, difficulties in the financial services sector and credit markets, continuing geopolitical uncertainties and other macroeconomic factors all affect the spending behavior of potential customers.

 

Spectaire may also face risks from financial difficulties or other uncertainties experienced by its suppliers, distributors or other third parties on which it relies. If third parties are unable to supply Spectaire with required materials or components or otherwise assist Spectaire in operating its business, Spectaire’s business could be harmed.

 

Spectaire’s industry routinely experiences cyclical market patterns and Spectaire’s services are used across different end markets. A significant downturn in the industry or in any of these end markets could cause a meaningful reduction in demand for Spectaire’s services and harm its operating results.

 

The air quality measurement systems industry is cyclical and Spectaire’s financial performance may be affected by downturns in the industry. Down cycles are generally characterized by price erosion and weaker demand for Spectaire’s services. Spectaire attempts to identify changes in market conditions as soon as possible; however, the dynamics of the market in which Spectaire operates make prediction of and timely reaction to such events difficult. Due to these and other factors, Spectaire’s past results are not reliable predictors of Spectaire’s future results. Furthermore, any significant upturn in the air quality measurement systems industry could result in increased competition for access to raw materials and third-party service providers.

 

Additionally, Spectaire’s services are used across different end markets, and demand for Spectaire’s products is difficult to predict and may vary within or among the various industries it serves. Spectaire’s target markets may not grow or develop as it currently expects, and demand may change in one or more of Spectaire’s end markets, which may reduce Spectaire’s revenue, lower Spectaire’s gross margin or affect Spectaire’s operating results. Spectaire has experienced concentrations of revenue at certain customers and within certain end markets. Any deterioration in these end markets, reductions in the magnitude of revenue streams, Spectaire’s inability to meet requirements, or volatility in demand for Spectaire’s services could lead to a reduction in Spectaire’s revenue and adversely affect Spectaire’s operating results. Spectaire’s success in its end markets depends on many factors, including the strength or financial performance of the customers in such end markets, Spectaire’s ability to timely meet rapidly changing requirements, market needs, and its ability to maintain program wins across different markets and customers to dampen the effects of market volatility. The dynamics of the markets in which Spectaire operates make prediction of and timely reaction to such events difficult.

 

If Spectaire is unable to accomplish any of the foregoing, or to offset the volatility of cyclical changes in the air quality measurement systems industry or its end markets through diversification into other markets, such inability could harm its business, financial condition, and operating results.

 

Spectaire’s limited operating history makes evaluating Spectaire’s current business and future prospects difficult and may increase the risk to investors.

 

Spectaire’s limited operating history may make it difficult for investors to evaluate Spectaire’s current business and future prospects as Spectaire continues to grow its business. Spectaire’s ability to forecast future operating results is subject to a number of uncertainties, including Spectaire’s ability to plan for and model future growth. Spectaire has encountered risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, and Spectaire will encounter such risks and uncertainties as it continues to grow Spectaire’s business. If Spectaire’s assumptions regarding these uncertainties are incorrect or change in reaction to changes in its markets, or if Spectaire does not address these risks successfully, Spectaire’s operating and financial results could differ materially from its expectations, Spectaire’s business could suffer, and the trading price of Spectaire’s stock may decline.

 

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Spectaire expects to be dependent on a limited number of customers and end markets. A decline in revenue from, or the loss of, any significant customer, could have a material adverse effect on Spectaire’s financial condition and operating results.

 

As of June 3, 2024, Spectaire only has five anticipated customers in its initial pilot program, and Spectaire expects to depend upon a small number of customers for a substantial portion of its future revenue. Accordingly, a decline in revenue from, or the loss of, any significant customer could have a material adverse effect on Spectaire’s financial condition and operating results. Spectaire cannot assure that (i) orders that may be completed, delayed, cancelled or reduced will be replaced with new business; (ii) the pilot customers will ultimately utilize Spectaire’s products and services; or (iii) the pilot customers will enter into additional contracts with Spectaire on acceptable terms or at all.

 

There can also be no assurance that Spectaire’s efforts to secure new customers and programs in Spectaire’s traditional or new markets, including through acquisitions, will succeed in reducing Spectaire’s customer concentration. Acquisitions are also subject to integration risk, and revenues and margins could be lower than Spectaire anticipates. Failure to secure business from existing or new customers in any of Spectaire’s end markets would adversely impact Spectaire’s operating results.

 

The market price of shares of Common Stock may be volatile or may decline, regardless of Spectaire’s operating performance, and investors may lose some or all of their investment.

 

The trading price of Common Stock may be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. Investors may not be able to resell shares at an attractive price due to a number of factors such as the following:

 

Spectaire’s operating and financial performance and prospects;

 

Spectaire’s quarterly or annual earnings or those of other companies in its industry compared to market expectations;

 

conditions that impact demand for Spectaire’s products and services;

 

future announcements concerning Spectaire’s business, its clients’ businesses or its competitors’ businesses;

 

the public’s reaction to Spectaire’s press releases or other public announcements and filings with the SEC;

 

the market’s reaction to Spectaire’s reduced disclosure and other requirements as a result of being an “emerging growth company” under the JOBS Act;

 

the size of Spectaire’s public float;

 

coverage by or changes in financial estimates by securities analysts or failure to meet their expectations;

 

market and industry perception of Spectaire’s success, or lack thereof, in pursuing its growth strategy;

 

strategic actions by Spectaire or its competitors, such as acquisitions or restructurings;

 

changes in laws or regulations which adversely affect Spectaire’s industry or Spectaire;

 

privacy and data protection laws, privacy or data breaches, or the loss of data;

 

changes in accounting standards, policies, guidance, interpretations or principles;

 

changes in senior management or key personnel;

 

issuances, exchanges or sales, or expected issuances, exchanges or sales of Spectaire capital stock;

 

changes in Spectaire’s dividend policy;

 

adverse resolution of new or pending litigation against Spectaire; and

 

changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from inflation, natural disasters, terrorist attacks, acts of war and responses to such events.

 

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These broad market and industry factors may materially reduce the market price of Common Stock, regardless of Spectaire’s operating performance. In addition, price volatility may be greater if the public float and trading volume of Common Stock is low. As a result, you may suffer a loss on your investment.

 

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If Spectaire was involved in securities litigation, it could have a substantial cost and divert resources and the attention of management from Spectaire’s business regardless of the outcome of such litigation.

 

Spectaire does not intend to pay dividends on Common Stock for the foreseeable future.

 

Spectaire currently intends to retain all available funds and any future earnings to fund the development and growth of its business. As a result, Spectaire does not anticipate declaring or paying any cash dividends on Common Stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, Spectaire’s business prospects, results of operations, financial condition, cash requirements and availability, certain restrictions related to Spectaire indebtedness, industry trends and other factors that the Board may deem relevant. Any such decision will also be subject to compliance with contractual restrictions and covenants in the agreements governing Spectaire’s current and future indebtedness. In addition, Spectaire may incur additional indebtedness, the terms of which may further restrict or prevent it from paying dividends on Common Stock. As a result, you may have to sell some or all of your Common Stock after price appreciation in order to generate cash flow from your investment, which you may not be able to do. Spectaire’s inability or decision not to pay dividends could also adversely affect the market price of Common Stock.

 

If securities or industry analysts do not publish research or reports about Spectaire’s business or the Business Combination or publish negative reports, the market price of Common Stock could decline.

 

The trading market for Common Stock is influenced by the research and reports that industry or securities analysts publish about Spectaire, Spectaire’s business. Spectaire may be unable or slow to attract research coverage and if one or more analysts cease coverage of Spectaire, the price and trading volume of Spectaire’s securities would likely be negatively impacted. If any of the analysts that may cover Spectaire change their recommendation regarding Spectaire’s securities adversely, or provide more favorable relative recommendations about Spectaire’s competitors, the price of Spectaire’s securities would likely decline. If any analyst that may cover Spectaire ceases covering Spectaire or fails to regularly publish reports on Spectaire, it could lose visibility in the financial markets, which could cause the price or trading volume of Spectaire’s securities to decline. If one or more of the analysts who cover Spectaire downgrades Common Stock or if Spectaire’s reporting results do not meet their expectations, the market price of Common Stock could decline. Moreover, the market price of Common Stock may decline if Spectaire does not achieve the perceived benefits of the Business Combination as rapidly or to the extent anticipated by financial analysts, or the effect of the Business Combination on Spectaire’s financial results is not consistent with the expectations of financial analysts. Accordingly, holders of Common Stock may experience a loss as a result of a decline in the market price of such common stock. In addition, a decline in the market price of Common Stock would likely adversely affect Spectaire’s ability to issue additional securities and to obtain additional financing in the future.

 

Spectaire’s ability to timely raise capital in the future may be limited, or such capital may be unavailable on acceptable terms, if at all. Spectaire’s failure to raise capital when needed could harm its business, operating results and financial condition. Debt issued to raise additional capital may reduce the value of Common Stock.

 

Spectaire has funded its operations since inception primarily through its operations and private capital raises with existing securityholders. Spectaire cannot be certain when or if its operations will generate sufficient cash to fund its ongoing operations or the growth of its business.

 

Spectaire intends to continue to make investments to support Spectaire’s business and may require additional funds. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, Spectaire may be unable to invest in future growth opportunities, which could harm Spectaire’s business, operating results and financial condition. If Spectaire incurs debt, the debt holders could have rights senior to holders of Common Stock to make claims on Spectaire’s assets. The terms of any debt could restrict Spectaire’s operations, including its ability to pay dividends on Common Stock. As a result, Spectaire stockholders bear the risk of future issuances of debt securities reducing the value of Common Stock.

 

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The issuance of additional shares of Common Stock or convertible securities could make it difficult for another company to acquire Spectaire, may dilute your ownership of Spectaire and could adversely affect the price of Common Stock.

 

Spectaire expects to pursue financing, including issuing additional shares of Common Stock or offering debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity, or shares of preferred stock. Issuing additional shares of Common Stock, other equity securities, or securities convertible into equity may dilute the economic and voting rights of Spectaire’s existing stockholders, reduce the market price of outstanding Common Stock, or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Spectaire Preferred Stock, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit Spectaire’s ability to pay dividends to the holders of Common Stock. Spectaire’s decision to issue securities in any future offering will depend on market conditions and other factors beyond its control, which may adversely affect the amount, timing or nature of its future offerings. As a result, holders of Common Stock bear the risk that Spectaire’s future offerings may reduce the market price of Common Stock and dilute their percentage ownership. See the section entitled “Description of Securities of Spectaire.”

 

Future resales of Common Stock may cause the market price of Spectaire’s securities to drop significantly, even if Spectaire’s business is doing well.

 

Pursuant to the Lock-Up Agreement, after the consummation of the Business Combination and subject to certain exceptions, the Sponsor, certain directors and officers of PCCT and certain Legacy Spectaire stockholders will be contractually restricted from selling or transferring any of their shares of Common Stock. Such restrictions begin at Closing and end on the earlier of (i) the date that is 180 days or 365 days (depending on the relevant holder) after Closing, (ii) the closing of a merger, liquidation, stock exchange, reorganization or other similar transaction after the Closing date of the Merger that results in all of the public stockholders of Spectaire having the right to exchange their shares of Common Stock for cash securities or other property, (iii) the day after the date on which the closing price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any twenty trading days within any thirty-trading day period commencing at least 150 days after the closing date of the Merger or (iv) the liquidation of Spectaire.

 

However, following the expiration of such lockup, such parties will no longer be restricted from selling shares of Common Stock held by them, other than by applicable securities laws. As of immediately following the completion of the Business Combination such parties collectively beneficially owned approximately 69.5% of the outstanding shares of Common Stock. As restrictions on resale end and registration statements are available for use, the sale or possibility of sale of these shares could have the effect of increasing the volatility in Spectaire’s share price or the market price of Common Stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

 

Spectaire is an “emerging growth company.” The reduced public company reporting requirements applicable to emerging growth companies may make Common Stock less attractive to investors.

 

Spectaire qualifies as an “emerging growth company,” as defined in the JOBS Act. While Spectaire remains an emerging growth company, it is permitted to and plans to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These provisions include: (1) an exemption from compliance with the auditor attestation requirement in the assessment of Spectaire’s internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (2) not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, (3) reduced disclosure obligations regarding executive compensation arrangements in Spectaire’s periodic reports, registration statements, and proxy statements, and (4) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, the information Spectaire provides will be different than the information that is available with respect to other public companies that are not emerging growth companies.

 

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In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as Spectaire is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. 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.

 

Spectaire cannot predict whether investors will find Common Stock less attractive if it relies on these exemptions. If some investors find Common Stock less attractive as a result, there may be a less active trading market for Common Stock. The market price of Common Stock may be more volatile.

 

Spectaire’s management has limited experience in operating a public company.

 

Spectaire executive officers have limited experience in the management of a U.S. publicly traded company. Spectaire’s management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of Spectaire. Spectaire may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for Spectaire to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that Spectaire will be required to expand its employee base and hire additional employees to support its operations as a public company which will increase its operating costs in future periods.

 

Spectaire may be required to take write-downs or write-offs, or Spectaire may be subject to restructuring, impairment or other charges that could have a significant negative effect on Spectaire’s financial condition, results of operations and the price of Spectaire’s securities, which could cause you to lose some or all of your investment.

 

Factors outside of Spectaire’s control may, at any time, arise. As a result of these factors, Spectaire may be forced to write down or write off assets, restructure its operations, or incur impairment or other charges that could result in Spectaire reporting losses. Even though these charges may be non-cash items and therefore not have an immediate impact on Spectaire’s liquidity, the fact that Spectaire reports charges of this nature could contribute to negative market perceptions about Spectaire or its securities. In addition, charges of this nature may cause Spectaire to be unable to obtain future financing on favorable terms or at all.

 

Delaware law and Spectaire’s organizational documents contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

 

Spectaire’s organizational documents and the Delaware General Corporation Law (“DGCL”) contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of Common Stock, and therefore depress the trading price of Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Board or taking other corporate actions, including effecting changes in Spectaire’s management. Among other things, Spectaire’s organizational documents include provisions:

 

providing for a classified board of directors with staggered, three-year terms;

 

permitting the Board to issue shares of Spectaire Preferred Stock, including “blank check” preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

 

eliminating cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

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providing for the limitation of the liability of, and the indemnification of, Spectaire’s directors and officers;

 

permitting the Board to amend our bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our bylaws to facilitate an unsolicited takeover attempt; and

 

providing advance notice procedures with which stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of Spectaire.

 

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Board or management.

 

THE STANDBY EQUITY PURCHASE AGREEMENT

 

On May 17, 2024, we entered into the SEPA and the Registration Rights Agreement with Yorkville. Upon the terms and subject to the satisfaction of the conditions contained in the SEPA, we will have the right, in our sold discretion, to sell to Yorkville up to $25.0 million of shares of our Common Stock, subject to certain limitations set forth in the SEPA, from time to time. Sales of Common Stock by us to Yorkville under the SEPA, and the timing of any such sales, are solely at our option, and we are under no obligation to sell any securities to Yorkville under the SEPA. In accordance with our obligations under the Registration Rights Agreement, we have filed the registration statement that includes this prospectus with the SEC to register under the Securities Act the resale by Yorkville of up to 10,000,000 shares of Common Stock, consisting of (i) up to 9,766,356 Purchase Shares that we may, in our sole discretion, elect to sell to Yorkville, from time to time, and (ii) the 233,644 commitment shares (“Commitment Shares”) we issued to Yorkville upon our execution of the SEPA, together with our payment of the cash commitment fee to Yorkville, as consideration for its commitment to purchase shares of our Common Stock.

 

Upon the satisfaction of the conditions to Yorkville’s purchase obligation set forth in the SEPA, including having a registration statement registering the resale of the shares of Common Stock issuable under the SEPA declared effective by the SEC pursuant to the Registration Rights Agreement, the Company will have the right, but not the obligation, from time to time at its discretion until the SEPA is terminated to direct Yorkville to purchase an Advance by delivering an Advance Notice. While there is no mandatory minimum amount for any Advance, it may not exceed the greater of (i) an amount equal to 100% of the average of the daily traded amount during the five consecutive trading days immediately preceding an Advance Notice, and (ii) 500,000 shares of Common Stock.

 

The shares of Common Stock purchased pursuant to an Advance delivered by the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of common stock during the three consecutive trading days commencing on the date of the delivery of the Advance Notice, other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on the subject trading day. The Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any sales to Yorkville.

 

Under the applicable Nasdaq rules and the terms of the SEPA, in no event may we issue to Yorkville under the SEPA shares that exceed the Exchange Cap (or greater than 19.9% of the outstanding Common Stock immediately prior to the execution of the SEPA) unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid by Yorkville for all of the shares of Common Stock that we direct Yorkville to purchase from us pursuant to the SEPA, if any, equals or exceeds (a) the official closing price of our Common Stock on Nasdaq immediately preceding the execution of the SEPA and (b) the average official closing price of our Common Stock on Nasdaq for the five consecutive Trading Days immediately preceding the execution of the SEPA, adjusted as required by Nasdaq to take into account our issuance of the Commitment Shares, to Yorkville as consideration), so that the Exchange Cap limitation will not apply to issuances and sales of Common Stock pursuant to the SEPA.

 

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Moreover, we may not issue or sell any shares of Common Stock to Yorkville under the SEPA which, when aggregated with all other shares of Common Stock then beneficially owned by Yorkville and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act, would result in Yorkville beneficially owning more than 4.99% of the outstanding shares of our Common Stock).

 

The net proceeds to us from sales that we elect to make to Yorkville under the SEPA, if any, will depend on the frequency and prices at which we sell shares of our Common Stock to Yorkville. We expect that any proceeds received by us from such sales to Yorkville will be used primarily for investment in growth, debt repayment, working capital and general corporate purposes.

 

Neither we nor Yorkville may assign or transfer our respective rights and obligations under the SEPA, and no provision of the SEPA may be modified or waived by us or Yorkville, without the written consent of the other party.

 

As consideration for Yorkville’s commitment to purchase shares of Common Stock pursuant to the SEPA, upon our execution of the SEPA, we (i) issued the Commitment Shares, which have a total aggregate value equal to 0.5% of Yorkville’s $25.0 million total aggregate purchase commitment under the SEPA (each Commitment Share valued at $0.535 per share, representing the official closing price of the Common Stock on Nasdaq immediately preceding the execution of the SEPA) and (ii) agreed to pay Yorkville a cash commitment fee in the amount of $125,000, which is equal to 0.5% of Yorkville’s $25.0 million total aggregate purchase commitment under the SEPA, on the three-month anniversary of the SEPA. In addition, we paid Yorkville a structuring fee in the amount of $25,000.

 

The SEPA and the Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties and have been filed with the SEC.

 

Purchases of Common Stock Under the SEPA

 

Advance Notice

 

Pursuant to the SEPA, we will have the right, but not the obligation, from time to time at our sole discretion for a period of up to 36 months, unless the SEPA is earlier terminated, to direct Yorkville to purchase a specified number of shares of Common Stock, not to exceed the Maximum Advance Amount (as defined below), by timely delivering an Advance Notice to Yorkville by 9:00 a.m. New York City time on any Trading Day we select as the purchase date (the “Purchase Date”) for such purchase.

 

The “Maximum Advance Amount” applicable to such Advance will be equal to the greater of:

 

500,000 shares of Common Stock; and

 

an amount equal to one hundred percent (100%) of the average of the daily trading volume of the Company’s Common Stock during regular trading hours as reported by Bloomberg L.P. (“Daily Traded Amount”) during the five consecutive Trading Days immediately preceding the date of such Advance Notice.

 

The actual number of shares of Common Stock that Yorkville will be required to purchase in an Advance, which we refer to as the Advance Amount, will be equal to the number of shares that we specify in the applicable Advance Notice, subject to adjustment to the extent necessary to give effect to the applicable Maximum Advance Amount and other applicable limitations set forth in the SEPA, including the Beneficial Ownership Limitation and, if then applicable, the Exchange Cap.

 

The per share purchase price that Yorkville will be required to pay will be equal to the VWAP of our Common Stock for the applicable Pricing Period, less a fixed 3% discount to the VWAP for such Pricing Period. The “Pricing Period” for an Advance is defined in the SEPA as the three consecutive Trading Days commencing on the date of the Advance Notice.

 

In the case of an Advance Notice effected under the SEPA, if any, all share and dollar amounts used in determining the purchase price per share of Common Stock to be purchased by Yorkville in an Advance, or in determining the applicable maximum purchase share amounts or applicable volume or price amounts in connection with any such Advance, in each case, will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during any period used to calculate such per share purchase price, maximum purchase share amounts or applicable volume or price amounts.

 

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Conditions Precedent to the Right of the Company to Deliver an Advance Notice

 

Yorkville’s obligation to accept Advance Notices that are timely delivered by us under the SEPA and to purchase shares of our Common Stock in Advances under the SEPA, are subject to satisfaction of the conditions precedent thereto set forth in the SEPA, all of which are entirely outside of Yorkville’s control, which conditions include the following:

 

the accuracy in all material respects of the representations and warranties of the Company included in the SEPA as of the Advance Notice Date;

 

the Company having paid the cash commitment fee or issued the Commitment Shares to an account designated by Yorkville;

 

the registration statement that includes this prospectus (and any one or more additional registration statements filed with the SEC that include shares of Common Stock that may be issued and sold by the Company to Yorkville under the SEPA) having been declared effective under the Securities Act by the SEC, and Yorkville being able to utilize this prospectus (and the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement) to resell all of the shares of Common Stock included in this prospectus (and included in any such additional prospectuses);

 

the Company obtaining all permits and qualifications required by any applicable state for the offer and sale of all shares of Common Stock issuable pursuant to such Advance Notice, or will have the availability of exemptions therefrom;

 

the Board of Directors approving the transactions contemplated by the SEPA and Registration Rights Agreement, which approval will remain in full force;

 

there will not have occurred any event and there will not exist any condition or state of facts, which makes any statement of a material fact made in the registration statement that includes this prospectus (or in any one or more additional registration statements filed with the SEC that include shares of Common Stock that may be issued and sold by the Company to Yorkville under the SEPA) untrue or which requires the making of any additions to or changes to the statements contained therein in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of this prospectus or the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement, in the light of the circumstances under which they were made) not misleading;

 

the Company performing, satisfying and complying in all material respects with all covenants, agreements and conditions required by the SEPA;

 

the absence of any statute, regulation, order, decree, writ, ruling or injunction by any court or governmental authority of competent jurisdiction which prohibits the consummation of or that would materially modify or delay any of the transactions contemplated by the SEPA or the Registration Rights Agreement;

 

trading in the Common Stock will not have been suspended by the SEC, Nasdaq or FINRA, the Company will not have received any final and non-appealable notice that the listing or quotation of the Common Stock on Nasdaq will be terminated on a date certain (unless, prior to such date, the Common Stock is listed or quoted on any other Principal Market, as such term is defined in the SEPA), and there will be no suspension of, or restriction on, accepting additional deposits of the Common Stock, electronic trading or book-entry services by The Depository Trust Company with respect to the Common Stock;

 

the Company will have authorized all of the shares of Common Stock issuable pursuant to the applicable Advance Notice by all necessary corporate action of the Company; and

 

the accuracy in all material respects of the representations and warranties of the Company included in the applicable Advance Notice as of the applicable Advance Notice Date.

 

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Termination of the SEPA

 

Unless earlier terminated as provided in the SEPA, the SEPA will terminate automatically on the earliest to occur of:

 

the 36-month anniversary of the Effective Date; or

 

the date on which Yorkville will have purchased shares of Common Stock under the SEPA for an aggregate gross purchase price equal to $25.0 million.

 

We have the right to terminate the SEPA at any time after the Effective Date, at no cost or penalty, upon five Trading Days’ prior written notice to Yorkville; provided that (i) there are no outstanding Advance Notices under which shares of Common Stock have yet to be issued and (ii) the Company has paid all amounts owed to Yorkville pursuant to the SEPA. We and Yorkville may also terminate the SEPA at any time by mutual written consent.

 

No Short-Selling or Hedging by Yorkville

 

Yorkville has agreed that none of Yorkville, its sole member, any of their respective officers, or any entity managed or controlled by Yorkville or its sole member will engage in or effect, directly or indirectly, for its own account or for the account of any other of such persons or entities, any short sales of the Common Stock or hedging transaction that establishes a net short position in the Common Stock during the term of the SEPA.

 

Prohibition on Dilutive Issuances and Similar Transactions

 

There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the SEPA or Registration Rights Agreement, other than a prohibition on repaying any loans to any executives or employees of the Company or payments in respect of any related party debt, and a prohibition on effecting or entering into an agreement to effect an “equity line of credit” or other substantially similar continuous offering with a third party, in which we may offer, issue or sell Common Stock or any securities exercisable, exchangeable or convertible into Common Stock at a future determined price.

 

Effect of Sales of our Common Stock under the SEPA on our Stockholders

 

The Commitment Shares that we issued, and the Purchase Shares to be issued or sold by us, to Yorkville under the SEPA that are being registered under the Securities Act for resale by Yorkville in this offering are expected to be freely tradable. The resale by Yorkville of a significant amount of shares registered for resale in this offering at any given time, or the perception that these sales may occur, could cause the market price of our Common Stock to decline and to be highly volatile. Sales of our Common Stock, if any, to Yorkville under the SEPA will depend upon market conditions and other factors to be determined by us.

 

If and when we do sell shares of our Common Stock to Yorkville pursuant to the SEPA, after Yorkville has acquired such shares, Yorkville may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from Yorkville in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution, and in some cases substantial dilution, and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from Yorkville in this offering as a result of future sales made by us to Yorkville at prices lower than the prices such investors paid for their shares in this offering. In addition, if we sell a substantial number of shares of our Common Stock to Yorkville under the SEPA, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with Yorkville may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.

 

Because the per share purchase price that Yorkville will pay for Purchase Shares in any Advance that we may elect to effect pursuant to the SEPA will be determined by reference to the VWAP during the applicable Pricing Period on the applicable Purchase Date for such Advance, as of the date of this prospectus, it is not possible for us to predict the number of shares of Common Stock that we will sell to Yorkville under the SEPA, the actual purchase price per share to be paid by Yorkville for those shares, or the actual gross proceeds to be raised by us from those sales, if any.

 

As of June 3, 2024, there were 18,547,201 shares of our Common Stock outstanding. If all of the 10,000,000 shares offered for resale by Yorkville under this prospectus were issued and outstanding, such shares would represent approximately 35.0% of the total number of outstanding shares of Common Stock and approximately 61.7% of the total number of outstanding shares of Common Stock held by non-affiliates of our company, in each case as of June 3, 2024.

 

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Although the SEPA provides that we may sell up to $25.0 million of our Common Stock to Yorkville, only 10,000,000 shares (which includes the 233,644 Commitment Shares, for which we have not and will not receive any cash consideration) are being registered under the Securities Act for resale by Yorkville under the registration statement that includes this prospectus. If we were to issue and sell all of such 10,000,000 shares to Yorkville at an assumed purchase price per share of $0.350 (without taking into account the 19.99% Exchange Cap limitation), representing the closing sale price of our Common Stock on Nasdaq on June 3, 2024, we would only receive approximately $3.5 million35 in aggregate gross proceeds from the sale of such Purchase Shares to Yorkville under the SEPA. Depending on the market prices of our Common Stock on the Purchase Dates on which we elect to sell such Purchase Shares to Yorkville under the SEPA, we may need to register under the Securities Act additional shares of our Common Stock for resale by Yorkville in order for us to receive aggregate proceeds equal to Yorkville’s $25.0 million maximum aggregate purchase commitment available to us under the SEPA.

 

If we elect to issue and sell to Yorkville more Common Stock than the amount being registered, we must file with the SEC one or more additional registration statements to register such additional shares, which the SEC must declare effective, in each case before we may elect to sell any additional shares to Yorkville.

 

The issuance of our Common Stock to Yorkville pursuant to the SEPA will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted. Although the number of shares of our Common Stock that our existing stockholders own will not decrease, the shares of our Common Stock owned by our existing stockholders will represent a smaller percentage of our total outstanding shares of our Common Stock after any such issuance.

 

The following table sets forth the amount of gross proceeds we would receive from Yorkville from our sale of shares of Common Stock to Yorkville under the SEPA at varying purchase prices and subject to the limitation of the number of shares being registered at this time:

 

 

Assumed Average Purchase Price Per Share

   Number of
Registered Shares
to be Issued if
Full Purchase(1)
   Percentage of
Outstanding Shares
After Giving Effect
to the Issuance to
Yorkville(2)
   Gross Proceeds
from the Sale of
Shares to
Yorkville
Under the SEPA
 
$0.350(3)   10,000,000    35.0%  $3,500,000.00 
$1.00    10,000,000    35.0%  $10,000,000.00 
$2.00    10,000,000    35.0%  $20,000,000.00 
$2.50    10,000,000    35.0%  $25,000,000.00 

 

 

(1)Including the 233,644 Commitment Shares that we issued to Yorkville. Although the SEPA provides that we may sell up to $25,000,000 of our Common Stock to Yorkville, we are only registering 10,000,000 shares under the registration statement that includes this prospectus, which may or may not cover all of the shares we ultimately sell to Yorkville under the SEPA. The number of shares to be issued as set forth in this column is without regard to the Exchange Cap or Beneficial Ownership Limitation, but is limited to the actual number of shares being registered at this time.

 

(2)The denominator is based on 18,547,201 shares of Common Stock outstanding as of June 3, 2024 (which, for these purposes, includes the 233,644 Commitment Shares we issued to Yorkville), adjusted to include the issuance of the number of shares set forth in the adjacent column that we would have sold to Yorkville, assuming the average purchase price in the first column. The numerator is based on the number of shares issuable under the SEPA at the corresponding assumed average purchase price set forth in the first column.

 

(3)The closing sale price of our Common Stock on Nasdaq on June 3, 2024.

 

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USE OF PROCEEDS

 

Any sales of Common Stock by Yorkville pursuant to this prospectus will be solely for Yorkville’s accounts. The Company will not receive any proceeds from any such sales.

 

We may receive up to $25.0 million aggregate gross proceeds under the SEPA from any sales we make to Yorkville pursuant to the SEPA. The net proceeds from sales, if any, under the SEPA, will depend on the frequency and prices at which we sell our Common Stock to Yorkville after the date of this prospectus. See the section titled “Plan of Distribution” in this prospectus for more information.

 

We expect to use any proceeds that we receive under the SEPA primarily for investment in growth, debt repayment, working capital and general corporate purposes. As of the date of this prospectus, we cannot specify with certainty all of the particular uses, and the respective amounts we may allocate to those uses, for any net proceeds we receive. Accordingly, we will retain broad discretion over the use of these proceeds.

 

The Selling Stockholder will pay any underwriting discounts, selling commissions and stock transfer taxes and fees incurred by the Selling Stockholder in connection with any sale of their shares of Common Stock. The Company will generally bear all other costs, fees and expenses incurred in effecting the registration of the shares of Common Stock covered by this prospectus, including, without limitation, all registration and filing fees, Nasdaq listing fees and fees and expenses of Company counsel and independent registered public accountants.

 

DETERMINATION OF OFFERING PRICE

 

We cannot currently determine the price or prices at which shares of Common Stock may be sold by the Selling Stockholder under this prospectus.

 

DIVIDEND POLICY

 

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and growth of the business, and therefore, do not anticipate declaring or paying any cash dividends on our Common Stock in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors (our “Board”) after considering our business prospects, results of operations, financial condition, cash requirements and availability, debt repayment obligations, capital expenditure needs, contractual restrictions, covenants in the agreements governing current and future indebtedness, industry trends, the provisions of Delaware law affecting the payment of dividends and distributions to stockholders and any other factors or considerations the Board deems relevant.

 

MARKET INFORMATION

 

Our Common Stock and Warrants are listed on Nasdaq under the symbols “SPEC” and “SPECW,” respectively. Prior to the consummation of the Business Combination, the Common Stock, units and warrants were listed on Nasdaq under the symbols “PCCT,” “PCCTU” and “PCCTW,” respectively. As of June 3, 2024, there were 31 holders of record of our Common Stock and two holders of record of our Warrants. The actual number of stockholders of our Common Stock and the actual number of holders of our Warrants is greater than the number of record holders and includes holders of our Common Stock or Warrants whose shares of Common Stock or Warrants are held in street name by brokers and other nominees.

 

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KEY TRANSACTIONS

 

Business Combination

 

On January 16, 2023, PCCT entered into that certain Agreement and Plan of Merger, dated as of January 16, 2023 (the “Merger Agreement”), with Perception Spectaire Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of PCCT (the “merger subsidiary”), and Legacy Spectaire, pursuant to which, on October 19, 2023, the merger subsidiary merged with and into Legacy Spectaire, with Legacy Spectaire surviving the merger as a wholly owned subsidiary of the Company (together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the consummation of the Business Combination, the Company changed its name from “Perception Capital Corp. II” to “Spectaire Holdings Inc.”

 

During the five-year period following the closing of the Business Combination (the “Earnout Period”), the Company will issue up to 7,500,000 shares of Common Stock in three equal tranches to certain Legacy Spectaire equityholders upon the occurrence of the following triggering events:

 

if the volume-weighted average closing sale price is greater than or equal to $15.00, a one-time issuance of 2,500,000 Spectaire Earnout Shares; and

 

if the volume-weighted average closing sale price is greater than or equal to $20.00, a one-time issuance of 2,500,000 Spectaire Earnout Shares; and

 

if the volume-weighted average closing sale price is greater than or equal to $25.00, a one-time issuance of 2,500,000 Spectaire Earnout Shares.

 

Acquisition of MicroMS

 

Prior to the Business Combinations, on December 13, 2022, Legacy Spectaire engaged in a group corporate reorganization in which the owners of MicroMS, Inc. (“MicroMS”) contributed their equity interests in MicroMS to Legacy Spectaire in exchange for equity in Legacy Spectaire. As part of this reorganization, the ownership of MicroMS was transferred to Legacy Spectaire.

 

MIT License Agreement

 

Spectaire is party to that certain Exclusive Patent License Agreement, dated as of September 1, 2018, by and between MIT and microMS, as modified by that certain Common Stock Issuance Agreement, dated as of January 10, 2023, by and between MIT and Spectaire (the “MIT License Agreement”). Pursuant to the terms of the MIT License Agreement, MIT grants an exclusive license to Spectaire to incorporate certain intellectual property into its products, and Spectaire agreed to issue shares of Spectaire common stock to MIT upon the occurrence of certain triggering events. Spectaire satisfied all obligations to issue shares of Spectaire common stock to MIT pursuant to the MIT License Agreement prior to the consummation of the Business Combination.

 

Joint Venture

 

On December 22, 2023, the Company entered into a joint venture agreement (the “Joint Venture”) with MLab Capital GmbH (“MLab”) and Spectaire Europe GmbH (“JVC”), a wholly owned subsidiary of MLab and Dr. Jörg Mosolf, an affiliate of a director of the Company. Under the Joint Venture, JVC is responsible for the marketing, sale and manufacture of the Company’s AirCore technology in Europe, the Middle East and South America. In accordance with the Joint Venture, the Company will grant JVC an exclusive, non-sublicensable license to conduct such activities upon closing. In consideration for the rights granted by the Company to JVC, JVC agreed to pay to the Company an amount of $1.5 million. Pursuant to the Joint Venture’s payment schedule, JVC has paid the Company $500,000 as of December 31, 2023. The remaining $1.0 million in payments to the Company are contingent upon a third party’s approval of the AirCore technology’s effectiveness and the delivery of units specified thereunder.

 

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Corsario Agreement

 

Spectaire was party to that certain Contract for Services, dated as of August 1, 2022 (the “Corsario Agreement”), by and between Spectaire and Corsario Ltd., a Limited corporation with offices in Mississauga Ontario that is wholly owned by Brian Semkiw (“Corsario”), pursuant to which Spectaire engaged Corsario as a contractor for certain administrative and other services. Pursuant to the Corsario Agreement, Corsario’s employees, including Brian Semkiw, Rui Mendes and Chris Grossman, provided any and all services required by Spectaire on a full-time basis in exchange for the payment by Spectaire of a monthly rate, plus certain housing and technology expenses, totaling, in the aggregate, approximately $122,500 per month. The Corsario Agreement was on a month-by-month basis until terminated by Spectaire. Under the terms of the Corsario Agreement, any intellectual property developed by Corsario or its employees during the term of the Corsario Agreement is the exclusive property of Spectaire.  The Corsario Agreement was terminated on May 31, 2024.

 

Yorkville Standby Equity Purchase Agreement (SEPA)

 

On May 17, 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with Yorkville pursuant to which the Company has the right to sell to Yorkville up to $25.0 million of its shares of Common Stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. Sales of shares of Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of Common Stock to Yorkville under the SEPA. While there is no mandatory minimum amount, the Company may not sell at any time the greater of (i) an amount equal to 100% of the average of the daily traded amount during the five consecutive trading days immediately preceding a sale notice, and (ii) 500,000 shares of Common Stock. The shares of Common Stock delivered by the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of Common Stock during the three consecutive trading days commencing on the date of the delivery of the sale notice, other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the notice or there is no VWAP on the subject trading day. The Company may establish a minimum acceptable price in each notice below which the Company will not be obligated to make any sales to Yorkville. The net proceeds to the Company will depend on the frequency and prices at which the Company sells Common Stock to Yorkville.

 

Under applicable Nasdaq rules, in no event may the Company issue to Yorkville under the SEPA shares equal to greater than 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the SEPA (the “Exchange Cap”), unless (i) the Company obtains stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid by Yorkville for all of the shares of Common Stock that the Company directs Yorkville to purchase from the Company pursuant to the SEPA, if any, equals or exceeds the lower of (a) the official closing price of the Common Stock on Nasdaq immediately preceding the execution of the SEPA and (b) the average official closing price of the Common Stock on Nasdaq for the five consecutive trading days immediately preceding the execution of the SEPA, adjusted as required by Nasdaq so that the Exchange Cap limitation will not apply to issuances and sales of Common Stock pursuant to the SEPA. In addition, the Company may not issue or sell any shares of Common Stock to Yorkville under the SEPA which, when aggregated with all other shares of Common Stock then beneficially owned by Yorkville and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act, and Rule 13d-3 thereunder), would result in Yorkville beneficially owning more than 4.99% of the outstanding shares of Common Stock.

 

The SEPA will automatically terminate on the earliest to occur of (i) the 36-month anniversary of the date of the SEPA or (ii) the date on which it has been fully performed. The Company has the right to terminate the SEPA at no cost or penalty upon five (5) trading days’ prior written notice to Yorkville, provided that there are no outstanding notices for which shares of common stock need to be issued. The Company and Yorkville may also agree to terminate the SEPA by mutual written consent.

 

PIPE Financing

 

On October 11, 2023, the Company entered into a private placement subscription agreement (the “PIPE Subscription Agreement”) with Dr. Jörg Mosolf (the “PIPE Investor”), pursuant to which the PIPE Investor agreed to subscribe for newly issued shares of Common Stock (the “PIPE Shares”), with an aggregate purchase price of up to $3,500,000. On October 19, 2023, concurrently with the closing of the Business Combination, the PIPE Investor closed on the purchase of 50,000 PIPE Shares at a price of $10.00 per share, for an aggregate purchase price of $500,000 (the “PIPE Investment”). Pursuant to the PIPE Subscription Agreement, within two years following the Closing, the PIPE Investor may purchase additional PIPE Shares in one or multiple subsequent closings for a purchase price per share of $10.00 for an aggregate purchase price of $3,000,000 (the “Additional Investments”). The purchase and sale of the PIPE Shares pursuant to the Additional Investments is conditioned on typical conditions for transactions of this type. The PIPE Shares issued and sold in the PIPE Investment and to be issued and sold in the Additional Investments, in any, pursuant to the PIPE Subscription Agreement have not been and will not be registered under the Securities Act and have been and will be issued in reliance on an exemption from such registration.

 

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2024 Private Placement

 

On March 18, 2024, the Company entered into a subscription agreement with an investor for the sale and issuance by the Company of (i) an aggregate of 1,538,461 shares of the Company’s common stock and (ii) an accompanying warrant to purchase up to 1,538,461 shares of common stock at an exercise price of $1.30 per share, for aggregate gross proceeds of approximately $2.0 million, before deducting related expenses. The warrant is immediately exercisable, may be exercised at any time until March 18, 2027, and would result in proceeds of approximately $2.0 million if exercised for cash. $2,000,000 has been received under this agreement and reported as investor deposit; however, there no shares have yet been issued under this agreement. These securities will be issued pursuant to Section 4(a)(2) of the Securities Act.

 

Arosa Loan

 

On March 31, 2023, Legacy Spectaire, as borrower, entered into the Arosa Loan Agreement with Arosa Multi-Strategy Fund LP (“Arosa”), as lender, providing for a term loan (the “Arosa Loan”) in a principal amount not to exceed $6.5 million (the “Loan Agreement”). On October 13, 2023, the Company requested an additional advance in the aggregate principal amount of $650,000 (the “Additional Advance”) under the Arosa Loan Agreement. The Additional Advance together with the original loan amount results in an aggregate outstanding principal amount under the Loan of $7,150,000.

 

Legacy Spectaire, its subsidiaries, and Arosa also entered into a Guarantee and Collateral Agreement providing that Legacy Spectaire’s obligations to Arosa are secured by substantially all of Legacy Spectaire’s assets and all of Legacy Spectaire’s stockholders entered into a pledge agreement with Arosa pursuant to which such stockholders pledged all of their equity interests in Spectaire to Arosa as collateral under the Arosa Loan, which obligations continue to apply following the Business Combination.

 

In connection with the Business Combination, Spectaire issued to Arosa a warrant to purchase 2,194,453 shares of Common Stock, subject to adjustment as described therein (the “Arosa Warrant”), and cancelled an existing warrant issued by Legacy Spectaire to Arosa. The shares of Common Stock underlying the Arosa Warrant represent approximately 11.8% of the number of shares of Common Stock outstanding on a fully diluted basis.

 

Pursuant to the Arosa Loan Agreement, Spectaire is obligated to pay certain expenses incurred by Arosa relating to the Arosa Loan, during the continuance of an event of default under the Arosa Loan Agreement, all outstanding obligations under the Loan Agreement bear interest at a rate per annum that is 5.0% greater than the rate that would otherwise be applicable, and while the Arosa Loan remains outstanding, Arosa will, subject to certain limitations, have the right to participate in any capital raise by Spectaire or any of its subsidiaries consummated on or prior to the Maturity Date.

 

Following the payment of additional interest of $500,000, the parties agreed to an extension whereby the Arosa Loan has a maturity date of June 1, 2024 (the “Maturity Date”) and bears interest at a rate of 20%. The Arosa Loan is currently due upon demand, however, the parties are in the process of finalizing an additional extension to the Maturity Date.

 

Sponsor Transactions

 

Sponsor Promissory Notes

 

Working Capital Note. On January 10, 2023, PCCT issued to the Sponsor a Working Capital Note, effective as of December 7, 2022, pursuant to which the Sponsor agreed to provide PCCT up to an aggregate of $2,500,000 in loans for working capital purposes (the “Working Capital Note”). On October 17, 2023 and on April 14, 2024, PCCT and the Sponsor amended and restated the Working Capital Note, resulting in, among other things, the Working Capital Note having a maturity date of April 14, 2025.

 

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Extension Note. On October 31, 2022, in connection with PCCT seeking an extension of the business combination deadline, PCCT issued to the Sponsor an Extension Note in the aggregate principal amount of up to $720,000 (the “Extension Note”). On April 10, 2023, the Extension Note was amended and restated to, among other things, increase the aggregate principal amount available thereunder from $720,000 to $1,200,000 (the “A&R Extension Note”). Pursuant to the Extension Note, as amended, the Sponsor agreed that it would continue to contribute to the Trust Account $0.04 for each outstanding public share each month (or pro rata portion thereof if less than a month) until the earlier of (i) the date of the meeting held in connection with the stockholder vote to approve an initial business combination and (ii) the Sponsor having made aggregate Contributions of $1,200,000. On October 17, 2023, PCCT and the Sponsor amended and restated the A&R Extension Note (the “Second A&R Extension Note”) resulting in, among other things, (A) a maturity date that is one year following the consummation of an initial business combination, and (B) provisions that allow the Company to convert up to $1,200,000 of the unpaid principal amount into a number of shares of Common Stock calculated based on a 10-day volume weighted average price of the Common Stock over a period ending on the day the Company provides the Sponsor notice of such conversion.

 

Sponsor Shares

 

On January 25, 2021, the Sponsor paid an aggregate of $25,000 to cover certain expenses on behalf of PCCT in exchange for the issuance of 7,187,500 PCCT Class B Ordinary Shares. In August 2021, the Sponsor surrendered 1,437,500 PCCT Class B Ordinary Shares for no consideration, resulting in an aggregate of 5,750,000 PCCT Class B Ordinary Shares outstanding (the “Founder Shares”). The Sponsor has agreed that, subject to certain limited exceptions, the Founder Shares will not be transferred, assigned, sold or released from escrow until the earlier of (a) one year after the completion of a business combination or (b) (i) if last reported sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and other similar transactions) for any 20 trading days within any 30-trading day period commencing at least 150 days after a business combination, or (ii) the date on which the Company completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of public stockholders having the right to exchange their Common Stock for cash, securities or other property.

 

Sponsor Private Placement Warrants

 

Simultaneously with the closing of the PCCT IPO, PCCT consummated the sale of 10,050,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant (the “Private Placement Warrants”) in a private placement to the Sponsor, generating gross proceeds of $10,050,000. Each Private Placement Warrant is exercisable to purchase one share of Common Stock at a price of $11.50 per share.

 

Legacy Spectaire Transactions

 

Legacy Spectaire Convertible Promissory Notes

 

Prior to the consummation of the Business Combination, Legacy Spectaire issued convertible promissory notes in a combined aggregate principal amount of approximately $2.0 million, including to related persons and their affiliated entities. In connection with the consummation of the Business Combination, each holder of outstanding convertible promissory notes converted the aggregate outstanding amounts under their respective convertible promissory notes, including all outstanding principal and interest accrued thereon at the time of the conversion, into shares of Common Stock. The following table summarizes issuances of Legacy Spectaire convertible notes to related persons and their affiliated entities.

 

 

Name

  Aggregate
Principal
Amount
($)
 
True Remainders LLC(1)   682,480 
MLab Capital GmbH(2)   725,000 
David Jackson   500,000 
Total   1,907,480 

 

 

(1)As of immediately prior to the consummation of the Business Combination, True Remainders LLC held more than 5% of Legacy Spectaire’s outstanding capital stock on a fully diluted basis.

 

(2)Jörg Mosolf is a member of the Board and is affiliated with MLab Capital GmbH. As of immediately prior to the consummation of the Business Combination, Mr. Mosolf held more than 5% of Legacy Spectaire’s outstanding capital stock on a fully diluted basis.

 

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Legacy Spectaire Seed Preferred Stock Financing

 

In November 2022, Legacy Spectaire issued an aggregate of 5,100,000 shares of Legacy Spectaire Series Seed preferred stock for an aggregate purchase price of $455,359. The following table summarizes purchases of shares of Legacy Spectaire Series Seed preferred stock by related persons and their affiliated entities.

 

Name  Shares of
Series Seed
Preferred
Stock
   Aggregate
Principal
Amount
($)
 
Gregory Hancke   200,000    17,857 
True Remainders LLC(1)   2,100,000    187,501 
MLab Caital GmbH(2)   2,800,000    250,001 
Total   5,100,000    455,359 

 

 

(1)As of immediately prior to the consummation of the Business Combination, True Remainders LLC held more than 5% of Legacy Spectaire’s outstanding capital stock on a fully diluted basis.

 

(2)Jörg Mosolf is a member of the Board and is affiliated with MLab Capital GmbH. As of immediately prior to the consummation of the Business Combination, Mr. Mosolf held more than 5% of Legacy Spectaire’s outstanding capital stock on a fully diluted basis.

 

Registration Rights

 

In connection with the Business Combination, PCCT, the Sponsor, and certain of PCCT’s directors and officers and Legacy Spectaire stockholders entered into an Amended and Restated Registration Rights Agreement, pursuant to which the Company agreed to register for resale certain shares of Common Stock and other equity securities of the Company that are held by the parties thereto from time to time and all of such shares are currently registered.

 

Polar Financing

 

Polar Subscription Agreement

 

On October 4, 2023, PCCT entered into a subscription agreement with Polar Multi-Strategy Master Fund (“Polar”) to cover working capital requirements of PCCT prior to the consummation of the Business Combination (the “Polar Subscription Agreement”). Pursuant to the terms and subject to the conditions of the Polar Subscription Agreement, Polar agreed to contribute up to $650,000 (the “Capital Contribution”). In consideration for the Capital Contribution, PCCT agreed to issue 0.9 shares of Common Stock for each dollar of the Capital Contribution. Accordingly, at the closing of the Business Combination, the Company issued 585,000 shares of Common Stock to Polar. Upon certain events of default under the Polar Subscription Agreement, Polar would receive 0.1 shares of Common Stock (“Default Shares”) for each dollar of the Capital Contribution funded as of the date of such default, and for each month thereafter until such default is cured, subject to certain limitations provided for therein. In connection with the Polar Subscription Agreement, the Sponsor delivered to PCCT a letter agreement to facilitate PCCT’s fundraising efforts (the “Sponsor Letter Agreement”). Pursuant to the Sponsor Letter Agreement, the Sponsor agreed to forfeit for cancellation (i) 585,000 Class B Ordinary Shares concurrently with the closing of the Business Combination and (ii) following the closing of the Business Combination, the number of shares of Common Stock equal to the number of Default Shares, if any, issued by the Company to Polar in accordance with the Subscription Agreement. Subsequent to the closing of the Business Combination, Polar and the Company agreed to amend and restate the subscription agreement (the “Amended and Restated Polar Subscription Agreement”) to provide for, among other things, the delayed repayment of the remainder of the Capital Contribution, and in consideration of the delay in the repayment of the Capital Contribution, the Company agreed to issue 42,937 shares of Common Stock to Polar each month until the date on which the Company has repaid Polar the Capital Contribution, which shares constitute the shares forfeit by the Sponsor.

 

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Polar Forward Purchase Agreement

 

On October 16, 2023, PCCT and Polar entered into an agreement, which was subsequently amended on October 26, 2023 (as amended, the “Polar Forward Purchase Agreement”) for an OTC Equity Prepaid Forward Transaction. Pursuant to the terms of the Polar Forward Purchase Agreement, Polar purchased 206,000 PCCT Class A Ordinary Shares from holders (other than PCCT or its affiliates) who elected to redeem such shares in connection with the Business Combination. Purchases by Polar were made through brokers in the open market after the redemption deadline in connection with the Business Combination at a price no higher than the redemption price to be paid by PCCT in connection with the Business Combination (the “Polar Initial Price”). The shares purchased by Polar, other than the Share Consideration Shares (as defined below) are referred to herein as the “Polar Recycled Shares.”

 

Pursuant to the Polar Forward Purchase Agreement, in connection with the closing of the Business Combination, the Company transferred to an account designated by Polar a cash amount (the “Polar Prepayment Amount”) equal to the product of the number of Polar Recycled Shares and the Polar Initial Price, less an amount equal to 1% of the product of the number of Polar Recycled Shares and the Polar Initial Price (the “Polar Shortfall Amount”). In addition to the Polar Prepayment Amount, the Company paid Polar an amount equal to the product of 45,000 PCCT Class A Ordinary Shares (the “Share Consideration Shares”) and the Polar Initial Price. Polar agreed to waive any redemption rights in connection with the Business Combination with respect to the Polar Recycled Shares.

 

From time to time following the closing of the Business Combination and prior to the earliest to occur of (a) the first anniversary of the closing of the Business Combination (or, upon the mutual agreement of the Company and Polar, eighteen (18) months following the closing of the Business Combination) and (b) the date specified by Polar in a notice to be delivered to the Company at Polar’s discretion after the occurrence of a Seller Price Trigger Event, a Delisting Event or a Registration Failure (each as defined in the Polar Forward Purchase Agreement) (in each case, the “Polar Maturity Date”), Polar may, in its sole discretion, sell some or all of the Polar Recycled Shares. On the last trading day of each calendar month following the Business Combination, in the event that Polar has sold any Polar Recycled Shares (other than sales to recover the Polar Shortfall Amount), the Company will be entitled to an amount equal to the product of the number of Polar Recycled Shares sold multiplied by the Polar Reset Price and Polar will be entitled to an amount equal to the excess of the Polar Initial Price over the Polar Reset Price for each sold Polar Recycled Share. The “Reset Price” will be set on the first scheduled trading day of each month, commencing with the first calendar month following the closing of the Business Combination, to be the lowest of the (b) Polar Initial Price and (c) volume weighted average price of the Common Stock during the last ten (10) trading days during the prior calendar month, but not lower than $7.50; provided that to the extent that the Company offers and sells any Common Stock or securities convertible into Common Stock at a price lower than the existing Polar Reset Price, the Polar Reset Price will be modified to equal such reduced price.

 

At the Polar Maturity Date, Polar will transfer the Polar Recycled Shares that are still held by Polar (the “Polar Matured Shares”) to the Company. Additionally, at the Polar Maturity Date, the Company will pay to Polar an amount equal to $1.25 (or $1.75, if the Polar Maturity Date has been extended by the mutual agreement of the Company and Polar) for each Polar Matured Share, which may be paid in cash or in shares of Common Stock at the 10-day volume weighted average price of the Common Stock.

 

A break-up fee equal to (i) up to $50,000 of Polar’s reasonable and documented fees and expenses relating to the Polar Forward Purchase Agreement plus (ii) $250,000 (the “Polar Break-up Fee”), is payable by the Company to Polar in the event that, prior to the Polar Maturity Date, (x) the Polar Forward Purchase Agreement is terminated by the Company or (y) the Common Stock ceases to be listed on a national securities exchange or a Form 25 is filed with the SEC.

 

Keystone Equity Line of Credit

 

On November 17, 2023, the Company entered into a common stock purchase agreement (the “Keystone Purchase Agreement”) with Keystone Capital Partners, LLC, a Delaware limited liability company establishing a committed equity facility, including up to 300,000 shares of Common Stock that were issuable to Keystone upon the conversion of that certain convertible promissory note, dated as of November 17, 2023, issued by the Company to Keystone in connection with the execution of the Keystone Purchase Agreement. Under the Keystone Purchase Agreement, subject to certain pricing, volume, and ownership limitations, the Company had the right, but not the obligation, to sell to Keystone, and Keystone was obligated to purchase, up to the lesser of (i) an aggregate of $20 million of newly issued shares of Common Stock and (ii) the 19.9% exchange cap as defined in the Keystone Purchase Agreement. The Company sold 3,067,438 shares under the Keystone Purchase Agreement, representing the maximum amount permitted, taking into account the pricing and volume limitations, and has registered such shares for resale. The Company has provided notice of termination to Keystone and does not anticipate any further sales pursuant to the Keystone Purchase Agreement.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

 

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our unaudited condensed consolidated financial statements for the three months ended March 31, 2024 and 2023, our audited financial statements as of and for the years ended December 31, 2023 and 2022, and other information included herein. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included herein. Additionally, our historical results are not necessarily indicative of the results that may be expected in any future period. Amounts are presented in U.S. dollars.

 

Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Spectaire,” “we”, “us”, “our”, and the “Company” are intended to refer to (i) following the Business Combination (as defined below), the business and operations of Spectaire Holdings Inc. (formerly Spectaire Inc.) and its consolidated subsidiaries (“Spectaire”), and (ii) prior to the Business Combination, Spectaire (the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiary.

 

Company Overview

 

Spectaire is an industrial technology company whose core offering, AireCore, allows its customers to measure, manage, and potentially reduce carbon dioxide equivalent (CO2e) and other greenhouse gas emissions. AireCore is a fully integrated hardware, software, and data platform designed primarily for logistics and supply chain operators that uses mass spectrometry to directly measure and report emissions in real time. Companies currently face a “technology gap” between increasing requirements with respect to reporting and reducing emissions and lack of available technology to accurately measure and manage such emissions, which creates a no-win scenario. Spectaire’s asset-light, reasonably priced solution delivers a win-win-win for Spectaire, for its customers, and for the environment.

 

The research and development for AireCore’s mass spectrometry technology began more than 15 years ago at MIT, led by Spectaire’s Chief Technology Officer, Dr. Brian Hemond, and co-founder, Professor Ian Hunter. AireCore is protected by a robust patent portfolio and a lengthy research and development process. MIT has granted Spectaire an exclusive license for all of the intellectual property owned by MIT that underlies the AireCore and is a minority stockholder in Spectaire.

 

Companies are coming under increasing pressure from governments, customers, and the public to account for and reduce their emissions. We believe that, prior to our introduction of AireCore, there was no practical way to directly measure real-time transportation emissions. Instead of directly measuring their emissions, our potential customers currently estimate their emissions using emissions estimation calculators for transport and logistics that estimate based on fuel consumption, mileage, and vehicle weight. These estimates cannot accommodate the minute-to-minute, mile-to-mile variations that often drive significant differences between these estimates and actual emissions. As a result, these estimates have come under criticism for being inaccurate, simplistic, and - until now - impossible to verify. A pilot study conducted with our anchor customer, Mosolf, found that Mosolf’s emissions estimate calculated using CSN EN 16258, a publicly available and widely used emissions estimation standard, overstated its actual emissions by approximately 60%.

 

Spectaire’s AireCore patented micro mass spectrometer (MMS) solves this problem. Unlike conventional mass spectrometers, which typically have significant cost, size, power, and environmental requirements, AireCore uses a proprietary miniaturized and ruggedized analyzer, combined with solid state pump technology, to address mobile operation in harsh environments.

 

AireCore is cloud-connected through mobile phone networks, enabling a continuous feed of emissions data. AireCore core software can also be upgraded over-the-air (OTA) smartphone-style, enabling a continuous roll-out of features and improvements.

 

We believe that AireCore is the world’s first and only device capable of addressing the technology gap between emissions requirements and emissions management technology by delivering real-time, accurate, and verifiable emissions measurements.

 

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Financing Requirements

 

As an early-stage company bringing new technology to market, we have yet to generate meaningful revenue from our business operations and have funded capital expenditures and working capital requirements through debt and equity financing. The further development of our products and expansion of our business will require a significant amount of cash. Our ability to successfully grow will depend on many factors, including our working capital needs, the availability of debt or equity financing and, over time, our ability to generate positive cash flows from operations. We anticipate incurring net losses for the foreseeable future and continuing to depend on debt and equity financing in the near term.

 

The period between initial discussions with a potential customer and the sale of our products typically depends on a number of factors, including the potential customer’s attitude towards innovative products and the potential customer’s budget. Prospective customers often undertake a significant evaluation process, which may further extend the sales cycle. While customers are evaluating our products, we may incur substantial sales, marketing, and research and development expenses in exploring and demonstrating the suitability of our products to a customer’s needs. This lengthy sales cycle is subject to a number of significant risks over which we have little or no control.

 

Spectaire’s Business Model

 

Our business model is based on asset-light production and focuses on three high-margin revenue streams through our AireCoreTM MMS product line.

 

Product sales. We intend to sell the AireCoreTM MMS directly to customers, with a target of approximately 30% gross margin on a unit basis.

 

Data subscription and services. The AireCoreTM MMS requires an annual data subscription to operate. The data subscription grants access to applications, reporting capabilities, and secure cloud connectivity. We target an approximate 65% gross margin on data subscriptions.

 

Carbon credits. We will receive a 50% share of carbon credits. Carbon credits pricing will vary depending on the market, certification, and quality, but we would anticipate recognizing 100% gross margin on our share. We believe that carbon credits require negligible or no directly attributable cost of goods sold.

 

Margin Profile Evolution

 

We believe we will benefit from unique characteristics of our business model, such that our margin profile will structurally improve over time, as we shift among our three revenue streams. Our revenues will initially be weighted towards unit sales. As the AireCoreTM MMS installed base grows and scales, we will be able to realize an increasing share of revenues from data subscriptions (at a higher margin versus unit sales). Subsequently, we expect that we will begin deriving significant revenues from carbon credits. As the installed base grows, the center of gravity for revenue sources is expected to shift to progressively higher-margin revenue streams, which we believe will allow us to grow and increase profitability over the long term.

 

Key Financial Definitions/Components of Results

 

Revenue

 

Spectaire anticipates earning revenue based on three high-margin revenue streams from: product sales, data subscription and services, and carbon credits.

 

Operating Expenses

 

Selling, general and administrative expense

 

Selling, general and administrative expense consists primarily of personnel-related expenses for our executives. These expenses also include non-personnel costs, such as rent, legal, audit and accounting services, share-based compensation expense and other professional fees.

 

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Depreciation expense

 

Depreciation expense consists of depreciation of Spectaire’s lab equipment.

 

Research and development expense

 

Research and development expense includes internal personnel and third-party consulting costs related to preliminary research and development of Spectaire’s products and platforms and share-based compensation expense.

 

Year ended December 31, 2023 compared to year ended December 31, 2022

 

    Year ended December 31,     $     %  
    2023     2022     Change     Change  
Revenue   $ -       -     $ -       0 %
Costs and expenses:                                
Sales and marketing     527,330       -       527,330       NM *
General and administrative     12,700,622       137,686       12,562,936       9,124 %
Research and development     3,480,731       967,826       2,512,905       260 %
Depreciation Expense     21,126       10,418       10,708       103 %
Total costs and expenses     16,729,809       1,115,930       15,613,879       9,487 %
Operating loss     (16,729,809 )     (1,115,930 )     (15,613,879 )     1,399 %
Other income (expense):                                
Interest income     -       23       (23 )     (100 )%
Interest income on marketable securities     45,057       -       45,057       NM *
Gain on extinguishment of debt     -       700,000       (700,000 )     (100 )%
Interest expense     (6,321,665 )     -       (6,321,665 )     NM *
Capital raise finance charge     (300,000 )     -       (300,000 )     NM *
Change in fair value of forward purchase agreements     248,000       -       248,000       NM *
Change in fair value of earnout liabilities     47,930,000       -       47,930,000       NM *
Loss on initial issuance of warrants     (15,919,501 )     -       (15,919,501 )     NM *
Income (loss) before income taxes     8,952,082       (415,907 )     9,367,989       (2,252 )%
Income tax expense     -       -       -       -  
Net income (loss)   $ 8,952,082       (415,907 )   $ 9,367,989       (2,252 )%

 

 

NM*  - Percentage change not meaningful

 

Sales and marketing

 

Sales and marketing increased by $527,330, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily related to an increase in personnel costs as Spectaire continues to develop and market its products and technology.

 

General and administrative expenses

 

General and administrative expenses increased by $12,562,936 or 9,124%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily related to share-based compensation expense ($6,847,393), audit and accounting fees ($1,631,766), personnel costs ($1,757,714) and legal expenses ($1,608,736).

 

Research and development

 

Research and development increased by $2,512,905 or 260%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily related to an increase in personnel costs as Spectaire continues to develop its products and technology.

 

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Depreciation expense

 

Depreciation expense increased by $10,708 or 103% for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily related to depreciation on Spectaire’s lab equipment.

 

Interest Expense

 

For the year ended December 31, 2023, Spectaire incurred $6,321,665 of interest expense primarily related to the Arosa loan ($1,014,361) and amortization of discount relating to the warrants issued to Arosa ($5,200,000).

 

Gain on extinguishment of debt

 

During the year ended December 31, 2022, Spectaire recognized a gain on the extinguishment of debt of $700,000. During 2021 and 2022, a lender loaned money to MicroMS with the intention of becoming a shareholder once an initial capital commitment was met. This capital commitment was never met as the lender experienced liquidity issues. In September 2022, Spectaire and the lender entered into a termination and mutual release agreement which terminated any obligations of Spectaire for repayment. As such the total amount owed, $700,000, was recognized into income as an extinguishment of debt for the year ended December 31, 2022.

 

Fair value of forward purchase agreements

 

Upon consummation of the Business Combination, Spectaire assumed $965,000 in liabilities in connection with Forward Purchase Agreements. The change in fair value of $248,000 during the year ended December 31, 2023 is recognized into earnings for the year ended December 31, 2023.

  

Fair value of earnout liabilities

 

Upon consummation of the Business Combination, Spectaire assumed $49,894,000 of earnout liabilities. The change in fair value of $47,930,000 is recognized into earnings for the year ended December 31, 2023.

 

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Loss on initial issuance of warrants

 

During the year ended December 31, 2023, Spectaire recorded $15,919,501 of loss related to the initial issuance of warrants issued to Arosa.

 

Net income (loss)

 

Net income was $8,952,082 for the year ended December 31, 2023 compared to the net loss of $415,907 for the year ended December 31, 2022. The change primarily relates to changes in the fair value of earnout liabilities partially offset by the increase in interest expense, loss on initial issuance of warrants and operating expenses, as discussed above.

 

Three months ended March 31, 2024 compared to three months ended March 31, 2023

 

   For the Three Months ended
March 31,
   $   % 
   2024   2023   Change   Change 
Revenue  $ -   $ -   $ -   NM*
Costs and expenses:                
Sales and marketing   131,291    105,000    26,291    25%
General and administrative   919,796    3,611,677    (2,691,881)   (75)%
Research and development   945,125    599,227    345,898    58%
Depreciation Expense   8,520    2,997    5,523    184%
Total costs and expenses   2,004,732    4,318,901    (2,314,169)   (54)%
Operating loss   (2,004,732)   (4,318,901)   2,314,169    (54)%
Other income (expense):                    
Interest Expense   (2,379,320)   (37,654)   (2,341,666)   6219%
Change in fair value of forward purchase agreement   515,750    -    515,750    NM*
Change in fair value of earnout liabilities   1,353,000    -    1,353,000    NM*
Other income:   11,128    -    11,128    NM*
Loss before income taxes   (2,504,174)   (4,356,555)   1,852,381    (57)%
Income tax expense   -    -    -    0%
Net loss  $(2,504,174)  $(4,356,555)  $1,852,381    (57)%

 

 

NM* - Percentage change not meaningful

 

Sales and marketing

 

Sales and marketing increased by $26,291 or 25%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily related to an increase in personnel costs, as Spectaire continues to develop and market its products and technology.

 

General and administrative expenses

 

General and administrative expenses decreased by $2,691,881 or 75%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily related to share-based compensation expense ($1,637,330), personnel costs ($1,010,062) and legal expenses ($832,462).

 

Research and development

 

Research and development increased by $345,898 or 58%, three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily related to the inventory mark -to- market adjustment loss, as Spectaire continues to develop its products and technology.

 

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Depreciation expense

 

Depreciation expense increased by $5,523 or 184% three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily related to depreciation on Spectaire’s lab equipment.

 

Interest Expense

 

Interest expense increased by $2,341,666 or 6219% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily related to the Arosa loan ($350,274) and amortization of the discount relating to the warrants issued to Arosa ($1,950,000).

 

Fair value of forward purchase agreements

 

Upon consummation of the Business Combination, Spectaire assumed $965,000 in liabilities in connection with Forward Purchase Agreements. The change in fair value of $515,750 during the three months ended March 31, 2024 is recognized into earnings for the year ended December 31, 2023.

 

Fair value of earnout liabilities

 

Upon consummation of the Business Combination, Spectaire assumed $49,894,000 of earnout liabilities. The change in fair value of $1,353,000 is recognized into earnings for the three months ended March 31, 2024.

 

Other Income

 

During the three months ended March 31, 2024, Spectaire redeemed $11,128 of credit card cash rewards.

 

Net loss

 

Net loss was $2,504,174 for the three months ended March 31, 2024 compared to the net loss of $4,356,555 for the three months ended March 31, 2023. The change primarily relates to the decrease in share-based compensation expense, personnel costs and interest expense, partially offset by changes in the fair value of earnout liabilities as discussed above.

 

Liquidity and capital resources

 

Historically, Spectaire’s primary sources of liquidity have been contributions from founders or other investors. Spectaire reported an operating loss of $2.0 million for the three months ended March 31, 2024 and $4.3 million for the three months ended March 31, 2023. Spectaire reported negative cash flows from operations of $2.7 million and $1.5 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, Spectaire had an aggregate unrestricted cash balance of $31 thousand, a net working capital deficit of $27.9 million, and an accumulated deficit of $29.7  million. For the year ended December 31, 2023, Spectaire reported an operating loss of $16.7 million and negative cash flows from operations of $7.4 million. As of December 31, 2023, Spectaire had an aggregate unrestricted cash balance of $0.3 million, a net working capital deficit of $25.4 million, and accumulated deficit of $27.2 million. In order to fund planned operations while meeting obligations as they come due, the Company will need to secure additional capital. The Company’s future capital requirements will depend on many factors, including its revenue growth rate, the timing and extent of spending to support further sales and marketing and research and development efforts. In order to finance these opportunities, Spectaire will need to raise additional financing. While there can be no assurances, the Company intends to raise such capital through additional debt or equity financing transactions, including the sale of shares of Common Stock to Yorkville pursuant to the SEPA, subject to the terms and conditions therein.

 

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SEPA

 

Although the SEPA provides that the Company may, in its sole discretion, from time to time during the term of the SEPA, and on the terms and subject to the conditions set forth therein, direct Yorkville to purchase shares of Common Stock from the Company in one or more purchases under the SEPA for a maximum aggregate purchase price of up to $25.0 million, the Company may not issue or sell any shares of Common Stock under the SEPA if such issuance or sale would breach any applicable Nasdaq rules or limitations provided in the SEPA. Under applicable Nasdaq rules, in no event may the Company issue to Yorkville shares exceeding the Exchange Cap (representing 19.99% of the total number of our shares of Common Stock issued and outstanding immediately prior to the execution of the SEPA), unless the Company obtains stockholder approval to issue shares of Common Stock in excess of the Exchange Cap or unless sales of Common Stock are made at a price equal to or greater than the SEPA Floor Price. The SEPA also prohibits the Company from directing Yorkville to purchase any shares of our Common Stock if those shares, when aggregated with all other shares of our Common Stock then beneficially owned by Yorkville (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 thereunder), would result in Yorkville beneficially owning more than 4.99% of the outstanding Common Stock.

 

2024 Private Placement

 

The description of the 2024 Private Placement included in the section titled “Key Transactions” is incorporated by reference.

 

Warrants

 

If the price of our Common Stock increases above $11.50, and holders of the Warrants determine to exercise such Warrants for cash, we could potentially receive up to approximately $247.8 million from such exercise. Each Warrant entitles the holder thereof to purchase one share of our Common Stock at a price of $11.50 per share. The Arosa Warrant entitles the holder thereof to purchase up to 2,194,453 shares of Common Stock at an exercise price of $0.01 per share. On June 3, 2024, the closing price for our Common Stock was $0.350 and, as a result, we believe our warrant holders would be unlikely to exercise their Warrants for cash, resulting in little or no cash proceeds to us.

 

Arosa Loan

 

The description of the Arosa Loan included in the section titled “Key Transactions” is incorporated by reference.

 

Sponsor Promissory Notes

 

The description of the Sponsor Promissory Notes included in the section titled “Key Transactions” is incorporated by reference.

 

Going Concern

 

While the Company will continue to evaluate potential sources of funding, the Company may not be able to raise additional capital on terms acceptable to it or at all. If the Company is unable to raise additional capital when desired, the Company may be required to modify, delay, or abandon some of its planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on the Company’s business, operating results, financial condition, and ability to achieve its intended business objectives. As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern.

 

Cash flows for the years ended December 31, 2023 and 2022

 

The following table summarizes Spectaire’s cash flows from operating, investing and financing activities for the years ended December 31, 2023 and 2022:

 

   For the year ended
December 31,
 
   2023   2022 
Net cash used in operating activities   (7,374,497)   (365,813)
Net cash (used in) provided by investing activities   (24,696)   42,190 
Net cash provided by financing activities   7,723,303    60,000 

 

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Cash flows from operating activities

 

Net cash used in operating activities for the year ended December 31, 2023 was $(7,374,497), primarily related to Spectaire’s non-cash items such as change in value of earnout liabilities partially offset by share-based compensation, loss on initial issuance of warrants and non-cash interest expense as well as an increase in accounts payable.

 

Cash flows from investing activities

 

Net cash used in investing activities during the year ended December 31, 2023 was $(24,696), driven by the purchases of lab equipment. Net cash provided by investing activities during the year ended December 31, 2022 was $42,190, driven by cash acquired in the acquisition of MicroMS.

 

Cash flows from financing activities

 

Net cash provided by financing activities during the years ended December 31, 2023 was $7,723,303, consisting primarily of the proceeds received from the issuance of the Convertible Promissory Notes and common stock and entering into the Arosa Loan Agreement partially offset by disbursement from the issuance of note receivable.

 

Cash flows for the three months ended March 31, 2024 and 2023.

 

The following table summarizes Spectaire’s cash flows from operating, investing and financing activities for the three months ended March 31, 2024 and 2023:

   For the three months ended
March 31,
 
   2024   2023 
Net cash used in operating activities  $(2,671,164)  $(1,467,435)
Net cash provided by (used in) investing activities  $(2,256)  $(10,761)
Net cash provided by financing activities  $2,361,838   $6,594,980 

 

Cash flows from operating activities

 

Net cash used in operating activities for the three months ended March 31, 2024 was $(2,671,164), primarily related to the change in value of earnout liabilities, changes in value of forward purchase agreements liability and decrease in accounts payable and accrued expenses.

 

Net cash used in operating activities for the three months ended March 31, 2023 was $(1,467,435), primarily related to net loss for the year , partially offset by stock- based compensation expense and an increase in accounts payable and accrued expenses.

 

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Cash flows from investing activities

 

Net cash used in investing activities during the three months ended March 31, 2024 and 2023 was $(2,256) and $(10,761), respectively, driven by the purchases of lab equipment.

 

Cash flows from financing activities

 

Net cash provided by financing activities during the three months ended March 31, 2024 was $2,361,838, consisting primarily of the proceeds received from the issuance of common stock, proceeds from forward purchase agreement s and deposit from investor under a subscription agreement.

 

Net cash provided by financing activities during the three months ended March 31, 2023 was $6,594,980, consisting primarily of the proceeds received from the Arosa Loan and issuance of the convertible promissory notes.

 

Contractual Obligations and Commitments

 

AirCore Mass Spectrometer Program

 

On June 30, 2023, the Company entered into an agreement with a Contract Manufacturer in which the vendor will support the Company with a co-build of 5 AireCore Mass Spectrometers at the Company’s facilities followed by documentation and assembly of 50 AireCore Mass Spectrometers at the vendor’s facility. The co-build, documentation and assembly is estimated to cost $276,834.

 

Off balance sheet arrangements

 

Spectaire does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Currently Spectaire does not engage in off-balance sheet financing arrangements.

 

Emerging Growth Company Status

 

We are an emerging growth company (“EGC”), as defined in the JOBS Act. The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.

 

In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an EGC, we intend to rely on such exemptions, we are not required to, among other things: (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

 

We will remain an EGC under the JOBS Act until the earliest of (i) the last day of our first fiscal year following the fifth anniversary of the closing of the Initial Public Offering, (ii) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three-years.

 

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Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Interest Rate Risk

 

The Company maintains its cash in checking and savings accounts. The Company held investment securities in mutual funds primarily in U.S. government securities We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

 

Credit Risk

 

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and marketable securities. Bank deposits are held by accredited financial institutions and these deposits may at times be in excess of federally insured limits. The Company limits its credit risk associated with cash and cash equivalents by placing them with financial institutions that it believes are of high quality. The Company has not experienced any losses on its deposits of cash or cash equivalents. As of March 31, 2024 and December 31, 2023, our cash were maintained with one financial institution in the United States in checking and savings accounts.

 

At March 31, 2024, the Company held investment securities in mutual funds primarily in U.S. government securities. Since all of the Company’s permitted investments consist of treasury securities, fair values of its investments are determined by Level 1 inputs utilizing quoted market prices (unadjusted) in active markets for identical assets. These securities are presented on the condensed consolidated balance sheet at fair value at the end of the reporting period. Earnings on these securities are included in interest income on marketable securities in the condensed consolidated statement of operations and are automatically reinvested. The fair value of these securities is determined using quoted market prices in active markets for identical assets.

 

Critical Accounting Policies and Significant Management Estimates

 

We prepare our financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, expressed in U.S. dollars. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in accordance with GAAP. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. References to GAAP issued by the FASB in these accompanying notes to the condensed consolidated financial statements are to the FASB Accounting Standards Codification (“ASC”). All significant intercompany balances and transactions have been eliminated in consolidation. The December 31, 2023 condensed consolidated balance sheet herein was derived from the audited consolidated financial statements at that date, but does not include all disclosures including notes required by U.S. GAAP for complete financial statements.

 

Spectaire also has other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding its results, which are described in Note 3 to Spectaire’s condensed consolidated financial statements as of and for the three months ended March 31, 2024.

 

Preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. Actual results could materially differ from these estimates. On an ongoing basis the Company evaluates its estimates including those relating to fair values, income taxes, and contingent liabilities among others. The Company bases its estimates on assumptions both historical and forward looking that are believed to be reasonable, the results of which form the basis for making judgements about the carrying values of assets and liabilities.

 

In addition, management monitors the effects of the global macroeconomic environment, including increasing inflationary pressures; social and political issues; regulatory matters, geopolitical tensions; and global security issues. The Company is also mindful of inflationary pressures on its cost base and is monitoring the impact on customer preferences.

 

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Fair Value Measurements

 

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels:

 

Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.

 

Level 2: Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

 

Level 3: Inputs are unobservable for the asset or liability.

 

The carrying amounts of certain financial instruments, such as cash equivalents, marketable securities, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. The fair value of debt instruments for which the Company has not elected fair value accounting is based on the present value of expected future cash flows and assumptions about the then-current market interest rates as of the reporting period and the creditworthiness of the Company. All of the Company’s debt is carried on the condensed consolidated balance sheet on a historical cost basis net of unamortized discounts and premiums because the Company has not elected the fair value option of accounting.

 

Warrants

 

The Company reviews the terms of warrants to purchase its common stock to determine whether warrants should be classified as liabilities or stockholders’ deficit in its condensed consolidated balance sheets. In order for a warrant to be classified in stockholders’ deficit, the warrant must be (i) indexed to the Company’s equity and (ii) meet the conditions for equity classification.

 

If a warrant does not meet the conditions for stockholders’ deficit classification, it is carried on the condensed consolidated balance sheets as a warrant liability measured at fair value, with subsequent changes in the fair value of the warrant recorded in other non-operating losses (gains) in the condensed consolidated statements of operations. If a warrant meets both conditions for equity classification, the warrant is initially recorded, at its relative fair value on the date of issuance, in stockholders’ deficit in the condensed consolidated balance sheets, and the amount initially recorded is not subsequently remeasured at fair value.

 

Share-Based Compensation

 

The Company accounts for share-based compensation arrangements granted to employees in accordance with ASC 718, “Compensation: Stock Compensation”, by measuring the grant date fair value of the award and recognizing the resulting expense over the period during which the employee is required to perform service in exchange for the award. Equity-based compensation expense is only recognized for awards subject to performance conditions if it is probable that the performance condition will be achieved. The Company accounts for forfeitures when they occur.

 

Research and development costs

 

Costs related to preliminary research and development of internal use software are expensed as incurred as a component of operating expenses.

 

Net loss Per Share

 

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock of the Company outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including preferred stock and convertible notes, to the extent dilutive. For the three months ended March 31, 2024, the preferred shares, unvested restricted stock awards, and potential shares from convertible notes were not included in the calculation of diluted net loss per share as their effect would be anti-dilutive. There were no potential dilutive common stock equivalents for the three months ended March 31, 2023.

 

Recent Accounting Pronouncements

 

See Note 3, “Summary of Significant Accounting Policies,” to Spectaire’s unaudited condensed consolidated interim financial statements.

 

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BUSINESS

 

Company Overview

 

Spectaire is an industrial technology company whose core offering, AireCore, allows its customers to measure, manage, and potentially reduce carbon dioxide equivalent (CO2e) and other greenhouse gas emissions. AireCore is a fully integrated hardware, software, and data platform designed primarily for logistics and supply chain operators that uses mass spectrometry to directly measure and report emissions in real time. Companies currently face a “technology gap” between increasing requirements with respect to reporting and reducing emissions and lack of available technology to accurately measure and manage such emissions, which creates a no-win scenario. Spectaire’s asset-light, reasonably priced solution delivers a win-win-win for Spectaire, for its customers, and for the environment.

 

The research and development for AireCore’s mass spectrometry technology began more than 15 years ago at MIT, led by Spectaire’s Chief Technology Officer, Dr. Brian Hemond, and co-founder, Professor Ian Hunter. AireCore is protected by a robust patent portfolio and a lengthy research and development process. MIT has granted Spectaire an exclusive license for all of the intellectual property owned by MIT that underlies the AireCore and is a minority stockholder in Spectaire.

 

The Science Behind Spectaire

 

Companies are coming under increasing pressure from governments, customers, and the public to account for and reduce their emissions. We believe that, prior to our introduction of AireCore, there was no practical way to directly measure real-time transportation emissions. As we describe below, conventional mass spectrometers, the only technology that could directly measure transportation emissions in real-time, are large, expensive, and required stable lab environments. Even ostensibly “mobile” mass spectrometers are impractical and require being towed separately behind an emitting vehicle. As a result of these impractical options, instead of directly measuring their emissions, our potential customers currently estimate their emissions using emissions estimation calculators for transport and logistics that estimate based on fuel consumption, mileage, and vehicle weight. These estimates cannot accommodate the minute-to-minute, mile-to-mile variations that often drive significant differences between these estimates and actual emissions. As a result, these estimates have come under criticism for being inaccurate, simplistic, and - until now - impossible to verify. A pilot study conducted with our anchor customer, Mosolf, found that Mosolf’s emissions estimate calculated using CSN EN 16258, a publicly available and widely used emissions estimation standard, overstated its actual emissions by approximately 60%.

 

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The most practical way to directly measure emissions at the source is through mass spectrometry. Mass spectrometry is a chemical analytical technique used to confirm both the identity and the relative quantity of molecules in a sample. In a typical mass spectrometry measurement, a gas sample is ionized and the resultant ions are separated by their mass-to-charge ratios (m/z). The specific sample molecules can then be identified by the atomic masses of the ions and ion fragmentation pattern.

 

A mass spectrometer attached to a vehicle can precisely measure the CO2e emitted while the engine is running. However, most commercially available mass spectrometers are industrial-scale equipment, roughly the size and weight of a refrigerator, can cost hundreds of thousands of dollars, and typically require stable lab environments to operate. Companies today incur real costs in emissions offsets or carbon tax payments due to inaccurate estimates, while simultaneously lacking the technology to deliver an accurate accounting of their actual emissions. As a result, our potential customers currently face a no-win situation, as public policy and corporate commitments outpace available technology.

 

Spectaire’s AireCore Solution

 

Our AireCore patented micro mass spectrometer (MMS) solves this problem. Unlike conventional mass spectrometers, which typically have significant cost, size, power, and environmental requirements, the AireCore uses a proprietary miniaturized and ruggedized analyzer, combined with solid state pump technology, to address mobile operation in harsh environments.

 

AireCore is cloud-connected through mobile phone networks, enabling a continuous feed of emissions data. AireCore core software can also be upgraded over-the-air (OTA) smartphone-style, enabling continuous roll-out of features and improvements.

 

 

 

AireCore is protected by a robust patent portfolio and a lengthy research and development process, with significant time and resources invested by MIT in developing this technology. MIT has granted us an exclusive license for all of the intellectual property owned by MIT that underlies the AireCore and is a minority stockholder in Spectaire.

 

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We believe that AireCore is the world’s first and only device capable of addressing the technology gap between emissions requirements and emissions management technology by delivering real-time, accurate, and verifiable emissions measurements. Through our flagship AireCore product, we provide a fully integrated hardware, software, and data solution designed primarily for logistics and supply chain operators to directly measure their emissions. We are aware of no other commercially available device that can be directly integrated into a vehicle, thus providing real-time emissions measurement while the vehicle is in everyday operation - yet reporting standards for emissions from industry, government, or other entities implicitly presume exactly such a technological capability.

 

Hardware

 

Designed for maximum portability. Small form factor of 16.3” × 7.9” × 11.9”, battery powered, and weighing approximately 22 lb.

 

Ruggedized and built for harsh environments. Designed to be mounted onto the back of trucks and able to operate in other comparable harsh environments.

 

Industry leading accuracy. Able to measure molecules from 10-80 atomic mass units with unit resolution at m/z 28. We believe this to be industry leading accuracy because all greenhouse gases of primary importance (nitrogen oxide, carbon oxide, methane) are at or below m/z 46, meaning that AireCoreTM’s accuracy is sufficient to capture all vehicle exhaust products.

 

Real-time analysis. Able to turn around sample analysis on 1-minute cycles, on a continuous basis, allowing true minute-to-minute, mile-to-mile visibility on emissions.

 

Software

 

IoT connected. AireCore can connect to WiFi or mobile phone networks, allowing customers to monitor emissions on a fleetwide basis in real-time and identify how maintenance and operating conditions impact emissions.

 

OTA upgrades. AireCore’s software can be upgraded over-the-air (OTA) smartphone-style, enabling continuous roll-out of features and improvements.

 

Carbon credit management. AireCore software can capture and secure data necessary to generate carbon credits, at the standards required by carbon certification bodies.

 

Data

 

Consolidated audits and reporting. Customers can generate, view, and export emissions reporting based on AireCore data stored in encrypted cloud data centers.

 

Geolocated emissions databank. Customers will be able to monitor their emissions profile along their routes, allowing them to optimize their routes.

 

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Patent portfolio

 

The following table sets forth certain information related to each of the issued patents related to AireCore’s MMS technology, including the relevant jurisdiction of each and corresponding expiration date.

 

 

Issued Patent

  Jurisdiction  Type  Issue Date  Anticipated
Expiration Date
Methods, Apparatus, and System for Mass Spectrometry      
Patent No.: 201280000000  China  Utility: National Phase  August 10, 2016  February 13, 2032
Patent No.: 105869982  China  Utility: Divisional  June 1, 2018  February 14, 2032
Patent No.: 1228101  Hong Kong  Utility: National Phase  August 30, 2019  February 9, 2037
Patent No.: 6141772  Japan  Utility: National Phase  May 12, 2017  February 14, 2032
Patent No.: 192703  Singapore  Utility: National Phase  March 1, 2016  February 14, 2032
Patent No.: 8754371  United States  Utility: Continuation  June 17, 2014  March 3, 2032
Patent No.: 9312117  United States  Utility: Continuation  April 12, 2016  February 14, 2032
Patent No.: 9735000  United States  Utility: Continuation  August 15, 2017  February 19, 2032
Patent No.: 10236172  United States  Utility: Continuation  March 19, 2019  February 14, 2032
Patent No.: 10658169  United States  Utility: Continuation  May 19, 2020  February 14, 2032
Patent No.: 11120983  United States  Utility: Continuation  September 14, 2021  February 14, 2032
Patent No.: 10201601048U  Singapore  Utility: Divisional  January 6, 2023  February 14, 2032
System for Mass Spectrometry         
Patent No.: 2676286  Contracting States
to the European
Patent Convention
  Utility: National Phase  August 29, 2018  February 14, 2032

 

Our Industry and Opportunity

 

We estimate a market opportunity exceeding $95 billion, derived bottom-up from logistics provider fleet sizes in the United States and Europe, and explicitly excluding several major sources of potential revenues. We believe our market is growing, and that we are well-positioned at the center of three converging forces: the evolution of the regulatory environment, changes in customer expectations, and the growth and development of carbon credit markets.

 

 

We Address a $95 Billion1 Market

 

We estimate our total addressable market exceeds $95 billion. This figure is derived by multiplying heavy-duty truck fleet size in the United States and Europe against our unit economics.2

 

 

1TAM analysis excludes carbon credit TAM; Carbon credit market TAM is ~$170B (Source: Global Financial Markets Association).

 

2US figure based on 11.6 million of registered medium/heavy trucks in the United States as of 2019 (Source: United States Department of Transportation, Bureau of Transportation Statistics). Europe figure includes European Union, Iceland, Norway, Switzerland, and UK’s vehicles as of 2021 (Source: The European Automobile Manufactures’ Association).

  

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We believe this is an estimate is conservative, as it excludes potential revenues from:

 

Fleets outside of the United States and Europe;

 

Applications other than logistics and transportation as the AireCore product can measure the emissions from a wide range of combustion and industrial processes; and

 

Carbon credit markets, which are estimated at over $170 billion as of 2021.

 

Emissions are Rising Rapidly

 

Global CO2e emissions have risen rapidly to all-time highs and are continuing to accelerate. The National Aeronautics and Space Administration (NASA) estimates that global atmospheric CO2e levels reached 419.7 parts per million, a 10.2% increase from 2005 levels, as of 2023. Meanwhile, the US Energy Information Administration (EIA) estimates that 35.3 billion metric tons of CO2e were emitted in 2020 alone, roughly equivalent to the weight of 570 billion people or more than 70 times the current global population. The trajectory of emissions increases is accelerating.

 

At the United Nations Climate Change Conference of 2015 (COP 21), 196 nations signed the Paris Agreement, which committed them to limit the increase in the global average temperature to well below 2.0°C, and preferably 1.5°C, compared to pre-industrial levels. Achieving this goal will require net zero emissions by 2050. These commitments encourage focus on the largest sources of emissions. The International Energy Agency estimates that 37% of global emissions come from transport.

 

 

 

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Evolutions of the Regulatory Environment

 

Regulation has historically required manufacturers to adhere to ever-evolving standards of emissions and efficiency. The United States first introduced regulation on vehicle emissions with the Clean Air Act of 1963 and fuel economy with the Energy Policy and Conservation Act of 1975. The scope of government action under the Clean Air Act was significantly clarified by the 2007 Supreme Court case of Massachusetts vs. EPA. Today, three government agencies - the Environmental Protection Agency (EPA), the National Highway Traffic Safety Administration (NHTSA), and the California Air Resources Board (CARB) - set Federal and state vehicle emissions and fuel economy standards. These standards are steadily growing in specificity and granularity, and include:

 

Corporate Average Fuel Economy (CAFÉ). The sales-weighted average fuel economy in mile per gallon (mpg) of vehicles in a manufacturer’s fleet, set according to a specific model year (MY).

 

Carbon dioxide grams per mile (g/mi). The total volume of carbon dioxide released per mile on a fleet average basis.

 

Specific engine emissions on a gram or milligram per horsepower-hour (g/hp-hr or mg/hp-hr) basis. Specific emissions may include oxides of nitrogen (NOx), particulate matter (PM), non-methane hydrocarbon (NMHC), carbon monoxide (CO), carbon dioxide (CO2), and methane (CH4).

 

The Clean Air Act further empowers the EPA to assess significant fines to manufacturers and distributors in case of noncompliant engines, tampering events, and reporting and recordkeeping violations. Similar legislation is in place in the European Union, Brazil, Japan, India, and other major jurisdictions.

 

 

Starting with Finland in 1990, and accelerating in recent years, many jurisdictions have introduced a new type of legislation that targets owners and operators - as opposed to manufacturers and distributors - of emissions producing assets. This type of legislation puts a price on the usage of carbon, to be borne by the owner or the end-state customers. Carbon-pricing legislation falls into two distinct categories.

 

First, an emissions trading scheme (ETS), also known as a cap-and-trade scheme, limits the total level of greenhouse gas emissions through the grant of allowances, and allows emitters who fall below their respective allowance to “sell” their excess allowance to emitters who have exceeded their allocations. This allows the “systemwide aggregate” level of emissions to be kept constant, while allowing market pricing to determine the price of emissions. In an ETS, the planned volume of emissions is - in theory - known (via the allowances), but the price of carbon is not set by the market. The European Union, the State of California, and New Zealand are examples of jurisdictions that have implemented emissions trading schemes.

 

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Second, a carbon tax directly sets a price on carbon usage and is assessed by governments. Carbon taxes are simpler to administer versus the market infrastructure and operating costs of an ETS, but are less common. In a carbon tax system, the planned volume of emissions is not known (although emitters are economically incentivized to reduce it), but the price of carbon is known, as it is set by government authorities as a tax. Germany, South Africa, and several Canadian provinces are examples of jurisdiction that have or plan to implement a carbon tax.

 

 

We expect further growth and convergence of carbon pricing legislation and regulation in the years ahead. We believe a trend of “carbon pricing without borders” will continue to accelerate, as emissions are not constrained by national or subnational borders. Emissions trading schemes are already “linking” their markets to encourage greater trading activity and liquidity, such as in the case of the Switzerland-EU ETS link, and the Regional Greenhouse Gas Initiative (RGGI), a consortium of 12 US states.

 

We believe the growth of these trends will strengthen demand for our products and services. Both ETS and carbon taxes require accurate and continuous measurement, which is currently not possible without expensive and impractical equipment, and which can only work in lab settings, thus creating a “technology gap” between legal requirements and the capability to fulfill them. Our AireCore MMS closes this “technology gap” and is key to the successful shift of manufacturer-directed emissions limits to user-directed emissions limits.

 

Changes in Customer Expectations

 

In line with government action, companies have become increasingly conscious of their environment footprint as a result of expectations placed upon them by their customers, investors, and other stakeholders. The Governance & Accountability Institute found that in 2022, 96% of S&P 500 companies and 81% of Russell 1000 companies published reports to their investors describing their ESG (environmental, social, and governance) commitments. We believe our products and services actively help our customers manage their sustainability profiles and derive real commercial and operational benefits from doing so.

 

We believe companies with significant carbon footprints (both direct and indirect) are developing strategies to adapt their business models in response to customer and investor demands.

 

First, they are adopting a common language to provide transparency on their environmental footprint. The Greenhouse Gas Protocol Corporate Standard (GHG Protocol) and the Carbon Disclosure Project (CDP) are non-profit initiatives with significant participation. Over 18,700 companies representing more than half of global market capitalization participated in CDP’s annual disclosure programs, and 90% of Fortune 500 companies participating in CDP used GHG Protocol as the mechanism to frame their disclosures.

 

Second, they are adopting a common framework to guide their aspirations. The Science Based Targets Initiative (SBTi), a partnership between CDP, the United Stations, the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF), is used by over 4,000 companies to reduce emissions in line with the Paris Agreement goals - limiting global warming to 1.5 °C above pre-industrial levels. SBTi targets are emissions reduction targets typically with a 5-15 year range from the date of submission, and can include net-zero targets.

 

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Third, they are expanding their scope of responsibility. The GHG Protocol defines emissions as Scope 1 (direct emissions from owned or controlled sources, such as a factory’s direct emissions), Scope 2 (indirect emissions from the generation of purchased energy, such as the power plant providing electricity for the factory), and Scope 3 (all other emissions not included in Scope 1 or Scope 2, both upstream and downstream, such as truck emissions from a supplier providing raw materials to the factory). For many companies, Scope 3 emissions make up a significant, if not a majority of their emissions, which they now seek to control and influence by exerting pressure upstream and downstream on their value chain.

 

 

Our initial set of indirect downstream customers have been working extensively with their suppliers to gain visibility on, manage, and reduce their Scope 3 emissions:

 

Nestlé S.A. has committed to SBTi targets of 20% emissions reduction by 2025, 50% emissions reduction by 2030, and net zero by 2050. Nestle’s efforts are closely focused on Scope 3, which represents 95% of company emissions, a significant portion of which are transportation-related.

 

Mercedes-Benz has committed to SBTi targets of 50% reduction of CO2 emissions across all worldwide operations by 2030, and a 40% reduction of all well-to-wheel (Scope 3) CO2 emissions by 2030.

 

Volkswagen has committed to SBTi targets of 30% CO2 reductions from production and use of all vehicles worldwide by 2030, including Scope 3 emissions.

 

 

Companies that make such commitments require suppliers to report on their emissions and potentially purchase carbon credits or offsets as a cost of doing business. For these upstream suppliers (our direct customers), the ability to measure emissions directly enables them to comply with their customer mandates.

 

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Growth and Development of Carbon Credit Markets

 

Companies that operate in jurisdictions with either ETS or carbon taxes can take advantage of carbon credits, a tradeable certificate or permit representing the right to emit a set amount of greenhouse gas, typically a single metric ton of CO2 equivalent (MTCO2e). Companies that generate certified carbon credits have two avenues to realize value. First, they can offset their own carbon emissions, thus lowering their exposure to carbon limits or carbon taxes. Once used to offset emissions, carbon credits are retired and no longer have value. Second, they can sell their carbon credits on carbon markets, creating an additional revenue stream.

 

Specific types of carbon credits are typically grouped into three categories: carbon avoidance (preventing carbon from entering the atmosphere, for example, building a wind farm in lieu of a natural gas plant), carbon reduction (reducing carbon already entering the atmosphere, for example, an efficiency upgrade to an emissions source), and carbon removal (removing carbon from the atmosphere, for example, carbon sequestration projects). Carbon credits are typically certified by a verification body such as Gold Standard, Verra, American Carbon Registry, and Climate Action Reserve. The certification process is rigorous and typically specific to a methodology of measurement, the emitting activity, and sometimes the site of emissions. Market pricing of carbon credits takes these differential factors into account.

 

Carbon markets are split between Compliance Carbon Markets (CCMs) and Voluntary Carbon Markets (VCMs). CCMs, as their name implies, exist where carbon limits are set by governmental authorities, such as the European Union or the State of California. VCMs allow emitters outside of CCMs to voluntarily offset their carbon emissions. CCMs are generally more mature and liquid than VCMs, given the regulatory aspect of participation. Carbon credits traded in VCMs and CCMs are generally not fungible, and thus give rise to significant pricing differentials. For example, in 2022, carbon credits in the EU CCM traded at €70-€100 per MTCO2e, while carbon credits in VCMs traded at $2-$10 per MTCO2e.

 

Carbon markets are growing and scaling significantly. Research from the Global Financial Markets Association (GFMA) released in 2021 estimated the size of CCMs to be $170 billion, with a need to scale up to $1 trillion or more by 2030 to achieve Paris Agreement goals. Research by McKinsey & Company conducted in partnership with the Institute of International Finance estimate VCMs as much more nascent at $300 million, but forecast that the market could increase to a value of $50 billion or more by 2030.

 

 

 

The growth and development of carbon markets creates upside potential for Spectaire. While the business model is not dependent on carbon credits, our technologies allow companies to reduce the volume of emissions through efficiency improvements. Spectaire is prepared to participate in both CCMs and VCMs, and is in the certification process with both Gold Standard and Verra.

 

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Spectaire’s Business Model

 

Our business model is based on asset-light production and delivers a win-win-win for Spectaire from high-margin revenue streams, for our customers who realize lower costs and new revenues, and for the environment from better outcomes and more effective public policy.

 

The following discussion of our business model reflects numerous estimates, beliefs and assumptions, including, but not limited to, general business, economic, regulatory, market and financial conditions, as well as assumptions about competition, future performance, and matters specific to Spectaire’s business, all of which are difficult to predict and inherently subject to significant risks and uncertainties, many of which are beyond Spectaire’s and PCCT’s control. The various risks and uncertainties include those set forth in the sections entitled “Risk Factors” beginning on page 9 of this prospectus and “Cautionary Note Regarding Forward-Looking Statements” beginning on page iii of this prospectus, which you should read and carefully in connection with your review of the following discussion of our business model.

 

A Win for Spectaire: Three High-Margin Revenue Streams

 

We can achieve three high-margin revenue streams through our AireCore MMS product line.

 

Product sales. We intend to sell the AireCoreMMS directly to customers at a price of approximately $2,000 per unit. We project an approximately 30% gross margin on a unit basis for product sales. We derive this gross margin estimate from current bill-of-materials and labor cost on a unit basis.

 

Data subscription and services. The AireCoreMMS requires an annual data subscription to operate, at approximately $1,000 per unit per year. The data subscription grants access to applications, reporting capabilities, and secure cloud connectivity. We project an approximately 65% gross margin on data subscriptions. We derive this gross margin estimate from current estimated cost of technology infrastructure necessary to service our installed base based on our customer pipeline.

 

Carbon credits. We will receive a 50% share of carbon credits. Carbon credits pricing will vary depending on their market, certification, and quality, but offer a 100% gross margin. We believe that carbon credits require negligible or no directly attributable cost of goods sold.

 

A Win for Customers: Lower Costs and New Revenues

 

Our customers realize immediate and long-term benefits by deploying the AireCore MMS product at scale.

 

Reduced compliance costs. Proving lower emissions for customer fleets results in reduced costs to purchase carbon credit offsets and carbon taxes. In a pilot study conducted with anchor customer Mosolf, we found that calculated estimates overstated emissions by approximately 60% versus what was measured by AireCore.

 

Increased competitiveness. Customers that use and properly maintain modern fleets will be able to prove lower carbon footprints which will make those fleets more competitive, leading to increased business and potentially increased haulage rates.

 

Access to new revenues. Customers will receive a 50% share of carbon credits, which they are able to sell into markets for incremental revenues.

 

A Win for the Environment: Better Outcomes and More Effective Public Policy

 

Our technologies provide significant direct and indirect benefits for the environment far into the future.

 

Lower emissions. Increasing usage of our AireCoreMMS enables companies to better control their emissions, supporting their emissions reductions and net zero commitments.

 

Geolocated emissions databank. Over time, we will use our data to create a proprietary geolocated emissions databank. Customers will be able to design their routes according to this databank, achieving cleaner and more efficient operations.

 

Improved effectiveness of public policy. Emissions legislation, regulation, and commitments are impractical to enforce today because companies experience a technology gap with no way to accurately measure their emissions in real-time. We fill this technology gap by providing the vital missing piece for companies to deliver on their commitments.

 

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Prospects for Future Growth

 

We plan to grow and scale our business significantly through a “land and expand” strategy, serving customers who are upstream suppliers of large emitters focused on their Scope 3 emissions.

 

Our Go-To-Market Approach

 

We focus on customers in the logistics industry who have made public commitments to reducing emissions, who have invested in technology that helps lower their carbon footprint, and who appreciate AireCore’s easy-to-understand value proposition to accurately quantify those reductions.

 

We believe that awareness of this problem - unreliable emissions calculations - spans many industries, and that we face no meaningful direct competition in this space. We believe a growing number of customers publishing accurate emission reduction figures supported by Spectaire will increase visibility among partners, suppliers, and vendors across an inherently interconnected industry. Our sales approach is tailored specifically to senior executives, who know the value of not only reducing emissions but also having reliable measurements and reports from outside sources for increased risk mitigation. We believe these network effects will support its “land and expand” go-to-market strategy.

 

Pilot Programs

 

Our customer engagement model is designed for modern, globalized operations. By focusing our initial pilots on companies that are already well-known to the Spectaire management team and board, we can achieve a significant and positive impact for our customers in managing efficient logistics solutions even without a physical presence in each territory.

 

We are currently preparing and deploying a robust set of pilot deployments with four customers - Borghi, Fonterra, Mosolf, and American Ag Energy - representing a potential fleet size of over 11,500 assets.

 

 

 

Borghi Italia SRL, headquartered in Modena, Italy, is a leading logistics and logistics service provider. Borghi supports the deployment of enterprise hardware installations including medical equipment such as imaging machines, financial equipment such as ATMs, and IT equipment such as servers and storage. Borghi has been servicing customers for over 30 years and in 2022 transported over 46,000 pieces of equipment for their clients. Borghi reports their logistics emissions to their clients, has the goal to measure emissions and believes Spectaire can help them monetize the investments they have made to logistics modernization by allowing them to capture additional carbon credits. We have received a purchase order from Borghi for a pilot deployment.

 

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Fonterra Co-operative Group Limited, headquartered in Auckland, New Zealand, is a leading global dairy producer and exporter, and New Zealand’s largest company based on revenue. Reflecting New Zealand regulation and its own sustainability commitments, Fonterra has committed to a net zero target by 2050, and has partnered extensively with its downstream customer Nestlé on shared goals regarding Nestle’s Scope 3 emissions. We estimate that deploying the AireCore system will allow Fonterra to report on average 42% lower emissions. Fonterra has indicated its intent to use AireCore units on both its logistics fleets as well as other potential applications. We have received payment and have begun delivery of pilot units.

 

Mosolf SE & Co. KG, headquartered in Kirchheim unter Teck, Baden-Württemberg Germany, is a leading German logistics operator. Mosolf’s chairman Dr. Jörg Mosolf is a stockholder and member of Spectaire’s board. Mosolf was the first company where we were able to test the AireCore MMS on vehicles. Based on Mosolf’s fleet of 208 Class 8 trucks, we estimate that Mosolf’s fleet would be able to prove an emissions reduction of approximately 60% and generate nearly 50,000 carbon credits over the course of a year. Mosolf has indicated its intent to use AireCore units on its logistics fleet. We have received payment for deployment of pilot units.

 

American Ag Energy, based in Cambridge, Massachusetts, is a next-generation agricultural technology solution provider. Their primary focus is to connect greenhouses with energy efficient power sources and measure and monitor the emissions of those locations. The ability to visualize in real time the emissions of their greenhouse equipment is critical to measuring the carbon footprint as well as the optimal growing conditions inside their growing centers. American Ag Energy has issued to us a non-binding letter of intent.

 

Properties

 

Our corporate headquarters are located at 155 Arlington Street, Watertown, MA 02472. We believe our existing facility meets our current needs.

 

Legal Proceedings

 

We are and, from time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any other legal proceedings that, in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

 

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MANAGEMENT

 

Management and Board of Directors

 

The following sets forth certain information, as of June 3, 2024, concerning the persons who serve as our executive officers and directors.

 

Name

  Age   Position
Dr. Jörg Mosolf   66   Director
Scott Honour   56   Director
Frank Baldesarra   68   Director
Rick Gaenzle   59   Director
Brian Semkiw   68   Chairman of the Board and Chief Executive Officer
Brian Hemond   41   Chief Technology Officer and Director
Chris Grossman   47   Chief Commercial Officer
Rui Mendes   67   Chief Information Officer

 

Dr. Jörg Mosolf has served as a member of our Board since the consummation of the Business Combination. Dr. Mosolf has served as Chairman of the Board of Directors and Chief Executive Officer of Mosolf SE & Co. KG since 2002. Dr. Mosolf holds an MBA from the University of St. Gallen and a Doctorate degree from the University of Prague. Dr. Mosolf is also the President and a member of the executive board of the German Transport Forum. We believe that Dr. Mosolf is qualified to serve on the Board due to, among other things, his extensive leadership and director experience.

 

Scott Honour has served as a member of our Board since November 28, 2023. Prior to the consummation of the Business Combination, Scott served as the Chairman of PCCT’s board of directors. Mr. Honour has over 30 years of private equity investment experience and has been involved in over 100 transactions totaling over $20 billion in transaction value. Mr. Honour is the Managing Partner of NPG, a private equity firm, which he co-founded in 2012. He also serves as Chairman of EVO and served as Chairman of SOAC, the first ESG focused SPAC. Prior to that, Mr. Honour was at The Gores Group, a Los Angeles-based private equity firm, for 10 years, serving as Senior Managing Director and as one of the firm’s top executives. Mr. Honour also served on the investment committee for The Gores Group. During his time at The Gores Group, the firm raised four funds, totaling $4 billion in aggregate, and made over 35 investments. Prior to joining The Gores Group, Mr. Honour was a Managing Director at UBS Investment Bank from 2000 to 2002 and was an investment banker at Donaldson, Lufkin & Jenrette from 1991 to 2000. Mr. Honour began his career at Trammell Crow Company in 1988. Mr. Honour has served on the board of directors of numerous public and private companies, including Anthem Sports & Entertainment Inc., 1st Choice Delivery, United Language Group, Renters Warehouse, Real Dolmen (REM:BB) and Westwood One, Inc. (formerly Nasdaq: WWON), and is a co-founder of Titan CNG LLC and YapStone Inc. Mr. Honour earned a B.S. and B.A., cum laude, in Business Administration and Economics from Pepperdine University and an M.B.A. in Finance and Marketing from the Wharton School of the University of Pennsylvania. We believe that Mr. Honour is qualified to serve on the Board due to, among other things, his extensive leadership and corporate experience.

 

Frank Baldesarra has served as a member of our Board since the consummation of the Business Combination. Mr. Baldesarra has served as the Chief Executive Officer at ENGINEERING.com Incorporated, which he co-founded, since 2001. Prior to co-founding ENGINEERING.com Incorporated, Mr. Baldesarra served in multiple roles at other organizations, including Executive Chairman of Cadsoft Corporation, President and Chief Operating Officer at Rand Worldwide, Inc., which he co-founded with Mr. Semkiw, and President at Rand Investments, which he co-founded. Mr. Baldesarra has served as a member of the board of directors of ENGINEERING.com Incorporated since 2001 and Eberspaecher Venture Inc. since May 2010. Mr. Baldesarra holds a B.A.Sc. in civil engineering from the University of Toronto. We believe that Mr. Baldesarra is qualified to serve on the Board due to, among other things, his extensive leadership, engineering and technology industry experience.

 

Rick Gaenzle has served as a member of our Board since 2024. Mr. Gaenzle is the Founder and Managing Director at Gilbert Global Equity Partners, a $1.2bn private equity fund, and a board member at Sustainable Opportunities Acquisition Corporation with previous experience at Soros Capital, Mr. Gaenzle is also a Senior Adviser at Impact Delta, a consulting firm that advises financial services firms on impact investing. Mr. Gaenzle earned a B.A. from Hartwick College and his M.B.A. from Fordham University, Fordham Graduate School of Business. We believe that Mr. Gaenzle is qualified to serve on the Board due to, among other things, experience with strategic investing and financing matters.

 

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Brian Semkiw has served as Chairman of the Board and Chief Executive Officer of Spectaire since the consummation of the Business Combination. Mr. Semkiw has served as Chairman of the board of directors and Chief Executive Officer of Legacy Spectaire since its formation in September 2022 and as the Chief Executive Officer of 3rdGP Financial LLC, which he founded with Mr. Mendes, since July 2018. Prior to founding 3rdGP Financial LLC, Mr. Semkiw served as Chief Executive Officer of Carta Solutions Holding Corp., which he co-founded, from 2007 through July 2018. Mr. Semkiw also previously served as Chief Executive Officer of Rand Worldwide, Inc., which he co-founded with Mr. Baldesarra. Mr. Semkiw earned a B.A.Sc. in engineering from the University of Toronto. We believe that Mr. Semkiw is qualified to serve on the Board due to, among other things, his deep knowledge of Spectaire and his extensive leadership, engineering and financial experience.

 

Dr. Brian Hemond has served as a member of the Board and Chief Technology Officer of Spectaire since the consummation of the Business Combination. Dr. Hemond has served as Chief Technology Officer of Legacy Spectaire since its formation in September 2022. Prior to joining Legacy Spectaire, Dr. Hemond served as Chief Executive Officer of microMS, which he co-founded, from 2011 until the consummation of Legacy Spectaire’s acquisition of microMS in December 2022. Dr. Hemond also served in multiple roles, including Chief Executive Officer and Chief Operating Officer, of Indigo Technologies, Inc., an original equipment manufacturer focused on the electric vehicle industry, from 2011 to 2020. Dr. Hemond holds a B.S. in electrical engineering, a Masters of Engineering in electrical engineering and a Ph.D. in mechanical engineering from the Massachusetts Institute of Technology. We believe that Dr. Hemond is qualified to serve on the Board due to, among other things, his invention of the core technology underlying Spectaire’s business, deep knowledge of Spectaire and his extensive engineering, financial and leadership experience.

 

Chris Grossman has served as Chief Commercial Officer of Spectaire since the consummation of the Business Combination. Mr. Grossman has served as Chief Commercial Officer of Legacy Spectaire since its formation in September 2022. Prior to joining Legacy Spectaire, Mr. Grossman served as President of Quantum Fleet Technology America’s Ltd. From November 2018 through August 2022. From 2013 through October 2018, Mr. Grossman served as Chief Executive Officer of Zovy LLC. Prior to joining Zovy, Mr. Grossman served in multiple roles, including Vice President of Engineering, at Rand Worldwide, Inc. Mr. Grossman holds a Bachelor of Science in mechanical engineering from Rensselaer Polytechnic Institute.

 

Rui Mendes has served as Chief Information Officer of Spectaire since the consummation of the Business Combination. Mr. Mendes has served as Chief Information Officer of Legacy Spectaire since July 2022, as Chief Technology Officer of 3rdGP Financial LLC, which he co-founded with Mr. Semkiw, since July 2018 and as Chief Executive Officer of LVI Holdings LTD since 2008. Mr. Mendes previously served as Chief Technology Officer of Carta Solutions Holding Corp from 2006 through June 2018. Mr. Mendes also previously served as Chief Executive Officer of NOVAData Information Systems Inc. and as Chief Technology Officer of Geodata. Mr. Mendes earned a BSC Computer Science in information systems and operations research from the University of South Africa.

 

Corporate Governance

 

Composition of the Board

 

Spectaire’s business and affairs are organized under the direction of the Board. Brian Semkiw is Chairman of the Board. The primary responsibilities of the Board are to provide oversight, strategic guidance, counseling, and direction to Spectaire’s management. The Board meets on a regular basis and additionally as required. In accordance with the terms of our bylaws, the Board may establish the authorized number of directors from time to time by resolution. The Board currently consists of six members. In accordance with our certificate of incorporation, the Board is divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Spectaire’s directors are divided among the three classes as follows:

 

the Class I directors are Rick Gaenzle and Brian Hemond and their terms will expire at the annual meeting of stockholders to be held in 2026;

 

the Class II directors are Scott Honour and Brian Semkiw and their terms will expire at the annual meeting of stockholders to be held in 2024; and

 

the Class III directors are Jörg Mosolf and Frank Baldesarra and their terms will expire at the annual meeting of stockholders to be held in 2025.

 

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of the Board into three classes with staggered three-year terms may delay or prevent a change of Spectaire’s management or a change in control.

 

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Independence of the Board of Directors

 

Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Dr. Jörg Mosolf, Frank Baldesarra, Scott Honour and Rick Gaenzle are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors have regularly scheduled meetings at which only independent directors are present.

 

Board Committees

 

Our board of directors directs the management of our business and affairs, as provided by Delaware law, and conducts its business through meetings of the board of directors and standing committees. We have a standing audit committee, nominating committee and compensation committee. In addition, from time to time, special committees may be established under the direction of the board of directors when necessary to address specific issues.

 

Audit Committee

 

Our audit committee consists of Rick Gaenzle and Frank Baldesarra, with Mr. Tan serving as chairperson. Each member of the audit committee is able to read and understand fundamental financial statements in accordance with applicable requirements.

 

The primary purpose of the audit committee is to discharge the responsibilities of the Board with respect to Spectaire’s corporate accounting and financial reporting processes, systems of internal control and financial statement audits, and to oversee Spectaire’s independent registered public accounting firm. Specific responsibilities of our audit committee include:

 

helping the Board oversee corporate accounting and financial reporting processes;

 

managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit Spectaire’s consolidated financial statements;

 

discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and the independent accountants, Spectaire’s interim and year-end operating results;

 

developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

 

reviewing related person transactions;

 

obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes Spectaire’s internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues when required by applicable law; and

 

approving or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm.

 

Compensation Committee

 

Spectaire’s compensation committee consists of Frank Baldesarra, who serves as chairperson. The primary purpose of the compensation committee is to discharge the responsibilities of the Board in overseeing the compensation policies, plans and programs and to review and determine the compensation to be paid to executive officers, directors, and other senior management, as appropriate. Specific responsibilities of the compensation committee will include:

 

reviewing and approving the compensation of the chief executive officer, other executive officers and senior management;

 

reviewing and recommending to the Board the compensation of directors;

 

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administering the incentive award plans and other benefit programs;

 

reviewing, adopting, amending, and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections and any other compensatory arrangements for the executive officers and other senior management; and

 

reviewing and establishing general policies relating to compensation and benefits of the employees, including the overall compensation philosophy.

 

Nominating and Corporate Governance Committee

 

Spectaire’s nominating and corporate governance committee consists of Dr. Jörg Mosolf, who serves as chairperson.

 

Specific responsibilities of the nominating and corporate governance committee include:

 

identifying and evaluating candidates, including the nomination of incumbent directors for re-election and nominees recommended by stockholders, to serve on the Board;

 

considering and making recommendations to the Board regarding the composition and chairmanship of the committees of the Board;

 

developing and making recommendations to the Board regarding corporate governance guidelines and matters, including in relation to corporate social responsibility; and

 

overseeing periodic evaluations of the performance of the Board, including its individual directors and committees.

 

Risk Oversight

 

One of the key functions of the Board is informed oversight of Spectaire’s risk management process. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of oversight. In particular, the Board is responsible for monitoring and assessing strategic risk exposure, and Spectaire’s audit committee has the responsibility to consider and discuss Spectaire’s major financial risk exposures and the steps its management will take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements. Spectaire’s compensation committee also assesses and monitors whether Spectaire’s compensation plans, policies and programs comply with applicable legal and regulatory requirements.

 

Compensation Committee Interlocks and Insider Participation

 

None of our executive officers serves as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our board of directors or compensation committee.

 

Code of Business Conduct and Ethics

 

Spectaire has a code of ethics that applies to all of its executive officers, directors and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The code of ethics is available at Spectaire’s website, www.spectaire.com. In addition, Spectaire intends to post on its website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the code of ethics. The reference to the Spectaire website address does not constitute incorporation by reference of the information contained at or available through Spectaire’s website, and you should not consider it to be a part of this prospectus.

 

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EXECUTIVE AND DIRECTOR COMPENSATION

 

Overview

 

This section discusses the material components of the executive compensation program for Spectaire’s executive officers who are named in the “Summary Compensation Table” below. In 2023, Spectaire’s “named executive officers” and their positions were as follows:

 

Brian Semkiw, Chief Executive Officer;

 

Brian Hemond, Chief Technology Officer; and

 

Christopher Grossman, Chief Commercial Officer.

 

Summary Compensation Table

 

The following table sets forth information concerning the compensation of Spectaire’s named executive officers for the fiscal years ended December 31, 2022 and December 31, 2023.

 

Name and Principal Position(1)

  Year   Salary
($)
   Bonus
($)(2)
   Stock Award
($)(3)
   All Other
Compensation
($)(4)
   Total
($)
 
Brian Semkiw   2023    255,147    658,000    2,830,500    -    3,743,647 
Chief Executive Officer   2022    102,000    -    10,500,000    -    10,602,000 
Brian Hemond   2023    209,769    149,500    2,830,500    7,257    3,197,026 
Chief Technology Officer   2022    186,875    -    300,000    -    486,875 
Christopher Grossman   2023    243,420    34,500    2,201,500    5,257    2,484,677 
Chief Commercial Officer                              

 

 

(1)Mr. Semkiw was employed by, and received compensation for services to Spectaire through, Corsario Ltd. during 2023. Mr. Grossman was employed by, and received compensation for services to Spectaire through, Corsario Ltd. through June 28, 2023, at which time he became employed by and began receiving compensation from Spectaire. For additional information about Spectaire’s arrangement with Corsario Ltd., please see the section entitled “Certain Relationships and Related Party Transactions - Spectaire” below.

 

(2)Amounts represent (i) cash transaction bonuses paid to each of Spectaire’s named executive officers during 2023, and (ii) cash bonuses paid to Messrs. Semkiw and Hemond in connection with Legacy Spectaire’s 2023 Financings. See “Narrative to Summary Compensation Table - Cash Incentive Compensation” for additional information.

 

(3)Amounts reflect the full grant-date fair value of restricted stock units issued during 2023 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. Assumptions used to calculate the value of such awards are included in Note 10 to the consolidated financial statements included in this prospectus or will be included in the notes to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2023.

 

(4)The amounts in this column reflect employer matching contributions under Spectaire’s 401(k) plan.

 

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Narrative Disclosure to Summary Compensation Table

 

2023 Salaries

 

The named executive officers receive a base salary to compensate them for services rendered to Spectaire. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. During 2023, Spectaire’s named executive officers’ annual base salaries increased as follows: (i) Mr. Semkiw’s base salary was increased by $48,000 in May 2023 in connection with Legacy Spectaire’s 2023 Financings; (i) Mr. Hemond’s base salary was increased by $57,000 in May 2023 in connection with Legacy Spectaire’s 2023 Financings; and (iii) Mr. Grossman’s base salary was increased by $72,000 in July 2023 after Legacy Spectaire’s 2023 Financings and Mr. Grossman’s commencement of employment with Spectaire (and cessation of employment with Corsario Ltd.). The table below sets forth the annual base salaries of our named executive officers during 2023, both before and after the foregoing increases. The Summary Compensation Table above shows the actual base salaries paid to each named executive officer in fiscal year 2023.

 

 

Named Executive Officer  2023
Pre-Increase
Base Salary
($)
   2023
Post-Increase
Base Salary
($)
 
Brian Semkiw   204,000    252,000 
Brian Hemond   195,000    252,000 
Christopher Grossman   180,000    252,000 

 

Cash Incentive Compensation

 

Transaction Bonuses

 

During 2023, each of the named executive officers received cash bonuses in connection with the closing of the Business Combination. Mr. Semkiw’s bonus was paid in two tranches, on each of October 24, 2023 and November 29, 2023, and Messrs. Hemond’s and Grossman’s bonuses were paid in full on October 24, 2023. The aggregate transaction bonuses paid to each of Messrs. Semkiw, Hemond and Grossman were $143,000, $84,500 and $34,500, respectively.

 

Financing Bonuses

 

Additionally, during 2023, each of Messrs. Semkiw and Hemond received cash bonuses related to the Company achieving capitalization targets for Legacy Spectaire (“2023 Financings”). The aggregate amount of such bonuses paid to Messrs. Semkiw and Hemond were $515,000 and $65,000, respectively, and the bonuses were paid in three tranches on each of February 23, 2023, April 2, 2023 and April 17, 2023.

 

Equity Compensation

 

On March 21, 2023, pursuant to Legacy Spectaire’s 2022 Equity Incentive Plan (as amended, the “2022 Plan”), we granted two awards of restricted stock units covering, in the aggregate, 195,190 shares of our common stock to Mr. Semkiw, two awards of restricted stock units covering, in the aggregate, 195,190 of shares of our common stock to Mr. Hemond, and one award of restricted stock units covering 151,814 shares of our common stock to Mr. Grossman. The awards granted to each of the named executive officers are subject to both a service-based vesting condition and a liquidity-based vesting condition, as further described below.

 

With respect to one of the awards granted to each of Messrs. Semkiw and Hemond, the service-based vesting condition is satisfied as to 1/8th of the restricted stock units subject thereto on each quarterly anniversary of the vesting commencement date, subject to the applicable executive’s continued service through the applicable service-vesting date. The liquidity-based vesting condition was satisfied upon the closing of the Business Combination.

 

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With respect to the second award granted to each of Messrs. Semkiw and Hemond and the award granted to Mr. Grossman, the service-based vesting condition is satisfied as to 1/12th of the restricted stock units subject thereto on each quarterly anniversary of the vesting commencement date, subject to the applicable executive’s continued service through the applicable service-vesting date. The liquidity-based vesting condition was satisfied upon the closing of the Business Combination.

 

The following table sets forth the restricted stock units issued to Spectaire’s named executive officers in the 2023 fiscal year.

 

 

Named Executive Officer

  2023
Restricted
Stock Units
(#)
 
Brian Semkiw   195,190 
Brian Hemond   195,190 
Christopher Grossman   151,814 

 

In connection with the Business Combination, Spectaire adopted a 2023 Incentive Award Plan (the “Spectaire Equity Incentive Plan,” in order to facilitate the grant of cash and equity incentives to directors, employees (including named executive officers) and consultants of Spectaire and certain of its affiliates and to enable Spectaire and certain of its affiliates to obtain and retain services of these individuals, which is essential to its long-term success. No further awards have been or will be granted under the 2022 Plan following the effectiveness of the Spectaire Equity Incentive Plan.

 

Other Elements of Compensation

 

Retirement Plans

 

Spectaire currently maintains a 401(k) retirement savings plan for its employees who satisfy certain eligibility requirements, including all of Spectaire’s named executive officers, who are eligible to participate in the 401(k) plan on the same terms as other full-time employees. The Internal Revenue Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. Spectaire believes that providing a vehicle for tax-deferred retirement savings through its 401(k) plan adds to the overall desirability of its executive compensation package and further incentivizes its employees and its named executive officers, in accordance with its compensation policies.

 

Employee Benefits and Perquisites

 

All of Spectaire’s full-time employees, including its named executive officers, are eligible to participate in our health and welfare plans, including medical and dental insurance programs.

 

Spectaire believes these benefits are appropriate and provide a competitive compensation package to Spectaire’s named executive officers. We do not currently, and we did not during 2023, provide perquisites to any of our named executive officers.

 

No Tax Gross-Ups

 

Spectaire does not make gross-up payments to cover its named executive officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by Spectaire.

 

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Outstanding Equity Awards at Fiscal Year-End

 

The following table summarizes the number of shares of Spectaire common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2023.

 

          Stock Awards 
Named Executive Officer  Grant Date  Vesting Start Date   Number of
Shares or
Units of
Stock that
have Not
Vested
(#)
   Market
Value of
Shares or
Units of
Stock that
have Not
Vested
($)(1)
 
Brian Semkiw  10/6/2022   10/6/2021(2)   759,071    1,252,467 
   3/21/2023   3/1/2023(3)   39,761    65,606 
   3/21/2023   3/1/2023(4)   139,163    229,619 
Brian Hemond  10/6/2022   10/6/2021(2)   21,688    35,785 
   3/21/2023   3/1/2023(3)   39,761    65,606 
   3/21/2023   3/1/2023(4)   139,163    229,619 
Christopher Grossman  3/21/2023   3/1/2023(4)   139,163    229,619 

 

 

(1)Amount calculated based on the fair market value of Legacy Common Stock as of December 31, 2023, which was $1.65.

 

(2)Represents an award of restricted common stock that vests with respect to 25% of the underlying shares on the first anniversary of the vesting start date, and with respect to 1/48th of the underlying shares on each monthly anniversary of the applicable vesting start date thereafter, subject to the applicable executive’s continued service through the applicable vesting date. If Spectaire undergoes a change in control and the executive’s service is terminated by Spectaire or a successor entity without cause or the executive resigns for good reason, in either case, within 60 days prior to or 12 months following such change in control, then the restricted stock award will vest in full upon such termination of service.

 

(3)Represents restricted stock units subject to both a service-based vesting condition and a liquidity-based vesting condition. The service-based vesting condition is satisfied as to 1/8th of the restricted stock units subject thereto on each quarterly anniversary of the vesting commencement date, subject to the applicable executive’s continued service through the applicable service-vesting date. The liquidity-based vesting condition was satisfied upon the closing of the Business Combination.

 

(4)Represents restricted stock units subject to both a service-based vesting condition and a liquidity-based vesting condition. The service-based vesting condition is satisfied as to 1/12th of the restricted stock units subject thereto on each quarterly anniversary of the vesting commencement date, subject to the applicable executive’s continued service through the applicable service-vesting date. The liquidity-based vesting condition was satisfied upon the closing of the Business Combination.

 

Director Compensation

 

Spectaire does not maintain, and Legacy Spectaire has not historically maintained, a formal non-employee director compensation program. However, during 2023, Legacy Spectaire granted an award of restricted stock units covering 43,375 shares of our common stock to each of Messrs. Hunter and Mosolf pursuant to the 2022 Plan. Messrs. Hunter’s and Mosolf’s awards are subject to both a service-based vesting condition and a liquidity-based vesting condition. The service-based vesting condition is satisfied as to 1/8th of the restricted stock units subject thereto on each quarterly anniversary of the vesting commencement date, subject to the applicable director’s continued service through the applicable service-vesting date. The liquidity-based vesting condition was satisfied upon the closing of the Business Combination.

 

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In addition, during 2023, Mr. Hunter received a cash bonus in an amount equal to $220,000 in connection with Legacy Spectaire’s 2023 Financings.

 

Messrs. Semkiw and Hemond do not receive additional compensation for their services as a directors, and the compensation provided to them as officers is set forth in the Summary Compensation Table above.

 

2023 Director Compensation Table

 

The following table sets forth information concerning the compensation of Spectaire’s non-employee directors for the year ended December 31, 2023.

 

 

Name

  Fees Earned
or Paid in
Cash
($)
   Stock
Awards
($)(1)
   All Other
Compensation
($)(2)
   Total
($)
 
Ian Hunter(3)   -    629,000    220,000    849,000 
Joerg Mosolf   -    629,000    -    629,000 
Frank Baldesarra   -    -    -    - 
Scott Honour   -    -    -    - 
Jim Sheridan(4)   -    -    -    - 
Tao Tan   -    -    -    - 

 

 

(1)Amounts reflect the full grant-date fair value of the restricted stock units issued to Messrs. Hunter and Mosolf during 2023 computed in accordance with ASC Topic 718. Spectaire provides information regarding the assumptions used to calculate the value of such awards in Note 10 to the consolidated financial statements included in this prospectus or will be included in the notes to the consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2023. As of December 31, 2023, Mr. Hunter held 21,688 restricted shares of our common stock and unvested restricted stock units covering 39,761 shares of our common stock, and Mr. Mosolf held unvested restricted stock units covering 39,761 shares of our common stock. No other options or stock awards were held by Spectaire’s non-employee directors as of December 31, 2023.

 

(2)Amount represents a cash bonus related to Legacy Spectaire’s 2023 Financings.

 

(3)Mr. Hunter ceased to serve as a non-employee director on March 24, 2023.

 

(4)Mr. Sheridan commenced service as a non-employee director on October 19, 2023.

 

Going forward, Spectaire intends to approve and implement a compensation program for its non-employee directors; however, the terms and conditions of such program have not yet been determined.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

In addition to the compensation arrangements with directors and executive officers described under “Executive and Director Compensation” and “Management,” the following is a description of each transaction since January 1, 2023 and each currently proposed transaction in which:

 

we have been or are to be a participant;

 

the amount involved exceeded or will exceed $120,000; and

 

any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals (other than tenants or employees), had or will have a direct or indirect material interest.

 

Statement of Policy Regarding Transactions with Related Persons

 

Our Board recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests (or the perception of such conflicts of interest). We have adopted a written policy on transactions with related persons that is in conformity with the requirements for issuers having publicly held common stock that is listed on Nasdaq. Under the policy, our finance team is primarily responsible for developing and implementing processes and procedures to obtain information regarding related persons with respect to potential related person transactions and then determining, based on the facts and circumstances, whether such potential related person transactions do, in fact, constitute related person transactions requiring compliance with the policy. If our Chief Financial Officer determines that a transaction or relationship is a related person transaction requiring compliance with the policy, our Chief Financial Officer will be required to present to the audit committee all relevant facts and circumstances relating to the related person transaction. The audit committee will be required to review the relevant facts and circumstances of each related person transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and the extent of the related person’s interest in the transaction, take into account the conflicts of interest and corporate opportunity provisions of the our code of business conduct and ethics, and either approve or disapprove the related person transaction. If advance audit committee approval of a related person transaction requiring the audit committee’s approval is not feasible, then the transaction may be preliminarily entered into by management upon prior approval of the transaction by the chair of the audit committee, subject to ratification of the transaction by the audit committee at the audit committee’s next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. If a transaction was not initially recognized as a related person transaction, then, upon such recognition, the transaction will be presented to the audit committee for ratification at the audit committee’s next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. Our management will update the audit committee as to any material changes to any approved or ratified related person transaction and will provide a status report at least annually of all then-current related person transactions. No director will be permitted to participate in approval of a related person transaction for which he or she is a related person.  

 

Certain Relationships and Related Party Transactions

 

Joint Venture

 

The description of the Joint Venture included in the section titled “Key Transactions” is incorporated by reference.

 

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Indemnification of Directors and Officers

 

Our bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the DGCL. In addition, our certificate of incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL.

 

There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

 

Registration Rights

 

The description of Registration Rights included in the section titled “Key Transactions” is incorporated by reference.

  

PIPE Financing

 

The description of the PIPE Financing included in the section titled “Key Transactions” is incorporated by reference.

 

Lock-up Agreements

 

In connection with the Business Combination, PCCT entered into lock-up agreements with (i) the Sponsor, (ii) certain of PCCT’s directors and officers and (iii) and certain Legacy Spectaire stockholders, restricting the transfer of Common Stock, Private Placement Warrants and any shares of Common Stock underlying the Private Placement Warrants from and after the closing of the Business Combination. The restrictions under the lock-up agreements (1) with respect to the Common Stock, began at the closing of the Business Combination and end on (a) in the case of the Sponsor and certain of PCCT’s directors and officers, the date that is 365 days after the closing of the Business Combination, or upon the price of Common Stock reaching $12.00 for any 20 trading days within a 30-trading day period commencing at least 150 days after the closing of the Business Combination, and (b) in the case of the Legacy Spectaire stockholders party thereto, the date that is 180 days after the closing of the Business Combination, and (2) with respect to the Private Placement Warrants and any shares of Common Stock underlying the Private Placement Warrants, the date that is 30 days after the closing of the Business Combination.

 

Arosa Loan

 

The description of the Arosa Loan included in the section titled “Key Transactions” is incorporated by reference.

 

MIT License Agreement

 

The description of the MIT License Agreement included in the section titled “Key Transactions” is incorporated by reference.

 

Corsario Agreement

 

The description of the Corsario Agreement included in the section titled “Key Transactions” is incorporated by reference.

 

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PRINCIPAL STOCKHOLDERS

 

The following table sets forth information known to us regarding the beneficial ownership of our Common Stock:

 

each person who is the beneficial owner of more than 5% of the outstanding shares of our Common Stock;

 

each of our named executive officers and directors; and

 

all of our executive officers and directors as a group.

 

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed above has sole voting and investment power with respect to such shares. Unless otherwise noted, the address of each beneficial owner is c/o Spectaire Holdings, Inc., 155 Arlington Street, Watertown, MA 02472.

 

The beneficial ownership of our Common Stock is shown as of June 3, 2024, based on 18,547,201 shares of Common Stock issued and outstanding as of June 3, 2024.

 

 

Name of Beneficial Owners

  Number of
Shares of
Common Stock
Beneficially
Owned
   Percentage of
Outstanding
Common
Stock
 
5% Stockholders:          
Perception Capital Partners II LLC(1)   15,800,000    62.2%
           
Directors and Named Executive Officers:          
Rick Gaenzle   -    - 
Brian Semkiw   775,337    5.1%
Brian Hemond   1,469,344    9.6%
Dr. Jörg Mosolf(2)   1,865,676    12.2%
Scott Honour(1)   15,800,000    62.2%
Frank Baldesarra   -    - 
Chris Grossman   12,651    * 
Rui Mendes   594,606    3.9%
Directors and executive officers as a group (8 individuals)   4,717,614    30.8%

 

 

*Less than one percent.

 

(1)Includes 10,050,000 shares of Common Stock issuable upon the exercise of the Private Placement Warrants. Perception Capital Partners II LLC, the Sponsor, is the record holder of the shares of Common Stock reported herein. Sponsor is managed by Perception Capital Partners LLC, which is controlled by Northern Pacific Group, L.P. Scott Honour and Marcy Haymaker control Northern Pacific Group, L.P. As a result, Scott Honour and Marcy Haymaker may be deemed to beneficially own shares held by Sponsor by virtue of their indirect shared control over Sponsor.

 

(2)1,812,062 of the shares of Common Stock beneficially owned by Dr. Jörg Mosolf are held indirectly through MLabCapital GmbH.

 

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SELLING STOCKHOLDER

 

This prospectus relates to the possible resale from time to time by Yorkville of any or all of the shares of Common Stock that may be issued by us to Yorkville under the SEPA. For additional information regarding the issuance of Common Stock covered by this prospectus, see the section titled “Committed Equity Financing” above.

 

We are registering the shares of common stock pursuant to the provisions of the Registration Rights Agreement we entered into with Yorkville on May 17, 2024 in connection with the SEPA in order to permit Yorkville to offer the shares of Common Stock for resale from time to time. Except for the transactions contemplated by the SEPA and the Registration Rights Agreement, Yorkville has not had any material relationship with us within the past three years.

 

The table below presents information regarding the Selling Stockholder and the shares of Common Stock that it may offer from time to time under this prospectus. This table is prepared based on information supplied to us by the Selling Stockholder, and reflects beneficial ownership as of June 3, 2024. The number of shares of Common Stock in the column “Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus” represents all of the shares of Common Stock that the Selling Stockholder may offer under this prospectus. The Selling Stockholder may sell some, all or none of its shares of Common Stock in this offering. We do not know how long the Selling Stockholder will hold the shares of Common Stock before selling them, and we currently have no agreements, arrangements or understandings with the Selling Stockholder regarding the sale of any of the shares of Common Stock.

 

Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes shares of Common Stock with respect to which the Selling Stockholder has voting and investment power. The percentage of shares of Common Stock beneficially owned by the Selling Stockholder prior to the offering shown in the table below is based on an aggregate of 18,547,201 shares of our Common Stock outstanding on June 3, 2024. Because the purchase price of the shares of Common Stock issuable under the Purchase Agreement is determined on each applicable purchase date, the number of shares of Common Stock that may actually be sold by the Company to Yorkville under the Purchase Agreement may be fewer than the number of shares of Common Stock being offered by this prospectus. The fourth column assumes the sale of all of the shares of Common Stock offered by the Selling Stockholder pursuant to this prospectus.

 

  Number of
Shares of
Common Stock
Owned Prior
to Offering
   Maximum
Number of
Shares of
Common Stock
to be Offered
Pursuant to this
   Number of
Shares of
Common Stock
Owned After
Offering
 
Name of Selling Stockholder  Number   Percent   Prospectus(2)   Number(3)   Percent 
YA II PN, LTD.(4)       -        -    10,000,000       -       - 

 

 

(1)In accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from the number of shares of Common Stock beneficially owned prior to the offering all of the shares of Common Stock that Yorkville may be required to purchase under the SEPA, because the issuance of such shares is solely at our discretion and is subject to conditions contained in the SEPA, the satisfaction of which are entirely outside of Yorkville’s control, including the registration statement that includes this prospectus becoming and remaining effective. Furthermore, the purchases of Common Stock are subject to certain agreed upon maximum amount limitations set forth in the SEPA. Also, the SEPA prohibits us from issuing and selling any shares of our Common Stock to Yorkville to the extent such shares, when aggregated with all other shares of our common stock then beneficially owned by Yorkville, would cause Yorkville’s beneficial ownership of our common stock to exceed beneficial ownership of greater than 4.99% of the outstanding number of shares of Common Stock.

 

(2)This number represents the 10,000,000 shares of common stock we may issue to Yorkville pursuant to the SEPA.

 

(3)Assumes the sale of all shares of Common Stock being offered pursuant to this prospectus.

 

(4)YA II PN, Ltd. is a fund managed by Yorkville Advisors Global, LP (“Yorkville LP”). Yorkville Advisors Global II, LLC (“Yorkville LLC”) is the general partner of Yorkville LP. All investment decisions for Yorkville are made by Yorkville LLC’s President and managing member, Mr. Mark Angelo. The business address of Yorkville is 1012 Springfield Avenue, Mountainside, NJ 07092.

 

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DESCRIPTION OF SECURITIES OF SPECTAIRE

 

The following description summarizes certain terms of our certificate of incorporation and bylaws and the DGCL.This description is summarized from, and qualified in its entirety by reference to, our certificate of incorporation and bylaws, each of which has been publicly filed with the SEC, as well as the relevant provisions of the DGCL.

 

Authorized and Outstanding Stock

 

The total amount of Spectaire’s authorized capital stock consists of 600,000,000 shares of Common Stock, par value $0.0001 per share, and 20,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”). No shares of Preferred Stock are outstanding.

 

Common Stock

 

Common Stock is not entitled to preemptive or other similar subscription rights to purchase any Spectaire securities. Common Stock is neither convertible nor redeemable. Unless the Board determines otherwise, we will issue all of Spectaire’s capital stock in uncertificated form.

 

Voting Power

 

Each holder of Common Stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Under our certificate of incorporation, Spectaire stockholders do not have cumulative voting rights. Because of this, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election.

 

Dividends

 

Each holder of Common Stock is entitled to the payment of dividends and other distributions as may be declared by the Board from time to time out of Spectaire’s assets or funds legally available for dividends or other distributions. These rights are subject to the preferential rights of the holders of Preferred Stock, if any, and any contractual limitations on Spectaire’s ability to declare and pay dividends.

 

Liquidation, Dissolution and Winding Up

 

If Spectaire is involved in voluntary or involuntary liquidation, dissolution or winding up of Spectaire’s affairs, or a similar event, each holder of Common Stock will participate pro rata in all assets remaining after payment of liabilities, in accordance with the number of shares of Common Stock held by each such holder, subject to prior distribution rights of Preferred Stock, if any, then outstanding.

 

Preemptive or Other Rights

 

Each holder of Common Stock is subject to, and may be adversely affected by, the rights of the holders of any series of Preferred Stock that we may designate and issue in the future.

 

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Preferred Stock

 

The Board has the authority to issue shares of Preferred Stock in one or more series and to determine and fix for each such series such voting powers, designations, preferences, qualifications, limitations, or restrictions thereof, including dividend rights, conversion rights, redemption privileges and liquidation preferences for the issue of such series all to the fullest extent permitted by the DGCL. The issuance of Preferred Stock could have the effect of decreasing the trading price of Common Stock, restricting dividends on Spectaire’s capital stock, diluting the voting power of Common Stock, impairing the liquidation rights of Spectaire’s capital stock, or delaying or preventing a change in control of Spectaire.

 

Warrants

 

The Board has the authority to create and issue warrants and to determine and set the exercise price, duration, times for exercise and other terms and conditions thereof, all to the fullest extent permitted by the DGCL.

 

Anti-Takeover Provisions

 

Section 203 of the Delaware General Corporation Law

 

As a Delaware corporation, we are subject to Section 203 of the DGCL, which generally prohibits a publicly held Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:

 

before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

 

Upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, those shares owned (1) by persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

 

on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least two-thirds (66 and 2/3%) of the outstanding voting stock that is not owned by the interested stockholder.

 

In general, Section 203 defines a “business combination” to include the following:

 

any merger or consolidation involving the corporation and the interested stockholder;

 

any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;

 

subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

 

any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or

 

the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the corporation.

 

In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.

 

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A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an express provision in its amended and restated certificate of incorporation or amended and restated bylaws resulting from a stockholders’ amendment approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of Spectaire may be discouraged or prevented.

 

Certificate of Incorporation and Bylaws

 

Among other things, our certificate of incorporation and bylaws:

 

permit the Board to issue up to 20,000,000 shares of Preferred Stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change of control;

 

provide that the authorized number of directors may be changed only by resolution of the Board;

 

provide that the Board will be classified into three classes of directors;

 

provide that, subject to the rights of any series of Preferred Stock to elect directors, directors may only be removed for cause, which removal may be effected, subject to any limitation imposed by law, by the holders of at least two-thirds (66 and 2/3%) of the voting power of all of the then outstanding shares of voting stock of the corporation entitled to vote at an election of directors;

 

provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum, or by a sole remaining director (other than any directors elected by the separate vote of one or more outstanding series of Preferred Stock), and will not be filled by the stockholders;

 

require that any action to be taken by stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent or electronic transmission;

 

provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s notice;

 

provide that special meetings of stockholders may be called only by the chairperson of the Board, its chief executive officer, its president or by its board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors; and

 

not provide for cumulative voting rights, therefore allowing the holders of a majority of the shares of Common Stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose.

 

The amendment of any of these provisions would require approval by the holders of at least two-thirds (66 and 2/3%) of the voting power of all of the then-outstanding capital stock entitled to vote generally in the election of directors, voting together as a single class. The Board may also act without stockholder action to amend, adopt or repeal our bylaws.

 

The combination of these provisions will make it more difficult for existing stockholders to replace the Board as well as for another party to obtain control of Spectaire by replacing its board of directors. Since the Board has the power to retain and discharge its officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated Preferred Stock makes it possible for the Board to issue Preferred Stock with voting or other rights or preferences that could impede the success of any attempt to change Spectaire’s control.

 

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These provisions are intended to enhance the likelihood of continued stability in the composition of the Board and its policies and to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce Spectaire’s vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for Spectaire’s capital stock and may have the effect of delaying changes in Spectaire’s control or management. As a consequence, these provisions may also inhibit fluctuations in the market price of Common Stock.

 

Limitations on Liability and Indemnification of Officers and Directors

 

Our certificate of incorporation contains provisions that limit the liability of Spectaire’s directors for monetary damages to the fullest extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL, including:

 

any breach of the director’s duty of loyalty to the corporation or its stockholders;

 

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

unlawful payments of dividends or unlawful stock repurchases or redemptions; or

 

any transaction from which the director derived an improper personal benefit.

 

Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

 

Our certificate of incorporation authorizes Spectaire to indemnify its directors, officers, employees, and other agents to the fullest extent permitted by Delaware law. Our bylaws provide that Spectaire is required to indemnify its directors and officers to the fullest extent permitted by Delaware law and may indemnify its other employees and agents. Our bylaws also provide that, on satisfaction of certain conditions, Spectaire will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and secure insurance on behalf of any officer, director, employee, or other agent for any liability arising out of his or her actions in that capacity regardless of whether Spectaire would otherwise be permitted to indemnify him or her under the provisions of Delaware law. Spectaire entered into agreements to indemnify its directors and executive officers in connection with the Business Combination. With certain exceptions, these agreements provide for indemnification for related expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by any of these individuals in connection with any action, proceeding or investigation. Spectaire believes that our certificate of incorporation and bylaws provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. Spectaire will also maintain customary directors’ and officers’ liability insurance.

 

The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against Spectaire’s directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against Spectaire’s directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that Spectaire pays the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

 

Dissenters’ Rights of Appraisal and Payment

 

Under the DGCL, with certain exceptions, our stockholders have appraisal rights in connection with a merger or consolidation of the Company. Pursuant to Section 262 of the DGCL, stockholders who properly demand and perfect appraisal rights in connection with such merger or consolidation will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery.

 

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Forum Selection

 

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action, suit or proceeding brought on Spectaire’s behalf; (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any of Spectaire’s directors, officers, or stockholders to us or Spectaire’s stockholders; (iii) any action, suit or proceeding asserting a claim against Spectaire or any of Spectaire’s directors, officers or other employees arising out of or pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws; and (iv) any action or proceeding asserting a claim against Spectaire or any of Spectaire’s directors, officers, or other employees that is governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, unless Spectaire consents in writing to the selection of an alternative forum. This choice of forum provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction, or the Securities Act. Our certificate of incorporation further provides that, unless Spectaire consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint. However, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such claims. As noted above, our certificate of incorporation provides that the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. Due to the concurrent jurisdiction for federal and state courts created by Section 22 of the Securities Act over all suits brought to

 

enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, there is uncertainty as to whether a court would enforce the exclusive form provision. Additionally, our certificate of incorporation provides that any person or entity holding, owning or otherwise acquiring any interest in any of Spectaire’s securities will be deemed to have notice of and consented to these provisions. Investors also cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our Common Stock is Continental Stock Transfer & Trust Company.

 

Trading Symbols and Market

 

Our Common Stock is listed on Nasdaq under the symbol “SPEC,” and our Warrants are listed on Nasdaq under the symbol “SPECW.”

 

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SHARES ELIGIBLE FOR FUTURE SALE

 

Lock-Up Agreement

 

Spectaire, the Sponsor, certain directors and officers of PCCT and Legacy Spectaire stockholders, entered into a Lock-Up Agreement (the “Lock-Up Agreement”), pursuant to which each party agreed that it will not, without the prior written consent of Spectaire during a lock-up period of 180 days or 365 days (depending on the relevant holder), as applicable, unless earlier released, and subject to customary exceptions, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option, right or warrant to purchase or otherwise transfer, dispose of or agree to transfer or dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (other than shares of Common Stock issued or issuable upon the exercise of Private Placement Warrants) issued or issuable to such party pursuant to the Merger Agreement (collectively, the “Lock-Up Shares”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Shares or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii). Notwithstanding the foregoing, if at any time before 180 days or 365 days after the Closing, as applicable, (x) the closing of a merger, liquidation, stock exchange, reorganization or other similar transaction after the Closing results in all of the public stockholders of Spectaire having the right to exchange their shares of Common Stock for cash securities or other property, or (y) the closing price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any twenty trading days within any thirty-trading day period commencing at least 150 days after the Closing, then each party’s Lock-Up Shares will be automatically released from the lock-up restrictions, in the case of clause (y) above, as of the last day of such thirty-trading day period. The lock-up restrictions contain customary exceptions, including for estate planning transfers, affiliates transfers, and transfers upon death or by will.

 

Shares Registered for Resale

 

In addition to the shares being registered with this prospectus, Spectaire filed a registration statement with the SEC for purposes of registering the resale from time to time of up to 24,469,671 shares of Common Stock (representing approximately 61.9% of our issued and outstanding shares of Common Stock and approximately 70.4% of our issued and outstanding shares of Common Stock held by non-affiliates (in each case, assuming the exercise of all of our warrants)), which consists of (a) 6,133,344 shares of Common Stock issued in connection with the Business Combination, (b) 5,165,000 shares of Common Stock originally issued to the Sponsor, (c) 10,050,000 shares of Common Stock that are issuable upon the exercise of the Private Placement Warrants, (d) 670,874 shares of Common Stock issued to Polar pursuant to the Amended and Restated Polar Subscription Agreement, (e) 206,000 shares of Common Stock issued to Polar in connection with the Polar Forward Purchase Agreement, (f) 50,000 shares of Common Stock issued in the PIPE Investment, and (g) 2,194,453 shares of Common Stock that are issuable upon the exercise of the Arosa Warrant. Spectaire has also filed a registration statement with the SEC for purposes of registering the resale from time to time by Keystone of up to 3,067,438 shares of Common Stock.

 

Rule 144

 

Pursuant to Rule 144, a person who has beneficially owned restricted Common Stock or Warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been an affiliate of Spectaire at the time of, or at any time during the three months preceding, a sale and (ii) Spectaire is subject to the Exchange Act periodic reporting requirements for at least three months before the sale and has filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as Spectaire was required to file reports) preceding the sale.

 

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Persons who have beneficially owned restricted Common Stock or Spectaire Warrants for at least six months but who are affiliates of Spectaire at the time of, or at any time during the three months preceding, a sale would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:

 

1% of the total number of shares of Common Stock then outstanding; or

 

the average weekly reported trading volume of Common Stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

 

Sales by affiliates of Spectaire under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about Spectaire.

 

Restrictions on the Use of Rule 144

 

Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:

 

The issuer of the securities that was formerly a shell company has ceased to be a shell company;

 

the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;

 

the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and

 

at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.

 

As a result of the consummation of the Business Combination, we are no longer a shell company. Accordingly, once the conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for the resale of the above noted restricted securities.

 

Rule 701

 

Rule 701 under the Securities Act generally allows a stockholder who purchases shares of PCCT capital stock pursuant to a written compensatory plan or contract executed prior to the Closing and who is not deemed to have been an affiliate of PCCT during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of PCCT to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. However, the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the applicable lock-up period expires.

 

84

 

 

PLAN OF DISTRIBUTION

 

The shares of Common Stock offered by this prospectus are being offered by the Selling Stockholder. The shares of Common Stock may be sold or distributed from time to time by the Selling Stockholder directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the shares of Common Stock offered by this prospectus could be effected in one or more of the following methods:

 

ordinary brokers’ transactions;

 

transactions involving cross or block trades;

 

through brokers, dealers, or underwriters who may act solely as agents;

 

“at the market” into an existing market for our common stock;

 

in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents;

 

in privately negotiated transactions; or

 

any combination of the foregoing.

 

In order to comply with the securities laws of certain states, if applicable, the shares of Common Stock may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares of Common Stock may not be sold unless they have been registered or qualified for sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.

 

Yorkville is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.

 

Yorkville has informed us that it intends to use one or more registered broker-dealers to effectuate all sales, if any, of our Common Stock that it has acquired and may in the future acquire from us pursuant to the Purchase Agreement. Such sales will be made at prices and at terms then prevailing or at prices related to the then current market price. Each such registered broker-dealer will be an underwriter within the meaning of Section 2(a)(11) of the Securities Act. Yorkville has informed us that each such broker-dealer will receive commissions from Yorkville that will not exceed customary brokerage commissions.

 

Brokers, dealers, underwriters or agents participating in the distribution of the shares of our Common Stock offered by this prospectus may receive compensation in the form of commissions, discounts, or concessions from the purchasers, for whom the broker-dealers may act as agent, of the shares of Common Stock sold by the Selling Stockholder through this prospectus. The compensation paid to any such particular broker-dealer by any such purchasers of shares of our Common Stock sold by the Selling Stockholder may be less than or in excess of customary commissions. Neither we nor the Selling Stockholder can presently estimate the amount of compensation that any agent will receive from any purchasers of shares of our Common Stock sold by the Selling Stockholder.

 

We know of no existing arrangements between the Selling Stockholder or any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares of our Common Stock offered by this prospectus.

 

We may from time to time file with the SEC one or more supplements to this prospectus or amendments to the registration statement of which this prospectus forms a part to amend, supplement or update information contained in this prospectus, including, if and when required under the Securities Act, to disclose certain information relating to a particular sale of shares of Common Stock offered by this prospectus by the Selling Stockholder, including the names of any brokers, dealers, underwriters or agents participating in the distribution of such shares of Common Stock by the Selling Stockholder, any compensation paid by the Selling Stockholder to any such brokers, dealers, underwriters or agents, and any other required information.

 

85

 

 

We will pay the expenses incident to the registration under the Securities Act of the offer and sale of the shares of our Common Stock covered by this prospectus by the Selling Stockholder.

 

We also have agreed to indemnify Yorkville and certain other persons against certain liabilities in connection with the offering of shares of our Common Stock offered hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Yorkville has agreed to indemnify us against liabilities under the Securities Act that may arise from certain written information furnished to us by Yorkville specifically for use in this prospectus or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable.

 

Yorkville has represented to us that at no time prior to the date of the SEPA has Yorkville or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our common stock or any hedging transaction, which establishes a net short position with respect to our Common Stock. Yorkville has agreed that during the term of the Purchase Agreement, neither Yorkville nor any of its agents, representatives or affiliates will enter into or effect, directly or indirectly, any of the foregoing transactions.

 

We have advised the Selling Stockholder that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the Selling Stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security that is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered by this prospectus.

 

This offering will terminate on the date that all shares of our Common Stock offered by this prospectus have been sold by the Selling Stockholder.

 

LEGAL MATTERS

 

The validity of the securities of Spectaire offered hereby will be passed upon for us by Holland & Hart LLP, Denver, Colorado.

 

EXPERTS

 

The consolidated financial statements of Spectaire Holdings Inc. (formerly known as Perception Capital Corp. II) as of December 31, 2023 and 2022 and for each of the years in the two-year period ended December 31, 2023, included in this registration statement/prospectus have been audited by UHY LLP, an independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein (which contains an explanatory paragraph relating to Spectaire Inc.’s ability to continue as a going concern), and are included in reliance upon such report given on the authority of said firm as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. We have also filed a registration statement on Form S-1, including exhibits, under the Securities Act with respect to the shares of Common Stock offered by this prospectus. This prospectus is part of the registration statement but does not contain all of the information included in the registration statement or the exhibits. Our SEC filings are available to the public on the internet at a website maintained by the SEC located at http://www.sec.gov. Those filings are also available to the public on, or accessible through, our website under the heading “Investors Relations” at www.spectaire.com. The information on our web site, however, is not, and should not be deemed to be, a part of this prospectus.

 

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SPECTAIRE HOLDINGS INC.

 

FINANCIAL STATEMENTS ANNEX TO FORM S-1 REGISTRATION STATEMENT

 

  Pages
Audited Condensed Consolidated Financial Statements    
Report of Independent Registered Public Accounting Firm   F-2
Consolidated Balance Sheets as of December 31, 2023 and 2022   F-3
Consolidated Statements of Operations for the Years ended December 31, 2023 and 2022   F-4
Consolidated Statements of Changes in Stockholders’ Deficit for the Years ended December 31, 2023 and 2022   F-5
Consolidated Statements of Cash Flows for the Years ended December 31, 2023 and 2022   F-6
Notes to the Consolidated Financial Statements   F-7
     
Unaudited Condensed Consolidated Financial Statements    
Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023   F-28
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (Unaudited)   F-29
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2024 and 2023 (Unaudited)   F-30
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (Unaudited)   F-31
Notes to Unaudited Condensed Consolidated Financial Statements   F-32

 

F-1

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders
Spectaire Holdings Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Spectaire Holdings Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2 to the consolidated financial statements, the Company has incurred recurring operating losses and negative cash flows from operations, has an accumulated deficit and working capital deficit, and has historically met its cash needs primarily from contributions from founders and other investors. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

 

We have served as the Company’s auditor since 2023.

 

Melville, New York

March 28, 2024

 

F-2

 

 

SPECTAIRE HOLDINGS INC.

Consolidated Balance Sheets

 

   December 31,
2023
   December 31,
2022
 
Assets        
Current assets        
Cash  $342,996   $18,886 
Inventories   243,448    
-
 
Prepaid expenses and other assets   577,665    5,930 
Total current assets   1,164,109    24,816 
Property and equipment, net   67,193    18,817 
Operating lease right of use asset   205,053    
-
 
Deposits   6,700    11,600 
Total assets  $1,443,055   $55,233 
           
Liabilities and stockholders’ deficit          
Current liabilities          
Accounts payable - related party (note 8)  $20,600   $188,000 
Accounts payable   1,885,390    13,030 
Accrued legal costs   6,765,906    208,432 
Accrued interest expense   1,014,360    
-
 
Other accrued expenses   1,867,822    2,165 
Other current liabilities   123,780    
-
 
Deferred revenue   525,000    
-
 
Notes payable   429,370    
-
 
Loan payable   5,200,000    
-
 
Convertible notes payable, net - related party (note 12)   1,411,516    437,499 
Operating lease liability - current portion   75,808    
-
 
Share based compensation liabilities   862,614    
-
 
Forward purchase agreements   717,000    
-
 
Deferred underwriting fees   5,635,000    
-
 
Total current liabilities   26,534,166    849,126 
           
Operating lease liability - non current portion   136,899    
-
 
Earnout liabilities   1,964,000    
-
 
Total liabilities   28,635,065    849,126 
           
Commitments and contingencies (note 16)   
 
    
 
 
           
Stockholders’ deficit          
Preferred stock, $0.0001 par value; 20,000,000 authorized shares and 0 shares issued and outstanding as of December 31, 2023 and 2022   
-
    
-
 
Common stock, $0.0001 par value;