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PART
I
References
in this Annual Report on Form 10-K (this “Annual Report”) to “we,” “us,” “our,” the “Company”
or “Sagaliam” are to Sagaliam Acquisition Corp., a blank check company incorporated as a Delaware corporation. References
to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor”
refer to Sagaliam Sponsor LLC, a Delaware limited liability company. References to our “initial stockholders” refer to our
Sponsor and each of our independent directors.
Overview
We
are a blank check company incorporated in Delaware on March 31, 2021. We were formed for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, or the initial business
combination. We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, as
modified by the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and, as such, we are subject to all of the risks associated
with early stage and emerging growth companies.
As
of December 31, 2022, we had not commenced any operations. All activity for the period from March 31, 2021 (inception) through December
31, 2022 relates to our formation, initial public offering (“IPO”), operating costs, and expenses
related to finding a business combination target as further described below. We will not generate
any operating revenues until after the consummation of our initial business combination, at the earliest. We generate non-operating income
in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO. We have selected December 31 as our
fiscal year end.
Initial
Public Offering
On
December 23, 2021, we consummated our initial IPO of 11,500,000 units, including 1,500,000 units issued pursuant to the full exercise
of the underwriters’ over-allotment option. Each unit consists of one share of Class A capital stock, par value $0.0001 and one
right, with each right entitling the holder to receive one-eighth (1/8) of one share of Class A common stock. The units were sold at
a price of $10.00 per unit, generating gross proceeds of $115.0 million.
Simultaneously
with the closing of the IPO, we consummated the sale of 400,000 units at a price of $10.00 per unit in a private placement to our Sponsor,
generating gross proceeds of $4.0 million. In connection with the consummation of the IPO, we issued to the representative and/or its
designees 115,000 representative’s shares.
Upon
the closing of the IPO and the private placement, $116.15 million ($10.10 per unit) of the net proceeds of the IPO and certain of the
proceeds from the private placement were placed in a trust account located in the United States with Continental Stock Transfer &
Trust Company acting as trustee, which will be invested only in U.S. government treasury obligations with a maturity of 185 days or less
or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, which invest only in direct
U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a business combination and (ii)
the distribution of the trust account as described below.
On
December 22, 2022, we entered into an amendment to our underwriting agreement dated December 20, 2021 (the “Underwriting Agreement”)
with EF Hutton, Division of Benchmark Investments, LLC (the “Underwriter”). Pursuant to the terms of the amendment, the Underwriter
has agreed to reduce the amount of the Deferred Underwriting Commission (as defined in the Underwriting Agreement) payable to the Underwriter
under the Underwriting Agreement from $4,025,000 in cash to $3,025,000 in cash.
The
2022 Charter Amendment and Related Stockholder Redemptions
Under
Sagaliam’s previous charter, Sagaliam had until December 23, 2022 (the “Original Deadline Date”) to consummate its
initial business combination, unless otherwise extended either (a) automatically for four months upon the execution of a business combination
agreement and filing of a preliminary proxy statement with the SEC prior to the Original Deadline Date or (b) for successive three-month
periods up to two times from the Original Deadline Date by the Sponsor depositing additional funds into the trust account.
Sagaliam’s
Board believed that there was not sufficient time before the Original Deadline Date to consummate the business combination. Therefore,
Sagaliam’s Board determined that it is in the best interests of Sagaliam’s stockholders to extend the date by which we must
consummate a business combination in order to provide Sagaliams’ stockholders with the opportunity to participate in the prospective
investment.
As
reported by Sagaliam’s Form 8-K filed with the SEC on December 23, 2022, on December 22, 2022, Sagaliam’s shareholders voted
in favor of amending Sagaliam’s charter to allow it more time to complete our initial business combination up until October 23,
2023 (the “Extended Deadline Date”).
The
charter amendment provides Sagaliam with the option to extend the date by which it must complete its initial business combination
from the Original Deadline Date by up to ten successive one-month periods up to an Extended Deadline Date by the Sponsor depositing
the lesser of (x) $120,000 or (y) $0.06 per share for each public share of Sagaliam that is not redeemed in connection with our
special meeting held on December 22, 2022 for each one-month extension after December 23, 2022 into the trust account at each
extension election. As reported by Sagaliam’s Form 8-K filed with the SEC on January 23, 2023, Sagaliam extended the date by
which it has to complete its business combination from January 23, 2023 to February 23, 2023. As reported by Sagaliam’s Form
8-K filed with the SEC on February 24, 2023, Sagaliam extended the date by which it has to complete its business combination from
February 23, 2023 to March 23, 2023. As reported by Sagaliam’s Form 8-K filed with the SEC on April 3, 2023, Sagaliam extended
the date by which it has to complete its business combination from March 23, 2023 to April 23, 2023. As reported by Sagaliam’s
Form 8-K filed with the SEC on April 24, 2023, Sagaliam extended the date by which it has to complete its business combination from
April 23, 2023 to May 23, 2023. If Sagaliam’s business combination is not consummated by the Extended Deadline Date or if
Sagaliam fails to deposit additional funds into the trust account after each extension election, then Sagaliam will cease all
operations except for the purpose of winding up and Sagaliam will distribute amounts in the trust account as provided in the
charter, unless it further amends the charter.
In
connection with the charter amendment, 10,543,663 shares were redeemed at a price of $10.21 per share and $107,595,680.53 was removed
from the trust account to pay Sagaliam public stockholders who requested redemption of their Sagaliam Shares. As of December 31, 2022,
the trust account balance was $9,843,440.
Proposed
Business Combination
Business
Combination Agreement
On
November 16, 2022, we entered into a Business Combination Agreement (as it may be amended, supplemented
or otherwise modified from time to time, the “Business Combination Agreement”) by and among Sagaliam, Allenby Montefiore
Limited, a private company limited by shares organized and existing under the Laws of the Republic of Cyprus (“PubCo”), AEC
Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of PubCo (“PubCo Merger Sub”), Supraeon Investments
Limited, a private company limited by shares organized and existing under the Laws of the Republic of Cyprus (“Supraeon”),
and GLD Partners, LP, a Delaware limited partnership (“Seller”). Arabian Entertainment Company Limited, a limited liability
company organized under the Laws of the Kingdom of Saudi Arabia (“AEC”) is a majority-owned subsidiary of Supraeon, with
Seller as the only other owner of shares of AEC.
Pursuant
to the Business Combination Agreement, Supraeon may terminate the Business Combination Agreement and abandon the Merger at any time prior
to the Merger Effective Time by written notice to Sagaliam if Sagaliam has not received commitments in the form of mutually agreed Subscription
Agreements (as defined in the Business Combination Agreement) for at least fifty percent of the Minimum Cash Amount before December 15,
2022. On February 23, 2023, Supraeon notified Sagaliam that as Sagaliam did not receive such commitments before December 15, 2022, Supraeon
was electing to terminate the Merger and the Business Combination Agreement. All related ancillary agreements entered into in connection with the Business Combination Agreement were also terminated
on February 23, 2023. For additional information regarding the Business Combination Agreement and related ancillary agreements, see our
Current Reports on Form 8-K filed with the SEC on November 16, 2022 and March 1, 2023, respectively. All capitalized terms used herein
and not defined shall have the meanings ascribed to them in the Business Combination Agreement, the Seller Support Agreement, the Sponsor
Support Agreement, the Amended
and Restated Registration Rights Agreement and the Lock-up Agreement.
Membership
Interest Purchase Agreement
On
March 23, 2023, GLD Sponsor Member, LLC, a Delaware limited liability company (the “Seller”), entered into a Membership Interest
Purchase Agreement (the “Purchase Agreement”) with BN Holdings Trust, a Nevada Trust (“BN Holdings Trust”) and
Sagaliam Sponsor, LLC (the “Sponsor”), pursuant to which BN Holdings Trust agreed to purchase all of the issued and outstanding
equity interests in the Sponsor from the Seller, which constitutes 100% of the membership interests in the Sponsor. The consummation
of the transactions contemplated by the Purchase Agreement (the “Closing”) is expected to take place at 10:00 am., New York time,
on or before May 19, 2023.
There
are a number of conditions precedent to the Closing including the delivery of an amended letter agreement, pursuant to which Sagaliam
Acquisition Corp. (the “Company”) and EF Hutton, as underwriter to the Company, will consent to the transfer of certain Class
A units and Class B Shares from the Sponsor to certain individuals and entities as listed in the Purchase Agreement. The Purchase Agreement
also requires (i) the delivery of a release in favor of the Seller by the Sponsor and certain third parties, (ii) the delivery of indemnification
and hold harmless agreements between BN Holdings Trust and certain third parties, including the current directors of the Company, (iii)
the assumption by BN Holdings Trust of certain obligations of the Sponsor and the Company, each of which are to be paid as of the closing
date of a business combination for the Company, (iv) the maintenance of directors’ and officers’ liability insurance and
(v) the resignation of the current officers of the Sponsor.
Initial
Business Combination
Our
management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the private placement
units, although substantially all of these net proceeds are intended to be applied generally toward consummating a business combination.
The Nasdaq Stock Market LLC (“Nasdaq”) rules provide that the business combination must be with one or more target businesses
that together have a fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions
and taxes payable on interest earned on the trust account) at the time we sign a definitive agreement to enter a business combination.
We will only complete a business combination if the post-business combination company owns or acquires 50% or more of the outstanding
voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register
as an investment company under the Investment Company Act.
Although
we may pursue an acquisition in any industry or geography, we intend to capitalize on the capabilities of our management team and our
Sponsor to identify, acquire and operate a business that may provide opportunities for attractive risk-adjusted returns in the telecommunications,
media, and technology industries.
We
will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our
initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account
as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in
the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding
public shares, subject certain limitations. The per-share amount we will distribute to investors who properly redeem their shares will
not be reduced by the deferred underwriting commissions we will pay to the underwriters. There will be no redemption rights upon the
completion of a business combination with respect to our rights.
If
we are unable to complete a business combination by October 23, 2023 if all extension rights are exercised, and our stockholders have
not further amended our certificate of incorporation to extend such date, we will (i) cease all operations except for the purpose of
winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (less taxes payable and
up to $150,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will
completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions,
if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders
and the board of directors, liquidate and dissolve, subject in each case, to our obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
Our
Business Strategy
Although
our efforts to identify a prospective target business will not necessarily be limited to a particular industry, sector or region, we
intend to capitalize on our expertise in the telecommunications, media, and technology industries.
We
believe that the telecommunications, media and technology industries present attractive characteristics of long-term growth prospects
globally, stable and cycle-resistant demand, fragmented markets with opportunities for consolidation, a lack of dominant players and
global brands, predictable digital transition patterns and a large universe of growing and profitable targets.
We
believe that five long-term trends are driving positive transformation in the telecommunications, media and technology industries, creating
opportunities for long-term value creation in the sector specifically and, more broadly, in the associated knowledge economy. These drivers
of transformation are: (i) digitization (the use of digital content and services), (ii) responsiveness (designing and offering products
and services on a customized or bespoke basis for the individual), (iii) privatization (the growing private supply of media, content
and services), (iv) automation (the use of artificial intelligence and data to enhance the efficacy and efficiency of product delivery
platforms) and (v) globalization (the international development and dissemination of content, certification, technology and brands).
We intend to take advantage of these long-term trends and the associated consolidation and value-creation opportunities.
Our
acquisition and value creation strategy is to identify, acquire and, after our initial business combination, fundamentally enhance a
company in the public markets. We intend to seek a company in an industry that complements the experience and expertise of our management
team and is a business to which we believe we can add value.
Our
management team is deeply familiar with the trends of our target industries and brings an investing approach that offers multiple competitive
advantages in sourcing, evaluating and executing on opportunities, including being:
| ● | Stockholder
Centric: We think like owners and are focused on long-term gains rather than short-term
results. Our compensation structure of our management team is closely tied to the long-term
performance of the stock. See “Management – Officer and Director Compensation”. |
| ● | Forward
Looking: We are deeply familiar with the trends of the industries in which we plan
to invest and can evaluate the opportunities and risks presented by ongoing secular changes
and temporary market disruptions. |
| ● | Nimble:
Our team is structured to allow it to move quickly when opportunities arise, and we can be
creative in our deal structures. |
| ● | Financially
Sophisticated: Our management team has extensive experience in mergers, capital restructuring,
divestitures, investing, capital deployment, credit analysis and setting capital structures. |
| ● | Long-Term
Focused: We take a long-term, strategic view in our various operating businesses
and are less concerned with short-term bouts of volatility. |
| ● | Connected,
through Proprietary Sourcing Channels and Leading Industry Relationships: We believe
the capabilities and connections associated with our management team will provide us with
a differentiated pipeline of acquisition opportunities that would be difficult for other
participants in the market to replicate. We expect these sourcing capabilities will be further
bolstered by our management team and our reputation and deep industry relationships. |
Our
Business Combination Criteria
Consistent
with our business strategy, we have developed the following general criteria and guidelines that we believe are important in evaluating
prospective initial business combinations. We will use these criteria and guidelines in evaluating business combination opportunities,
but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines.
| ● | Businesses
with Significant Revenue and Earnings Growth Potential. We will seek to acquire one
or more businesses that we believe will have multiple organic and M&A-driven growth opportunities
over time. We will search for attractive, growth-oriented businesses that exhibit sound,
underlying fundamentals as well as demonstrated revenue growth and a clear path to profitability.
This includes such potential targets that are currently, or have the potential to be, a category
leader with long-term growth potential. |
| ● | Targets
That Can Benefit from our Management Team’s Relationships and Experience. Although
we may pursue an initial business combination opportunity in any industry or sector, we intend
to capitalize on our management team’s domain expertise acquired through decades of
strategic deal-making in the media, digital media/consumer technology and related industries.
We believe our management’s deep network of CEO-level and other C-suite and board relationships,
in addition to contacts with pre-eminent private and public market investors, will give us
a number of competitive advantages and will present us with a substantial number of potential
business combination targets, particularly in the aforementioned industries. |
| ● | Companies
with Potential to Benefit from Digital Disruption. We will seek to acquire one or
more businesses which currently, or have the potential to, benefit from digital disruption,
or a disruption of traditional business models or markets. |
| ● | Businesses
in High-Growth Markets. We will seek out opportunities in higher-growth sectors in
the U.S., as well as in selected developed and emerging international markets. |
| ● | Companies
that Drive Shareholder Returns. We will seek to acquire one or more businesses that
offer an attractive risk-adjusted return for our stockholders, weighing potential growth
opportunities and operational improvements in the target business against any identified
downside risks. |
These
criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be
based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management
may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet
the above criteria and guidelines, we will disclose that the target business does not meet them in our stockholder communications related
to our initial business combination would be in the form of tender offer documents or proxy solicitation materials that we would file
with the SEC.
Our
Business Combination Process
In
evaluating prospective business combinations, we expect to conduct a thorough due diligence review process that will encompass, among
other things, a review of historical and projected financial and operating data, meetings with management and their advisors (if applicable),
on-site inspection of facilities and assets, discussion with customers and suppliers, legal reviews and other reviews as we deem appropriate.
We
are not prohibited from pursuing an initial business combination with a company that is affiliated with our Sponsor, officers or directors.
In the event we seek to complete our initial business combination with a company that is affiliated with our Sponsor, officers or directors,
we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA
or an independent accounting firm that our initial business combination is fair to our company from a financial point of view.
Each
of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations
to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly,
if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or
she has then-current fiduciary or contractual obligations to present the opportunity to such entity, he or she will honor his or her
fiduciary or contractual obligations to present such opportunity to such entity. We believe, however, that the fiduciary duties or contractual
obligations of our officers or directors will not materially affect our ability to complete our initial business combination. Our amended
and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director
or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our
company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us
to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our
Sponsor and our officers and directors own founder shares following the IPO. Because of this ownership, our Sponsor and our officers
and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which
to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect
to evaluating a particular business combination if the retention or resignation of any such officers or directors were to be included
by a target business as a condition to any agreement with respect to our initial business combination. Our Sponsor paid an aggregate
of $25,000, or approximately $0.009 per founder share, and accordingly, the Sponsor could potentially make a substantial profit even
if the company selects an acquisition target that substantially declines in value and is unprofitable for public stockholders.
Selection
of a Target Business and Structuring of our Initial Business Combination
Nasdaq
rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value
of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on
the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market
value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted
by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses
or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able
to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment
banking firm that is a member of FINRA or an independent accounting firm with respect to the satisfaction of such criteria. While we
consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our
initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target
or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to purchase
multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management
will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will
not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
In
any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities
of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business
or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be
taken into account for purposes of Nasdaq’s 80% of net assets test.
To
the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages
of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor
to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant
risk factors.
In
evaluating a prospective business target, we expect to conduct a thorough due diligence review, which may encompass, among other things,
meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities,
as well as a review of financial and other information that will be made available to us.
Competition
In
identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from
other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged
buyout funds, and operating businesses seeking strategic business combinations. Many of these entities are well established and have
extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors
possess greater financial, technical, human and other resources than we do. Our ability to acquire larger target businesses will be limited
by our available financial resources. This inherent limitation gives others an advantage in pursuing the initial business combination
of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption
rights may reduce the resources available to us for our initial business combination and our outstanding rights, and the future dilution
they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive
disadvantage in successfully negotiating an initial business combination.
Human
Capital Management
We
currently have four executive officers. These individuals are not obligated to devote any specific number of hours to our matters but
they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination.
The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial
business combination and the stage of the initial business combination process we are in. We do not intend to have any full-time employees
prior to the completion of our initial business combination.
As
a smaller reporting company, we are not required to include risk factors in this annual report. As of the date of this document, there
have been no material changes to the risk factors disclosed in our final prospectus dated December 20, 2021, preliminary proxy statement
dated November 25, 2022 and definitive proxy statement dated November 29, 2022 filed with the SEC, except we may disclose changes to
such factors or disclose additional factors from time to time in our future filings with the SEC. Any of these factors could result in
a significant or material adverse effect on our results of operations or financial condition.
Item
1B. | Unresolved
Staff Comments. |
None.
Our
executive offices are located at 1800 Avenue of the Stars, Suite 1475, Los Angeles, CA 90067. Our executive offices are provided to us
by an affiliate of our Sponsor. Commencing on May 1, 2021, we have agreed to pay our Sponsor a total of $20,000 per month for the provision
of officers’ cash salaries, office space, utilities and secretarial and administrative support. We consider our current office
space adequate for our current operations.
Item
3. | Legal
Proceedings. |
In
Re Argon Credit, LLC, et al., Debtors, Case No. 16-39654 (U.S. Bankruptcy Court Northern District of Illinois Eastern Division).
On
December 16, 2016, Argon Credit, LLC and Argon X, LLC (collectively the “Debtors”) filed petitions for relief under chapter
11 of title 11 of the United States Code. On January 11, 2017, Debtors’ bankruptcy cases were converted to chapter 7 cases. On
December 14, 2018, the chapter 7 trustee filed an adversary proceeding as case number 18-ap-00948 (the “Bankruptcy Complaint”)
against multiple defendants, including Barry Kostiner, asserting claims for aiding and abetting breach of fiduciary duty. As to Mr. Kostiner,
the Bankruptcy Complaint alleged that, while an employee of the Debtor, he aided and abetted the former CEO of Argon Credit, Raviv Wolfe,
in breaching his fiduciary duties to Argon Credit, by, among other things, knowingly participating in a scheme to funnel assets away
from the Debtors and their creditors, double pledging Argon Credit’s assets, and knowingly submitting false or misleading financial
reports to the Debtors’ secured lender to conceal the transfer of Argon Credit’s assets. On July 11, 2019, Mr. Kostiner,
appearing through counsel, filed an answer denying all allegations against him set forth in the Bankruptcy Complaint.
On
August 12, 2021, the trustee filed a Motion for the Entry of an Order Pursuant to Bankruptcy Rule 9019 Approving Settlement with Mr.
Kostiner. Under the terms of the proposed settlement, Mr. Kostiner would pay the trustee $35,000 in exchange for dismissal with prejudice
from the suit and the exchange of mutual releases (the “Proposed Settlement”). Each of the trustee and Mr. Kostiner concluded
that the Proposed Settlement was in their respective best interests in light of the contested nature of the Complaint, the costs that
both parties would incur in connection with the litigation of same the uncertain outcome from protracted litigation. The trustee argued
that the Proposed Settlement was reasonable based upon: (a) the range of potential outcomes taking into account the defenses that Mr.
Kostiner could assert; (b) the likelihood of recovering more given Mr. Kostiner’s financial condition; (c) Argon Credit’s
director and officers’ liability insurance policy had been exhausted; and (d) the Debtors’ pre-petition lender had recently
filed a complaint against many of the parties originally named by the trustee in its adversary proceeding, including Mr. Kostiner, and
this action further reduces the likelihood of recovery against Mr. Kostiner, because at a minimum, he will be forced to pay to defend
that action. On September 3, 2021, the Bankruptcy Court issued an order approving the settlement, and on November 18, 2021, the Bankruptcy
Court issued an order granting the motion to voluntarily dismiss the proceeding against Mr. Kostiner.
Fund
Recovery Services, LLC v. RBC Capital Markets, LLC, et al., Case No. 1:20-cv-5730 (U.S. District Court for the Northern District
of Illinois Eastern Division.
On
September 25, 2020, Fund Recovery Services, LLC (“Fund”), as assignee of Princeton Alterative Income Fund, L.P. (“PAIF”)
filed a complaint in the above-referenced action asserting a variety of claims against 37 defendants, including Mr. Kostiner. On May
15, 2021, Fund filed an amended complaint against 34 of the defendants, including Mr. Kostiner (the “Amended Complaint”).
The claims against Mr. Kostiner in the Amended Complaint include: (i) violation of 18 U.S.C. 1962(2) by the conduct and participation
in a RICO enterprise through a pattern of racketeering activity; (ii) violation of 18 U.S.C. 1962(d) by conspiracy to engage in a pattern
of racketeering activity; (iii) fraud/intentional misrepresentation; (iv) aiding and abetting fraud/intentional misrepresentation; (v)
fraudulent concealment; (vi) aiding and abetting fraudulent concealment; (vii) fraudulent/intentional inducement; (viii) conversion;
(ix) aiding and abetting conversion; (x) civil conspiracy; and (xi) tortious interference with contractual relations. The Amended Complaint
seeks damages of approximately $240 million jointly and severally against all defendants, together with treble and punitive damages,
among other relief.
The
Amended Complaint, as it pertains to Mr. Kostiner, covers much of the same conduct that is the subject of the Bankruptcy Complaint described
above and stems from a transaction that Argon Credit entered into with Spartan Specialty Finance, LLC (“Spartan”). Argon,
a consumer finance platform that made high-interest, unsecured loans to credit-impaired borrowers, financed its loans through a revolving
credit facility provided by PAIF. Mr. Kostiner was the sole member of Spartan and was also, for a period of time, the Vice President
of Capital Markets at Argon. Argon and Spartan entered into an agreement whereby Spartan agreed to purchase a portfolio of loans from
Argon. Spartan financed the acquisition by obtaining a loan from Hamilton Funding (“Hamilton”). The Amended Complaint alleges
that PAIF had a perfected security interest in the loans that Argon improperly sold to Spartan (which were financed by Hamilton Funding),
and that defendants, including Mr. Kostiner, engaged in a scheme to induce PAIF to initially lend funds, later to increase its credit
line, and ultimately convert and deprive PAIF of its property by numerous acts of fraud.
On
July 1, 2021, defendants, including Mr. Kostiner, filed a consolidated motion to dismiss the Amended Complaint in its entirety against
them, based on the following arguments: (a) the RICO claims (Counts (1)-(2)) are time-barred; (b) Fund lacks standing to bring Counts
1-11; (c) Fund is collaterally estopped from litigating the issues that are the subject of the Amended Complaint; (d) the allegations
in the Amended Complaint fail to satisfy the requirements of Rules 8 and 9(b) of the Federal Rules of Civil Procedure; (e) the Amended
Complaint failed to allege a duty sufficient to support its allegations in Counts 1-7; (f) Fund failed to adequately plead the elements
of a valid RICO claim; and (g) Fund failed to adequately plead the elements of any of its state law claims (Counts 3-13).
By
Memorandum and Order dated January 17, 2022, the Court found that the Amended Complaint failed to adequately plead the elements of count
one (violation of 18 U.S.C. 1962(2) by the conduct and participation in a RICO enterprise through a pattern of racketeering activity)
and count two (violation of 18 U.S.C. 1962(d) by conspiracy to engage in a pattern of racketeering activity). The Court accordingly granted
Defendants’ motion to dismiss those claims, and based on the dismissal of those claims, granted the motion to dismiss the remaining
claims based on state law, counts three through six, for lack of subject matter jurisdiction. The Order provides that Plaintiff has until
February 8, 2022, to file a motion for leave to amend with a proposed amended complaint that adequately states a claim over which the
Court has subject matter jurisdiction, otherwise the Court will issue a final judgment in accordance with its Order.
On
February 22, 2022, PAIF filed a Revised Second Amended Complaint (“RSA Complaint”) against 25 defendants, including Mr. Kostiner.
The RSA Complaint incorporates information from witness statements and journal entries from alleged Argon insiders. The claims against
Mr. Kostiner in the RSA Complaint include: (i) fraud/intentional misrepresentation; (ii) aiding and abetting fraud/intentional misrepresentation;
(iii) fraudulent concealment; (iv) aiding and abetting fraudulent concealment; (v) fraudulent/intentional inducement; (vi) conversion;
(vii) aiding and abetting conversion; (viii) civil conspiracy; and (ix) tortious interference with contractual relations. The Amended
Complaint seeks damages of approximately $240 million jointly and severally against all defendants, together with treble and punitive
damages, among other relief.
By
order dated September 30, 2022, the Court denied Fund’s motion to file a second amended complaint for failure to assert a viable
RICO claim, and directed the Clerk to enter judgment dismissing Fund’s civil RICO claims with prejudice and dismissing the state-law
claims for lack of supplemental jurisdiction.
In
re Spartan Specialty Finance I SPV, LLC, Case No. 16-22881-rdd (U.S. Bankruptcy Court for the Southern District of New York White
Plains Division).
On
June 29, 2016, Spartan filed a petition for relief under chapter 11 of title 11 of the United States Code. It did so in order to resolve
a loan dispute that it had with Hamilton, including Hamilton’s alleged right to access cash accounts that Spartan had pledged as
collateral. On May 26, 2017, the bankruptcy court approved a Stipulation and Agreement Resolving Debtor’s Motion for Use of Cash
Collateral and Fixing Amount of Secured Claim, between Hamilton, Spartan, and Mr. Kostiner, in his individual capacity. Spartan’s
bankruptcy petition was dismissed as part of the Court’s approval of the Settlement.
Except
for the actions set forth above, there is no material litigation, arbitration or governmental proceeding currently pending against us
or any members of our management team in their capacity as such, and we and our officers and directors have not been subject to any such
proceeding in the 12 months preceding the date of this report.
Item
4. | Mine
Safety Disclosures. |
Not
applicable.
PART
III
Item
10. | Directors,
Executive Officers and Corporate Governance. |
Officers
and Directors
Our
officers and directors as of December 31, 2022 were as follows:
Name |
|
Age
|
|
Position |
Barry
Kostiner |
|
52 |
|
Chief
Executive Officer |
Thomas
W. Neukranz |
|
65 |
|
Chief
Financial Officer and Director |
Jiayin
Liu |
|
31 |
|
Vice
President, Business Development |
George
Caruolo |
|
71 |
|
Director
and Chairman |
Gabriel
Del Virginia |
|
65 |
|
Director |
Glauco
Lolli-Ghetti |
|
46 |
|
Director |
Mr.
Barry Kostiner – Chief Executive Officer. Mr. Kostiner is serving as the Chief Executive Officer of Sagaliam Acquisition
Corp. Additionally, Mr. Kostiner has served as the President of Legacy Tech Partners, LLC (LTP), a microcap-focused EdTech investment
vehicle, since February 2021 and has also been a Manager of Capital Markets at Legacy Education (OTC: LEAI) since March 2021. Mr. Kostiner
joined the Board of Directors of LEAI in May 2021. Mr. Kostiner has served as the Interim Chief Executive Officer of Legacy Education
Alliance since December 1, 2021.
Mr.
Kostiner was the CFO of Ameri Holdings Inc. (Nasdaq: AMRH) from October 2018 through December 2020. The operations of AMRH, including
its global IT services business focused on SAP with operations in both the U.S. and India, was acquired by management, with the residual
Nasdaq vehicle acquired by Enveric Biosciences (Nasdaq: ENVB), an evidence-based cannabinoid pharma company focused on palliative therapies
for cancer patients. Mr. Kostiner has been a consultant to ENVB since January 2021. From May 2016 through October 2018, Mr. Kostiner
was a consultant to Cypress Skilled Nursing, a healthcare facility operator and from May 2017 through October 2018 he was a consultant
to LinKay Technologies Inc., an artificial intelligence incubator with a portfolio of intellectual property focused on AI and LiDAR /
geospatial technology, with research staff in India and New York. Mr. Kostiner’s 20-year career in energy includes eight years
at Goldman Sachs and Merrill Lynch and their affiliates, with a focus on energy trading and portfolio management, as well as serving
as the CEO of an oil & gas SPAC (Nasdaq: PGRI) from 2005 through 2009. Mr. Kostiner earned a Bachelor’s of Science degree in
Electrical Engineering and a Master’s of Science in Operations Research from MIT. His thesis on the mathematics of electric industry
deregulation was sponsored by Harvard’s Kennedy School of Government.
Mr. Barry Kostiner is a named defendant in an ongoing litigation. See Item
3 for further details.
Mr.
Thomas W. Neukranz – Chief Financial Officer and Director. Mr. Neukranz is serving as Chief Financial Officer and a director
of Sagaliam Acquisition Corp. Mr. Neukranz has served as Managing Director of Capital Markets for GLD Partners, LP since July 2020. Prior
to joining GLD, Mr. Neukranz served as Head of Capital Markets for CleanFund Inc., from July 2017 to August 2019, and as Executive Vice
President of Aegon Investment Management, from February 2017 to August 2018. From 1993 to 2000,
Mr. Neukranz was a Partner and Head of the Institutional businesses at RS Investments, Vice President, Global Head of Exchange Derivatives
at Goldman Sachs and Head of Exchange Traded Derivatives at JP Morgan. Previously, Mr. Neukranz was responsible for derivative hedging
for Bank of America and Lehman Brothers. Mr. Neukranz began his career on the floor of the Board of Trade in Chicago. Mr. Neukranz has
serves on the Board of the Stanford Cancer Institute since 2016 and served as Chairman from 2017 through 2019. Mr. Neukranz received
a B.S. in Industrial Management from Purdue University and holds Series 7 and 63 FINRA licenses. On May 5, 2023 Mr. Neukranz resigned his position effective May 7, 2023
Ms.
Jiayin Liu – Vice President, Business Development. Ms. Liu is serving as Vice President, Business Development of Sagaliam
Acquisition Corp. Ms. Liu has served as Director of Finance for GLD Partners, LP since July 2020. Prior thereto, Ms. Liu served as Senior
Financial Analyst for CleanFund Commercial PACE Capital, Inc., from March 2017 to June 2020, and served as Business Analyst for Industrial
and Commercial Bank of China in 2015. Ms. Liu received a B.S. in Economics and Finance from the University of Western Ontario, and a
Master’s Degree in Financial Analysis from the University of San Francisco.
Mr.
George Caruolo — Director and Chairman. Mr. Caruolo joined our board of directors December 20, 2021 and was appointed Chairman
on June 23, 2022. Mr. Caruolo has been the principal of his own law firm for nearly 40 years and a government relations strategy advisor
based in Rhode Island for over 24 years. He has represented privately held and publicly traded clients in the areas of healthcare, electric
utilities, solar energy, gaming, heavy construction, developmental disabilities and Native American tribal affairs, as well as in other
areas, both regionally and nationally. He is a director of Allegro, LLC, a fintech company. He was an elected state representative and
majority leader of the Rhode Island General Assembly, has chaired the Rhode Island Education Board and has served on other boards of
directors. Mr. Caruolo received a Bachelor’s Degree from Harvard University and a Juris Doctor degree from Suffolk University Law
School.
Mr.
Gabriel Del Virginia — Director. Mr. Del Virginia joined our board of directors on December 20, 2021. Mr. Del Virginia
has more than 30 years of experience providing legal representation in various types of public and private business entities in corporate,
mergers and acquisitions, financing, litigation and financial restructuring matters, as an associate at several prominent national law
firms, including Milbank Tweed Hadley & McCloy, and thereafter as principal of his own law firm, where he has practiced for over
10 years. Mr. Del Virginia also served on the board of directors Sysorex Global Holdings Corp. (SYRX), a Nasdaq-listed technology company
that provides data analytics and location-based solutions and services to commercial and government customers worldwide. He is a graduate
of Rutgers University and Rutgers Law School.
Mr.
Glauco Lolli-Ghetti — Director. Mr. Lolli-Ghetti joined our board of directors on December 20, 2021. Since 2019, Mr. Lolli-Ghetti
has served as Head of Development at Palatine Capital Partners, a real estate private equity firm, where he is responsible for development
investment strategies across acquisition and entitlement. Prior to joining Palatine, Mr. Lolli-Ghetti founded Urban Muse, a real estate
investment company responsible for developing 372,000 square feet of mixed-use properties with an aggregate cost of $397 million. Prior
to forming Urban Muse, Mr. Lolli-Ghetti was development manager at Federal Realty Investment Trust, a publicly traded REIT with a market
cap of $6.75 billion. Mr. Lolli-Ghetti received a Bachelor’s Degree from Lehigh University.
Number
and Terms of Office of Officers and Directors
As
of December 31, 2022, we had four directors. Our board of directors has been divided into two classes, with only one class of directors
being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving
a two-year term. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one
year after our first fiscal year end following our listing on Nasdaq. The term of office of the first class of directors, consisting
of Messrs. Del Virginia and Lolli-Ghetti, will expire at our first annual meeting of stockholders. The term of office of the second class
of directors, consisting of Messrs. Neukranz and Caruolo, will expire at the second annual meeting of stockholders.
Our
officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms
of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our
bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President,
Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Director
Independence
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 Messrs. Caruolo, Del Virginia and Lolli-Ghetti
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.
Committees
of the Board of Directors
Our
board of directors has two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited
exception, Nasdaq rules and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of
independent directors, and Nasdaq rules require that the compensation committee of a listed company be comprised solely of independent
directors.
Audit
Committee
We
have established an audit committee of the board of directors. Messrs. Caruolo, Del Virginia and Lolli-Ghetti serve as members of our
audit committee, and Mr. Caruolo chairs the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required
to have at least three members of the audit committee, all of whom must be independent. Each of Messrs. Caruolo, Del Virginia and Lolli-Ghetti
meet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Each
member of the audit committee is financially literate and our board of directors has determined that Mr. Caruolo qualifies as an “audit
committee financial expert” as defined in applicable SEC rules.
We
have adopted an audit committee charter, which details the principal functions of the audit committee, including:
the
appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged
by us;
pre-approving
all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing
pre-approval policies and procedures;
setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations;
setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence;
reviewing
and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior
to us entering into such transaction; and
reviewing
with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or
compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports
that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards
or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
Compensation
Committee
We
have established a compensation committee of our board of directors. Messrs. Del Virginia and Lolli-Ghetti serve as members of our compensation
committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation
committee, all of whom must be independent Messrs. Del Virginia and Lolli-Ghetti are independent, and Mr. Del Virginia chairs the compensation
committee.
We
have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other office;
reviewing on an annual basis our executive compensation policies and plans;
implementing and administering our incentive compensation equity-based remuneration plans;
assisting management in complying with our proxy statement and annual report disclosure requirements;
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
if required, producing a report on executive compensation to be included in our annual proxy statement; and
reviewing,
evaluating and recommending changes, if appropriate, to the remuneration for directors.
The
charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant,
legal counsel or other adviser and shall be directly responsible for the appointment, compensation and oversight of the work of any such
adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the
compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Compensation
Committee Interlocks and Insider Participation
None
of our officers currently serves, or in the past year has served, as a member of the compensation committee of any entity that has one
or more officers serving on our board of directors.
Special
Committee
On
October 13, 2022, Sagaliam’s board of directors discussed forming a special committee of independent directors (the “Special
Committee”) to explore a possible business combination. In the meeting, Sagaliam’s board of directors appointed George Caruolo,
Gabriel Del Virginia and Glauco Lolli-Ghetti to the Special Committee, and appointed George Caruolo as chairperson. The board of directors
delegated to the Special Committee the authority to (i) establish, approve, modify, monitor and direct the process and procedures related
to the review and evaluation of a possible transaction, including the authority to determine not to proceed with any such process, procedures,
review or evaluation; (ii) respond to any communications, inquiries or proposals regarding a possible transaction; (iii) review, evaluate,
investigate, pursue and negotiate the terms and conditions of a possible transaction; (iv) solicit expressions of interest or other proposals
for possible transactions to the extent the Special Committee deems appropriate; (v) determine on behalf of the board of directors and
Sagaliam whether a possible transaction is advisable and is fair to, and in the best interests of, Sagaliam and its stockholders (or
any subset of the stockholders of Sagaliam that the Special Committee determines to be appropriate); (vi) reject or approve a possible
transaction, or recommend such rejection or approval to Sagaliam’s board of directors; (vii) effect or recommend to Sagaliam’s
board of directors the consummation of a possible transaction; (viii) review, analyze, evaluate and monitor all proceedings and activities
of Sagaliam related to a possible transaction; and (ix) take such other actions as the Special Committee may deem to be necessary or
appropriate for the Special Committee to discharge its duties, the Special Committee shall act for the benefit of Sagaliam and its stockholders
who may participate as sellers, solely in such stockholders’ capacities as sellers, in a possible transaction. A Special Committee
charter was adopted during the October 13, 2022 meeting.
Director
Nominations
The
board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving
director nominees without the formation of a standing nominating committee. The directors who will participate in the consideration and
recommendation of director nominees are Messrs. Caruolo, Del Virginia and Lolli-Ghetti. In accordance with Rule 5605 of the Nasdaq rules,
all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The
board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are
seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders).
Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our
bylaws.
We
have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess.
In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of
professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent
the best interests of our stockholders.
Code
of Ethics
We
have adopted a Code of Ethics applicable to our directors, officers and employees. We have filed a copy of our Code of Ethics and our
audit and compensation committee charters as exhibits to the IPO registration statement. You will be able to review these documents by
accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without
charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current
Report on Form 8-K.
Conflicts
of Interest
Members
of our management team do not have any obligation to present us with any opportunity for a potential business combination of which they
become aware, unless presented to such member solely in his or her capacity as a director or officer of the company. Our amended and
restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or
officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company
and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue,
and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our
officers and directors may become officers or directors of another special purpose acquisition company with a class of securities registered
under the Exchange Act, even prior to us entering into a definitive agreement for our initial business combination.
Ten
“qualified institutional buyers” as that term is defined in Rule 144A of the Securities Act or “accredited investors”
as that term is defined in Regulation D of the Securities Act (who are not affiliated with any member of our management team), whom we
refer to as the anchor investors, have each purchased 9.9% of the units to be sold in the IPO, or 990,000 units, excluding any units
sold pursuant to the Underwriters’ exercise of their over-allotment opinion. As each anchor investor purchased 100% of the units
allocated to it, in connection with the closing of the IPO, our Sponsor sold 20,000 founder shares to each anchor investor, or an aggregate
of 200,000 founder shares to all ten anchor investors, at a purchase price of approximately $0.0029 per share.
Other
potential conflicts of interest include:
None
of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest
in allocating his or her time.
In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Our
initial stockholders have agreed to waive their redemption rights with respect to any founder shares, any private placement shares and
any public shares held by them in connection with the consummation of our initial business combination. Additionally, our initial stockholders
have agreed to waive their redemption rights with respect to any founder shares held by them if we fail to consummate our initial business
combination by the date by which Sagaliam must complete its initial business combination, which can be extended by up to ten successive
one-month periods up to October 23, 2023 by depositing additional funds into the trust account. If we do not complete our initial business
combination within such applicable time period, the proceeds of the sale of the private placement units held in the trust account will
be used to fund the redemption of our public shares, and the private placement units (and the underlying securities) will expire worthless.
Our initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier to occur of (i) six
months after the date of the consummation of our initial business combination or (ii) the date on which we consummate a liquidation,
merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares
of Class A common stock for cash, securities or other property, subject to certain exceptions. Any permitted transferees will be subject
to the same restrictions and other agreements of our initial stockholders with respect to any founder shares. Notwithstanding the foregoing,
if the closing price of our shares of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing 150 days after our
initial business combination, the founder shares will no longer be subject to such transfer restrictions. With certain limited exceptions,
the private placement units and the securities underlying such rights will not be transferable, assignable or saleable by our Sponsor
or its permitted transferees until the later of 30 days after the completion of our initial business combination and one year after the
completion of the IPO. Since our Sponsor and officers and directors may directly or indirectly own common stock and rights following
the IPO our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate
business with which to effectuate our initial business combination.
Our
officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention
or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our
initial business combination.
Our Sponsor, officers or directors may have a conflict of interest with respect to evaluating a business combination and financing arrangements as we may obtain loans from our Sponsor or an affiliate of our Sponsor or any of our officers or directors to finance transaction costs in connection with an intended initial business combination. Up to $1,500,000 of such working capital loans may be convertible into units at a price of $10.00 per unit (which, for example, would result in the holders being issued 150,000 units, if $1,500,000 of loans were so converted), at the option of the lender. Such units would be identical to the private placement units.
The
conflicts described above may not be resolved in our favor.
In
general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business
opportunities to a corporation if:
the
corporation could financially undertake the opportunity;
the
opportunity is within the corporation’s line of business; and
it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.
Accordingly,
as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business
opportunities meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation
provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly
offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally
and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer
is permitted to refer that opportunity to us without violating another legal obligation.
Below
is a table summarizing the entities to which our executive officers and directors currently have fiduciary duties or contractual obligations:
Individual |
|
Entity |
|
Affiliation |
Barry
Kostiner |
|
Legacy
Education Alliance, Inc. (OTC: LEAI) |
|
Director;
Manager, Capital Markets, Interim Chief Executive Officer |
|
|
Legacy
Tech Partners, LLC |
|
Director |
|
|
Enveric
Biosciences, Inc. (Nasdaq: ENVB) |
|
Consultant |
|
|
|
|
|
Thomas
W. Neukranz |
|
GLD
Partners, LP |
|
Managing
Director |
|
|
Global
Pacific Capital, LLC |
|
Managing
Partner |
|
|
|
|
|
Jiayin
Liu |
|
GLD
Management Inc. |
|
Director
of Finance, Capital Markets |
|
|
|
|
|
George
Caruolo |
|
Allegro,
LLC |
|
Director |
|
|
|
|
|
Gabriel
Del Virginia |
|
None |
|
N/A |
|
|
|
|
|
Glauco
Lolli-Ghetti |
|
Urban
Muse, LLC |
|
Managing
Director |
|
|
Urban
Muse Management, LLC |
|
Managing
Director |
|
|
Palatine
Real Estate Fund III, GP, LLC |
|
Limited
Partner |
Accordingly,
if any of the above executive officers or directors becomes aware of a business combination opportunity which is suitable for any of
the above entities to which he or she has current fiduciary or contractual obligations, he or she will honor his or her fiduciary or
contractual obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects
the opportunity.
We
are not prohibited from pursuing an initial business combination with a company that is affiliated with our Sponsor, officers or directors.
In the event we seek to complete our initial business combination with such a company, we, or a committee of independent directors, would
obtain an opinion from an independent investment banking firm which is a member of FINRA, or from an independent accounting firm, that
such an initial business combination is fair to our company from a financial point of view.
In
the event that we submit our initial business combination to our public stockholders for a vote, pursuant to the letter agreement, our
Sponsor, officers and directors have agreed to vote any founder shares and private placement shares held by them and any public shares
purchased during or after the IPO (including in open market and privately negotiated transactions) in favor of our initial business combination.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class
of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and
other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to
furnish us with copies of all Section 16(a) forms filed by such reporting persons. Based solely on our review of such forms furnished
to us and written representations from certain reporting persons, we believe that all reports applicable to our executive officers, directors
and greater than 10% beneficial owners were filed in a timely manner in accordance with Section 16(a) of the Exchange Act.
Item
11. | Executive
Compensation. |
Executive
Officer and Director Compensation
Commencing
on May 1, 2021, we agreed to pay our Sponsor a total of $20,000 per month for the provision of officers’ cash salaries, office
space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation
(and, in the case of officers’ cash salaries, subject to any applicable notice periods), we will cease paying these monthly
fees. The $20,000 monthly amount includes a monthly cash salary of $10,000 for our CEO, Barry Kostiner, a monthly cash salary of
$3,000 for our CFO, Thomas Neukranz, and a monthly cash salary of $1,000 for our Vice President, Business Development, Jiayin Liu.
Other than disclosed herein, none of our officers has received any cash compensation for services rendered to us. The services to be
provided by these officers shall include evaluation of potential business combination opportunities, preparation of financial
reports, SEC and regulatory compliance and any other administrative functions that pertain to our operation. As we are a shell
company, these officers may have obligations to other entities, and the officers are not required to allocate a minimum percentage
of time to our Company. The employment agreements with each officer specify the individual salary amounts and are filed as exhibits
to the IPO registration statement. In addition to the foregoing cash compensation, as additional consideration for their services,
our Sponsor transferred 100,000 founder shares to Mr. Kostiner (50,000 of which were transferred back to the Sponsor on November 5,
2021), 40,000 founder shares to Mr. Neukranz and 10,000 founder shares to Ms. Liu.
As
consideration for their services as members of our board of directors, our Sponsor transferred 25,000 founder shares each to Messrs.
Caruolo, Del Virginia and Lolli-Ghetti.
Other
than the foregoing, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect
of any payment of a loan, will be paid by us to our Sponsor, officers, directors or any affiliate of our Sponsor, officers or directors,
prior to or in connection with any services rendered in order to effectuate the consummation of our initial business combination (regardless
of the type of transaction).] However, these persons will be reimbursed for any out-of-pocket expenses incurred in connection with activities
on our behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit
committee will review on a quarterly basis all payments made to our Sponsor, officers, directors or any affiliate of our Sponsor, officers
or directors. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other
than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing reimbursement
payments to our Sponsor, officers, directors or any affiliate of our Sponsor, officers or directors for their out-of-pocket expenses
incurred in connection with activities on our behalf.
After
the completion of our initial business combination, directors or officers who remain with the combined companies may be paid consulting
or management fees or other compensation from the combined company. All of this compensation will be disclosed to stockholders, to the
extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed
initial business combination. We have not established any limit on the amount of such compensation. It is unlikely that the amount of
such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination
business will be responsible for determining officer and director compensation.
We
do not intend to take any action to ensure that our officers or directors maintain their positions after the consummation of our initial
business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements
to remain after our initial business combination. The existence or terms of any such employment or consulting arrangements may influence
our officers’ and directors’ motivation to identify or select a target business, but we do not believe that opportunities
for our officers or directors to remain after the consummation of our initial business combination will be a determining factor in our
decision to proceed with any potential business combination. We are not party to any agreements with our officers or directors that provide
for benefits upon termination of employment.
Item
12. | Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information regarding the beneficial ownership of our common stock as of May 19, 2023, by:
each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
each
of our executive officers and directors; and
all our executive officers and directors as a group.
Unless
otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all of our
common stock beneficially owned by them. The table below does not reflect the Class A common stock underlying the right entitling the
holder to receive upon consummation of our initial business combination as of May 19, 2023.
| |
Beneficial Ownership | |
Name of Securityholder | |
Class A Shares | | |
% | | |
Class B Shares(1) | | |
% | | |
Total Shares | | |
% | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Sagaliam Sponsor LLC(2) | |
| 400,000 | | |
| — | | |
| 2,500,000 | | |
| 86.9 | | |
| 2,900,000 | | |
| — | |
EF Hutton, a division of Benchmark Investments, Inc. (3) | |
| 115,000 | | |
| — | | |
| — | | |
| * | | |
| 115,000 | | |
| — | |
ATW SPAC Management LLC(4) | |
| 120,000 | | |
| — | | |
| — | | |
| * | | |
| 120,000 | | |
| — | |
Saba Capital Management, L.P.(5) | |
| 83,489 | | |
| — | | |
| — | | |
| * | | |
| 83,489 | | |
| — | |
Lighthouse Investment Partners (6) | |
| 721,460 | | |
| — | | |
| — | | |
| * | | |
| 721,460 | | |
| — | |
Wolverine Asset Management LLC(7) | |
| 67,000 | | |
| — | | |
| | | |
| * | | |
| 67,000 | | |
| — | |
Feis Equities LLC(8) | |
| 129,482 | | |
| — | | |
| 20,000 | | |
| * | | |
| 149,482 | | |
| — | |
Boothbay Fund Management, LLC(9) | |
| 120,000 | | |
| — | | |
| 20,000 | | |
| * | | |
| 140,000 | | |
| — | |
Polar Multi-Strategy Master Fund(10) | |
| 130,000 | | |
| — | | |
| 20,000 | | |
| * | | |
| 150,000 | | |
| — | |
Context Partners Master Fund, L.P. | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| 20,000 | | |
| — | |
D. E. Shaw Valence Portfolios, L.L.C. | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| 20,000 | | |
| — | |
The K2 Principal Fund, L.P. | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| 20,000 | | |
| — | |
Kepos Alpha Master Fund L.P. | |
| — | | |
| — | | |
| 14,700 | | |
| * | | |
| 14,700 | | |
| — | |
Kepos Special Opportunities Fund L.P. | |
| — | | |
| — | | |
| 5,300 | | |
| * | | |
| 5,300 | | |
| — | |
The Mangrove Partners Master Fund, Ltd. | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| 20,000 | | |
| — | |
Meteora Capital Partners, LP | |
| — | | |
| — | | |
| 10,000 | | |
| * | | |
| 10,000 | | |
| — | |
Meteora Special Opportunity Fund I, LP | |
| — | | |
| — | | |
| 10,000 | | |
| * | | |
| 10,000 | | |
| — | |
Space Summit Capital(19) | |
| — | | |
| — | | |
| 20,000 | | |
| * | | |
| 20,000 | | |
| — | |
Barry Kostiner | |
| — | | |
| — | | |
| 50,000 | | |
| 1.7 | | |
| 50,000 | | |
| — | |
Jiayin Liu | |
| — | | |
| — | | |
| 10,000 | | |
| * | | |
| 10,000 | | |
| — | |
Thomas W. Neukarnz | |
| — | | |
| — | | |
| 40,000 | | |
| 1.4 | | |
| 40,000 | | |
| — | |
George Caruolo | |
| — | | |
| — | | |
| 25,000 | | |
| * | | |
| 25,000 | | |
| — | |
Gabriela Del Virginia | |
| — | | |
| — | | |
| 25,000 | | |
| * | | |
| 25,000 | | |
| — | |
Glauco Lolli-Ghetti | |
| — | | |
| — | | |
| 25,000 | | |
| * | | |
| 25,000 | | |
| — | |
All officers and directors as a group (6 individuals) (2) | |
| — | | |
| — | | |
| 175,000 | | |
| 6.1 | | |
| | | |
| — | |
(1) | Interests
shown consist solely of founder shares, classified as shares of Class B common stock. Such
shares will automatically convert into shares of Class A common stock at the time of our
initial business combination. |
(2) | Our
Sponsor is the record holder of such shares. The sole member of our Sponsor is GLD Sponsor
Member, LLC. The managing member of GLD Sponsor Member, LLC is Alan H. Ginsburg. As such,
Mr. Ginsburg may be deemed to have beneficial ownership of the shares held directly by our
Sponsor. |
(3) | We
issued to the representative 115,000 shares of our Class A common stock as compensation in
connection with the initial public offering. |
(4) | Information
based on a Schedule 13G filed on February 14, 2023 reporting ownership as of December 31,
2022. |
(5) | Information
based on a Schedule 13G filed on February 14, 2023 reporting ownership as of December 31,
2022. |
(6) | Information
based on a Schedule 13G filed on February 14, 2023 reporting ownership as of December 31,
2022. |
(7) | Information
based on a Schedule 13G filed on February 2, 2023 reporting ownership as of December 31,
2022. |
(8) | Information
based on a Schedule 13G filed on February 8, 2023 reporting ownership as of December 31,
2022. |
(9) | Information
based on a Schedule 13G filed on February 10, 2023 reporting ownership as of December 31,
2022. |
(10) | Information
based on a Schedule 13G filed on February 13, 2023 reporting ownership as of December 31,
2022. |
Securities
Authorized for Issuance Under Equity Compensation Plans
None.
Changes
in Control
None.
Item
13. | Certain
Relationships and Related Transactions, and Director Independence. |
Certain
Relationships and Related Transactions
The
following is a summary of transactions since our formation on March 31, 2021, to which we have been a participant in which the amount
involved exceeded or will exceed the lesser of $1,172,211 or 1% of the average of our total assets as of December 31, 2022, and in which
any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the
foregoing persons, had or will have a direct or indirect material interest.
Relationship
to Supraeon
GLD
Management, Inc. is the sole member of GLD Principal Strategies LLC. GLD Principal Strategies LLC owns 9% of the interest
in GLD Sponsor Member, LLC which is the sole member of the Sponsor. In addition, GLD Management, Inc. is the general partner of
the Seller and owns 1% of the interest in the Seller. In February 2022, the Seller purchased AEC and subsequently transferred the substantial
majority of its shares to its wholly-owned subsidiary, Supraeon. The Seller continues to hold 250 shares of AEC. In connection with the
consummation of the transactions, the Seller shall receive an aggregate number of PubCo Ordinary Shares with an aggregate value equal
to $180,000,000 from the PubCo. On February 23, 2023 the Business Combination Agreement with related party was terminated.
In
addition, Thomas W. Neukranz, Sagaliam’s Chief Financial Officer, has also been serving as Managing Director of Capital Markets
of the Seller since July 2020; Jiayin Liu, Sagaliam’s Vice President, Business Development, has also been serving as Director of
Finance for the Seller since July 2020.
Founder
Shares
On
April 5, 2021, our Sponsor subscribed to purchase 2,875,000 shares of Class B common stock, par value $0.0001 per share, or the founder
shares, for an aggregate price of $25,000, and later transferred a total of 225,000 founder shares to our officers and directors, leaving
our Sponsor with 2,650,000 founder shares. (up to 375,000 of which remained subject to forfeiture by our Sponsor if the Underwriters’
over-allotment option were not exercised in full). The underwriter exercised its over-allotment option in full on December 21, 2021;
thus, these 375,000 founder shares were no longer subject to forfeiture.
Ten
“qualified institutional buyers” as that term is defined in Rule 144A of the Securities Act or “accredited investors”
as that term is defined in Regulation D of the Securities Act (who are not affiliated with any member of our management team), whom we
refer to as the anchor investors, have each purchased 9.9% of the units to be sold in the IPO, or 990,000 units, excluding any units
sold pursuant to the Underwriters’ exercise of their over-allotment option. In connection with the closing of the IPO, our Sponsor
sold 20,000 founder shares to each anchor investor at a purchase price of approximately $0.0029 per share, leaving our Sponsor with 2,450,000
founder shares.
On November 5, 2021, Barry Kostiner transferred 50,000 founder shares back to the Sponsor, leaving our Sponsor with 2,450,000 founder
shares and our officers. & directors with 175,000 founder shares.
The
initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the founder shares until the earlier
to occur of: (i) one year after the completion of the initial business combination or (ii) the date on which we consummate a liquidation,
merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares
of Class A common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and
other agreements of our initial stockholders with respect to any founder shares. Notwithstanding the foregoing, if the closing price
of our shares of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing 150 days after our initial business
combination, the founder shares will no longer be subject to such transfer restrictions. With certain limited exceptions, the private
placement units and the securities underlying such rights will not be transferable, assignable or saleable by our Sponsor or its permitted
transferees until the later of 30 days after the completion of our initial business combination and one year after the completion of
the IPO. Since our Sponsor and officers and directors may directly or indirectly own common stock and rights following the IPO, our officers
and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which
to effectuate our initial business combination.
Private
Placement Shares
Simultaneously
with the closing of the IPO, we issued 400,000 private placement units at a price of $10.00 per private placement unit to our Sponsor,
generating proceeds of $4.0 million. Each private placement unit consist of one share of our Class A common stock and one right entitling
the holder to receive one-eighth of one share of Class A common stock at the closing of our initial business combination.
Related
Party Loans
Promissory Note – Related Party
On
August 23, 2022, Sagaliam Acquisition Corp. (the “Company”) issued a convertible promissory note (the “Promissory Note”)
to our Sponsor. Pursuant to the Promissory Note, the Sponsor agreed to loan the Company an aggregate principal amount up to $1,500,000.
The principal of this Promissory Note may be drawn down from time to time prior to the earlier of: (i) October 23, 2023 or (ii) the date
on which the Company consummates an initial business combination with a target business (a “Business Combination”), upon
written request from the Company to the Sponsor. The Promissory Note was issued to fund working capital of the Company. The Promissory
Note is non-interest bearing and all outstanding amounts under the Promissory Note will be due on the earlier of: (i) October 23, 2023
or (ii) the date on which the Company consummates a Business Combination (the “Maturity Date”). If a Business Combination
is not announced prior to October 23, 2023, the unpaid principal balance of the Promissory Note, and all other sums payable with regard
to the Promissory Note, shall automatically and immediately become due and payable, in all cases without any action on the part of the
Sponsor. All or a portion of the amounts outstanding under the Promissory Note may be converted on the Maturity Date into units at a
price of $10.00 per unit at the option of the Sponsor. The units would be identical to the Company’s outstanding private placement
units that were issued to the Sponsor in a private placement at the time of the Company’s initial public offering. The Promissory
Note contains customary events of default, including, among others, those relating to the Company’s failure to make a payment of
principal when due.
The
Sponsor has the right, but not the obligation, to convert any outstanding principal amount under this Promissory Note, in whole or in
part, into units (the “Units”) of Sagaliam by providing Sagaliam with written notice of its intention to convert any outstanding
principal amount under this Promissory Note at least one business day prior to the closing of a Business Combination. The Units would
be identical to the private placement units. The number of Units to be received by the Sponsor in connection with such conversion shall
be an amount determined by dividing (x) the sum of the outstanding principal amount payable to Sponsor by (y) $10.00.
The
outstanding balance of the Promissory Note as of December 31, 2022 is $721,500.
Line
of Credit—Related Party
On
April 6, 2021, our Sponsor agreed to loan us up to $300,000 to cover expenses related to the IPO pursuant to a promissory note. On December
17, 2021, our Sponsor agreed to increase the principal amount under the promissory note to $400,000. This loan was non-interest bearing
and payable on the earlier of the completion of the initial public offering or the date we determine not to conduct an initial public
offering. We borrowed $400,000 under the promissory note, and on December 23, 2021, we repaid the promissory note in full.
Administrative
Support Agreement
Commencing
on May 1, 2021, we began paying our Sponsor $20,000 per month for office space and administrative and support services. Upon
completion of our initial business combination or liquidation (and, in the case of officers’ cash salaries, subject to any applicable
notice periods), we will cease paying these monthly fees.
Our
Sponsor, executive officers and directors, or their respective affiliates will be reimbursed for any out-of-pocket expenses incurred
in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable
business combinations targets. Our audit committee will review, on a quarterly basis, all payments that are made to our Sponsor, executive
officers or directors, or their affiliates.
Transaction
Support Agreement
In
connection with the execution of the Business Combination Agreement, Supraeon, Sagaliam and the Sponsor entered into the Sponsor Support
Agreement, which provides, among other things, that the Sponsor will vote in favor of (i) the transactions set forth in the Business
Combination Agreement and (ii) the other transaction proposals. In addition, in connection with the execution of the Business Combination
Agreement, Supraeon, Sagaliam and Seller, entered into the Seller Support Agreement, which provides, among other things, that Seller
will approve (i) the transactions set forth in the Business Combination Agreement and (ii) the other transaction proposals. On February
23, 2023, in connection with the
termination of the Business Combination Agreement, the Sponsor Support Agreement, the Seller Support Agreement and all related ancillary agreements in
connection with the Business Combination Agreement were terminated on February 23, 2023. For more information
regarding the transaction support agreement, please see “Item 1. Business—Proposed Business Combination” for a description
of this agreement.
Registration
Rights Agreement
Please
see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Registration Rights
Agreement” for a description of this agreement.
Policy
for Approval of Related Party Transactions
The
audit committee of our board of directors has adopted a charter, providing for the review, approval and/or ratification of “related
party transactions,” which are those transactions required to be disclosed pursuant to Item 404 of Regulation S-K as promulgated
by the SEC, by the audit committee. At its meetings, the audit committee shall be provided with the details of each new, existing, or
proposed related party transaction, including the terms of the transaction, any contractual restrictions that the company has already
committed to, the business purpose of the transaction, and the benefits of the transaction to the company and to the relevant related
party. Any member of the committee who has an interest in the related party transaction under review by the committee shall abstain from
voting on the approval of the related party transaction, but may, if so requested by the chairman of the committee, participate in some
or all of the committee’s discussions of the related party transaction. Upon completion of its review of the related party transaction,
the committee may determine to permit or to prohibit the related party transaction.
Director
Independence
Please
see “Item 10. Directors, Executive Officers and Corporate Governance—Director Independence” and “—Committees
of the Board of Directors” for information regarding the independence of the board of directors and the committees of the board
of directors.
Item
14. | Principal
Accounting Fees and Services. |
The
following table represents aggregate fees billed to us by Marcum LLP, our independent registered public accounting firm for the periods
indicated.
| |
For
the year ended December 31, 2022 | | |
For
the period from March 31, 2021 (inception) through December 31, 2021 | |
Audit
Fees | |
$ | 136,712 | | |
$ | 129,780 | |
Audit-Related
Feed | |
| — | | |
| — | |
Tax
Fees | |
$ | — | | |
$ | 5,154 | |
All
Other Fees | |
| — | | |
| — | |
Total
Fees | |
$ | 136,712 | | |
$ | 134,934 | |
Audit
Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements
and reviews of our quarterly financial statements and services that are normally provided by our independent registered public accounting
firm in connection with statutory and regulatory filings.
Audit-Related
Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance
of the audit or review of our year-end financial statements and are not reported under “Audit Fees.” These services include
attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
We did not pay Marcum LLP any audit-related fees for the year ended December 31, 2022 and for the period from March 31, 2021 (inception)
through December 31, 2021.
Tax
Fees. We did not pay Marcum LLP for professional services relating to tax compliance, tax planning and tax advice for the year
ended December 31, 2022. We did pay Marcum LLP $5,154 for professional services for tax compliance for the period from March 31, 2021
(inception) through December 31, 2021.
All
Other Fees. All other fees consist of fees billed for all other services. We did not pay Marcum LLP any other fees for the year
ended December 31, 2022 and for the period from March 31, 2021 (inception) through December 31, 2021.
Pre-Approval
Policy
Our
audit committee was formed upon the closing of our IPO. As a result, the audit committee did not pre-approve all of the foregoing
services, although any services rendered prior to the formation of our audit committee were approved by our board of directors.
Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing
services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to
the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to
the completion of the audit). The audit committee did pre approve our auditors for 2022.
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2022
Note
1 – Description of Organization and Business Operations and Liquidity
Sagaliam
Acquisition Corp. (the “Company”) is a blank check company incorporated in the state of Delaware on March 31, 2021. The Company
was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business
Combination with one or more businesses (a “Business Combination”).
The
Company has selected December 31 as its fiscal year end.
The
Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company
is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and
emerging growth companies.
As
of December 31, 2022, the Company had not yet commenced any operations. All activity through December 31, 2022 relates to the Company’s
formation, initial public offering (“Initial Public Offering”) and search for a business combination target. The Company
will not generate any operating revenues until its initial business combination. The registration statement for the Company’s Initial
Public Offering was declared effective on December 20, 2021. On December 23, 2021, the Company consummated the Initial Public Offering
of 11,500,000
units (the “Units” and, with respect
to the Class A common stock included in the Units sold, the “Public Shares”), at $10.00
per Unit, generating total gross proceeds of
$115,000,000,
which is described in Note 3.
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of units (the “Private Placement Units”)
at a price of $ per Private Placement Unit in a private placement to the Company’s Sponsor, Sagaliam Sponsor, LLC (the “Sponsor”),
generating gross proceeds of $4,000,000, which is described in Note 4.
Transaction
costs amounted to $7,525,729, consisting of $3,025,000 of deferred underwriting fees, $1,150,000 for the fair value of Class A shares
issued to underwriter as representative shares (see Note 6), $ for the fair value of the Founder Shares in excess of amounts
paid by anchor investors (see Note 5), and $566,109 of offering costs. The Company’s remaining cash after payment of the offering
costs is held outside of the Trust Account for working capital purposes.
As of December 22, 2022 the Underwriter agreement was amended whereby the
Underwriter has agreed to reduce the amount of the Deferred Underwriting Commission payable to the Underwriter from $ 4,025,000 in cash
to $3,025,000 in cash.
Following
the closing of the Initial Public Offering on December 23, 2021, an amount of $10.10 per
unit or an aggregate of $116,150,000 has
been placed in a trust account , (the “Trust Account”) and invested in U.S. government securities, within the meaning
set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment
company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as
determined by the Company. Except with respect to interest earned on the funds held in the trust account that may be released to the
Company to pay its franchise and income tax obligations (less up to $150,000 of
interest to pay dissolution expenses), the proceeds from this offering and the sale of the Private Placement Units will not be
released from the trust account until the earliest of (a) the completion of the Company’s initial business combination, (b)
the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended
and restated certificate of incorporation, and (c) the redemption of the Company’s public shares if the Company is unable to
complete the initial business combination within 12 months (or up to 18 months, as applicable) from the closing of this offering,
subject to applicable law. However, the Company had a charter Amendment to extend this date. The proceeds deposited in the trust
account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of
the Company’s public stockholders. The stockholders will be entitled to redeem their shares for a pro rata portion of
the amount then on deposit in the Trust Account (initially approximately $10.10 per
share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay
its tax obligations).
SAGALIAM ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2022
Note
1 – Description of Organization and Business Operations and Liquidity (cont.)
The
shares of Class A common stock subject to redemption are recorded at a redemption value and classified as temporary equity as of the
Public Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing
Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible
assets of at least $5,000,001
upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and
outstanding shares voted are voted in favor of the Business Combination.
On
December 22, 2022, the Company’s shareholders voted in favor of amending the Company’s charter to allow it more time to complete
our initial business combination up until the extended deadline date.
Charter
Amendment & Extension Agreement
As
reported by Sagaliam’s Form 8-K filed with the SEC on December 23, 2022, on December 22, 2022, Sagaliam’s shareholders voted
in favor of amending Sagaliam’s charter to allow it more time to complete our initial business combination up until October 23,
2023 (the “Extended Deadline Date”).
The
charter amendment provides the Company with the option to extend the date by which it must complete its initial business combination
from December 23, 2022 by up to ten successive one-month periods up to October 23, 2023 by the Sponsor depositing additional funds into
the Trust Account at each extension election. As reported by the Company’s Form 8-K filed with the SEC on January 23, 2023, the
Company extended the date by which it has to complete its business combination from January 23, 2023 to February 23, 2023. As reported
by the Company’s Form 8-K filed with the SEC on February 24, 2023, the Company extended the date by which it has to complete its
business combination from February 23, 2023 to March 23, 2023. As reported by the Company’s Form 8-K filed with the SEC on April 3, 2023, the Company extended the date by which it has to complete its business combination from March 23, 2023 to April 23,
2023. As reported by Sagaliam’s Form 8-K filed with the SEC on April 24, 2023, Sagaliam extended the date by which
it has to complete its business combination from April 23, 2023 to May 23, 2023.
If
the Company’s Business Combination is not consummated by the extended deadline date or if the Company fails to deposit additional
funds into the Trust Account after each extension election, the Company will (i) cease all operations except for the purpose of winding
up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held
in the trust account and not previously released to the Company to pay its franchise and income taxes (less up to $ of interest
to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public
stockholders rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable
law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining
stockholders and its board of directors, dissolve and liquidate, subject in each case to its obligations under Delaware law to provide
for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions
with respect to the Company’s Rights, which will expire worthless if the Company fails to complete an initial business combination
within the Combination Period.
The
Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their founder shares, private placement
shares and public shares in connection with the completion of the initial business combination, (ii) waive their redemption rights with
respect to their founder shares, private placement shares and public shares in connection with a stockholder vote to approve an amendment
to the Company’s amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from
the trust account with respect to their founder shares and private placement shares if the Company fails to complete the initial business
combination within the Combination Period.
The
Company’s Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of
intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below
the lesser of (i) $10.10 per public share and (ii) the actual amount per public share held in the trust account as of the date of the
liquidation of the trust account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable,
provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any
and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under
the Company’s indemnity of the Underwriters of this offering against certain liabilities, including liabilities under the Securities
Act. However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently
verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Company’s Sponsor’s
only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.
SAGALIAM ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2022
Note
1 – Description of Organization and Business Operations and Liquidity (cont.)
Charter Amendment & Extension Agreement
(cont.)
In connection with the charter amendment,
10,543,663 shares were redeemed at a price of $10.21 per share and $107,595,680 was removed from the trust account to pay Sagaliam public
stockholders who requested redemption of their Sagaliam Shares. As of December 31, 2022, the trust account balance was $9,843,439.
On
November 16, 2022 by way of an unanimous written consent of the Board of Directors the text of Section 9.1(b) of Article IX of the Charter
was amended by deleting the entire text of Section 9.1(b) of Article IX of the Charter and replacing it with the following: “Immediately
after the Offering, a certain amount of the net offering proceeds received by the Corporation in the Offering (including the proceeds
of any exercise of the underwriters’ overallotment option) and certain other amounts specified in the Corporation’s registration
statement on Form S-1, as initially filed with the U.S. Securities and Exchange Commission (the “SEC”), as
amended from time to time (the “Registration Statement”), shall be deposited in a trust account (the “Trust
Account”), established for the benefit of the Public Stockholders (as defined below) pursuant to a trust agreement described
in the Registration Statement. Except
for the withdrawal of interest to pay taxes (less up to $150,000 interest to pay dissolution expenses), none of the funds held in the
Trust Account (including the interest earned on the funds held in the Trust Account) will be released from the Trust Account until the
earliest to occur of (i) the completion of the initial Business Combination, (ii) the redemption of 100% of the Offering Shares (as defined
below) if the Corporation is unable to complete its initial Business Combination by December 23, 2022 (the “Deadline Date”),
provided, however the Deadline Date may be extended by the Corporation by up to ten successive one month periods up to October 23, 2023
by depositing into the trust account the lesser of $120,000. or $.06 per share for each public share of the Corporation that was not
redeemed in connection with the special meeting of the Corporation held on December 16, 2022 for each one-month extension and (iii) the
redemption of shares in connection with a vote seeking (a) to modify the substance or timing of the Corporation’s obligation to
provide for the redemption of the Offering Shares in connection with an initial Business Combination or amendments to this Amended and
Restated Certificate prior thereto or to redeem 100% of such shares if the Corporation has not consummated an initial Business Combination
by the Deadline Date (or any extension to the Deadline Date in accordance with the Charter) or (b) with respect to any other material
provisions relating to stockholders’ rights or pre-initial Business Combination activity (as described in Section 9.7).
Holders of shares of Common Stock included as part of the units sold in the Offering (the “Offering Shares”)
(whether such Offering Shares were purchased in the Offering or in the secondary market following the Offering and whether or not such
holders are the Sponsor or officers or directors of the Corporation, or affiliates of any of the foregoing) are referred to herein as
“Public Stockholders”.
As
of December 31, 2021 the Company had 12 months from the closing of the Public Offering, unless such period is extended. If the Company
has executed a definitive agreement and filed a proxy statement for an initial business combination within 12 months from the closing
of the Public Offering, the period of time the Company will have to consummate an initial business combination will be automatically
extended by an additional four months to an aggregate of 19 months without additional cost. However, if the Company is not able to consummate
an initial business combination within 12 months and the Company has not entered into a definitive agreement or filed a proxy statement
for an initial business combination by such date, the Company may, by resolution of the board if requested by the sponsor, extend the
time available to consummate an initial business combination for an additional three months up to two times (for a total of 18 months
to complete a business combination) by paying into the trust account $ ($0.10 per share in either case) on or prior to the date
of the deadline. The Company will only be able to extend the period of time to consummate a business combination by an additional three
months two times (for a total of nine months) (the “Combination Period”). However, if the Company is unable to complete a
Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii)
as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust
account and not previously released to the Company to pay its franchise and income taxes (less up to $ of interest to pay dissolution
expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’
rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii)
as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and
its board of directors, dissolve and liquidate, subject in each case to its obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s
Rights, which will expire worthless if the Company fails to complete an initial business combination within the Combination Period.
Business Combination Agreement
On November 16, 2022 the Board
of Directors entered into a Business Combination Agreement (the “BCA”) with Allenby Montefiore Limited, a private company
limited by shares organized and existing under the Laws of the Republic of Cyprus, AEC Merger Sub Corp., a Delaware corporation, Supraeon
Investments Limited, a private company limited by shares organized and existing under the Laws of the Republic of Cyprus, and GLD Partners,
LP, a Delaware limited partnership. The Board had determined that it was in the best interests of the stockholders to extend the date
to October 23, 2023 to consummate an initial business combination to an extended date in order to allow our stockholders to evaluate an
initial business combination and for us to be able to potentially consummate an initial business combination, and is submitting these
proposals to our stockholders to vote upon. This deal was not consummated and on February 23, 2023 the Business Combination Agreement
was terminated as detailed in the subsequent events note herein.
SAGALIAM
ACQUISITION CORP.
NOTES TO
FINANCIAL STATEMENTS
dECEMBER
31, 2022
Note 1 – Description of Organization and
Business Operations and Liquidity (cont.)
Stockholder Redemption
The Company has provided its public
stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of the initial business combination
either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer.
On December 14, 2022 10,543,663 shares were redeemed for a total dollar amount of $106,490,996.
The Sponsor, officers and directors
have agreed to (i) waive their redemption rights with respect to their founder shares, private placement shares and public shares in connection
with the completion of the initial business combination, (ii) waive their redemption rights with respect to their founder shares, private
placement shares and public shares in connection with a stockholder vote to approve an amendment to the Company’s amended and restated
certificate of incorporation, and (iii) waive their rights to liquidating distributions from the trust account with respect to their founder
shares and private placement shares if the Company fails to complete the initial business combination within the Combination Period.
The Company’s Sponsor has
agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to
the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar
agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.10 per public share and (ii) the actual amount
per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.10 per share due to
reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third
party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not
such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of this offering against
certain liabilities, including liabilities under the Securities Act. However, the Company has not asked its Sponsor to reserve for such
indemnification obligations, nor has the Company independently verified whether its Sponsor has sufficient funds to satisfy its indemnity
obligations and believe that the Company’s Sponsor’s only assets are securities of the Company. Therefore, the Company cannot
assure that its Sponsor would be able to satisfy those obligations.
Liquidity,
Capital Resources, and Going Concern
As
of December 31, 2022 and December 31, 2021, the Company had $3,116 and
$762,040, respectively, in its operating bank accounts, and working capital (deficit) of $(3,854,273) and $737,422, respectively.
Until
the consummation of a Business Combination, the Company will be using the funds in operating accounts 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.
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,” the Company has until October 23, 2023 (12 months from Public
Offering plus extension periods as discussed above) to consummate the proposed Business Combination. It is uncertain that the
Company will be able to consummate the proposed Business Combination by this time. If a Business Combination is not consummated by
this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Additionally, the Company may not have
sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these financial
statements. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not
occur, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going
concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate
after October 23, 2023. The Company intends to complete the proposed Business Combination before the mandatory liquidation date.
However, there can be no assurance that the Company will be able to consummate any Business Combination by October 23, 2023. In
addition, the Company may need to raise additional capital through loans or additional investments from its Sponsor, stockholders,
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, the Company may be required to take additional measures to conserve liquidity, which could
include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing
overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable
terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through
the liquidation date of October 23, 2023.
SAGALIAM
ACQUISITION CORP.
NOTES TO
FINANCIAL STATEMENTS
dECEMBER
31, 2022
Note 1 – Description of Organization and
Business Operations and Liquidity (cont.)
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could
have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the
specific impact is not readily determinable as of the date of the financial statement. The financial statement does not include any adjustments
that might result from the outcome of this uncertainty.
In
February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action,
various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further,
the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements
and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as
of the date of these financial statements.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, imposes a 1% excise
tax on the fair market value of stock repurchased by publicly traded U.S. corporations and certain U.S. subsidiaries of publicly traded
non-U.S. corporations beginning in 2023, with certain exceptions and adjustments (the “Excise Tax”). For purposes of calculating
the Excise Tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market
value of stock repurchases during the same taxable year. Because we are a Delaware corporation and our securities trade on the New York
Stock Exchange, we will likely be considered a “covered corporation” within the meaning of the Inflation Reduction Act. While
not free from doubt, absent any further guidance from Congress or the U.S. Department of the Treasury, there is significant risk that
the Excise Tax will apply to any redemptions of our common stock after December 31, 2022, including redemptions in connection with an
initial Business Combination and any amendment to our certificate of incorporation to extend the time to consummate an initial Business
Combination, unless an exemption is available. In addition, the Excise Tax may make a transaction with us less appealing to potential
business combination targets, and thus, potentially hinder our ability to enter into and consummate an initial Business Combination. Further,
the application of the Excise Tax in the event of a liquidation after December 31, 2022 is uncertain, and could impact the per-share amount
that would otherwise be received by our stockholders in connection with our liquidation.
SAGALIAM ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 2022
Note
2 – Significant Accounting Policies
Emerging
Growth Company
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our
Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further,
section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with
the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected
not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application
dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another
public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of the financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company did not have any cash equivalents as of December 31, 2022 and December 31, 2021.
Marketable
Securities Held in Trust Account
At
December 31, 2022 and December 31, 2021, all of the assets held in the Trust Account were held in U. S. Treasury securities. The Company’s
investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at
fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust
Account are included in other income earned on marketable securities held in Trust Account in the accompanying statements of operations.
The estimated fair value of investments held in Trust Account are determined using available market information.
SAGALIAM ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 2022
Note 2 – Significant Accounting Policies (cont.)
Marketable Securities Held in Trust Account
(cont.)
These financial assets were accounted for at fair value
on a recurring basis within Level 1 of the fair value hierarchy.
As
of December 31, 2022 and December 31, 2021, the Company had $9,843,440 and $116,157,019, respectively
in marketable securities held in the Trust Account.
Class
A Common Stock Subject to Possible Redemption
The
Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC 480 (Distinguishing Liabilities
from Equity). Common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally
redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.
At all other times, common stock are classified as stockholders’ equity. The Company’s common stock feature certain redemption
rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A common
stock to equal the redemption value at the end of each reporting period.
Increases
or decreases in the carrying amount of redeemable Class A common stock are affected by charges against additional paid-in capital and
accumulated deficit.
As
of December 31, 2022 and December 31, 2021, 956,337 and 11,500,000
shares of Class A common stock subject to possible
redemption are presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s
balance sheet. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of Class
A common stock subject to possible redemption to equal the redemption value at the end of each reporting period (less a provision of
$150,000 for the payment of dissolution expenses on any aggregate interest not released by the Company to pay income and franchise taxes).
Immediately
upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value.
As
of December 31, 2022 and December 31, 2021, the Class A ordinary shares subject to possible redemption reflected in the following table:
Schedule
of Class A Ordinary Shares Subject To Possible Redemption
Gross
proceeds | |
$ | 116,500,000 | |
Less: | |
| | |
Accretion of carrying cost | |
| (15,819,048 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 15,476,067 | |
Class
A ordinary shares subject to possible redemption as of December 31, 2021 | |
| 116,157,019 | |
Plus: | |
| — | |
Income earned on Trust assets | |
| 1,509,988 | |
Extension fee paid into trust | |
| 57,388 | |
Less: | |
| | |
Trust withdrawal for taxes | |
| (285,275 | ) |
Initial Pre-Extension Redemption | |
| (107,595,680 | ) |
Class
A ordinary shares subject to possible redemption as of December 31, 2022 | |
$ | 9,843,440 | |
Class
A ordinary shares subject to possible redemption | |
$ | 9,843,440 | |
SAGALIAM ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 2022
Note 2 – Significant Accounting Policies (cont.)
Offering
Costs Associated with the Initial Public Offering
The
Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – Expenses of Offering. Offering costs consist principally of professional and registration
fees incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly attributable to
the issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts
that are classified as assets and liabilities are expensed immediately.
The Company incurred offering costs amounting to $7,525,729 consisting of $1,150,000 of underwriting fees, $3,025,000 of deferred underwriting
fees, $1,150,000 for underwriting related costs recognized for representative shares, $ for the fair value of the Founder Shares
in excess of amounts paid by anchor investors (see Note 5), and $566,109 of other offering costs. There were -0- offering costs in the
year ended December 31, 2022.
Income
Taxes
We
account for income taxes under ASC 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets
and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and
for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC
740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes
a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination
by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition. Based on our evaluation, it has been concluded that there are no significant uncertain tax positions
requiring recognition in the our financial statement. Since we were incorporated on March 31, 2021, the evaluation was performed for
the years 2021and 2022 tax years which will be the only periods subject to examination.
We
recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits
and no amounts accrued for interest and penalties as of December 31, 2022. We are currently not aware of any issues under review that
could result in significant payments, accruals or material deviation from its position.
SAGALIAM ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 2022
Note 2 – Significant Accounting Policies (cont.)
Net
Loss Per Share
The Company complies with accounting
and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Income and losses are shared pro rata between Class
A common stock subject to possible redemption and non-redeemable common stock. Non-redeemable common stock includes Founder, Private Placement,
and Representative Shares as these shares do not have any redemption features. Diluted net loss per share is the same as basic net loss
per share for the year ended December 31, 2022 and the period March 31, 2021 (inception) through December 31, 2021, respectively.
The calculation of diluted loss
per ordinary share does not consider the effect of the rights issued in connection with the (i) Initial Public Offering, and (ii) the
private placement that convert into 1,487,500 ordinary shares since the conversion of the rights into ordinary shares is contingent upon
the occurrence of future events. As of December 31, 2022 and December 31, 2021, the Company did not have any dilutive securities or other
contracts that could potentially, be exercised or converted into ordinary shares and then shares in the earnings of the Company.
The
table represents a reconciliation of the numerator and denominator used to compute basic and diluted net loss per common stock:
Summary of Basic and Diluted Net Income (Loss) per Common Share
| |
| | |
| |
|
| | |
| |
| |
Year Ended December
31, 2022 | |
|
For
the period March 31, 2021 (Inception) through December 31, 2021 | |
| |
Class
A common stock | | |
Non-redeemable
common stock | |
|
Class
A common stock | | |
Non-redeemable
common stock | |
| |
| | |
| |
|
| | |
| |
Basic
and diluted net loss per common stock | |
| | | |
| | |
|
| | | |
| | |
Numerator: | |
| | | |
| | |
|
| | | |
| | |
Allocation
of net loss | |
$ | (2,607,381 | ) | |
$ | (802,896 | ) |
|
$ | (33,092 | ) | |
$ | (280,695 | ) |
Denominator: | |
| | | |
| | |
|
| | | |
| | |
Basic
and diluted weighted average shares outstanding | |
| 11,008,925 | | |
| 3,390,000 | |
|
| 334,545 | | |
| 2,837,709 | |
Basic
and diluted net loss per common stock | |
$ | (0.24 | ) | |
$ | (0.24 | ) |
|
$ | (0.10 | ) | |
$ | (0.10 | ) |
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account
and management believes the Company is not exposed to significant risks on such account.
Fair
Value of Financial Instruments
The
fair value of the Company’s financial assets and liabilities approximates the carrying amounts represented in the accompanying
balance sheets, primarily due to their short-term nature.
SAGALIAM
ACQUISITION CORP.
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2022
Note 2 – Significant Accounting Policies (cont.)
Recent
Accounting Standards
In
August 2020, the FASB issued ASU 2020-06,
Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s
Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates
the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies
the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s
own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for
all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The Company is currently reviewing what impact, if any, adoption will have
on the Company’s financial position, results of operations or cash flows.
Management
does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on the Company’s financial statements.
Note
3 – Initial Public Offering
Pursuant
to the Initial Public Offering, the Company sold 11,500,000
Units, at a purchase price of $10.00
per Unit. Each
unit consists of one share of Class A common stock, and one right (“Public Right”). Each Public Right will entitle the holder
to receive one-eighth of one share of Class A common stock at the closing of a Business Combination.
Note
4 – Private Placement
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of Private Placement Units at a price of
$ per Private Placement Unit, for an aggregate purchase price of $.
The
Company’s Sponsor, officers and directors have agreed to (i) waive their redemption rights with respect to their Founder Shares,
Private Placement Shares and public shares in connection with the completion of the Company’s initial business combination, (ii)
waive their redemption rights with respect to their Founder Shares, Private Placement Shares and public shares in connection with a stockholder
vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify the substance or
timing of the Company’s obligation to redeem 100% of its public shares if the Company does not complete its initial business combination
during the Combination Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination
activity and (iii) waive their rights to liquidating distributions from the trust account with respect to their Founder Shares and Private
Placement Shares if the Company fails to complete its initial business combination during the Combination Period. In addition, the Company’s
Sponsor, officers and directors have agreed to vote any Founder Shares and Private Placement Shares held by them and any public shares
purchased during or after the Proposed Public Offering (including in open market and privately negotiated transactions) in favor of the
Company’s initial business combination.
SAGALIAM
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2022
Note 4 – Private Placement (cont.)
Founder
Shares
On
April 5, 2021, the Company issued 2,875,000 shares of Class B common stock (the “Founder Shares”) to the Sponsor for
$25,000 in cash, or approximately $0.009 per share, in connection with formation. Thereafter, the Sponsor transferred a total of
225,000 Founder Shares to the Company’s officers and director nominees. The transfer of the Founder Shares to the officers and
director nominees is within the scope of FASB ASC 718, “Compensation-Stock Compensation” (“ASC 718”).
Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date and
expensed when earned. Shares granted to these individuals are forfeited if their status as officer or director is terminated for any
reason prior to the date of the initial business combination, and as such, there has been no stock-based compensation expense
recognized in the accompanying financial statements. The Sponsor and the Company’s officers and director nominees will
collectively own 20% of the Company’s issued and outstanding shares after the Public Offering (assuming that none of the
Sponsor and the Company’s officers and director nominees purchase any Public Shares in the Public Offering and excluding the
Private Placement Shares and Representative’s Shares (as defined below). All share and per-share amounts have been
retroactively restated.
The initial holders of the Founder
Shares have agreed not to transfer, assign or sell any of the Founder Shares until the earlier of (i) one year after the date of the consummation
of the Company’s initial business combination or (ii) the date on which the Company consummates a liquidation, merger, stock exchange
or other similar transaction which results in all of its stockholders having the right to exchange their shares of Class A common stock
for cash, securities or other property. Notwithstanding the foregoing, if the closing price of the Company’s shares of Class A common
stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)
for any 20 trading days within any 30-trading day period commencing 150 days after the Company’s initial business combination, the
Founder Shares will no longer be subject to such transfer restrictions.
A total of ten anchor investors
each purchased an allocation of units as determined by the underwriters, in the Initial Public Offering at the offering price of $10.00
per unit. Pursuant to such units, the anchor investors have not been granted any shareholder or other rights in addition to those afforded
to the Company’s other public shareholders. Further, the anchor investors are not required to (i) hold any units, Class A common
stock or rights they may purchase in the Initial Public Offering or thereafter for any amount of time, (ii) vote any Class A common stock
they may own at the applicable time in favor of the Business Combination or (iii) refrain from exercising their right to redeem their
public shares at the time of the Business Combination. The anchor investors will have the same rights to the funds held in the trust account
with respect to the Class A common stock underlying the units purchased in the Initial Public Offering as the rights afforded to the Company’s
other public shareholders.
Each anchor investor
entered into separate investment agreements with the Company and the Sponsor pursuant to which each anchor investor purchased a
specified number of Units for an aggregate of 990,000 Units at a purchase price of $10.00 per unit. In addition, the Sponsor sold
the ten anchor investors an aggregate of 200,000 of Founder Shares at a purchase price of $0.0029 per share. Pursuant to the
investment agreements, the anchor investors have agreed to (a) vote any Founder Shares held by them in favor of the Business
Combination and (b) subject any Founder Shares held by them the same lock-up restrictions as the Founder Shares held by the
Sponsor.
The Company estimated the fair
value of the 200,000 Founder Shares attributable to the anchor investors to be worth approximately $1,635,200 or $8.176 per share. The
excess of the fair value of the Founder Shares sold over the purchase price of $580 was determined to be an offering cost in accordance
with Staff Accounting Bulletin Topic 5A. Accordingly, the offering cost have been allocated to the separable financial instruments issued
in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received.
SAGALIAM
ACQUISITION CORP.
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2022
Note
5 – Related Party Transactions
On October 13, 2022 the Board
of Directors established a special committee of independent directors to explore a possible business combination with Arabian Entertainment
Company Limited, a limited liability company organized and existing under the laws and regulations of the Kingdom of Saudi Arabia, and
its affiliates, (a “Possible Transaction”); and (2) it is possible that one or more directors of the Company has a conflict
of interest in the Possible Transaction.
Promissory note – Related Party
On
August 23, 2022, in order to fund working capital deficiencies and finance transaction costs, Sagaliam Acquisition Corp. issued a convertible promissory note (the “Promissory Note”) to Sagaliam Sponsor LLC, the
Company’s sponsor. Pursuant to the Promissory Note, the Sponsor agreed to loan the Company an
aggregate principal amount up to $.
All or a portion of the amounts outstanding under the Promissory Note may be converted
on the Maturity Date into units at a price of $
per unit at the option of the Sponsor. The units would be identical to the Company’s outstanding private placement units that
were issued to the Sponsor in a private placement at the time of the Company’s initial public offering. The Promissory Note
contains customary events of default, including, among others, those relating to the Company’s failure to make a payment of
principal when due.
The
Payee has the right, but not the obligation, to convert any outstanding principal amount under this Note, in whole or in part, into units
(the “Units”) of the Maker, as described in the Prospectus, by providing the Maker with written notice of its intention to
convert any outstanding principal amount under this Note at least one business day prior to the closing of a Business Combination. The
Units would be identical to the private placement units as described in the Prospectus.
As of December 31, 2022 the principal balance of the promissory note was $.
SAGALIAM ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2022
Note 5 – Related Party Transactions (cont.)
Line of Credit – Related Party
The
Sponsor agreed to loan the Company an aggregate of up to $ to cover expenses related to the Initial Public Offering pursuant to
a promissory note (the “Promissory Note”). This unsecured loan was non-interest bearing and payable on the earlier of (i)
December 31, 2021, or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note was repaid
on December 23, 2021, upon the closing of the Initial Public Offering.
Administrative
Support Agreement
The
Company has entered into an agreement with the Sponsor commencing May 1, 2021, to pay a total of $20,000
per month for officer’s salaries, office
space, secretarial and administrative services. Upon the completion of an initial Business Combination or liquidation, the Company will
cease paying these monthly fees. The fees for the year ended December 31, 2022 were $240,000. The fees for the period from March 31,
2021 to December 31, 2021 were $160,000. As of December 31, 2022 and December 31, 2021 the outstanding balances were $30,000 and $20,000,
respectively due to Sponsor.
Termination
Fee
On February 23, 2023,
Sagaliam was notified by Allenby Montefiore Limited, a private company limited by shares organized and existing under the Laws of the
Republic of Cyprus (“PubCo”), AEC Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of PubCo (“PubCo
Merger Sub”), Supraeon Investments Limited, a private company limited by shares organized and existing under the Laws of the Republic
of Cyprus (the “Target”), and GLD Partners, LP, a Delaware limited partnership (“Seller”) are considered related
parties that the Target was electing to terminate the Merger and the Business Combination Agreement. Under the terms of the Business
Combination agreement, the Company was required to meet certain funding conditions by December 15, 2023, which it did not; therefore
management concluded the termination fee was probable as of December 31, 2022 and accrued the termination fee of $1,000,000 as presented
in the accompanying balance sheet.
Note
6 – Commitments and Contingencies
Registration
and Shareholder Rights Agreement
The
holders of the Founder Shares, Private Placement Units and rights may be issued Units upon conversion of Working Capital Loans to Class
A common stock issuable upon the exercise of the Private Placement statements.
Underwriting
Agreement
As of December 22, 2022 the Underwriter agreement was amended whereby the
Underwriter has agreed to reduce the amount of the Deferred Underwriting Commission payable to the Underwriter from $ 4,025,000 in cash
to $3,025,000 in cash.
The
underwriters were entitled to a cash underwriting discount of one percent (1%)
of the gross proceeds of the Public Offering, or $1,150,000.
The Company has also agreed to issue to EF Hutton, the representative of underwriters, and/or its designees, 115,000
shares of the Class A common stock (the “Representative’s shares”) upon the consummation of the offering, as
compensation in connection with the offering. Additionally, the underwriters will be entitled to a deferred underwriting discount of 2.5%
of the gross proceeds of the Public Offering upon the completion of the Company’s initial business combination. This discount was reduced from 3.5% to 2.5% on December 22, 2022. The
deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company
completes a Business Combination, subject to the terms of the underwriting agreement.
SAGALIAM
ACQUISITION CORP.
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2022
Note
7 – Stockholders’ Equity
Class
A Common Stock – The Company is authorized to issue 100,000,000 Class
A common stock with a par value of $0.0001 per
share. At December 31, 2022 and December 31, 2021, there were 515,000 Class
A common stock issued and outstanding, excluding 956,337
and 11,500,000 respectively
Class A common stock subject to possible redemption.
Class
B Common Stock – The Company is authorized to issue 10,000,000
Class B common stock with a par value of $0.0001
per share. At December 31, 2022 and December 31, 2021, there were 2,875,000
Class B common stock issued and outstanding.
The
shares of Class B common stock will automatically convert into shares of the Company’s Class A common stock at the time of its
initial business combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations
and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked
securities, are issued or deemed issued in excess of the amounts offered in and related to the closing of the initial
business combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted
(unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any
such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class
B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock
outstanding upon the completion of this offering (not including the Private Placement Shares and
Representative’s Shares) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection
with the initial business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the
initial business combination or any units issued to the Sponsor, its affiliates or certain of officers and directors upon conversion
of working capital loans made to the Company).
Holders
of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to
a vote of the Company’s stockholders, with each share of common stock entitling the holder to one vote, except
as required by law or the Company’s amended and restated certificate of incorporation.
Preferred
Shares – The Company is authorized to issue 1,000,000
shares of preferred shares, par value $0.0001
per share, with such designations, voting and other rights and preferences as may be determined from time to time by the
Company’s board of directors. At December 31, 2022 and December 31, 2021, there were no
preferred shares issued or outstanding.
Rights
– Each holder of a right will automatically receive one-eighth (1/8) of one share
of Class A common stock upon consummation of a Business Combination, except in cases where we are not the surviving company in a business
combination or the registered holder of a certificated right fails to tender their original rights certificate, and even if the holder
of such right redeemed all shares of Class A common stock held by it in connection with a Business
Combination.
No
additional consideration will be required to be paid by a holder of Public Rights in order to receive its additional shares upon consummation
of a Business Combination, as the consideration related thereto has been included in the unit purchase price paid for by investors in
the Proposed Public Offering.
If
the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the
definitive agreement will provide for the holders of Public Rights to receive the same per share consideration the holders of shares
of Class A common stock will receive in the transaction on an as-exchanged for Class A common
stock basis, and each holder of a Public Right will be required to affirmatively exchange its Public
Rights in order to receive the 1/8 share underlying each Public Right (without paying any additional consideration) upon consummation
of a Business Combination. More specifically, the Public Rights holder original rights certificates to the Company within a fixed period of time after
which period the rights will expire worthless.
SAGALIAM
ACQUISITION CORP.
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2022
Note 7 – Stockholders’ Equity (cont.)
Pursuant
to the rights agreement, a rights holder may exchange rights only for a whole number of shares of Class A common stock. This means that
the Company will not issue fractional shares in connection with an exchange of rights and rights may be exchanged only in multiples of
8 rights (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like). Fractional shares
will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware
General Corporation Law.
If
the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the
Trust Account, holders of Public Rights will not receive any such funds with respect to their Public Rights, nor will they receive any
distribution from the Company’s assets held outside of the Trust Account with respect to such Public Rights, and the Public Rights
will expire worthless. Further, there are no contractual penalties for failure to deliver securities to holders of the Public Rights
upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly,
the rights may expire worthless.
Dividends
The
Company has not paid any cash dividends on the common stock to date and does not intend to pay cash dividends prior to the completion
of the initial Business Combination.
Note
8 - Income Tax
The
Company’s net deferred tax assets (liability) at December 31, 2022 and 2021 is as follows:
Schedule of Deferred Tax Assets
|
|
December
31, |
|
|
|
December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
Deferred
tax assets |
|
|
|
|
|
|
|
|
Net
operating loss carryforward |
|
$ |
365,321 |
|
|
$ |
30,026 |
|
Startup/Organization
Expenses |
|
|
206,733 |
|
|
|
33,869 |
|
Transaction Costs |
|
|
210,000 |
|
|
|
0 |
|
Deferred Tax Asset |
|
|
782,053 |
|
|
|
65,895 |
|
Valuation Allowance |
|
|
(782,053 |
) |
|
|
(65,895 |
) |
Deferred tax assets, net of allowance |
|
|
— |
|
|
|
— |
|
The
income tax provision for the periods below consists of the following:
Schedule
of Components of Income Tax Provision
|
|
January
1, 2022 Through |
|
|
|
March 31, 2021 Through |
|
|
|
December 31,
2022 |
|
|
|
December 31,
2021 |
|
Federal |
|
|
|
|
|
|
|
Current |
|
$ |
0 |
|
|
$ |
0 |
|
Deferred |
|
|
(716,158 |
) |
|
|
(65,895 |
) |
Change
in valuation allowance |
|
|
716,158 |
|
|
|
65,895 |
|
Income
tax provision |
|
$ |
— |
|
|
$ |
— |
|
SAGALIAM
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2022
Note
8 - Income Tax (cont.)
As
of December 31, 2022, the Company has $1,739,623 of U.S. federal net operating loss carryovers, which can be carried forward indefinitely,
available to offset future taxable income.
In
assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of
all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which temporary differences representing net future deductible amounts
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment. After consideration of all of the information available, management believes that
significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full
valuation allowance. For the twelve months ending December 31, 2022, the change in the valuation allowance was $716,158. For the
period from March 31, 2021 (inception) through December 31, 2021, the change in the valuation allowance was $65,895.
A
reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2022 and December 31, 2021
is as follows:
Schedule of Effective Income Tax Rate Reconciliation
|
|
December
31,
2022 |
|
|
December 31,
2021 |
|
|
|
|
|
|
|
|
|
Statutory
federal income tax rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
Change
in valuation allowance |
|
|
(21.0 |
)% |
|
|
(21.0 |
)% |
Income
tax provision |
|
|
0.0 |
% |
|
|
0.0 |
% |
The
Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities.
The Company’s tax returns for the years ended December 31, 2022 and December 31, 2021 remain open and subject to
examination.
Note
9 – Subsequent Events
On February 23, 2023, Allenby Montefiore Limited
(the “Target Company”) notified Sagaliam that as Sagaliam did not receive such commitments before December 15, 2022, the Target Company was electing
to terminate the Merger and the Business Combination Agreement. Under the terms of the Business Combination Agreement, the termination
right exercised by the Company obligates Sagaliam to pay a termination fee of $1,000,000 no later than two business days after the date
of such termination fee. Since the agreement called for Sagaliam to obtain funding by December 31, 2022 and it did not, the termination
fee was accrued for as of December 31, 2022.
On March 23, 2023, GLD Sponsor
Member, LLC, a Delaware limited liability company (the “Seller”), entered into a Membership Interest Purchase Agreement (the
“Purchase Agreement”) with BN Holdings Trust, a Nevada Trust (“BN Holdings Trust”) and Sagaliam
Sponsor, LLC (the “Sponsor”), pursuant to which BN Holdings Trust agreed to purchase all of the issued and outstanding
equity interests in the Sponsor from the Seller, which constitutes 100% of the membership interests in the Sponsor. The consummation of
the transactions contemplated by the Purchase Agreement (the “Closing”) shall take place at 10:00 am, New York time,
on May 19, 2023. The consideration for the transaction is reimbursement of advances and the payment of various fees. The change in Sponsor will cause a change in some board seats however it
should not cause a significant impact to the Company.
SAGALIAM
ACQUISITION CORP.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2022
Note 9 – Subsequent Events (cont.)
The Company received a delinquency
notification letter (“Notice”) from the Listing Qualifications staff of the Nasdaq Stock Market LLC (“Nasdaq”)
on April 19, 2023 due to the Company’s non-compliance with Nasdaq Listing Rule 5250(c)(1) as a result of the Company’s failure
to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Nasdaq Listing Rule 5250(c)(1) requires
listed companies to timely file all required periodic financial reports with the SEC.
The Notice states that the Company
has 60 calendar days to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rules. If Nasdaq accepts the Company’s
plan, then Nasdaq may grant the Company up to 180 calendar days from the prescribed due date for filing the Form 10-K or until October
16, 2023, to regain compliance. If Nasdaq does not accept the Company’s plan, then the Company will have the opportunity to appeal
that decision to a Nasdaq Hearings Panel.
The Company requires additional time to prepare, review and finalize its plans to regain compliance with Nasdaq.