UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from _______to_______
Commission File Number:
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
| (Address of principal executive offices) | (Zip Code) |
| Registrant’s telephone number, including area code: |
| Not applicable |
| (Former name or former address, if changed since last report) |
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. Yes ☐
Indicate by check mark whether the registrant
has submitted electronically, if any, every Interactive Date 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 and post 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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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
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 | ||||
| The | ||||
| The |
As of August 10, 2024, there were
AROGO CAPITAL ACQUISITION CORP.
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. These factors include but are not limited to the “Summary Risk Factors” and “Risk Factors” described herein.
You should read the matters described and incorporated by reference in “Summary Risk Factors” and “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.
Forward-looking statements speak only as of the date of this Report or the date of any document incorporated by reference in this Report, as applicable. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.
Summary Risk Factors
We face risks and uncertainties related to our business, many of which are beyond our control. In particular, risks associated with our business include:
| ● | our ability to realize anticipated benefits of the business combination, and unanticipated expenses or delays in connection with the business combination; |
| ● | if we seek stockholder approval of our initial business combination, our initial stockholders and members of our management team have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote; |
| ● | past performance by our sponsor and our management team including their affiliates and including the businesses referred to herein, may not be indicative of future performance of an investment in us or in the future performance of any business that we may acquire. |
| ● | our management may not be able to maintain control of a target business after our initial business combination. Upon the loss of control of a target business, new management may not possess the skills, qualifications or abilities necessary to profitably operate such business. |
| ● | we may not be able to complete our initial business combination in the prescribed time frame; |
| ● | your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash; |
| ● | we may not be successful in retaining or recruiting required officers, key employees or directors following our initial business combination; |
ii
| ● | our officers and directors may have difficulties allocating their time between our Company and other businesses and may potentially have conflicts of interest with our business or in approving our initial business combination. We are dependent upon our executive officers and directors and their loss could adversely affect our ability to operate; |
| ● | we may not be able to obtain additional financing to complete our initial business combination or reduce the number of shareholders requesting redemption. The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure; |
| ● | we may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time; |
| ● | Our sponsor paid an aggregate of $25,000, or approximately $0.009 per founder share, and, accordingly, you will experience immediate and substantial dilution from the purchase of the shares of our Class A common stock; |
| ● | Since our sponsor paid only approximately $0.009 per share for the founder shares, our officers and directors could potentially make a substantial profit even if we acquire a target business that subsequently declines in value; |
| ● | you may not be given the opportunity to choose the initial business target or to vote on the initial business combination. |
| ● | Subsequent to the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our share price, which could cause you to lose some or all of your investment; |
| ● | trust account funds may not be protected against third party claims or bankruptcy; |
| ● | an active market for our public securities’ may not develop and you will have limited liquidity and trading; |
| ● | the availability to us of funds from interest income on the trust account balance may be insufficient to operate our business prior to the business combination; and |
| ● | our financial performance following a business combination with an entity may be negatively affected by their lack an established record of revenue, cash flows and experienced management. |
| ● | Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination and results of operations. |
| ● | Other risk factors included under “Risk Factors” in our latest Annual Report on Form 10-K and set forth below under “Risk Factors”. |
iii
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Statements
AROGO CAPITAL ACQUISITION CORP.
CONDENSED BALANCE SHEETS
| June 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other receivables | ||||||||
| Prepaid expenses | ||||||||
| Prepaid income tax | ||||||||
| Total Current Assets | ||||||||
| Cash held in the trust | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accrued expenses | $ | $ | ||||||
| Other Payables | ||||||||
| Franchise Tax Payable | ||||||||
| Excise tax | ||||||||
| Working capital loan | ||||||||
| Extension loan | ||||||||
| Due to related party | ||||||||
| Advances from related parties | ||||||||
| Total Current liabilities | ||||||||
| Deferred Underwriting Commission | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 6) | ||||||||
| Class A common stock subject to possible redemption; | ||||||||
| Shareholders’ Deficit | ||||||||
| Preferred share, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, par value $ | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
AROGO CAPITAL ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | For the Six Months Ended | For the Three Month Ended | For the Six Months Ended | |||||||||||||
| June 30, 2024 | June 30, 2024 | June 30, 2023 | June 30, 2023 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Formation and Operating costs | $ | $ | $ | $ | ||||||||||||
| Franchise tax | ||||||||||||||||
| Loss from operation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest earned | ||||||||||||||||
| Unrealized Gain on marketable securities held in the trust account | ||||||||||||||||
| Other Income | ||||||||||||||||
| Income (Loss) before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Weighted average shares of Redeemable Common Stock | ||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | $ | |||||||||
| Weighted average shares of Non-redeemable Common Stock | ||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
AROGO CAPITAL ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(UNAUDITED)
| Class A | Class B | Additional | Total | |||||||||||||||||||||||||
| Common Stock | Common Stock | Paid in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2023 (Audited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Additional amount deposit into trust | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Re-measurement of common stock subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Additional amount deposit into trust | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Re-measurement of common stock subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Class A | Class B | Additional | Total | |||||||||||||||||||||||||
| Common Stock | Common Stock | Paid in | Accumulated | Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2022 (Audited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Re-measurement of common stock subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Additional amount deposit into trust | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Re-measurement of common stock subject to possible redemption | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
AROGO CAPITAL ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended | For the Six Months Ended | |||||||
| June 30, 2024 | June 30, 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (Loss) Income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest earned | ( | ) | ( | ) | ||||
| Unrealized Gain from marketable securities held in the trust account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Prepaid income tax | ( | ) | - | |||||
| Accrued expenses | ||||||||
| Other payables | ||||||||
| Franchise tax payable | ( | ) | ( | ) | ||||
| Income tax payable | ( | ) | ||||||
| Due to related party | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Investment of Cash in Trust Account - redemption | ||||||||
| Investment of Cash in Trust Account - extension | ( | ) | ( | ) | ||||
| Withdrawal from Trust Account for tax payment | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Interest earned on Cash account | ||||||||
| Redemption of common stock | ( | ) | ||||||
| Proceeds from sponsor working capital loan | ||||||||
| Proceeds from extension loan | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash at the beginning of the period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Re-measurement of common stock subject to possible redemption | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
AROGO CAPITAL ACQUISITION CORP.
Notes to CONDENSED financial statementS
(UNAUDITED)
NOTE 1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Arogo Capital Acquisition Corp. (the “Company”) was incorporated in Delaware on June 9, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2024, the Company had not commenced any operations. All activity for the period from June 9, 2021 (inception) through June 30, 2024 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below and subsequently, evaluating business combination targets . The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Proposed Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement
for the Company’s Initial Public Offering was declared effective on December 23, 2021. On December 29, 2021, the Company consummated
the Initial Public Offering of
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an aggregate of
As of December 29, 2021,
transaction costs amounted to $
Following the closing of
the Initial Public Offering on December 29, 2021, an amount of $
5
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private
Placement Units, 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 with one or more operating businesses or assets with a fair market value equal to 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 either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of
a tender offer in connection with the Business Combination. 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 $
All of the Public Shares
contain a redemption feature which allows for the redemption of such Public Shares in connection with our liquidation, if there is a stockholder
vote or tender offer in connection with our initial business combination and in connection with certain amendments to our amended and
restated certificate of incorporation. In accordance with SEC and its guidance on redeemable equity instruments, which has been codified
in ASC 480-10-S99, redemption provisions not solely within the control of a company require common stock 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 value of Class A common stock classified as temporary equity will be the allocated proceeds determined in accordance with
ASC 470-20. The Class A common stock is subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable.
we have 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. We have elected to recognize the changes immediately. The accretion or remeasurement will be treated
as a deemed dividend (i.e., a reduction to retained earnings. or in absence of retained earnings. additional paid-in capital). While redemptions
cannot cause the Company’s net tangible assets to fall below $
If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate of incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder 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 stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
6
Notwithstanding the foregoing,
if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules,
the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person
with whom such stockholder 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
The holders of the Founder
Shares have agreed (a) to waive their redemption rights with respect to the Founder Shares and Public Shares held by them in connection
with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the
substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem
Charter Amendments
On March 24, 2023, the Company
held a Special Meeting of Stockholders (the “Meeting”). At the Meeting, the Company’s stockholders approved the Charter
Amendment, which extends the date by which the Company must consummate its initial Business Combination from March 29, 2023 to December
29, 2023, subject to the approval of the Board of Directors of the Company, provided the sponsor or its designees deposit into the trust
account an amount equal to $
Following the redemption,
the Company’s remaining shares of Class A common stock outstanding were
The Company also made an amendment to the Company’s investment management trust agreement (the “Trust Agreement”), dated as of December 23, 2021, by and between the Company and Continental Stock Transfer & Trust Company, allowing the Company to extend the business combination period from March 29, 2023 to December 29, 2023, and updating certain defined terms in the Trust Agreement (the “First Amendment to the Trust Agreement”).
On September 21, 2023, the
Company held a Special Meeting of Stockholders (the “Meeting”). At the Meeting, the Company’s stockholders approved
the Charter Amendment, which extends the date by which the Company must consummate its initial Business Combination from December 29,
2023 to December 29, 2024, subject to the approval of the Board of Directors of the Company, provided the sponsor or its designees deposit
into the trust account an amount equal to $
7
Following the redemption,
the Company’s remaining shares of Class A common stock outstanding were
The Company also made an amendment to the Company’s investment management trust agreement (the “Trust Agreement”), dated as of December 23, 2021, as amended by and between the Company and Continental Stock Transfer & Trust Company, allowing the Company to extend the business combination period from December 29 2023 to December 29, 2024, and updating certain defined terms in the Trust Agreement (the “Second Amendment to the Trust Agreement”).
The holders of the Founders
Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the holders of Founder Shares acquire Public Shares in or after the Initial Public Offering,
such Public Shares will be entitled to liquidating distributions from the Trust Account 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 and, in such
event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the
Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution
will be less than the Initial Public Offering price per Unit ($
Merger Agreement
On April 25, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Arogo Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Arogo (“Merger Sub”), Eon Reality, Inc., a California corporation (“EON”), Singto, LLC, f/k/a Koo Dom Investment, LLC, in its capacity as (“Purchaser Representative”), and EON, in its capacity as (“Seller Representative”).
Pursuant to the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with and into EON, with EON continuing as the surviving corporation (the “Surviving Corporation”).
As
consideration for the Merger, the holders of EON securities collectively shall be entitled to receive from Arogo, in the aggregate, a
number of the Company securities with an aggregate value equal to (the “Merger Consideration”) (a) Five Hundred and
Fifty Million U.S. Dollars ($
8
Termination of Material Definitive Agreement
On November 7, 2023, the Company sent EON a termination notice (the “Termination Notice”) that the Company had terminated the Business Combination Agreement (the “Termination”) and all Ancillary Agreements, pursuant to Section 8.1 (Termination) thereof and as a remedy at law, based on breaches by EON of certain covenants contained in the Business Combination Agreement.
The Termination Notice does not constitute a waiver of, and shall not prejudice any of the Company’s rights under the Business Combination Agreement or at law. The Company reserves all such rights in full to pursue any and all loss of the Company, the Company Representative, and the shareholders of the Company with respect to the Termination.
Business Combination Agreement
On June 25, 2024, the Company entered into a business combination agreement (the “Business Combination Agreement”), by and among the Company, Ayurcann Holding Corp., an Ontario corporation (“PubCo”), DE Ayurcann Merger Sub Inc., a Delaware corporation and a direct, wholly owned subsidiary of PubCo (“Merger Sub”), CAN Ayurcann Merger Sub, Inc., an Ontario corporation and a direct, wholly owned subsidiary of PubCo (“Canadian Merger Sub” and, together with PubCo and Merger Sub, each an “Acquisition Entity” and, together, the “Acquisition Entities”), and Ayurcann Holdings Corp., an Ontario corporation (“Ayurcann Holdings” or the “Company”).
At the Effective Time, upon the terms and subject to the conditions of the Business Combination Agreement and in accordance with the Delaware General Corporation Law (the “DGCL”), Merger Sub shall merge with and into Arogo (the “Merger”), with Arogo continuing as the surviving company after the Merger (the “Surviving Company”), as a result of which Arogo will become a direct, wholly owned subsidiary of PubCo.
Liquidity and Capital Resources
As of June 30, 2024 and December
31, 2023 the Company had cash of $
Going Concern Consideration
The Company expects to incur significant costs in pursuit of its financing and acquisition plans. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unsuccessful in consummating an initial business combination within the prescribed period of time from the closing of the Initial Public Offering, the requirement that the Company cease all operations, redeem the Public Shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management has determined that the Company will need to raise additional funds to meet the working capital needs of the Company prior to the consummation of an initial business combination or the winding up of the Company as stipulated in the Company’s amended and restated memorandum of association. The accompanying unaudited condensed financial statements has been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern.
Risks and Uncertainties
As a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, further escalation of the conflict between the State of Israel and Hamas, as well as further escalation of tensions between the State of Israel and various countries in the Middle East and North Africa, could result in a global economic slowdown and long-term changes to global trade, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. Further, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
9
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, as set forth by the Financial Accounting Standards Board (“FASB”), and pursuant to the rules and regulations of the SEC. The unaudited condensed interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, as filed with the SEC on May 10, 2024. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. The interim results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected through December 31, 2024 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the unaudited condensed financial statements in conformity with US 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 unaudited condensed financial statements.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed balance sheet, 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.
10
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 had cash of
$
Cash held in Trust Account
At June 30, 2024 and December
31, 2023, substantially all of the assets held in the Trust Account were held in treasury trust funds. At June 30, 2024 and December 31,
2023 the Company had $
Class A common stock subject to possible redemption
The Company accounts for
its Class A common stock subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing
Liabilities from Equity”. Common stock subject to mandatory redemption are classified as a liability instrument and are measured
at fair value. Conditionally redeemable common stock (including common stock that 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)
is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A
common stock features certain redemption rights that are considered by the Company 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 the
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Redeemable Class A Common Stock – Opening Balance | $ | $ | ||||||
| Less: | ||||||||
| Redemption of Class A common stock, including interest | ( | ) | ||||||
| Plus: | ||||||||
| Re-measurement of carrying value to redemption value | ||||||||
| Redeemable Class A Common Stock - Ending Balance | ||||||||
11
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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’s management determined the United States is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits as of June 30, 2024 and December 31, 2023 and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Income taxes was accrued
for $
Net income (loss) per share
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common stocks outstanding during the period, excluding common stocks subject to forfeiture. As of June 30, 2024 and June 30, 2023, the calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the Initial Public Offering and warrants issued as components of the Private Placement Units (the “Placement Warrants”) since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented. Accretion associated with the redeemable shares of Class A Common Stocks is excluded from earnings per share as the redemption value exceeded fair value at June 30, 2024. Accretion associated with the redeemable shares of Class A Common Stocks is excluded from earnings per share as the redemption value approximates fair value at June 30, 2023.
| For the three months ended June 30, 2024 | For the six months ended June 30, 2024 | For the three months ended June 30, 2023 | For the six months ended June 30, 2023 | |||||||||||||||||||||||||||||
| Redeemable Common Stock | Non-Redeemable Common Stock | Redeemable Common Stock | Non-Redeemable Common Stock | Redeemable Common Stock | Non-Redeemable Common Stock | Redeemable Common Stock | Non-Redeemable Common Stock | |||||||||||||||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||||||||||||||||||
| Numerators: | ||||||||||||||||||||||||||||||||
| Allocation of Expenses | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Interest | ||||||||||||||||||||||||||||||||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Allocation of net(loss) income | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Denominators: | ||||||||||||||||||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||||||||||||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
12
Concentration of Credit Risk
Financial instruments that
are potentially subject to concentration of credit risk consist of cash and cash held in trust. Cash is comprised of cash balances with
banks and bank deposits, which are insured by the Federal Deposit Insurance Company (“FDIC”), up to $
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction between market participants at the measurement date. US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
| Level | June 30, 2024 | December 31, 2023 | ||||||||||
| Assets: | ||||||||||||
| Cash held in trust account | 1 | $ | $ | |||||||||
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed statements of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company accounts for the warrants in accordance with the guidance contained in ASC 815-40. The Company has determined that the warrants qualify for the equity treatment in the Company’s unaudited condensed financial statements.
Recent Accounting Standards
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” that addresses requests for improved income tax disclosures from investors that use the financial statements to make capital allocation decisions. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2024. The amendments in this ASU must be applied on a retrospective basis to all prior periods presented in the financial statements and early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of this standard will have on its financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed balance sheets.
13
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company sold
NOTE 4 — PRIVATE PLACEMENTS
The Sponsor purchased an
aggregate of
NOTE 5 — RELATED PARTIES
Founder Shares
On June 30, 2021, the Sponsor
received
The holders of the Founder
Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur
of: (A)
14
Advances from Related Parties
Affiliates of the Sponsor advanced
$
Due to Related Parties
As of June 30, 2024, there
was $
General and Administrative Services
Commencing on the date the Units are first listed on the Nasdaq, the
Company has agreed to pay the Sponsor a total of $
Related Party Loans
In order to finance transaction
costs in connection with a Business Combination, the Sponsor or an affiliate of the 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”). Such Working
Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest,
or, at the lender’s discretion, up to $
Extension Payment Deposit
On March 29, 2023, April 25, 2023, May 29, 2023, June 26, 2023, July
25, 2023, and August 23, 2023, the Company caused to be deposited $
15
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Units and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters
a
The underwriters were paid
a cash underwriting discount of $
The underwriters also received
NOTE 7 — STOCKHOLDER’S DEFICIT
Preferred Stock
— The Company is authorized to issue
Class A Common Stock
— The Company is authorized to issue
Class B Common Stock
— The Company is authorized to issue
16
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a stockholders agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of the IPO.
The shares of Class B common
stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder,
on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities,
are issued or deemed issued in excess of the amounts issued in the Proposed Public Offering and related to the closing of a Business Combination,
the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance
or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock
will equal, in the aggregate, on an as-converted basis,
Warrants —
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units
and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a
Business Combination and (b) 12 months from the closing of the Proposed Public Offering. The Public Warrants will expire
The Company will not be obligated to deliver any shares of Class A common stock 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 covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. 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 residence of the exercising holder, or an exemption from registration 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, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
17
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| ● | in whole and not in part; |
| ● | at
a price of $ |
| ● | upon
a minimum of |
| ● | if,
and only if, the last reported sale price of the Class A common stock equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public 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 Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Initial Public Offering.
NOTE 8 — SUBSEQUENT EVENTS
On July 5, 2024, the Company held a special meeting of stockholders (the “Special Meeting”), in which the stockholders approved the Optional Conversion Amendment Proposal (defined below) to amend the Company’s amended and restated certificate of incorporation, as further amended on March 28, 2023 and September 28, 2023 (the “Charter”), and authorized the Company to file the Third Amendment to the Company’s Charter with the Secretary of State of Delaware (the “Third Amendment”). Following approval of the Optional Conversion Amendment Proposal by the stockholders, the Company filed the Third Amendment with the Secretary of State of Delaware.
At
the Special Meeting, the Company’s stockholders approved the proposal to amend the Company’s Charter to provide for the right
of a holder of Class B Common Stock, par value $
On
July 31, 2024, the Company received a written notice from the Staff of the Nasdaq indicating that, unless the Company timely requests
a hearing before the Nasdaq Hearing Panel (the “Panel”), the Company’s securities would be subject to suspension and
delisting from the Nasdaq Global Market at the opening of business on August 7, 2024 due to the Company’s non-compliance with: (a)
Nasdaq Listing Rule 5450(b)(2)(A), requiring the Company to maintain a Market Value of Listed Securities of at least $
The Company paid the required
$
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “us,” “our” or “we” refer to Arogo Capital Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included herein.
Overview
We are a blank check company incorporated in June 2021 as a Delaware corporation whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to as our initial business combination.
Our Sponsor is Singto, LLC, f/k/a Koo Dom Investment, LLC, a Delaware limited liability company. The registration statement for our initial public offering was declared effective on December 23, 2021. On December 29, 2021, we consummated our initial public offering of 10,350,000 units at $10.00 per unit, with each unit consisting of one Class A common stock and one redeemable warrant, with each warrant entitling the holder thereof to purchase one Class A common stock at a price of $11.50 per share.
On December 29, 2021, simultaneously with the consummation of the Offering, the Company consummated the private placement of an aggregate of 466,150 Units (the “Private Placement Units”) to Singto, LLC, f/k/a Koo Dom Investment, LLC, our sponsor, at a price of $10.00 per Private Placement Unit, generating total gross proceeds of $4,661,500 (the “Private Placement”).
Following the closing of the initial public offering on December 29, 2021, $105,052,500 ($10.15 per unit) from the net proceeds of the sale of the units in the initial public offering and the private placement was deposited into a trust account, invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act with a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to us to pay our income or other tax obligations as described in the initial public offering, the proceeds will not be released from the trust account until the earlier of the completion of a business combination or the redemption of 100% of the outstanding public shares if we have not completed a business combination within the time required time period.
We have until December 29, 2024, to complete the initial business combination. If we are unable to complete our initial business combination within such period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by December 29, 2024.
19
Recent Developments
On January 9, 2024, the Company received a letter (the “MVLS Deficiency Notice”) from the listing qualifications department staff (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that from November 13, 2023 to January 9, 2024, the Company’s Market Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Requirement”).
On July 31, 2024, the Company received a written notice from the Staff of the Nasdaq indicating that, unless the Company timely requests a hearing before the Nasdaq Hearing Panel (the “Panel”), the Company’s securities would be subject to suspension and delisting from the Nasdaq Global Market at the opening of business on August 7, 2024 due to the Company’s non-compliance with: (a) Nasdaq Listing Rule 5450(b)(2)(A), requiring the Company to maintain a Market Value of Listed Securities of at least $50 million, and (b) Nasdaq Listing Rule 5450(a)(2), which requires the Company to have at least 400 total holders, as additional basis for delisting the Company’s securities from Nasdaq.
The Company paid the required $20,000 fee and on August 6, 2024, submitted its timely request for a hearing before the Panel to request additional time to regain compliance with Nasdaq’s listing requirements and to complete a business combination. The Company expects that its timely hearing request will result in a stay of any suspension or delisting action pending the hearing. There can be no assurance that the Company will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with Nasdaq Listing Rule 5450(b)(2)(A) and Nasdaq Listing Rule 5450(a)(2), or maintain compliance with other Nasdaq listing requirements.
Charter Amendment Regarding the Optional Conversion Amendment
On July 5, 2024, the Company held a special meeting of stockholders (the “Special Meeting”), in which the stockholders approved the Optional Conversion Amendment Proposal (defined below) to amend the Company’s amended and restated certificate of incorporation, as further amended on March 28, 2023 and September 28, 2023 (the “Charter”), and authorized the Company to file the Third Amendment to the Company’s Charter with the Secretary of State of Delaware (the “Third Amendment”). Following approval of the Optional Conversion Amendment Proposal by the stockholders, the Company filed the Third Amendment with the Secretary of State of Delaware.
At the Special Meeting, the Company’s stockholders approved the proposal to amend the Company’s Charter to provide for the right of a holder of Class B Common Stock, par value $0.0001 per share, of the Company (“Class B Common Stock”), to convert such Class B Common Stock into Class A Common Stock on a one-for-one basis at any time and from time to time prior to the closing of an initial business combination at the election of the holder (the “Optional Conversion Amendment” and such proposal, the “Optional Conversion Amendment Proposal. The Optional Conversion Amendment Proposal was approved by 3,126,767 stockholders, 0 stockholders voted against and 0 stockholders abstained to vote.
Charter Amendment Regarding Extension and Share Redemptions
On March 24, 2023, the Company held a Special Meeting of Stockholders (the “Meeting”). At the Meeting, the Company’s stockholders approved the Charter Amendment, which extends the date by which the Company must consummate its initial Business Combination from March 29, 2023 to December 29, 2023, subject to the approval of the Board of Directors of the Company, provided the sponsor or its designees deposit into the trust account an amount equal to $0.0378 per share for each public share or $191,666, prior to the commencement of each extension period (the “Extension”). The Company filed the Charter Amendment with the Office of the Secretary of State of Delaware on March 28, 2023. At the Meeting, the Company’s stockholders approved the Charter Amendment extending the date by which the Company must consummate the initial Business Combination from March 29, 2023 to December 29, 2023, (or such earlier date as determined by the Company’s Board of Directors) (the “Extension Amendment Proposal”). Stockholders holding 5,289,280 shares of common stock exercised their right to redeem their shares for cash at an approximate price of $10.33 per share of the funds in the Trust Account. As a result, approximately $54,675,740 were removed from the Trust Account to pay such holders.
Following the redemption, the Company’s remaining shares of Class A common stock outstanding were 5,060,720. The Sponsor has continued to make monthly deposits into the Trust Account of $191,666 for five of the nine monthly extensions, from March 29, 2023 until August 29, 2023.
20
The Company also made an amendment to the Company’s investment management trust agreement (the “Trust Agreement”), dated as of December 23, 2021, by and between the Company and Continental Stock Transfer & Trust Company, allowing the Company to extend the business combination period from March 29, 2023 to December 29, 2023, and updating certain defined terms in the Trust Agreement (the “First Amendment to the Trust Agreement”).
On September 21, 2023, the Company held a Special Meeting of Stockholders (the “Meeting”). At the Meeting, the Company’s stockholders approved the Charter Amendment, which extends the date by which the Company must consummate its initial Business Combination from December 29, 2023 to December 29, 2024, subject to the approval of the Board of Directors of the Company, provided the sponsor or its designees deposit into the trust account an amount equal to $40,000, prior to the commencement of each extension period (the “Extension”). The Company filed the Charter Amendment with the Office of the Secretary of State of Delaware on September 28, 2023. At the Meeting, the Company’s stockholders approved the Charter Amendment extending the date by which the Company must consummate the initial Business Combination from December 29, 2023 to December 29, 2024, (or such earlier date as determined by the Company’s Board of Directors) (the “Extension Amendment Proposal”). Stockholders holding 3,298,311 shares of common stock exercised their right to redeem their shares for cash at an approximate price of $10.72 per share of the funds in the Trust Account. As a result, approximately $35,448,259 were removed from the Trust Account to pay such holders.
Following the redemption, the Company’s remaining shares of Class A common stock outstanding were 1,762,409. The Sponsor has made the monthly deposit into the Trust Account of $40,000 for the monthly extension, from September 29, 2023 until June 29, 2024.
The Company also made an amendment to the Company’s investment management trust agreement (the “Trust Agreement”), dated as of December 23, 2021, as amended by and between the Company and Continental Stock Transfer & Trust Company, allowing the Company to extend the business combination period from December 29 2023 to December 29, 2024, and updating certain defined terms in the Trust Agreement (the “Second Amendment to the Trust Agreement”).
The holders of the Founders Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account 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 and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.15 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.15 per public Share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering 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 Sponsor 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 Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
21
Termination of Proposed Business Combination
On April 25, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among Arogo, Arogo Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Arogo (“Merger Sub”), Eon Reality, Inc., a California corporation (“EON”), Singto, LLC, f/k/a Koo Dom Investment, LLC, in its capacity as (“Purchaser Representative”), and EON, in its capacity as (“Seller Representative”). On October 6, 2022, the parties to the Merger Agreement entered into that certain First Amendment to the Agreement and Plan of Merger (the “Amendment”). The Business Combination agreement and related agreements are further described in the Company’s Current Report on Form 8-K filed with the SEC on April 26, 2022, and on October 7, 2022.
On November 7, 2023, the Company sent EON a termination notice (the “Termination Notice”) that the Company had terminated the Business Combination Agreement (the “Termination”) and all Ancillary Agreements, pursuant to Section 8.1 (Termination) thereof and as a remedy at law, based on breaches by EON of certain covenants contained in the Business Combination Agreement.
The Termination Notice does not constitute a waiver of, and shall not prejudice any of the Company’s rights under the Business Combination Agreement or at law. The Company reserves all such rights in full to pursue any and all loss of Arogo, Arogo Representative, and the shareholders of the Company with respect to the Termination.
The foregoing description of the Business Combination Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the text of the Business Combination Agreement, which was previously filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on April 26, 2022, and the BCA Amendment, which was previously filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on October 6, 2022, which is incorporated by reference herein.
Registration Statement on Form S-4 Declared Abandoned
The Company filed a Registration Statement on Form S-4 with the SEC on October 7, 2022, to register the issuance of the Company Common Stock that will be issued at the consummation of the Business Combination, the warrants exercisable for Company Common Stock that will result from the amendment of the Company’s public warrants at the consummation of the Business Combination and the Company Common Stock issuable upon exercise of such warrants. The Company filed an Amendment No. 1 thereto on February 13, 2023. We use the term “Arogo Form S-4” to refer to the original registration statement as amended by the first amendment and as it may be subsequently further amended. On February 6, 2024, the Securities and Exchange Commission (the “SEC”) declared the Registration Statement as abandoned under the Securities Act of 1933, as amended.
Business Combination Agreement
On June 25, 2024, the Company entered into a business combination agreement (the “Business Combination Agreement”), by and among the Company, Ayurcann Holding Corp., an Ontario corporation (“PubCo”), DE Ayurcann Merger Sub Inc., a Delaware corporation and a direct, wholly owned subsidiary of PubCo (“Merger Sub”), CAN Ayurcann Merger Sub, Inc., an Ontario corporation and a direct, wholly owned subsidiary of PubCo (“Canadian Merger Sub” and, together with PubCo and Merger Sub, each an “Acquisition Entity” and, together, the “Acquisition Entities”), and Ayurcann Holdings Corp., an Ontario corporation (“Ayurcann Holdings” or the “Company”).
22
At the Effective Time, upon the terms and subject to the conditions of the Business Combination Agreement and in accordance with the Delaware General Corporation Law (the “DGCL”), Merger Sub shall merge with and into Arogo (the “Merger”), with Arogo continuing as the surviving company after the Merger (the “Surviving Company”), as a result of which Arogo will become a direct, wholly owned subsidiary of PubCo.
Results of Operations
As of June 30, 2024, we have neither engaged in any operations nor generated any revenues. All activity for the period from June 9, 2021 (inception) through June 30, 2024, relates to our formation and the initial public offering and subsequently, evaluating business combination targets. We will not generate any operating revenues until after the completion of our initial business combination, at the earliest. We will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the initial public offering.
For the three months ended June 30, 2024, we had a net loss of $448,321 consisting of formation and operating costs of $638,219 and franchise tax of $21,600 and income tax of $44,631 offset by unrealized gain earned on marketable securities held in Trust of $256,129. For the six months ended June 30, 2024, we had a net loss of $637,044 consisting of formation and operating costs of $997,211 and franchise tax of $57,200 and income tax of $89,892 offset by unrealized gain earned on marketable securities held in Trust of $507,258 and interest earned in operating account of $1.
By comparison, for the three months ended June 30, 2023, we had a net income of $673,543 consisting of formation and operating costs of $125,048, franchise taxes of $40,000 and income taxes of $42,640, adjusted by unrealized gain earned on marketable securities held in trust account in the amount of $881,224 and interest earned in operating account of $7. For the six months ended June 30, 2023, we had a net income of $1,437,346 consisting of formation and operating costs of $298,131, franchise taxes of $120,000 and income taxes of $85,280, adjusted by unrealized gain earned on marketable securities held in trust account in the amount of $1,940,738 and interest earned in operating account of $19.
Liquidity and Capital Resources
On December 29, 2021, we consummated our initial public offering of 10,350,000 units at a price of $10.00 per unit, at $10.00 per unit, generating gross proceeds of $103.5 million. Simultaneously with the closing of our initial public offering, we consummated the private placement of an aggregate of 466,150 Units to Singto, LLC, f/k/a Koo Dom Investment, LLC, at a price of $10.00 per Private Placement Unit, generating total gross proceeds of $4,661,500.
The net cash used in operating activities for the six-month period ended June 30, 2024, was $287,348.
As of June 30, 2024, we had cash of $19,647,685 held in the Trust Accounts. We intend to use substantially all of the funds held in the Trust Accounts, including any amounts representing interest earned on the Trust Accounts (less taxes paid and deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay taxes. During the six months period ended June 30, 2024, we withdraw $286,748 interest earned on the Trust Accounts for tax payment. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Accounts will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
23
As of June 30, 2024, we had cash of $78,427 outside of the Trust Accounts. We intend to use the funds held outside the Trust Accounts primarily to complete our initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with our initial business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Accounts to repay such loaned amounts but no proceeds from our Trust Accounts would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units, at a price of $10.00 per unit at the option of the lender, upon consummation of our initial business combination. The units would be identical to the placement units.
We believe we will need to raise additional funds following the IPO in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of the IPO and the sale of the placement units and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Going Concern Consideration
The Company expects to incur significant costs in pursuit of its financing and acquisition plans. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unsuccessful in consummating an initial business combination within the prescribed period of time from the closing of the Initial Public Offering, the requirement that the Company cease all operations, redeem the Public Shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management has determined that the Company will need to raise additional funds to meet the working capital needs of the Company prior to the consummation of an initial business combination or the winding up of the Company as stipulated in the Company’s amended and restated memorandum of association. The accompanying unaudited condensed financial statements has been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern.
24
Extension Payment Deposit
Following the redemption, the Company’s remaining shares of Class A common stock outstanding were 1,762,409. The Sponsor has continued to make monthly deposits into the Trust Account of $40,000 for the monthly extensions, from September 29, 2023 until June 29, 2024.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of our Sponsor a monthly fee of $10,000 for office space, utilities, out of pocket expenses, and secretarial and administrative support. We began incurring these fees on December 29, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination or our liquidation.
The underwriters are entitled to a deferred fee of $3,622,500. The deferred fee will become payable to the underwriters from the amounts held in the trust account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
This management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with GAAP requires 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 unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period.
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 unaudited condensed 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.
Net Loss Per Common Stock
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock shares outstanding for the period. The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the Initial Public Offering and warrants issued as components of the Private Placement Units (the “Placement Warrants”) since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
Net loss per share, basic and diluted, for Class A and Class B non-redeemable common stock is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable common stock shares, by the weighted average number of Class A and Class B non-redeemable common stock shares outstanding for the period. Non-redeemable Class A and Class B common stock shares includes the Founder Shares and non-redeemable common stock shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
25
Class A Common Stock Subject to Possible Redemption
All of the Class A common stock sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with ASC 480, conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its public shares in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001. However, the threshold in its charter would not change the nature of the underlying shares as redeemable and thus public shares would be required to be disclosed outside of permanent equity. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value ($10.15 per share) at the end of each reporting period. Such changes are reflected in additional paid-in capital, or in the absence of additional capital, in accumulated deficit.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Through June 30, 2024, we were not subject to any market or interest rate risk. The net proceeds held in the Trust Account have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less, or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
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.
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter ended June 30, 2024, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
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 the information required by this Item. Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our final prospectus for the Initial Public Offering declared effective by the SEC on December 23, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report on Form 10-Q, except as set forth below, there have been no material changes to the risk factors disclosed in our Registration Statement filed with the SEC on February 14, 2023, our Annual Report on Form 10-K for the year ended December 31, 2021, December 31, 2022 and December 31, 2023. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
If we are not able to comply with the applicable continued listing requirements or standards of The Nasdaq Stock Market, Nasdaq could delist our common stock.
On January 9, 2024, the Company received a letter (the “MVLS Deficiency Notice”) from the listing qualifications department staff (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that from November 13, 2023 to January 9, 2024, the Company’s Market Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Requirement”).
On July 31, 2024, the Company received a written notice from the Staff of the Nasdaq indicating that, unless the Company timely requests a hearing before the Nasdaq Hearing Panel (the “Panel”), the Company’s securities would be subject to suspension and delisting from the Nasdaq Global Market at the opening of business on August 7, 2024 due to the Company’s non-compliance with: (a) Nasdaq Listing Rule 5450(b)(2)(A), requiring the Company to maintain a Market Value of Listed Securities of at least $50 million, and (b) Nasdaq Listing Rule 5450(a)(2), which requires the Company to have at least 400 total holders, as additional basis for delisting the Company’s securities from Nasdaq.
The Company paid the required $20,000 fee and on August 6, 2024, submitted its timely request for a hearing before the Panel to request additional time to regain compliance with Nasdaq’s listing requirements and to complete a business combination. The Company expects that its timely hearing request will result in a stay of any suspension or delisting action pending the hearing. There can be no assurance that the Company will be able to satisfy Nasdaq’s continued listing requirements, regain compliance with Nasdaq Listing Rule 5450(b)(2)(A) and Nasdaq Listing Rule 5450(a)(2), or maintain compliance with other Nasdaq listing requirements.
Unstable market and economic conditions and adverse developments with respect to financial institutions and associated liquidity risk may have serious adverse consequences on our business, financial condition and stock price.
The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, inflationary pressure and interest rate changes, increases in unemployment rates and uncertainty about economic stability. More recently, the closures of Silicon Valley Bank and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation (“FDIC”) created bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve, and the FDIC jointly confirmed that depositors at SVB and Signature Bank would continue to have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty. There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our business plans. In addition, there is a risk that one or more of our financial institutions or other third parties with whom we do business may be adversely affected by the foregoing risks, which may have an adverse effect on our business.
A new 1% U.S. federal excise tax could be imposed on us in connection with future redemptions by us of the Public Shares.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury has been given authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of, the purpose of the excise tax legislation. The IR Act applies only to repurchases that occur after December 31, 2022. It is unclear at this time how and to what extent it will apply to future redemptions of the Public Shares.
27
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
None. There has been no material change in the planned use of proceeds from our offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) related to the Initial Public Offering.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
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. | |
| *** | Previously filed. |
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AROGO CAPITAL ACQUISITION CORP. | ||
| Date: August 12, 2024 | By: | /s/ Suradech Taweesaengsakulthai |
| Suradech Taweesaengsakulthai | ||
| Chief Executive Officer | ||
| Date: August 12, 2024 | By: | /s/ Suthee Chivaphongse |
|
Suthee Chivaphongse Chief Financial Officer |
29