| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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References to “we”, “us”, “our” or the “Company” are to AxonPrime Infrastructure Acquisition Corporation, except where the context requires otherwise. References to our “management” or our “management team” refer to
our officers and directors, and references to the “Sponsor” refer to AxonPrime Infrastructure Sponsor LLC, a Delaware limited liability company. The following discussion should be read in conjunction with our unaudited condensed financial
statements and related notes thereto included elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effects on
us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or assumptions, and actual
results, events or performance may be materially different from those expressed or implied by these forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s
expectations, hopes, beliefs, intentions, plans or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions,
are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Factors that might cause or contribute to actual results, events or performance differing from such
forward-looking statements include, but are not limited to, those set forth in the Risk Factors section of the Company’s registration statement on Form S-1, as amended, and the Company’s final prospectus for our initial public offering (“IPO”)
filed with the SEC on August 16, 2021 (“Final Prospectus”). The following discussion should be read in conjunction with our unaudited condensed financial statements and related notes thereto included elsewhere in this report.
Overview
We are a blank check company formed under the laws of the State of Delaware on April 1, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other
similar business combination (the “Business Combination”) with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of our IPO, our capital stock, debt or a combination of cash, stock and debt. We
are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Results of Operations
Our entire activity from inception up to March 31, 2022, was related to our formation and the IPO. Since the IPO, our activity has been limited to the evaluation of business combination candidates, and we will not be
generating any operating revenues until the closing and completion of our initial business combination. We expect to generate small amounts of non-operating income in the form of interest income from the proceeds derived from the IPO. We expect to
incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. We expect our expenses to increase substantially after this period.
For the three months ended March 31, 2022, we had a net income of $1,936,589, which was comprised of operating costs of $440,594, accrued income of $10,516 from investments in our Trust Account, $50,000 of franchise
tax expense and $2,416,667 of unrealized gain on fair value changes of warrants. The operating expenses were primarily due to fees to professionals such as the auditors, legal counsel and consultants, and insurance expenses.
Liquidity and Going Concern
As of March 31, 2022, the Company had $365,701 in its operating bank account and working capital deficit of $398,032. To date, the Company’s liquidity needs have been satisfied through a payment of $25,000 from the
Sponsor to cover certain expenses on behalf of the Company in exchange for the issuance of the Founder Shares, a loan of approximately $121,000 pursuant to the Note issued to the Sponsor, and the net proceeds from the consummation of the Private
Placement not held in the Trust Account. The Company fully repaid the Note on September 8, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s officers, directors and Initial
Shareholders may, but are not obligated to, provide the Company Working Capital Loans. As of March 31, 2022, there was no written agreement in place for the Working Capital Loans.
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and
evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business
Combination. The Company may need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated
to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing.
If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential
transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures
of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company would not be able to meet its obligations as they become due within one year after the date that the unaudited condensed
financial statements are available to be issued. As such, management has determined that the liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern. As of March 31, 2022, no adjustments have been
made to the carrying amounts of assets or liabilities.
Off-Balance Sheet Arrangements
As of March 31, 2022, and December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
Contractual Obligations
Administrative Services Agreement
Commencing on the date the Company’s securities were first listed, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, secretarial and administrative services provided to the members
of the Company’s management team. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. The Company recognized approximately $30,000 in connection with such services for
the three months ended March 31, 2022 in other operating expenses in the accompanying statement of operations, and which remains included in accrued expenses in the condensed balance sheet.
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and in each case holders of their component securities, as applicable)
will be entitled to registration rights pursuant to a registration rights agreement signed on the closing date of the Initial Public Offering, requiring the Company to register such securities for resale (in the case of the Founder Shares, only
after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain
“piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the
Securities Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter was paid a cash underwriting discount of 2.00% of the gross proceeds of the Initial Public Offering, or $3,000,000, in connection with the Initial Public Offering. In addition, the underwriter is
entitled to a deferred fee of three and half percent (3.50%) of the gross proceeds of the Initial Public Offering, or $5,250,000. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event
that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies and Estimates
The preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, and income and expenses during the periods reported. Actual
results could materially differ from those estimates. The Company has identified the following as its critical accounting policies:
Warrant Liabilities
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480,
Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or
modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value
of the warrants are recognized as a non-cash gain or loss on the statement of operations. The fair value of the private warrants were estimated using a Monte Carlo simulation model-based approach. The measurements of fair market value of the Public
Warrants were initially estimated using a Monte Carlo simulation model-based approach. As of March 31, 2022 and December 31, 2021, the Public warrants are calculated based on the market price of the Public Warrants, which trade under the ticker
symbol APMIW.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in FASB ASC Topic 480, “Distinguishing Liabilities from Equity.” The shares of Class A common stock
subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable shares of Class A common stock (including Class A common stock that features redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A common stock is classified as stockholders’
equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2022 and December 31,
2021, 15,000,000 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed balance sheets.
Net Income Per Share of Common Stock
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per common stock is computed by dividing net income by the weighted average number of shares of
common stock outstanding for the period. The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. This presentation
assumes a business combination as the most likely outcome. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
The calculation of diluted income per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the Private Placement since the exercise of the warrants is
contingent upon the occurrence of future events. The warrants are exercisable to purchase 8,333,333 shares of Class A common stock in the aggregate. At March 31, 2022, the Company did not have any dilutive securities or other contracts that could,
potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted net income per common stock is the same as basic net income per common stock for the periods presented.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act will be allowed to
comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our condensed financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an
“emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii)
provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the condensed financial statements (auditor discussion and analysis), (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation and (v) comply with the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,”
whichever is earlier.
PART II. OTHER INFORMATION
| ITEM 1. |
LEGAL PROCEEDINGS.
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None.
Factors that could cause our actual results to differ materially from those in this Quarterly Report on Form 10-Q include any of the risk factors described in our Annual Report on Form 10-K filed with the SEC on
March 31, 2022. Any of these factors could result in a significant or material adverse effect on our business, results of operations or financial condition. Additional risk factors not currently known to us or that we currently deem immaterial may
also impair our business, results of operations or financial condition. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in the Annual Report on Form 10-K filed with the SEC on
March 31, 2022.
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ITEM 2.
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
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On April 9, 2021, one of our founders purchased an aggregate of 8,625,000 shares of our Class B common stock (“founder shares”) for an aggregate offering price of $25,000 at an average purchase price of approximately
$0.003 per share. On April 19, 2021, the founder shares were assigned to our Sponsor for the same purchase price that was initially paid by one of our founders. In July 2021, our Sponsor returned to us, for no consideration, an aggregate of
4,312,500 founder shares, which were canceled, resulting in an aggregate of 4,312,500 founder shares outstanding and held by our initial shareholders (562,500 of which are subject to forfeiture by our Sponsor). On July 6, 2021, our Sponsor
transferred 25,000 founder shares to each of Muneer Satter, William Ulrich, and Richard Spencer, our independent director nominees, (for a total of 75,000 founder shares) at their original purchase price. In connection with the IPO, certain
qualified institutional buyers or institutional accredited investors (in addition to related investment vehicles controlled by or affiliated with these investors) that are not affiliated with us, our Sponsor, our directors or any member of our
management (the “Institutional Anchor Investors”) purchased an aggregate of $127,900,000 of Units (in each case, subject to a minimum of $8.5 million of Units) in the IPO. In connection with the closing of the IPO, our Sponsor sold an amount up to
75,000 founder shares to each Institutional Anchor Investor at their original purchase price (for a total of 650,000 founder shares). The number of founder shares issued was determined based on the expectation that the founder shares would
represent 20% of the outstanding common stock upon completion of the IPO. Such securities were issued in connection with our organization in reliance on the private offering exemption from registration contained in Section 4(a)(2) of the Securities
Act.
The founder shares will automatically convert into shares of our Class A common stock at the time of the Company’s initial business combination on a one-for-one basis, subject to adjustment as set forth in the Final
Prospectus.
On August 17, 2021, we consummated our IPO of 15,000,000 Units at a price of $10.00 per Unit, generating total gross proceeds of $150,000,000. Morgan Stanley & Co. LLC acted as sole book-running manager. The
securities sold in the offering were registered under the Securities Act on a registration statement on Form S-1, as amended (Registration No. 333-257777). The offering has been completed and all of the Units registered pursuant to the registration
statement, other than the Units underlying the underwriter’s over-allotment option, were sold. The registration statement became effective on August 12, 2021. The Company granted the underwriter a 45-day option from the date of the Final Prospectus
to purchase up to 2,250,000 additional Units to cover over-allotments, if any, at the IPO price, less underwriting discounts and commissions. Following the expiration of the underwriter’s over-allotment option, an aggregate of 3,750,000 founder
shares were issued and outstanding as of March 31, 2022 (reflecting the forfeiture by our Sponsor of 562,500 founder shares).
Simultaneously with the consummation of the IPO, we consummated the Private Placement of 3,333,333 Private Warrants at a price of $1.50 per Private Warrant, generating total proceeds of $5,000,000, to the Sponsor.
Such securities were issued in reliance on the private offering exemption from registration contained in Section 4(a)(2) of the Securities Act. Substantially concurrently with the closing of the Private Placement, one of the Institutional Anchor
Investors purchased Private Warrants from the Sponsor, in an aggregate amount of 66,666 Private Warrants, at the same price per Private Warrant paid by our Sponsor for such warrants.
A total of $150,000,000 composed of proceeds from the IPO and the sale of Private Warrants was placed in the Trust Account.
We paid a total of $3,000,000 in underwriting discounts and commissions and $453,625 for other costs and expenses related to the IPO, in addition to an estimated additional $80,000 in other offering expenses that
will be paid. In addition, the underwriter agreed to defer $5,250,000 in underwriting discounts and commissions.
For a description of the net proceeds and the use of the proceeds generated in our IPO, see Part I, Item 2 of this Form 10-Q, which is incorporated in this Part II, Item 2 by reference.
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ITEM 3.
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DEFAULTS UPON SENIOR SECURITIES.
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None.
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ITEM 4.
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MINE SAFETY DISCLOSURES.
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Not applicable.
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ITEM 5.
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OTHER INFORMATION.
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None.
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Exhibit
Number
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Description
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Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS*
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCH*
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Inline XBRL Taxonomy Extension Schema Document.
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101.CAL*
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Inline XBRL Taxonomy Extension Calculation Linkbase Document.
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101.DEF*
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Inline XBRL Taxonomy Extension Definition Linkbase Document.
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101.LAB*
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Inline XBRL Taxonomy Extension Label Linkbase Document.
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101.PRE*
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Inline XBRL Taxonomy Extension Presentation Linkbase Document.
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104*
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Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document, which is contained in Exhibit 101).
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