References to the "Company," "our," "us" or "we" refer to APx Acquisition Corp.
I The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of many factors, including those set forth under "Cautionary Note
Regarding Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk
Factors" and elsewhere in this Annual Report on Form 10-K.
Overview
We are a blank check company incorporated on May 13, 2021 as a Cayman Islands
exempted company formed for the purpose of effecting an initial business
combination. We have not selected any specific business combination target and
we have not, nor has anyone on our behalf, engaged in any substantive
discussions directly or indirectly, with any business combination target with
respect to an initial business combination with us. While we may pursue an
initial business combination target in any industry, we intend to focus our
search on companies in a SSLA or companies outside a SSLA that provide goods and
services to Spanish speaking markets. We intend to effectuate our initial
business combination using remaining cash in the trust account from the proceeds
of the offering and the private placement of the private placement warrants, the
proceeds of the sale of our shares in connection with our initial business
combination (pursuant to forward purchase agreements or backstop agreements we
may enter into following the consummation of the offering or otherwise), shares
issued to the owners of the target, debt issued to bank or other lenders or the
owners of the target, or a combination of the foregoing.
RESULTS OF OPERATIONS
Our entire activity since inception up to December 31, 2022 was in preparation
for our formation and the IPO and after search for target. We will not be
generating any operating revenues until the closing and completion of our
initial business combination.
For the period from May 13, 2021 (inception) through December 31, 2021, we had
net income of approximately $1,655,213, which consisted of approximately
$788,606 of formation costs and other operating expenses, approximately
$2,442,925 of non-operating gain from changes in fair value of derivative
warrant liabilities, and approximately $894 in interest income.
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For the year ended December 31, 2022, we had a net income of $12,836,510 which
consists of operating costs of $1,118,794, offset by interest income of
$2,001,308 from investments in our Trust Account, $249,047 of gain on settlement
of deferred underwriting fees and $11,704,950 of unrealized gain on fair value
changes of warrants. The operating expenses were primarily due to fees for
professionals such as the auditors, legal counsel and consultants, and insurance
expenses.
Liquidity and Capital Resources and Going Concern
As of December 31, 2022, the Company had approximately $413,206 in its operating
bank account and a working capital deficit of $200,832.
The Company's liquidity needs up to December 31, 2022 had been satisfied through
a payment from the Sponsor of $25,000 (Note 6) for the Founder Shares to cover
certain offering. In addition, in order to finance transaction costs in
connection with a Business Combination, the Company's Sponsor or an affiliate of
the Sponsor or certain of the Company's officers and directors may, but are not
obligated to, provide the Company Working Capital Loans, as defined below (Note
6). As of December 31, 2022, there were no amounts outstanding under any Working
Capital Loans.
On February 28, 2023, we issued an unsecured promissory note (the "Promissory
Note") in an amount of $875,000 in order to economically facilitate our ability
to effect the Extension. The Promissory Note is payable in full on the earlier
of (a) our consummation of an initial business combination (as defined in our
amended and restated memorandum and articles of association, as it may be
amended from time to time) and (b) December 31, 2023 (the earlier of such dates,
the "Due Date"). On the Due Date, the Company shall (i) pay to the Payee (as
defined in the Promissory Note) the outstanding principal amount of the
Promissory Note in immediately available funds (the "Principal Balance") and
(ii) deliver to the Payee, as interest-in-kind, a number of newly issued
Warrants equal to the Principal Balance divided by (y) $1.00, rounded up to the
nearest whole number of Warrants. The terms of the Warrants would be identical
to the warrants we issued in a private placement that was consummated in
connection with our IPO. The Payee shall be entitled to certain registration
rights with respect to the Warrants and the shares issuable upon exercise of the
Warrants.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity to meet its needs through the
earlier of the consummation of a Business Combination or one year from this
filing. Over this time period, the Company will be using these funds for paying
existing accounts payable, identifying and evaluating prospective initial
Business Combination candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
merge with or 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 Account Standards Update
("ASU") 2014-15, "Disclosure of Uncertainties about an Entity's Ability to
Continue as a Going Concern." The Company has until June 9, 2023, or
September 9, 2023 if it further deposits $750,000 to extend the date by an
additional three-month period, to consummate a Business Combination. It is
uncertain that the Company will be able to consummate a Business Combination by
this time. If a Business Combination is not consummated by this date, there will
be a mandatory liquidation and subsequent dissolution of the Company. Management
has determined that the 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. The financial statements do
not include any adjustment that might result from the outcome of this
uncertainty.
Risks and Uncertainties
Management continues to evaluate the impact of future global pandemics and
geopolitical events and has concluded that while it is reasonably possible that
such events 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 these financial statements.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
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Off-Balance Sheet Arrangements
As of December 31, 2022 and December 31, 2021, we did not have any off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did
not have any commitments or contractual obligations.
Contractual Obligations
Administrative Services Agreement
Commencing on the date of the prospectus and until completion of the Company's
initial business combination or liquidation, the Company may reimburse an
affiliate of the Sponsor up to an amount of $10,000 per month for office space
and secretarial and administrative support provided to members of the Company's
management team. Upon completion of the Business Combination or its liquidation,
the Company will cease paying these monthly fees.
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of the Working Capital Loans (and in each
case holders of their component securities, as applicable) will be entitled to
registration rights pursuant to a registration rights agreement to be signed
prior to or on the effective date of the Initial Public Offering, requiring the
Company to register such securities for resale (in the case of the Founder
Shares, only after conversion to our Class A ordinary shares). The holders of
the majority of these securities are entitled to make up to three demands,
excluding short form demands, that the Company register such securities. In
addition, the holders have certain "piggy-back" registration rights with respect
to registration statements filed subsequent to the consummation of a Business
Combination and rights to require the Company to register for resale such
securities pursuant to Rule 415 under the Securities Act. The Company will bear
the expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
In connection with the IPO, the underwriter was granted a 45-day option to
purchase up to 2,250,000 additional Units to cover over-allotments at the
Proposed Offering price, less the underwriting discounts and commissions. As of
December 31, 2022, the underwriter exercised all of the over-allotment units.
The underwriter was entitled to a cash underwriting discount of 2.00% of the
gross proceeds of the Proposed Offering, or $3,450,000 as the over-allotment
option was exercised in full. In addition, the underwriter would be entitled to
a deferred fee of three and half percent (3.50%) of the gross proceeds of the
Proposed Offering, or $6,037,500 as the over-allotment option was exercised in
full. The deferred fee would become payable to the underwriter from the amounts
held in the Trust Account solely in the event that the Company completes a
Business Combination, subject to the terms of the underwriting agreement.
Effective as of September 28, 2022, the underwriter from the Initial Public
Offering resigned and withdrew from their role in the Business Combination and
thereby waived their right to the deferred underwriting commissions in the
amount of $6,037,500, which the Company has recorded as a gain on settlement of
underwriter fees on the statement of shareholders' equity for the year ended
December 31, 2022 for $5,788,453, which represents the original amount recorded
to accumulated deficit, and the remaining balance representing the original
amount recorded to the statement of operations of $249,047 was recorded for the
year ended December 31, 2022.
Critical Accounting Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of our financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities in
our financial statements. On an ongoing basis, we evaluate our estimates and
judgments, including those related to fair value of financial instruments and
accrued expenses. We base our estimates on historical
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experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company has identified
the following as its critical accounting policies:
Warrant Liabilities
The Company accounts for warrants based on an assessment of the warrant's
specific terms and applicable authoritative guidance in Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 480,
"Distinguishing Liabilities from Equity" ("ASC 480"), and ASC 815, "Derivatives
and Hedging" ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own ordinary shares, among other
conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of
each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, the
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the
statements of operations. The fair value of the warrants was estimated using a
Monte Carlo simulation model-based approach (see Note 10).
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Ordinary shares subject to mandatory redemption (if any) is classified
as a liability instrument and is measured at fair value. Conditionally
redeemable ordinary shares (including ordinary shares 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)
is classified as temporary equity. At all other times, ordinary shares are
classified as shareholder's equity. The Company's ordinary shares feature
certain redemption rights that are considered to be outside of the Company's
control and subject to the occurrence of uncertain future events. Accordingly,
ordinary shares subject to possible redemption are presented at redemption value
as temporary equity, outside of the shareholder's equity section of the
Company's balance sheet.
Net Income (Loss) Per Ordinary Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A ordinary shares and Class B ordinary shares. Income and losses are
shared pro rata between the two classes of shares. Net income (loss) per common
share is calculated by dividing the net income (loss) by the weighted average
shares of ordinary shares outstanding for the respective period.
The calculation of diluted net income (loss) does not consider the effect of the
warrants underlying the Units sold in the IPO (including the consummation of the
Over-allotment) and the private placement warrants to purchase an aggregate of
17,575,000 Class A ordinary shares in the calculation of diluted income (loss)
per share, because their inclusion would be anti-dilutive under the treasury
stock method. As a result, diluted net income (loss) per share is the same as
basic net income (loss) per share for the year ended December 31, 2022.
Accretion associated with the redeemable Class A ordinary shares is excluded
from earnings per share as the redemption value approximates fair value.
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): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("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 for fiscal years beginning after December
15, 2023, including interim periods within those fiscal years, with early
adoption permitted. The Company is currently assessing the impact, if any, that
ASU 2020-06 would have on its financial position, results of operations or cash
flows.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As such, our financial statements may not be
comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company's financial statements.
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