References in this report (the "Quarterly Report") to "we," "us," "our" or the
"Company" refer to Parabellum Acquisition Corp. References to our "management"
or our "management team" refer to our officers and directors, and references to
the "Founder" or "Sponsor" refer to Parabellum Acquisition Partners, LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the condensed financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 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 Quarterly
Report 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 "expect," "believe," "anticipate," "intend," "estimate," "seek,"
"may," "might," "plan," "possible," "potential," "should", "would" and similar
words and expressions are intended to identify such 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 the
Company's final prospectus for our initial public offering filed with the U.S.
Securities and Exchange Commission (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 the State of Delaware on February
5, 2021 and formed for the purpose of effectuating a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses. We have identified EnOcean as
our initial business combination target, and expect to schedule a special
meeting of stockholders to approve the business combination later this year.
Upon consummation of the business combination with EnOcean, we expect that
Holdco will become a public company and will change its name to EnOcean
Holdings, N.V.
On November 13, 2022, the Company and EnOcean entered into the Business
Combination Agreement pursuant to which the Company consummates a merger with a
Merger Sub with the Company surviving such Merger, and such Surviving
Corporation will become a wholly-owned subsidiary of Holdco. Each Company
Shareholder as of immediately prior to the Closing, will contribute each Company
Ordinary Share held to Holdco, in exchange for the Company Per Share
Consideration (as defined in the Business Combination Agreement) As a result
of the transaction, the post-combination company is expected to receive up to
$40,000,000 in gross proceeds from a fully committed PIPE consisting of units of
shares and half a warrant for one share being sold at $10.00 per unit. For more
information regarding the Business Combination Agreement and related
transactions, see Note 1 to the Condensed Consolidated Financial Statements and
the Form 8-K filed by the Company with the SEC on November 14, 2022.
The completion of the proposed Business Combination with EnOcean is subject to
the satisfaction of the conditions set forth in the Business Combination
Agreement, including (i) completion of any required stock exchange and
regulatory review, (ii) approval of the transaction by the Company's and
EnOcean's stockholders and (iii) receipt by EnOcean of any required third-party
approvals. Accordingly, no assurances can be made that the proposed transaction
will be consummated on the terms or timeframe currently contemplated, or at all.
If we are unable to consummate the Business Combination within the Combination
Window, we will (i) cease all operations except for the purposes 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
any interest earned on the Trust Account not previously released to us to pay
its tax obligations and up to $100,000 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), subject to
applicable law, and; (iii) as promptly as reasonably possible following such
redemption, subject to the approval of our remaining stockholders and our board
of
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directors, dissolve and liquidate, subject in each case to our 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 our warrants, which will expire if we fail to complete a
Business Combination within the Combination Window.
We intend to effectuate our initial Business Combination using cash from the
proceeds from the sale of Public Units in our Offering, the sale of the Private
Placement Warrants to our Sponsor, our common equity or any preferred equity
that we may create in accordance with the terms of our charter documents, debt,
or a combination of cash, common or preferred equity and debt. The Public Units
sold in the Offering each consisted of one share of Class A common stock, and
three-quarters (3/4) of one redeemable warrant to purchase one share of Class A
common stock (no fractional shares will be issued upon exercise of the
warrants). The Private Placement Warrants were substantially similar to the
Public Units sold in the Offering, but for certain differences in the warrants
included in each of them. For clarity, the warrants included in the Public Units
are referred to herein as the "public warrants," and the warrants included in
the Private Placement Warrants are referred to herein as the "private warrants."
The issuance of additional shares of any class of common stock or the creation
of one or more classes of preferred stock during our initial Business
Combination:
? may significantly dilute the equity interest of investors in the Offering who
would not have pre-emption rights in respect of any such issue;
may subordinate the rights of holders of any class of common stock if the
? rights, preferences, designations and limitations attaching to the preferred
shares are senior to those afforded our shares of Class A common stock;
could cause a change in control if a substantial number of shares of common
? stock are issued, which may affect, among other things, our ability to use our
net operating loss carry forwards, if any, and could result in the resignation
or removal of our present officers and directors;
may have the effect of delaying or preventing a change of control of us by
? diluting the share ownership or voting rights of a person seeking to obtain
control of us; and
? may adversely affect prevailing market prices for our shares of Class A common
stock.
Similarly, if we issue debt securities or otherwise incur significant
indebtedness, it could result in:
? default and foreclosure on our assets if our operating revenues after our
initial Business Combination are insufficient to repay our debt obligations;
acceleration of our obligations to repay the indebtedness even if we make all
? principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a
waiver or renegotiation of that covenant;
? our immediate payment of all principal and accrued interest, if any, if the
debt is payable on demand;
our inability to obtain necessary additional financing if any document
? governing such debt contains covenants restricting our ability to obtain such
financing while the debt security is outstanding;
? our inability to pay dividends on our shares of common stock;
using a substantial portion of our cash flow to pay principal and interest on
? our debt, which will reduce the funds available for dividends on our common
stock if declared, expenses, capital expenditures, acquisitions and other
general corporate purposes;
? limitations on our flexibility in planning for and reacting to changes in our
business and in the industry in which we operate;
? increased vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation; and
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limitations on our ability to borrow additional amounts for expenses, capital
? expenditures, acquisitions, debt service requirements, execution of our
strategy and other purposes and other disadvantages compared to our competitors
who have less debt.
We expect to incur significant costs in the pursuit of our acquisition plans. We
cannot assure you that our plans to raise capital or to complete our initial
Business Combination will be successful.
Recent Developments
Special Stockholder Meeting
In November 2022, our board of directors approved, among other things, an
amendment to our amended and restated certificate of incorporation (the "Charter
Amendment"). Adoption of the Charter Amendment will require the affirmative vote
of at least 65% of our outstanding shares of common stock as of the close of
business on November 28, 2022 (the "record date").
We filed a preliminary proxy statement with the SEC on November 18, 2022 to
solicit the approval of our stockholders at a special meeting of stockholders
(the "Special Meeting"), which is to be held on December 20, 2022, to approve
the Charter Amendment, giving the Company the right to extend the Combination
Window up to six (6) times for an additional one (1) month each time, from March
30, 2023 to September 30, 2023 (i.e., for a period of time ending 24 months from
the consummation of its IPO by depositing into the Trust Account for each
one-month extension $185,000 on or prior to the date of the applicable deadline.
We expect our Sponsor to vote any common stock owned by it in favor of the
Charter Amendment. If the Charter Amendment is not approved or implemented and
we are unable to complete a Business Combination on or before the Original
Termination Date, we expect to liquidate and dissolve in accordance with our
certificate of incorporation.
Notice of Delisting of Company's Warrants
On November 1, 2022, the New York Stock Exchange (the "NYSE") notified us, and
publicly announced, that the NYSE determined to commence proceedings to delist
the Company's warrants, each whole warrant exercisable to purchase one share of
the Company's Class A common stock, at a price of $11.50 per share, and listed
to trade on NYSE under the symbol "PRBM.WS" (the "Public Warrants"), from the
NYSE and that trading in the Public Warrants would be suspended immediately, due
to "abnormally low" trading price levels pursuant to Section 802.01D of the NYSE
Listed Company Manual. We filed Form 8-K on November 1, 2022 announcing the
NYSE's determination and that we intend to appeal such determination.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date.
From February 5, 2021 (inception) through September 30, 2022, our only
activities have been organizational activities, those necessary to prepare for
the Public Offering and to identify a target business for the Business
Combination. We do not expect to generate any operating revenues until after
completion of our initial Business Combination. We expect to generate
non-operating income in the form of interest income on cash and marketable
securities held in the Trust Account at JP Morgan Chase Bank, N.A. in New York,
New York with Continental Stock Transfer & Trust Company acting as trustee,
which was funded after the Public Offering to hold an amount of cash and
marketable securities equal to the redemption amount of the Public Units sold in
the Public Offering. We expect to incur increased expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had net income of $1,845,721,
which included $1,633,838 of other income related to the change in the fair
value of the warrant liability and $659,891of dividend and interest income
earned in the trust account, offset by $523,816 in general and administrative
expenses.
For the nine months ended September 30, 2022, we had net income of $6,998,606,
which included $7,195,839 of other income related to the change in the fair
value of the warrant liability and $906,427 of dividend and interest income
earned in the trust account, offset by $1,103,660 in general and administrative
expenses.
Liquidity and Capital Resources
As of September 30, 2022, we had cash of $419,160, and negative working capital
of $114,959. Until the consummation of the Initial Public Offering, our only
source of liquidity was an initial purchase of common stock by the Sponsor and
loans from our Sponsor.
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On September 30, 2021, we consummated the Initial Public Offering of 12,500,000
Units, at a price of $10.00 per Unit, generating gross proceeds of $125,000,000.
On October 15, 2021, the underwriter exercised in full its over-allotment option
to purchase additional 1,875,000 Units at a price of $10.00 per Unit.
Simultaneously with the closing of the Initial Public Offering and the exercise
of the over-allotment option by the underwriter, we consummated the sale of
6,600,000 Private Placement Warrants to the Sponsor at a price of $1.00 per
Private Placement Warrant generating gross proceeds of $6,600,000.
An aggregate of nine Anchor Investors were allocated and purchased a total of
11,137,500 Units or 77.5% of the outstanding Units following the Initial Public
Offering and exercise of the over-allotment option by the underwriter, for gross
proceeds of approximately $111.4 million.
In addition, subject to each Anchor Investor purchasing 100% of the Units
allocated to it, in connection with the closing of the Initial Public Offering,
the Sponsor sold a portion of Founder Shares to each Anchor Investor, or an
aggregate of 495,000 Founders Shares to all Anchor Investors. The Company
estimated the aggregate fair value of these Founder Shares attributable to
Anchor Investors to be approximately $2.93 million, or $5.93 per share.
Simultaneously with the exercise of the over-allotment option by the
underwriter, the Company sold the additional total of 112,500 Founder Shares to
the Anchor Investors. The Company estimated the aggregate fair value of these
Founder Shares to be approximately $667,125, or $5.93 per share.
Following the closing of the Initial Public Offering on September 30, 2021 and
the exercise of the over-allotment option by the underwriter on October 15,
2021, an amount of $145,187,500 ($10.10 per Unit) from the net proceeds of the
sale of the Units in the Initial Public Offering and the sale of the Private
Placement Warrants was placed the Trust Account.
As of the IPO Date, transaction costs amounted to $10,343,978, consisting of
$2,500,000 of underwriting fees, $4,375,000 of deferred underwriting fees,
$2,930,399 representing the aggregate fair value of Founder Shares sold to
Anchor Investors and $538,579 of other offering costs. The Company's remaining
cash after payment of the Initial Public Offering costs is held outside the
Trust Account for working capital purposes. Of the total transaction costs of
$10,343,978 as of the IPO Date, $9,809,375 was allocated to the Class A common
stock and $534,603 was allocated to the Public Warrants.
As of October 15, 2021, transaction costs related to the exercise of the
over-allotment option amounted to $1,941,520, consisting of $375,000 of
underwriting fees, $656,250 of deferred underwriting fees, $667,125 representing
the aggregate fair value of Founder Shares sold to Anchor Investors, and
$243,145 of other offering costs. Of the total transaction costs of $1,941,520
related to the exercise of the over-allotment option, $1,865,801 was allocated
to the Class A common stock and $75,719 was allocated to the Public Warrants.
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
deferred underwriting commissions and income taxes payable), to complete our
business combination. To the extent that our capital stock or debt is used, in
whole or in part, as consideration to complete our 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.
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a business combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. In the event that a 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 warrants, at a
price of $1.00 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimates of
the costs of undertaking in-depth due diligence and negotiating our 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 consummate 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 Business Combination. Subject
to compliance with applicable securities laws, we would only complete such
financing simultaneously with the completion of our business combination. If we
are unable to complete our business combination because we do not have
sufficient funds available to us, we will be forced to cease operations and
liquidate the Trust Account. In addition, following our business combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
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As described more fully in Note 1 to the Financial Statements if the Company is
unable to obtain approval for an extension of the deadline or complete a
Business Combination by March 30, 2023, then the Company will cease all
operations except for the purpose of liquidating. The Company has until March
30, 2023 to consummate a Business Combination. It is uncertain that the Company
will be able to consummate a Business Combination by the specified period. If a
Business Combination is not consummated by March 30, 2023, there will be a
mandatory liquidation and subsequent dissolution. The date for mandatory
liquidation and subsequent dissolution raises substantial doubt about the
Company's ability to continue as a going concern for one year from the date that
these financial statements are issued. 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.
Critical Accounting Policies and Estimates
The Company prepares its financial statements and accompanying notes in
conformity with accounting principles generally accepted in the United States of
America, which require management to make estimates and assumptions about future
events that affect reported amounts. Estimations are considered critical
accounting estimates based on, among other things, its impact on the portrayal
of the Company's financial condition, results of operations, or liquidity, as
well as the degree of difficulty, subjectivity, and complexity in its
deployment. Critical accounting estimates address accounting matters that are
inherently uncertain due to unknown future resolution of such matters.
Management routinely discusses the development, selection, and disclosure of
each critical accounting estimates. There have been no significant changes to
the Company's policies, estimates and assumptions during the nine-months ended
September 30, 2022, except as noted below. Reference should be made to the
financial statements and related notes included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2021 for a full description of
other significant accounting policies.
Recent Accounting Standards
In February 2016, the FASB issued ASU No. 2016-02, which establishes new
accounting and disclosure requirements for leases. ASU No. 2016-02 requires
lessees to classify most leases as either finance or operating leases and to
initially recognize a lease liability and right-of-use asset. The Company
adopted ASU No. 2016-02 on January 1, 2022 using the effective date approach to
recognize and measure leases as of the adoption date. The Company has elected to
utilize the available practical expedient to not separate lease components from
non-lease components as well as the package of practical expedients that allows
the Company not to reassess (1) whether any expired or existing contracts as of
the adoption date are or contain a lease, (2) lease classification for any
expired or existing leases as of the adoption date and (3) initial direct costs
for any existing leases as of the adoption date. As a result of the adoption of
this guidance, the Company recorded a non-cash transaction to recognize on
January 1, 2022 lease liabilities totaling $76,141 and right-of-use-assets
totaling $72,007, which will be amortized over the remaining terms of the lease.
Management does not believe that other any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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