The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties. 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 "Item 1A. Risk
Factors" and elsewhere in this Annual Report.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Annual
Report on Form 10-K including, without limitation, statements in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's financial position, business strategy and
the plans and objectives of management for future operations, are
forward-looking statements. Words such as "anticipate," "believe," "continue,"
"could," "estimate," "expect," "intend," "may," "might," "plan," "possible,"
"potential," "predict," "project," "should," "would" and similar expressions may
identify forward-looking statements. Such forward-looking statements relate to
future events or future performance, but reflect management's current beliefs,
based on information currently available. A number of factors could cause actual
events, performance or results to differ materially from the events, performance
and results discussed in the forward-looking statements. For information
identifying important factors that could cause actual results to differ
materially from those anticipated in the forward-looking statements, please
refer to the "Risk Factors" section of this Annual Report on Form 10-K and the
Risk Factors section of the Registration Statements on Form S-1 (Registration
No. 333-253092) filed with the SEC. The Company's securities filings can be
accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as
expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in Delaware on January 4, 2021 formed
for the purpose of effecting a merger, share exchange, asset acquisition, share
purchase, reorganization or similar business combination with one or more
businesses. We intend to effectuate our initial business combination using cash
derived from the proceeds of the Initial Public Offering and the sale of Private
Placement Warrants, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete an initial
business combination will be successful.
47
Proposed Business Combination with Novibet
On March 30, 2022, the Company entered into the Business Combination Agreement,
with Komisium, Novibet, PubCo and Merger Sub, which was subsequently amended on
September 2, 2022, which provides for, among other things, (i) the Share
Exchange and (ii) the Merger.
Pursuant to the Business Combination Agreement, subject to the satisfaction or
waiver of certain closing conditions set forth therein, immediately prior to the
Effective Time, Komisium will sell and transfer all issued ordinary shares and
other equity interests of Novibet to PubCo in consideration for receiving at
closing of the Proposed Business Combination (a) the Closing Cash Consideration,
(b) the Closing Share Consideration, and (c) in the event that redemptions by
Artemis's public stockholders equal or exceed 85% of the outstanding shares of
Class A Common Stock, the Additional Closing Share Consideration. If redemptions
by the Public Stockholders are less than 85%, the Additional Closing Share
Consideration will be deferred and the Deferred Share Consideration will be
issued upon the satisfaction of certain earnout conditions. In addition to the
Closing Cash Consideration, Closing Share Consideration, Additional Closing
Share Consideration (if any), and Deferred Share Consideration (if any),
Komisium (i) will retain the 65,000 PubCo Ordinary Shares to which the Initial
Share Premium relates, and (ii) may receive the Earnout Consideration upon the
satisfaction of certain earnout conditions set forth in more detail in the
Business Combination Agreement.
Additionally, pursuant to the Business Combination Agreement, subject to the
satisfaction or waiver of certain closing conditions set forth therein,
immediately prior to the Effective Time, (a) each share of Class B Common Stock
shall no longer be outstanding and will be automatically converted into one
share of Class A Common Stock subject to the terms of the Company's Certificate
of Incorporation and the Sponsor Support Agreement, (b) each issued and
outstanding share of Class A Common Stock (including the shares of Class A
Common Stock issued upon conversion of shares of Class B Common Stock, but not
including any shares redeemed by the Public Stockholders and certain other
excluded Company shares) shall no longer be outstanding and will be
automatically converted into the right of the holder thereof to receive one
PubCo Ordinary Share and (c) each outstanding whole warrant of the Company will
be assumed by PubCo and will become exercisable for one PubCo Ordinary Share, on
the same terms as the warrants of the Company in accordance with the terms of
the Warrant Agreement.
On September 2, 2022, Komisium, Novibet, PubCo, Merger Sub and the Company
entered into Amendment No. 1 to the Business Combination Agreement, which among
other things provided for (i) a closing share valuation of $500,000,000, with
12,254,902 PubCo Ordinary Shares issuable to Komisium at closing of the Proposed
Business Combination if redemptions equal or exceed 85%, or if redemptions are
less than 85%, then such PubCo Ordinary Shares would be deferred and issuable in
subsequent years if certain earnout targets are met, (ii) a dual tranche earnout
based on the achievement of certain net gaming revenue targets, (iii) clauses
permitting Komisium to transfer up to 30% of the issued PubCo Ordinary Shares
after the Closing, (iv) the payment of an amount of dividend declared prior to
March 30, 2022 to Komisium up to the amount of €3,579,625, (v) the payment of
the net profits generated by Novibet between signing and closing to Komisium,
(vi) a minimum cash closing condition of $12.5 million after transaction
expenses and redemptions, and (vii) clauses permitting the Company to cause the
Sponsor to forfeit or transfer a portion of the Founder Shares to incentivize
investors to acquire Public Shares and not redeem them.
On December 14, 2022, Komisium, Novibet, PubCo, Merger Sub and the Company
entered into Amendment No. 2 to the Business Combination Agreement, which among
other things provided for (i) the change of Pubco's jurisdiction of
incorporation from England and Wales to Jersey and (ii) clauses permitting
Komisium to transfer up to 10% of the issued Novibet ordinary shares prior to
the Closing Date.
Novibet is a vertically-integrated online gambling operator offering a full
suite of online gaming and sports betting products across desktop and mobile
channels. The parties have ascribed Novibet a pre-business combination
enterprise value of $500 million. The Proposed Business Combination is expected
to close following the fulfillment of the closing conditions set forth in the
Business Combination Agreement.
For more information about the Business Combination Agreement and the Proposed
Business Combination, see the Registration Statement on Form F-4/A filed by
PubCo on December 15, 2022 (the "Registration Statement"). Unless specifically
stated, this Annual Report does not give effect to the Proposed Business
Combination and does not detail the risks associated with the Proposed Business
Combination. Such risks and effects are set forth in the Registration Statement.
48
Restatement of Third Quarter Form 10-Q
As previously disclosed in the Current Report on Form 8-K filed the Company on
March 31, 2023, in connection with the preparation of its financial statements
as of and for the year ended December 31, 2022, the Company reevaluated the
accounting for the waiver of the deferred underwriting fee by the underwriters
of its initial public offering. The Company had recognized this waiver of fees
as an extinguishment of the contingent liability, with a resulting non-operating
gain recognized in its statement of operations, in Third Quarter 10-Q. Upon
further review and analysis, the Company's management concluded that the Company
should have recognized the extinguishment of the contingent liability as a
credit to stockholder's deficit.
On March 30, 2023, the Company's management and the Audit Committee concluded
that the Company's previously issued unaudited interim financial statements
included in the Third Quarter 10-Q should no longer be relied upon and that it
is appropriate to restate the Third Quarter 10-K. This Form 10-K contains (i)
the Company's audited financial statements as of and for the years ended
December 31, 2022 and 2021 and (ii) restated statement of operations, statement
of changes in stockholder's deficit, and statement of cash flows for the three
and nine months ended September 30, 2022. See Part II, Item 7, Note 2
"Restatement of Previously Issued Financial Statements" in the notes to the
consolidated financial statements included in this Form 10-K for a detailed
discussion of the effect of the restatement on the previously issued financial
statements as of and for the period ended September 30, 2022.
Further, the Company's management has considered the effect of the foregoing on
the Company's prior conclusions of the adequacy of its internal control over
financial reporting and disclosure controls and procedures as of September 30,
2022. As a result of the error, management has determined that a material
weakness existed in the Company's internal control over financial reporting as
of the December 30, 2022. See Part II Item 9A - Controls and Procedures within
this Form 10-K for a description of these matters.
49
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception were organizational activities, those
necessary to prepare for the Initial Public Offering, described below, and
subsequent to the Initial Public Offering, identifying and evaluating a target
company for an initial business combination. We do not expect to generate any
operating revenues until after the completion of our initial business
combination. We generate non-operating income in the form of interest income on
investments held in the Trust Account. We will incur expenses as a result of
being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the year ended December 31, 2022, we had net income of $3,479,590, which
consisted of $6,469,453 of operating costs, offset by non-cash gains of
$7,144,256 related to change in fair value of warrant liabilities, derecognition
of deferred underwriting fee payable of $326,138 and interest income of
$3,070,568.
For the period from January 4, 2021 (inception) through December 31, 2021, we
had net income of $312,118, which consisted of formation and operating costs,
change in fair value of warrant liabilities, interest earned on marketable
securities in trust account, and transaction costs related to warrant issuances.
Liquidity and Capital Resources
On October 4, 2021, we consummated the Initial Public Offering of 20,125,000
Units, which includes the full exercise by the underwriters of their
over-allotment option in the amount of 2,625,000 Units, at $10.00 per Unit,
generating gross proceeds of $201,250,000. Simultaneously with the closing of
the Initial Public Offering, the Company consummated the sale of 8,000,000
Sponsor Warrants at a price of $1.00 per Sponsor Warrant in a private placement
to the Sponsor, generating gross proceeds of $8,000,000. The Company also
consummated the sale of 2,000,000 Anchor Investor Warrants at a price of $1.00
per Anchor Investor Warrant in a private placement to certain Institutional
Anchor Investors, generating gross proceeds of $2,000,000.
Following the closing of the Initial Public Offering on October 4, 2021, an
amount of $205,275,000 ($10.20 per Unit) from the net proceeds of the sale of
the Units in the Initial Public Offering and a portion of the proceeds from the
sale of the Private Placement Warrants was placed in the Trust Account. We
incurred transaction costs totaling $25,559,771, consisting of $3,825,000 of
underwriting fees, $7,043,750 of deferred underwriting commissions, $13,796,426
of offering costs related to the fair value of the Founder Shares issued to
certain Institutional Anchor Investors and $894,595 of other offering costs.
Effective as of July 14, 2022, Barclays resigned and withdrew from its role as
financial advisor and capital markets advisor to the Company and waived its
entitlement to all fees in connection with the Proposed Business Combination,
including its portion of the deferred underwriting commissions in the amount of
approximately $4,578,438. Effective as of July 20, 2022, BMO waived its
entitlement to its portion of the deferred underwriting commissions in the
amount of approximately $2,465,312.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
income taxes payable), to complete our initial business combination. To the
extent that our share capital or debt is used, in whole or in part, as
consideration to complete our initial business combination, the remaining
proceeds held in the Trust Account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and
pursue our growth strategies.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete an initial business combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with an initial business combination, the Sponsor, or certain of our
officers and directors or their affiliates may, but are not obligated to, loan
us funds as may be required. If we complete an initial business combination, we
would repay such loaned amounts. In the event that an initial business
combination does not close, we may use a portion of the working capital held
outside the Trust Account to repay such loaned amounts but no proceeds from our
Trust Account would be used for such repayment. Up to $1,500,000 of such loans
may be convertible into Private Placement Warrants at a price of $1.00 per
warrant, at the option of the lender.
50
The Company's management plans to continue its efforts to complete an initial
business combination within 21 months of the closing of the Initial Public
Offering, or July 4, 2023.
The Company will 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, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead
expenses. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern through July 4, 2023. These financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
In connection with the Company's assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Presentation of Financial
Statements - Going Concern," management has determined that the liquidity
condition and mandatory liquidation, should an initial 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 unable to
raise additional capital.
However, if our estimate of the costs of identifying a target business,
undertaking in-depth due diligence and negotiating an initial business
combination are less than the actual amount necessary to do so, we may have
insufficient funds available to operate our business prior to our initial
business combination. Moreover, we may need to obtain additional financing
either to complete our initial business combination or because we become
obligated to redeem a significant number of our Public Shares upon consummation
of our initial business combination, in which case we may issue additional
securities or incur debt in connection with such initial business combination.
For the year ended December 31, 2022, cash used in operating activities was
$903,711. Net income of $3,479,590 was affected by non-cash gains of $7,144,256
related to changes in the fair value of warrant liabilities, derecognition of
deferred underwriting fee payable of $326,138, interest income of $3,070,568 and
changes in operating assets and liabilities.
For the period from January 4, 2021 (inception) through December 31, 2021, cash
used in operating activities was $594,984. Net income of $312,118 was affected
by noncash losses of $1,739,419 related to changes in the fair value of warrant
liabilities, offering costs allocated to warrant liabilities of $1,154,518,
interest income of $9,883 and changes in operating assets and liabilities.
As of December 31, 2022, we had cash of $160,940 and investments of $208,244,129
held in the Trust Account. We intend to use substantially all of the funds held
in the Trust Account (less taxes paid) to complete our initial business
combination. To the extent that our capital stock or debt is used, in whole or
in part, as consideration to complete our initial business combination, the
remaining proceeds held in the Trust Account will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor a monthly fee of $10,000 for office space,
administrative and support services. We began incurring these fees on
September 30, 2021 and will continue to incur these fees monthly until the
earlier of the completion of the initial business combination and our
liquidation.
51
The Company will provide its shareholders with the opportunity to redeem all or
a portion of their Public Shares upon the completion of an initial business
combination either (i) in connection with a general meeting called to approve
the Proposed Business Combination or (ii) by means of a tender offer. The
decision as to whether the Company will seek shareholder approval of an initial
business combination or conduct a tender offer will be made by the Company. The
shareholders will be entitled to redeem their shares for a pro rata portion of
the amount held in the Trust Account (initially $10.20 per share), calculated as
of two business days prior to the completion of an initial business combination,
including 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. There
will be no redemption rights upon the completion of an initial business
combination with respect to the Company's warrants.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. Management does not believe the Company has any critical accounting
estimates.
© Edgar Online, source Glimpses