UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, including zip code)
Tel:
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☐ Large accelerated filer | ☐ Accelerated filer |
| ☒
|
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of August 16, 2024 there were Class A ordinary shares, par value $ per share, and Class B ordinary shares, $ par value per share, issued and outstanding.
POWERUP ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024
TABLE OF CONTENTS
| i |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POWERUP ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Prepaid expenses and other | $ | $ | ||||||
| Due from Sponsor | ||||||||
| Total current assets | ||||||||
| Investments held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | |||||||
| Loan and Transfer notes payable | ||||||||
| Subscription Agreement loan | ||||||||
| Due to affiliate | ||||||||
| Total current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 6) | ||||||||
| REDEEMABLE ORDINARY SHARES | ||||||||
| Class A ordinary shares subject to possible redemption at redemption value, $ par value, and shares, respectively, as of June 30, 2024 and December 31, 2023 | ||||||||
| SHAREHOLDER’S DEFICIT | ||||||||
| Preference shares; $ par value, shares authorized, issued or outstanding | ||||||||
| Class A ordinary shares; $ par value; shares authorized; issued or outstanding at June 30, 2024 and December 31, 2023, respectively (excluding and shares, respectively, subject to redemption as of June 30, 2024 and December 31, 2023) | ||||||||
| Class B ordinary shares; $ par value; shares authorized; issued and outstanding at June 30, 2024 and December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, REDEEMABLE ORDINARY SHARES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
POWERUP ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest earned on investments held in Trust Account | ||||||||||||||||
| Other (expense) | ( | ) | ( | ) | ||||||||||||
| Change in fair value of convertible note | ( | ) | ( | ) | ||||||||||||
| Total other (expense) income, net | ( | ) | ( | ) | ||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average shares outstanding of Class A ordinary shares | ||||||||||||||||
| Basic and diluted net (loss) income per share, Class A ordinary shares | $ | ) | $ | $ | ) | $ | ||||||||||
| Weighted average shares outstanding of Class B ordinary shares | ||||||||||||||||
| Basic and diluted net income per share, Class B ordinary shares | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
POWERUP ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement for Class A shares to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Face value of convertible note in excess of fair value | — | — | ||||||||||||||||||||||||||
| Issuance of subscription shares | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement for Class A shares to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Face value of convertible note in excess of fair value | — | — | ||||||||||||||||||||||||||
| Issuance of subscription shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Contribution - shareholder non-redemption agreements | — | — | ||||||||||||||||||||||||||
| Shareholder non-redemption agreements | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance - January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Remeasurement for Class A shares to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Conversion of Class B shares to Class A | ( | ) | ( | ) | ||||||||||||||||||||||||
| Remeasurement for Class A shares to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Reduction of U/W Fee Payable | — | — | ||||||||||||||||||||||||||
| Contribution - shareholder non-redemption agreements | — | — | ||||||||||||||||||||||||||
| Shareholder non-redemption agreements | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
POWERUP ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Interest income on investments held in Trust Account | ( | ) | ( | ) | ||||
| Change in fair value of convertible note | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Due from Sponsor | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Due to affiliate | ||||||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash withdrawn from Trust Account in connection with redemptions | ||||||||
| Net cash flows provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from Subscription Agreement loan | ||||||||
| Proceeds from Loan and Transfer Payable | ||||||||
| Redemption of ordinary shares | ( | ) | ( | ) | ||||
| Net cash flows used in financing activities | ( | ) | ( | ) | ||||
| NET CHANGE IN CASH | ( | ) | ||||||
| CASH, BEGINNING OF THE PERIOD | ||||||||
| CASH, END OF THE PERIOD | $ | $ | ||||||
| Supplemental disclosure of noncash activities: | ||||||||
| Forgiveness of the deferred underwriting commissions payable charged to additional paid in capital | $ | $ | ( | ) | ||||
| Remeasurement of Class A ordinary shares to redemption value | $ | $ | ||||||
| Sponsor shares contributed for no redemption of shares | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
POWERUP ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND LIQUIDITY
PowerUp Acquisition Corp. (the “Company” or “PowerUp”) was incorporated as a Cayman Islands exempted company on February 9, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).
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.
On December 26, 2023, the Company entered into an Agreement and Plan of Merger (as subsequently amended, the “Merger Agreement”) with PowerUp Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), SRIRAMA Associates, LLC, a Delaware limited liability company (the “New Sponsor”), Ryan Bleeks, in the capacity as the seller representative, and Visiox Pharmaceuticals, Inc., a Delaware corporation (“Visiox”). The transactions contemplated by the Merger Agreement were intended to serve as the Company’s initial Business Combination. See Note 6 for further information.
On June 6, 2024, the parties to the Merger Agreement
entered into an amendment agreement (the “Amendment Agreement”). The Amendment Agreement extended the Outside Date (as defined
in the Merger Agreement) from May 31, 2024 to June 30, 2024, increased the Company’s indebtedness cap from $
On July 19, 2024, the Company delivered written notice to Visiox of its election to terminate the Merger Agreement and abandoned the transactions contemplated thereby, primarily because the conditions to closing set forth in the Merger Agreement were not satisfied or waived by June 30, 2024.
As
of June 30, 2024, the Company had not commenced any operations. Substantially all activity from February 9, 2021 (inception) through
June 30, 2024 relates to the Company’s formation and initial public offering (“IPO”), which is described below
and, since the IPO, the search for a prospective initial Business Combination, the negotiation of the Merger Agreement and actions
taken until July 19, 2024 to advance the previously anticipated business combination with Visiox. The Company will not generate any
operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates
non-operating income in the form of interest income earned on investments from the proceeds derived from the IPO. The registration
statement for the Company’s IPO was declared effective on February 17, 2022. On February 23, 2022, the Company consummated the
IPO of
units (“Units” and, with respect to Class A ordinary shares included in the Units offered, the “Public
Shares”) at $
per Unit, generating gross proceeds of $
Simultaneously
with the closing of the IPO, the Company consummated the sale of
Simultaneously
with the closing of the IPO, the Company consummated the closing of the sale of additional Units upon receiving notice of the
underwriter’s election to fully exercise its overallotment option (the “Overallotment Units”), generating additional
gross proceeds of $
Offering
costs for the IPO amounted to $
Following
the closing of the IPO, $
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale
of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating
a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company
must complete one or more initial Business Combinations having an aggregate fair market value of at least
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $ per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There are no redemption rights with respect to the Company’s warrants.
| 6 |
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated memorandum and articles of association (the “Memorandum and Articles of Association”). In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) Subtopic 10-S99, redemption provisions not solely within the control of a company require Class A ordinary shares subject to redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., Public Warrants), the initial carrying value of the Public Shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20 “Debt with Conversion and other Options”. The Public Shares are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The Public Shares are redeemable and are classified as such on the consolidated balance sheet until such date that a redemption event takes place.
Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to an initial Business Combination. If the Company seeks shareholder approval of a Business Combination, the Company will proceed with the Business Combination if a majority of the shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a shareholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, shareholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain shareholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks shareholder approval in connection with a Business Combination, the Original Sponsor agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of the Business Combination. The New Sponsor is subject to this same obligation. Additionally, each Public Shareholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed Business Combination.
Notwithstanding the foregoing, the Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of % or more of the Class A ordinary shares sold in the IPO, without the prior consent of the Company.
The Company’s Original Sponsor, and its initial officers and directors (the “Initial Shareholders”) agreed not to propose an amendment to the Memorandum and Articles of Association that would affect the substance or timing of the Company’s obligation to redeem % of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment. The New Sponsor and the Company’s current officers and directors are subject to this same obligation.
On
May 18, 2023, the Company held an extraordinary general meeting of shareholders (the “2023 Extension Meeting”). At the 2023
Extension Meeting, the Company’s shareholders approved an amendment to the Company’s Amended and Restated Memorandum and
Articles of Association to extend the date by which the Company must consummate its initial Business Combination from May 23, 2023 to
May 23, 2024 (the “2023 Extension Amendment”). In connection with the approval of the 2023 Extension Amendment, holders of
of the Company’s Class A ordinary shares exercised their right to redeem those shares for cash at an approximate price
of $ per share, for an aggregate of approximately $
Following the 2023 Extension Meeting, on May 18, 2023, those Initial Shareholders holding all of the issued and outstanding Class B ordinary shares of the Company elected to convert their Class B ordinary shares into Class A ordinary shares of the Company on a one-for-one basis. As a result, of the Company’s Class B ordinary shares were cancelled and of the Company’s Class A ordinary shares were issued to converting Class B shareholders.
On
August 14, 2023, the Company was notified by Equiniti Trust Company, LLC that the
per share redemption price for the redemption of Public Shares effected on May 18, 2023 should have been approximately $, which
was approximately $ higher than the approximately $ per share previously paid. The Company made a “true-up” payment
in the amount of approximately $ per share to the holders of record as of April 19, 2023 that exercised their right to redeem their
shares for a pro rata portion of the funds in the Trust Account. On August 18, 2023, the Company made the true-up payment to the applicable
holders in the aggregate amount of $
On
April 13, 2023, the Company engaged J.V.B. Financial Group, LLC, acting through its Cohen & Company Markets division (“CCM”)
to act as its capital markets advisor in connection with seeking an extension for completing a Business Combination. The Company will
pay CCM the sum of (i) $
On August 18, 2023, in connection with the closing of the transaction contemplated by the Purchase Agreement (defined below), each then serving director tendered their resignations as members of the board of directors of the Company (the “Board”), each then serving executive officer resigned from their positions as officers of the Company, and new persons were appointed to serve as officers and directors of the Company.
| 7 |
On
May 22, 2024, the Company held an extraordinary general meeting of shareholders (the “2024 Extension Meeting”). At the 2024
Extension Meeting, the Company’s shareholders approved an amendment to the Company’s Amended and Restated Memorandum and
Articles of Association to extend the date by which the Company must consummate its initial Business Combination from May 23, 2024 to
February 17, 2025 (the “2024 Extension Amendment”). In connection with the approval of the 2024 Extension Amendment, holders
of of the Company’s Class A ordinary shares exercised their right to redeem those shares for cash at an approximate price
of $ per share, for an aggregate of approximately $
In connection with the 2024 Extension Meeting, the Company and the New Sponsor entered into a non-redemption agreement (the “2024 Non-Redemption Agreement”) with an unaffiliated third-party shareholder in exchange for such shareholder agreeing not to redeem (or to validly rescind any redemption requests on) of the Company’s Class A ordinary shares (the “2024 Non-Redeemed Shares”) in connection with the 2024 Extension Meeting. In exchange for the commitment not to redeem the Non-Redeemed Shares, the New Sponsor has agreed to transfer to such shareholder Class A ordinary shares of the Company held by the New Sponsor and Class A ordinary shares which will be issued to the New Sponsor upon the closing of the Company’s initial Business Combination. The 2024 Non-Redemption Agreement increased the amount of funds that remained in the Company’s Trust Account following the 2024 Extension Meeting.
If
the Company is unable to complete a Business Combination by February 17, 2025, and in the absence of the Company’s shareholders approving an additional
extension to the Company’s term, 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 us to pay the Company’s franchise and income taxes (less up
to $
The Initial Shareholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by February 17, 2025, or during any additional extension period (the “Combination Period”). However, if the Initial Shareholders acquired Public Shares in or after the IPO, they are entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account. In the event the Company does not complete a Business Combination within the Combination Period, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be approximately $ per share held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsors have agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a Business Combination, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsors will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsors will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going Concern
As
of June 30, 2024, the Company had $ in its operating bank account and a working capital deficit of $
The Company initially had 15 months from the closing of the IPO to consummate an initial Business Combination. At the 2024 Extension Meeting, the Company’s shareholders approved the 2024 Extension Amendment that served to extend the date by which the Company must consummate its initial Business Combination to February 17, 2025 (See Note 10). The remaining life of the Company as of June 30, 2024 is under 12 months.
Until the consummation of a Business Combination, the Company will be using any funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating an initial Business Combination. The Company may need to raise additional capital through loans or additional investments from its New Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and New 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 for a reasonable period of time, which is considered to be one year from the issuance date of the consolidated financial statements. These consolidated 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.
| 8 |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP have been condensed consolidated or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended December 31, 2023, as filed with the SEC on March 11, 2024. The interim results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for any future period.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an emerging growth company as defined in Section 102 (b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which 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 an 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 the comparison of the Company’s condensed consolidated financial statements with another public company difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed consolidated 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 condensed consolidated financial statements. Making estimates requires management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those significant estimates. 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 condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. 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
| 9 |
Cash Held in Trust Account
At June 30, 2024 substantially all of the assets held in the Trust Account were held in an interest-bearing demand deposit account at a bank, and at December 31, 2023, substantially 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 at December 31, 2023 are classified as trading securities. Trading securities are presented on the condensed consolidated balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in the fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed consolidated statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Offering Costs associated with the Initial Public Offering
Offering
costs consist principally of legal, accounting, underwriting fees and other costs directly related to the IPO. Offering costs amounted
to $
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed consolidated balance sheet, primarily due to their short-term nature.
Income Taxes
The Company accounts 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 consolidated 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 consolidated financial statements
and prescribes a recognition threshold and measurement process for consolidated 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. The Company recognizes accrued interest and penalties related to unrecognized
tax benefits as income tax expense. There were
The Company is considered an exempted Cayman Islands Company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
| 10 |
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, are classified as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Public 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, at June 30, 2024 and December 31, 2023, and ordinary shares subject to possible redemption, respectively, are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed consolidated balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of the redeemable ordinary shares are affected by charges against additional paid-in capital and accumulated deficit.
At June 30, 2024, the redeemable ordinary shares subject to possible redemption reflected in the condensed consolidated balance sheet is reconciled in the following table:
| Redeemable ordinary shares subject to possible redemption at December 31, 2023 | $ | |||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Less: | ||||
| Redemption | ( | ) | ||
| Redeemable ordinary shares subject to possible redemption at June 30, 2024 | $ |
The Company has two classes of shares, which are referred to as Class A ordinary shares (as defined above, the “Public Shares”) and Class B ordinary shares (the “Founder Shares”). Earnings and losses are shared pro rata between the two classes of shares. Public and private warrants to purchase Public Shares at $ per share were issued on February 23, 2022. At June 30, 2024, no warrants have been exercised. The Public Shares underlying the outstanding warrants to purchase the Company’s stock were excluded from diluted earnings per share for the three and six months ended June 30, 2024 and 2023, because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted income (loss) per ordinary share is the same as basic income (loss) per ordinary share for all periods presented. The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of ordinary shares.
For the three months ended June 30, 2024 | For the three months ended June 30, 2023 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net (loss) income per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net (loss) income | $ | ( | ) | $ | $ | $ | ||||||||||
| Denominator: | ||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic and dilution net (loss) income per share | $ | ) | $ | $ | $ | |||||||||||
| For the six months ended | For the six months ended | |||||||||||||||
| June 30, 2024 | June 30, 2023 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net (loss) income per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net (loss) income | $ | ( | ) | $ | $ | $ | ||||||||||
| Denominator: | ||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Basic and dilution net (loss) income per share | $ | ) | $ | $ | $ | |||||||||||
| 11 |
Accounting for Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free standing consolidated financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants (as defined below) and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its condensed consolidated financial statements and disclosures.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant
to the IPO, the Company sold Units at a price of $ per Unit. Each Unit consisted of one Class A ordinary share and one-half
of a redeemable warrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase
NOTE 4. PRIVATE PLACEMENT WARRANTS
On
February 23, 2022, simultaneously with the consummation of the IPO and the underwriters’ exercise of their over-allotment option
in full, the Company consummated the issuance and sale of
The Original Sponsor and the Company’s initial officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination. The New Sponsor and the Company’s current officers and directors are subject to this same obligation.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On February 16, 2021, the Original Sponsor purchased shares of the Company’s Class B ordinary shares for an aggregate price of $, and on December 18, 2021, the Original Sponsor surrendered Class B ordinary shares, so that the Original Sponsor then owned an aggregate of Class B ordinary shares. On February 11, 2022, the Company effected a -for-1.0 share dividend of its Class B ordinary shares, so that the Original Sponsor owned an aggregate of Founder Shares. The share dividend was retroactively restated. Since the underwriters’ exercised their overallotment option in full upon IPO, none of the Founder Shares were forfeited.
The Founder Shares are subject to certain transfer restrictions, as described in this Note 5.
The Initial Shareholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of:
On August 18, 2023, the New Sponsor purchased from the Original Sponsor (x) Class A ordinary shares and (y) Private Placement Warrants for an aggregate purchase price of $, payable at the time of the initial Business Combination.
| 12 |
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the New Sponsor or an affiliate of the New
Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required
(“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans
out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds
held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held
outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working
Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at
the lender’s discretion, up to $
On
December 21, 2023, the Company entered into a Loan and Transfer Agreement with the New Sponsor and SSVK Associates, LLC
(“SSVK”), pursuant to which SSVK loaned an aggregate of $
On
January 9, 2024, the Company entered into a Loan and Transfer Agreement with the New Sponsor and Apogee Pharma
(“Apogee”), pursuant to which Apogee loaned an aggregate of $
On
January 10, 2024, the Company entered into a Loan and Transfer Agreement with the New Sponsor and Jinal Sheth (“Sheth”),
pursuant to which Sheth loaned an aggregate of $
Pursuant to ASC 470, the Company recorded the fair value of the loan and transfer liability on the condensed consolidated balance sheets using the relative fair value method and the related amortization of the debt discount on its condensed consolidated statements of operations. The initial fair value of the subscription liability at issuance was estimated using a Black Scholes and Probability Weighted Expected Return Model (“PWERM”).
On March 5, 2024, the Company entered into four separate
Subscription Agreements (each, a “First Subscription Agreement”) with the New Sponsor, Visiox, VKSS Capital, LLC, an affiliate
of, and an entity under common control with, the New Sponsor (the “Affiliate”), and four separate investors (each, an “Investor”),
whereby the Investors collectively contributed to New Sponsor a total of $
On May 9, 2024, the Company entered into four
separate Subscription Agreements (each, a “Second Subscription Agreement”) with the New Sponsor, the Affiliate, and the
four separate Investors, whereby, the Investors collectively contributed to the New Sponsor a total of $
The Company analyzed its First Subscription Agreements and Second Subscription Agreements under ASC 480 “Distinguishing Liabilities from Equity” and ASC 815 “Derivatives and Hedging” and concluded that bifurcation of a single derivative that comprises all of the fair value of the conversion feature(s) (i.e., derivative instrument(s)) is not necessary under ASC 815-15-25-7 through 25-10. As a result, all debt proceeds received from Lender have been recorded using the relative fair value method of accounting under ASC 470 “Debt”. Pursuant to ASC 470, the Company recorded the fair value of the subscription liability on the condensed consolidated balance sheets using the relative fair value method. The initial fair value of the subscription liability at issuance was estimated using a Black Scholes and Probability Weighted Expected Return Model.
Administrative Services Fee
The
Company entered into an agreement, commencing on the effective date of the IPO through the earlier of the consummation of a Business
Combination and the Company’s liquidation, to pay an affiliate of the Original Sponsor a monthly fee of $
Due to affiliate
As
of June 30, 2024 and December 31, 2023, $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights pursuant to a registration rights agreement dated February 17, 2022. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
| 13 |
Underwriting Agreement
The
Company granted the underwriters a
The
underwriters were paid a cash underwriting discount of $
On
June 28, 2023, the underwriters agreed to waive their entitlement to the deferred underwriting commissions of $
Non-Redemption Agreements
The
Original Sponsor entered into non-redemption agreements (the “2023 Non-redemption Agreements”) with various shareholders
of the Company (the “2023 Non-Redeeming Shareholders”), pursuant to which these shareholders agreed not to redeem a
portion of their Class A ordinary shares (the “2023 Non-Redeemed Shares”) solely in connection with the 2023 Extension
Meeting, but such shareholders retained their right to require the Company to redeem such 2023 Non-Redeemed Shares in connection
with the closing of an initial Business Combination. The Original Sponsor agreed to transfer to such 2023 Non-Redeeming Shareholders an
aggregate of
the Founder Shares held by the Original Sponsor immediately following the consummation of an initial Business Combination. The
Company estimated the aggregate fair value of such
Founder Shares transferrable to the 2023 Non-Redeeming Shareholders pursuant to the non-redemption agreements to be $
or approximately $
per share. The fair value was determined using the probability of a successful Business Combination of
The
Company and the New Sponsor entered into the 2024 Non-Redemption Agreement with an unaffiliated third-party shareholder (the “2024
Non-Redeeming Shareholder”) in exchange for such shareholder agreeing not to redeem (or to validly rescind any redemption requests
on) 2024 Non-Redeemed Shares in connection with the 2024 Extension Meeting. In exchange for the commitment not to redeem the
2024 Non-Redeemed Shares, the New Sponsor has agreed to transfer to such shareholder Class A ordinary shares of the Company
held by the New Sponsor and Class A ordinary shares which will be issued to the New Sponsor upon the closing of the Company’s
initial Business Combination. The Company estimated the aggregate fair value of such Founder Shares transferrable to the 2024 Non-Redeeming
Shareholder pursuant to the non-redemption agreements to be $
The excess of the fair value of such Founder Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A. Accordingly, in substance, it was recognized by the Company as a capital contribution by the New Sponsor to induce these 2023 Non-Redeeming Shareholders and 2024 Non-Redeeming Shareholder not to redeem the 2023 Non-Redeemed Shares and 2024 Non-Redeemed Shares, with a corresponding charge to additional paid-in capital to recognize the fair value of the Founder Shares subject to transfer as an offering cost.
Purchase Agreement
On
July 14, 2023, the Company entered into a purchase agreement (the “Purchase Agreement”) with the New Sponsor and the Original
Sponsor, pursuant to which the New Sponsor purchased from the Original Sponsor (x) Class A Ordinary Shares and (y)
private placement warrants, free and clear of all liens and encumbrances (other than those contained in the Letter Agreement, dated February
22, 2022, by and among the Company, its officers, directors and the Original Sponsor, and the Underwriting Agreement), for an aggregate
purchase price of $
Contingent Agreement
On
April 13, 2023, the Company engaged CCM to act as its capital markets advisor in connection with seeking an extension for completing
a Business Combination. The Company will pay CCM the sum of (i) $
| 14 |
Merger Agreement
On December 26, 2023, the Company entered into the Merger Agreement with Merger Sub, the New Sponsor, Visiox, and Ryan Bleeks, in the capacity as the seller representative. Pursuant to the Merger Agreement, among other things, the parties intended to effect the merger of Merger Sub with and into Visiox, with Visiox continuing as the surviving entity (the “Merger”), as a result of which all of the issued and outstanding capital stock of Visiox were to be exchanged for shares of common stock of PowerUp (the “Share Exchange”) subject to the conditions set forth in the Merger Agreement, with Visiox surviving the Share Exchange as a wholly owned subsidiary of PowerUp.
Prior to the Closing Date, and subject to the satisfaction or waiver of the conditions of the Merger Agreement, PowerUp was to migrate out of the Cayman Islands and domesticate as a Delaware corporation in accordance with Section 388 of the DGCL and Part XII of the Cayman Islands Companies Act.
Merger Consideration
As
consideration for the Merger, the holders of Visiox’s securities collectively were to be entitled to receive from the Company, in
the aggregate, a number of shares of Company Common Stock with an aggregate value equal to the Merger Consideration. Under the Merger
Agreement, “Merger Consideration” means
In addition, holders of Visiox’s securities and the New Sponsor also had the contingent right to receive from the Company, in the aggregate, an additional shares of Company Common Stock subject to various milestones set forth in the Merger Agreement.
Amendment Agreement
On June 6, 2024, the parties to the Merger Agreement
entered into the Amendment Agreement. The Amendment Agreement extended the Outside Date (as defined in the Merger Agreement) from May
31, 2024 to June 30, 2024, increased the Company’s indebtedness cap from $
Termination of Merger
On July 19, 2024, the Company delivered written notice to Visiox of its election to terminate the Merger Agreement and abandoned the transactions contemplated thereby, primarily because the conditions to closing set forth in the Merger Agreement were not satisfied or waived by June 30, 2024.
The Company intends to continue evaluating other possible business combination targets, though there can be no assurance these evaluations or efforts will result in a business combination transaction (See Note 10 Subsequent Event).
| 15 |
NOTE 7. SHAREHOLDERS’ DEFICIT
Preference Shares—The Company is authorized to issue preference shares with a par value of $ per share with such designations, voting and other rights and preferences as may be determined from time to time by the Board. At June 30, 2024 and December 31, 2023, there were preference shares issued or outstanding.
Class A ordinary shares—The Company is authorized to issue Class A ordinary shares with a par value of $ per share. As of June 30, 2024 and December 31, 2023, there were Class A ordinary shares issued and outstanding (excluding and Class A ordinary shares subject to possible redemption, respectively, as of June 30, 2024 and December 31, 2023).
Class B ordinary shares—The Company is authorized to issue Class B ordinary shares with a par value of $ per share. As of June 30, 2024 and December 31, 2023, there were Class B ordinary shares outstanding.
If
there are any Class B ordinary shares outstanding at the time of the initial Business Combination, such shares will automatically convert
into Class A ordinary shares on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked
securities, are issued or deemed issued in excess of the amounts offered in the IPO and related to the closing of the initial Business
Combination, the ratio at which Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders
of a majority of the outstanding Class B ordinary shares agree to waive such adjustment with respect to any such issuance or deemed issuance)
so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on
an as-converted basis,
| 16 |
NOTE 8. WARRANTS
Public
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) the completion of a Business Combination and (b)
The Company will not be obligated to deliver any ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its best efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration statement covering the offer and sale of the ordinary shares issuable upon exercise of the warrants is not effective within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, the Company may redeem the warrants:
| ● | in whole and not in part; | |
| ● | at
a price of $ | |
| ● | upon
not less than | |
| ● | if,
and only if, the reported last sale price of the Public Shares equals or exceeds $ per share (as adjusted for share subdivisions,
share consolidations, share capitalizations, rights issuances, reorganizations, recapitalizations and the like) for any |
If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect such registration or qualification.
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger, or consolidation. However, except as described below, the warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. 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 warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In
addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection
with the closing of its initial Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Placement Warrants and the ordinary shares issuable upon the exercise of the Private Placement Warrants are not transferable, assignable, or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
The
Company has determined that warrants issued in connection with its IPO in February 2022 are subject to treatment as equity. In order
to account for the fair value of the Public Warrants issued in the IPO, the Company used Black Scholes Model to allocate cost to the
Public Warrants on IPO. The key assumptions in the option pricing model utilized are assumptions related to expected share-price volatility,
expected term, risk-free interest rate and dividend yield. The expected volatility as of the IPO closing date was derived from observable
public warrant pricing on comparable ‘blank check’ companies that recently went public in 2020 and 2021. The risk-free interest
rate is based on the interpolated U.S. Constant Maturity Treasury yield. The expected term of the warrants is assumed to be
| 17 |
NOTE 9. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
At June 30, 2024 the assets held in the Trust Account were held in an interest-bearing demand deposit account at a bank and at December 31, 2023, the assets held in the Trust Account were held in treasury funds. At December 31, 2023 the Company’s investments held in the Trust Account are classified as trading securities.
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| Quoted Prices in | Significant Other | Significant Other | ||||||||||||||
| Active Markets | Observable Inputs | Unobservable Inputs | ||||||||||||||
| June 30, 2024 | Level | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Investment held in Trust Account | 1 | $ | ||||||||||||||
| Liabilities: | ||||||||||||||||
| Subscription Agreement loan | 3 | $ | $ | |||||||||||||
| Loan and Transfer notes payable | 3 | $ | $ | |||||||||||||
| Quoted Prices in | Significant Other | Significant Other | ||||||||||||||
| Active Markets | Observable Inputs | Unobservable Inputs | ||||||||||||||
| December 31, 2023 | Level | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
| Investment held in Trust Account | 1 | $ | ||||||||||||||
As discussed in Note 6, the fair values of the subscription liabilities related to advances made to, or on behalf of the Company under such agreements, are classified and accounted for as a financial liability of which will be measured at fair value on a recurring basis (one of the instruments is accounted for at fair value on a recurring basis under ASC 480-10, as a derivative instrument under ASC 815, or at fair value under the fair value option in ASC 825-10).
The Financial Liabilities are valued under a PWERM which fair values repayable capital investment and used a Black Scholes Model that fair values the conversion features within the convertible debt. The PWERM is a multistep process in which value is estimated based on the probability-weighted present value of various future outcomes. The estimated fair value of the Financial Liabilities Component is determined using Level 3 inputs. Inherent in the pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate.
| 18 |
The key inputs of the models used to value the Company’s Subscription Agreement loan were:
| Inputs | June 30, 2024 | |||
| Term Remaining | ||||
| Share Price | $ | |||
| Risk-Free Rate | % | |||
The change in the fair value of Subscription Agreement loans measured using Level 3 inputs is summarized as follows:
| Initial Subscription Agreement loans at March 5, 2024 | $ | |||
| Change in fair value | ||||
| Subscription Agreement loans at June 30, 2024 | $ |
As discussed in Note 5, the Company fair values the Loan and Transfer notes payable are classified and accounted for as a financial liability of which will be measured at fair value on a recurring basis (one of the instruments is accounted for at fair value on a recurring basis under ASC 480-10, as a derivative instrument under ASC 815, or at fair value under the fair value option in ASC 825-10);
The Financial Liabilities are valued under a Probability Weighted Expected Return Model (“PWERM”) which fair values repayable capital investment and used a Black Scholes Model that fair values the conversion features within the convertible debt. The PWERM is a multistep process in which value is estimated based on the probability-weighted present value of various future outcomes. The estimated fair value of the Financial Liabilities Component is determined using Level 3 inputs. Inherent in the pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate.
The key inputs of the models used to value the Company’s Loan and Transfer notes payable as of June 30, 2024 were:
| Inputs | June 30, 2024 | |||
| Term Remaining | ||||
| Share Price | $ | |||
| Risk-Free Rate | % | |||
The change in the fair value of Loan and Transfer notes payable measured using Level 3 inputs, for June 30, 2024 and December 31, 2023 is summarized as follows:
| Loan and Transfer notes payable at December 31, 2023 | $ | |||
| Change in fair value | ||||
| Loan and Transfer notes payable at June 30, 2024 | $ |
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the unaudited condensed financial statements were issued. Based upon this review, other than disclosed below or within these financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On July 19, 2024, the Company delivered written notice to Visiox of its election to terminate the Merger Agreement and abandoned the transactions contemplated thereby, primarily because the conditions to closing set forth in the Merger Agreement were not satisfied or waived by June 30, 2024. The termination of the Merger Agreement shall have the effects set forth therein.
The Company intends to continue evaluating other possible business combination targets, though there can be no assurance these evaluations or efforts will result in a business combination transaction.
| 19 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to PowerUp Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, references to the “Original Sponsor” refer to PowerUp Sponsor LLC, and references to the “New Sponsor” refer to SRIRAMA Associates, LLC. The Original Sponsor and the New Sponsor are collectively referred to as the “Sponsors.” The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the 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 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 Form 10-Q 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” and variations 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 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and otherwise identified in reports we file 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 on February 9, 2021 as a Cayman Islands corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar transaction (“Business Combination”) with one or more businesses or entities. While we may pursue an acquisition opportunity in any business, industry, sector, or geographical location, we have focused, and intend to focus, on industries that complement our management’s background and to capitalize on the ability of our management team to identify and acquire a business. We may pursue a transaction in which our shareholders immediately, prior to completion of our initial Business Combination, would collectively own a minority interest in the combined post-Business Combination company. We intend to effectuate our initial Business Combination using cash from the proceeds of our initial public offering (the “IPO”) and the sale of the private placement warrants, our shares, debt or a combination of cash, equity 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 a Business Combination will be successful.
Results of Operations
As of June 30, 2024, the Company had not commenced any operations. From February 9, 2021 (inception) until the Company’s initial public offering on February 23, 2022, the Company’s entire activity was in preparation for an initial public offering, and following the Company’s IPO through June 30, 2024, the Company’s entire activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until after completion of our initial Business Combination at the earliest. We incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses for due diligence efforts. Our operating expenses consist of general and administrative expenses necessary to operate and maintain the Company as we pursue one or more Business Combinations.
For the three months ended June 30, 2024, we had a net loss of $602,258, which consisted of operating expenses of $501,012, interest expense associated with the debt discount of $208,184 and other expense of $62,974, offset by interest earned on investments held in Trust Account of $169,912. For the three months ended June 30, 2023, we had a net income of $1,811,817, which consisted of interest earned on investments held in Trust Account of $2,100,063 offset by operating expenses of $288,246.
For the six months ended June 30, 2024, we had a net loss of $3,069,359, which consisted of operating expenses of $3,023,690, interest expense associated with the debt discount of $391,494 and other expense of $58,940, offset by interest earned on investments held in Trust Account of $404,765. During the six months ended June 30, 2024 there was a $2,000,000 subscription agreement expense recognized as part of the Merger Agreement which is included in general and administrative expenses. For the six months ended June 30, 2023, we had a net income of $4,684,250, which consisted of interest earned on investments held in Trust Account of $5,297,061 offset by operating expenses of $612,811.
| 20 |
Liquidity and Capital Resources
Until the consummation of the IPO, our only source of liquidity was an initial purchase of Founder Shares by the Original Sponsor and loans from the Original Sponsor.
On February 23, 2022, the Company consummated the IPO of 25,000,000 units (“Units”) with respect to the ordinary shares included in the Units being offered (the “Public Shares”) at $10.00 per Unit generating gross proceeds of $250,000,000. Simultaneously with the closing of the IPO, the Company consummated the sale of 9,138,333 private placement warrants (“Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to the Original Sponsor generating gross proceeds of $13,707,500. Simultaneously with the closing of the IPO, the Company consummated the closing of the sale of 3,750,000 additional Units upon receiving notice of the underwriter’s election to fully exercise its overallotment option (the “Overallotment Units”), generating additional gross proceeds of $37,500,000. Simultaneously with the exercise of the overallotment, the Company consummated the private placement of an additional 625,000 Private Placement Warrants to the Original Sponsor, generating gross proceeds of $937,500.
For the six months ended June 30, 2024, net cash used in operating activities was $2,852,308, net cash provided by investing activities was $13,781,323 and net cash used in financing activities was $10,929,015.
For the six months ended June 30, 2023, net cash used in operating activities was $372,058, net cash provided by investing activities was $284,283,159 and net cash used in financing activities was $284,283,159.
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 taxes payable and deferred underwriting commissions), to complete our initial Business Combination. We may withdraw interest income (if any) to pay taxes, if any. Our annual tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We expect the interest income earned on the amount in the Trust Account (if any) will be sufficient to pay our taxes. To the extent that our equity 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.
As of June 30, 2024, the Company had $0 in its operating bank account, $6,524,611 held in the Trust Account to be used for a Business Combination or to repurchase or redeem its Ordinary Shares in connection therewith and working capital deficit of $5,897,306.
The Company has until February 17, 2025 to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate an initial Business Combination prior to February 17, 2025, its shareholders may vote by special resolution to amend the Company’s Amended and Restated Memorandum and Articles of Association to extend the period of time that the Company has to consummate the initial Business Combination (any such extended period of time, an “Extension Period”).
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination. The Company may need to raise additional capital through loans or additional investments from New Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and New 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. Unless the shareholders vote for an additional extension, the remaining life of the Company as of June 30, 2024 is under 12 months.
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 for a reasonable period of time, which is considered to be one year from the issuance date of the consolidated financial statements. These consolidated 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.
Related Party Transactions
Founder Shares
On February 16, 2021, the Original Sponsor purchased 8,625,000 shares of the Company’s Class B ordinary shares, par value $0.0001 (“Class B ordinary shares”) for an aggregate price of $25,000, and on December 18, 2021, the Original Sponsor surrendered 2,156,250 Class B ordinary shares, so that the Original Sponsor owned an aggregate of 6,468,750 Class B ordinary shares. On February 11, 2022, the Company effected a 1.11111111-for-1.0 share dividend of its Class B ordinary shares, so that the Original Sponsor owned an aggregate of 7,187,500 Founder Shares. The share dividend was retroactively restated. Since the underwriters’ exercised their overallotment option in full upon IPO, none of the Founder Shares were forfeited.
The Founder Shares are subject to certain transfer restrictions, as described below.
| 21 |
The Initial Shareholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital share exchange or other similar transaction that results in all of the Company’s shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
On August 18, 2023, the New Sponsor purchased from the Original Sponsor (x) 4,317,500 Class A Ordinary Shares and (y) 6,834,333 Private Placement Warrants for an aggregate purchase price of $1.00, payable at the time of the initial Business Combination.
Private Placement
On February 23, 2022, simultaneously with the consummation of the IPO and the underwriters’ exercise of their over-allotment option in full, the Company consummated the issuance and sale of 9,763,333 Private Placement Warrants in a private placement transaction at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $14,645,000. Each whole Private Placement Warrant is exercisable for one whole Class A ordinary share at a price of $11.50 per share. A portion of the proceeds from the Private Placement Warrants was added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants are non-redeemable and exercisable on a cashless basis.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the New Sponsor or an affiliate of the New Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of June 30, 2024 and December 31, 2023, $449,214 and $250,000 in Working Capital Loans were outstanding, respectively.
On December 21, 2023, the Company entered into a Loan and Transfer Agreement with the New Sponsor and SSVK, pursuant to which SSVK loaned an aggregate of $250,000 to the New Sponsor, and, in turn, the New Sponsor loaned $250,000 to the Company. As of June 30, 2024 and December 31, 2023, there was $250,000 and $155,848 in borrowings under the agreement, respectively. The debt discount is being amortized to interest expense as a non-cash charge over the term of the loan and transfer liability, in which is generally the Company’s expected Business Combination date at the time of each draw. The remaining balance of the debt discount as of June 30, 2024 and December 31, 2023 amounted to $0 and $143,464, respectively. During the three and six months ended June 30, 2024, the Company recorded $88,644 and $229,919, respectively, of interest expense related to the amortization of the debt discount.
On January 9, 2024, the Company entered into a Loan and Transfer Agreement with the New Sponsor and Apogee, pursuant to which Apogee loaned an aggregate of $50,000 to the New Sponsor, and, in turn, the New Sponsor loaned the $50,000 to the Company. On January 10, 2024, the Company entered into a Loan and Transfer Agreement with the New Sponsor and Sheth, pursuant to which Sheth loaned an aggregate of $150,000 to the New Sponsor and the New Sponsor loaned $150,000 to the Company. As of June 30, 2024 and December 31, 2023, there was $200,000 and $0, respectively, in aggregate borrowings under the Loan and Transfer Agreements with Apogee and Sheth. The debt discount is being amortized to interest expense as a non-cash charge over the term of the loan and transfer liability, in which is generally the Company’s expected Business Combination date at the time of each draw. The remaining balance of the debt discount as of June 30, 2024 and December 31, 2023 amounted to $21,426 and $0, respectively. During the three and six months ended June 30, 2024, the Company recorded $119,540 and $161,575, respectively, of interest expense related to the amortization of the debt discount.
On March 5, 2024, the Company entered into the First Subscription Agreement with the New Sponsor, Visiox, the Affiliate, and the four separate Investors, whereby the Investors collectively contributed to New Sponsor the $1,000,000 First Contribution.
On May 9, 2024, the Company entered into the Second Subscription Agreement with the New Sponsor, the Affiliate, and the four separate Investors, whereby, the Investors collectively contributed to New Sponsor the $500,000 Second Contribution and, in turn, the New Sponsor loaned the $500,000 May Loan to the Company.
Administrative Services Fee
We agreed, commencing on the effective date of the IPO through the earlier of our consummation of a Business Combination or our liquidation, to pay an affiliate of the Original Sponsor a monthly fee of $10,000 for office space, secretarial and administrative services. For the three and six months ended June 30, 2024 and 2023, the Company has incurred $30,000 and $60,000, respectively, of expenses under this arrangement.
| 22 |
Deferred Underwriting Fees
The underwriters were paid a cash underwriting discount of $0.20 per unit, or $5,000,000 in the aggregate at the closing of the IPO. The underwriters agreed to defer the cash underwriting discount of $0.20 per share related to the over-allotment to be paid at Business Combination ($750,000 in the aggregate). In addition, the underwriters were entitled to a deferred underwriting commissions of $0.35 per unit, or $10,062,500 from the closing of the IPO. The total deferred fee was $10,812,500 consisting of the $10,062,500 deferred portion and the $750,000 cash discount agreed to be deferred until Business Combination. The deferred fee was to become payable to the underwriters from the amounts held in the Trust Account solely if the Company completes a Business Combination, subject to the terms of the underwriting agreement.
On June 28, 2023, the underwriters agreed to waive their entitlements to the deferred underwriting commissions of $10,812,500 pursuant to the underwriting agreement for the IPO (the “Underwriting Agreement”). As a result, $10,812,500 was recorded to additional paid-in capital in relation to the waiver of the deferred underwriting discount in the accompanying condensed consolidated financial statements (see Note 6 to the condensed consolidated financial statements contained elsewhere in this Quarterly Report).
Due to affiliate
As of June 30, 2024 and December 31, 2023, $298,939 and $238,939, respectively, has been accrued and shown as ‘Due to affiliate’ in the accompanying balance sheet for the administrative services fees described above and a residual balance due from IPO proceeds. The amount is due to New Sponsor and will be repaid as soon as practical from the Company’s operating account.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2024. We do not participate in transactions that create relationships with 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.
| 23 |
Recently Adopted Accounting Standards
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its condensed consolidated financial statements and disclosures.
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 Original Sponsor a monthly fee of $10,000 for office space, utilities and secretarial, and administrative support services provided to the Company. We began incurring these fees on February 23, 2022 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination or the Company’s liquidation.
Critical Accounting Estimates
The preparation of 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 and the reported amounts of expenses during the reporting periods.
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 significantly from those estimates.
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 qualify as an “emerging growth company” and are 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 consolidated financial statements may not be comparable to companies that comply with public company effective dates.
Subject to certain conditions set forth in the JOBS Act, 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 of the Sarbanes-Oxley Act, (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 consolidated 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 executive compensation to median employee compensation. These exemptions apply for a period of five years following the completion of the IPO or until we are no longer an “emerging growth company,” whichever is earlier.
| 24 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide disclosure under this Item 3.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended June 30, 2024, the company identified a material weakness in our internal controls over debt discount, amortization and debt in financial reporting. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely effect investors.
| 25 |
PART II - OTHER INFORMATION
ITEM 1A. RISK FACTORS
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide disclosure under this Item 1A.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Unregistered Sales of Equity Securities
None.
Use of Proceeds
On February 23, 2022, we consummated our IPO of 28,750,000 Units. Each Unit consisted of one Class A ordinary share of the Company, par value $0.0001 per share, and one-half of one redeemable warrant of the Company, with each whole warrant entitling the holder thereof to purchase one Class A ordinary share for $11.50 per share. The Units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $287,500,000.
Additionally, on February 23, 2022, we consummated the closing of the sale of 3,750,000 additional Units upon receiving notice of the underwriter’s election to fully exercise its overallotment option (the “Overallotment Units”), generating additional gross proceeds of $37,500,000. Simultaneously with the exercise of the overallotment, we consummated the private placement of an additional 625,000 Private Placement Warrants to the Original Sponsor, generating gross proceeds of $937,500.
A total of $294,687,500 ($10.25 per Unit) from the net proceeds of the sale of the Units, Overallotment Units, and the Private Placement Warrants was placed in the Trust Account and was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (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 selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account.
Issuer Purchases of Equity Securities
None.
| 26 |
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
*Filed herewith.
**Furnished herewith.
| 27 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| POWERUP ACQUISITION CORP. | ||
| Date: August 16, 2024 | By: | /s/ Surendra Ajjarapu |
| Name: | Surendra Ajjarapu | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: August 16, 2024 | By: | /s/ Howard Doss |
| Name: | Howard Doss | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
| 28 |