IXAQF 10-Q
IX Acquisition Corp. (IXAQF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
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 No.) |
(Address of principal executive offices) |
(Zip Code)
+44 0
(Registrant’s telephone number, including area code)
Not Applicable |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading |
| Name of each exchange |
|
|
| The | |
|
| The | ||
|
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| 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
As of November 13, 2024, there were
IX ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
IX ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, |
| December 31, | |||
2024 | 2023 | |||||
(Unaudited) | ||||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | | $ | | ||
Prepaid expenses | | | ||||
| |
| — | |||
Total current assets | | | ||||
Non-current assets: |
|
|
|
| ||
Cash held in the Trust Account | | | ||||
Total Assets | $ | | $ | | ||
Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit: |
|
|
|
| ||
Current liabilities: | ||||||
Accounts payable | $ | | $ | — | ||
Accrued expenses | | | ||||
Extension Promissory Note | | | ||||
Total current liabilities |
| |
| | ||
Non-current liabilities: |
| |||||
Derivative warrant liabilities | | | ||||
Deferred underwriting fee payable | | | ||||
Total non-current liabilities |
| |
| | ||
Total Liabilities |
| |
| | ||
|
|
|
| |||
Commitments and Contingencies (Note 6) |
|
|
|
| ||
Class A ordinary shares subject to possible redemption, $ | | | ||||
|
|
|
| |||
Shareholders’ Deficit: |
|
|
|
| ||
Preference shares, $ |
|
| ||||
Class A ordinary shares, $ |
| |
| | ||
Class B ordinary shares, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Total shareholders’ deficit |
| ( |
| ( | ||
Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1
IX ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Operating and formation expenses | $ | | $ | | $ | | $ | | ||||
Loss from operations | ( | ( | ( | ( | ||||||||
|
| |||||||||||
Other income (expense): |
| |||||||||||
Income from cash and investments held in the Trust Account | | | | | ||||||||
Interest income (expense) on operating account | — | | ( | | ||||||||
Gain on forfeiture of deferred underwriting fee payable | — | — | ― | | ||||||||
Change in fair value of derivative warrant liabilities | — | — | ( | ( | ||||||||
Total other income (expense), net | | | ( | | ||||||||
|
| |||||||||||
Net (loss) income | $ | ( | $ | | $ | ( | $ | | ||||
|
|
| ||||||||||
Basic and diluted weighted average shares outstanding, Class A ordinary shares |
| | | | | |||||||
Basic and diluted net (loss) income per share, Class A ordinary shares | $ | ( | $ | | $ | ( | $ | | ||||
Basic and diluted weighted average shares outstanding, Class A (non-redeemable) and Class B ordinary shares | | | | | ||||||||
Basic and diluted net (loss) income per share, Class A (non-redeemable) and Class B ordinary shares | $ | ( | $ | | $ | ( | $ | | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
IX ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
Class A | Class B | Additional | Total | ||||||||||||||||
Ordinary Shares | Ordinary Shares | Paid-in | Accumulated | Shareholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||||
Balance — January 1, 2024 | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
Remeasurement of Class A ordinary shares to redemption amount |
| — | — | — |
| — |
| ( |
| — |
| ( | |||||||
Net loss |
| — | — | — |
| — |
| — |
| ( |
| ( | |||||||
Balance — March 31, 2024 (Unaudited) | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
Remeasurement of Class A ordinary shares to redemption amount | — | — | — | — | ( | — | ( | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance — June 30, 2024 (Unaudited) | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
Remeasurement of Class A ordinary shares to redemption amount | — | — | — | — | ( | — | ( | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance — September 30, 2024 (Unaudited) | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
Class A | Class B | Additional | Total | ||||||||||||||||
Ordinary Shares | Ordinary Shares | Paid-in | Accumulated | Shareholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | ||||||
Balance — January 1, 2023 | — | $ | — | | $ | | $ | — | $ | ( | $ | ( | |||||||
Remeasurement of Class A ordinary shares to redemption amount | — | — | — | — | — | ( | ( | ||||||||||||
Net income |
| — | — | — |
| — |
| — |
| |
| | |||||||
Balance — March 31, 2023 | — | — | | | — | ( | ( | ||||||||||||
Remeasurement of Class A ordinary shares to redemption amount | — | — | — | — | ( | — | ( | ||||||||||||
Gain on forfeiture of deferred underwriting fee payable | — | — | — | — | | — | | ||||||||||||
Class B to Class A Conversion | | | ( | ( | — | — | — | ||||||||||||
Net income | — | — | — | — | — | | | ||||||||||||
Balance — June 30, 2023 |
| | | | | | ( | ( | |||||||||||
Remeasurement of Class A ordinary shares to redemption amount | — | — | — | — | ( | — | ( | ||||||||||||
Net income | — | — | — | — | — | | | ||||||||||||
Balance — September 30, 2023 | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
IX ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, | ||||||
| 2024 |
| 2023 | |||
Cash Flows from Operating Activities: |
|
| ||||
Net (loss) income | $ | ( | $ | | ||
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
|
|
|
| ||
Change in fair value of derivative warrant liabilities | | | ||||
Income from cash and investments held in the Trust Account | ( | ( | ||||
Gain on forfeiture deferred underwriting fee payable | — | ( | ||||
Changes in operating assets and liabilities: | ||||||
Prepaid expenses | | | ||||
Accounts payable |
| |
| ( | ||
Accrued expenses | | | ||||
Net cash (used in) operating activities |
| ( |
| ( | ||
Cash Flows from Investing Activities: | ||||||
Cash withdrawn from Trust Account in connection with Redemptions | — | | ||||
Cash deposited in Trust Account | ( | ( | ||||
Net cash (used in) provided by investing activities | ( | | ||||
Cash Flows from Financing Activities: |
|
|
|
| ||
Proceeds from convertible promissory note-related party | | | ||||
Redemption of ordinary shares |
| ― | ( | |||
Net cash provided by (used in) financing activities | | ( | ||||
|
|
|
| |||
Net change in cash | ( | ( | ||||
Cash - beginning of the period |
| |
| | ||
Cash - end of the period | $ | | $ | | ||
|
|
|
|
| ||
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
| ||
Deferred underwriting fee reduction | $ | — | | |||
Remeasurement of Class A ordinary shares to redemption amount | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Overview
IX Acquisition Corp. (the “Company”, “our Company,” “we” or “us”) is a blank check company incorporated in the Cayman Islands on March 1, 2021. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”). The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
The Company has a wholly-owned subsidiary that was created on March 15, 2024, AKOM Merger Sub, Inc., a Nevada corporation and a wholly owned subsidiary of the Company (“Merger Sub”) and AERKOMM Inc., a Nevada corporation (“AERKOMM”). The transactions contemplated by the Merger Agreement are intended to serve as the Company’s initial Business Combination. See Note 6 for further information.
As of September 30, 2024, the Company had not commenced any operations. All activity for the period from March 1, 2021 (inception) through September 30, 2024 relates to the Company’s formation and the initial public offering consummated on October 12, 2021 (“Initial Public Offering”), which is described below, and since the Initial Public Offering, the search for a prospective initial Business Combination. The Company generates non-operating income in the form of interest income from the amount held in the Trust Account (as defined below).
The Registration Statement on Form S-1 initially filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 16, 2021 (File No. 333-259567), as amended (the “Registration Statement) for the Initial Public Offering was declared effective on October 6, 2021. On October 12, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
Transaction costs amounted to $
Upon the closing of the Initial Public Offering on October 12, 2021, an amount of $
5
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
If the Company does not invest the proceeds as discussed above, the Company may be deemed to be subject to the Investment Company Act. If the Company is deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which the Company has not allotted funds and may hinder the Company’s ability to complete a Business Combination. If the Company is unable to complete the initial Business Combination, the Public Shareholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to Public Shareholders, and the warrants will expire worthless.
The Company will provide its holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. All Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $
The Company will proceed with a Business Combination if a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required under applicable law or stock exchange listing requirements and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association as then in effect, conduct the redemptions pursuant to the tender offer rules of the SEC, and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with a Business Combination, the holders of the Founder Shares prior to the Initial Public Offering (other than the Anchor Investors) (the “Initial Shareholders”), the Anchor Investors, and the Company’s executive officers and directors (“Management” or “Management Team”) agreed to vote any Founder Shares held by them, and any Public Shares purchased in or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective of whether they (i) vote for or against the proposed transaction or (ii) were a Public Shareholder on the record date for the general meeting held to approve the proposed transaction.
Notwithstanding the above, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The Initial Shareholders agreed to (i) waive their redemption rights with respect to any Founder Shares and Public Shares they hold in connection with the completion of an initial Business Combination, (ii) waive their redemption rights with respect to any Founder Shares and Public Shares they hold in connection with a shareholder vote to approve an amendment to the Amended and Restated Memorandum and Articles of Association to modify the substance or timing of the Company’s obligation to redeem
6
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Combination Period and Share Redemption/Conversion Events
If the Company is unable to complete a Business Combination within a certain period of time as outlined below (“the Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 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 (which interest shall be net of taxes payable and up to $
The Company initially had 18 months from the closing of the Initial Public Offering (by April 12, 2023) to consummate a Business Combination as the Combination Period, prior to any amendments to the Amended and Restated Memorandum and Articles of Association to extend the duration of the Combination Period. As outlined through a series of proposals below, the Combination Period has since been extended. The Company had until January 12, 2024 to complete a Business Combination, with the right to extend the Combination Period through no later than October 12, 2024, subject to making required monthly extension deposits into the Trust Account of the lesser of (x) $
On April 10, 2023, the Company held an extraordinary general meeting of shareholders (the “2023 Extraordinary Meeting”). At the 2023 Extraordinary Meeting, the Company’s shareholders approved, among other things, a proposal to grant the Company the right to extend the Combination Period, from April 12, 2023 to May 12, 2023 (the “Extended Date”), and to allow the Company, without another shareholder vote, by resolution of the Company’s board of directors (the “Board of Directors”), to elect to further extend the Extended Date in one-month increments up to eleven additional times, or a total of up to twelve months total, up to April 12, 2024 (the “Extension Proposal”) by amending the Amended and Restated Memorandum and Articles of Association. Under Cayman Islands law, such amendment of the Amended and Restated Memorandum and Articles of Association took effect upon approval of the Extension Proposal. As a result of the approval of the Extension Proposal, the Company was provided the ability, with monthly extension payments, but without another shareholder vote and by resolution of the Board of Directors, to extend the Extended Date in one-month increments through April 12, 2024, and further extending the Combination Period up to October 12, 2024 to complete a Business Combination which was approved during the Extraordinary General Meeting held on December 11, 2023.
At the 2023 Extraordinary Meeting, the Company’s shareholders also approved to further amend the Amended and Restated Memorandum and Articles of Association (i) to eliminate (x) the limitation that the Company may not redeem Public Shares in an amount that would cause the Company’s net tangible assets to be less than $
7
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Additionally, the Sponsor agreed that if the Extension Proposal was approved, it or its designee would deposit into the Trust Account as a loan, an amount equal to the lesser of (x) $
In connection with the Contribution and advances the Sponsor may make in the future to the Company for working capital expenses, on April 13, 2023, the Company issued a convertible promissory note to the Sponsor with a principal amount up to $
On April 13, 2023, the Sponsor advanced $
On May 9, 2023, pursuant to the terms of the Amended and Restated Memorandum and Articles of Association, the Sponsor, the holder of an aggregate of
On September 8, 2023, the Company issued an amended and restated promissory note in the principal amount of up to $
At the election of the Sponsor, up to $
On October 12, 2023, the Company issued a press release announcing that the Board of Directors has elected to extend the Combination Period for an additional month, from October 12, 2023 to November 12, 2023. In connection with the seventh extension of the Extended Date, the Board of Directors delivered the Sponsor a written request to draw down $
On November 13, 2023, the Company issued a press release announcing that the Board of Directors has elected to extend the Combination Period for an additional month, from November 12, 2023 to December 12, 2023. In connection with the eighth extension of the Extended Date, the Board of Directors delivered the Sponsor a written request to draw down $
8
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
On December 11, 2023, the Company held an extraordinary general meeting. At the meeting, the Second Extension Amendment Proposal to give the Board the right to extend the date by which the Company must consummate a Business Combination from December 12, 2023 on a monthly basis up to
The meeting was held, in part, to satisfy the annual meeting requirement pursuant to Listing Rule 5620(a) (the “Rule”) of The Nasdaq Stock Market LLC. Pursuant to the Rule, the Company was required to hold its first annual meeting of shareholders on or prior to December 31, 2023. Because the Meeting did not technically constitute an “annual general meeting” under Cayman Islands law, the terms of the Company’s Class I directors did not expire at the meeting.
In connection with the approval of the Second Extension Amendment Proposal, the Sponsor agreed to contribute to the Company, as a loan (the “Contribution”), the lesser of (x) $
In connection with the vote to approve the Second Extension Amendment Proposal, the holders of
In order to protect the amounts held in the Trust Account, the Sponsor 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 (1) $
9
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
On January 19, 2024, the Company issued a press release announcing that the Board had elected to extend the date by which the Company has to consummate a business combination from January 12, 2024 for an additional month to February 12, 2024 and further extend March 12, 2024 and April 12, 2024. The Company’s Amended and Restated Memorandum and Articles of Association provides the Company with the right to extend the Deadline Date
On March 29, 2024, the Company entered into a Merger Agreement, by and among Merger Sub and AERKOMM (as it may be amended and/or restated from time to time, the “Merger Agreement”). Pursuant to the Merger Agreement, the Company was obligated to enter into simple agreements for future equity (the “SAFE Agreements”) with certain investors providing for investments in shares of the Company's Common Stock in a private placement in an aggregate amount of not less than $
On August 12, 2024, the Company and AERKOMM entered into one new SAFE Agreement (the “PIPE Minimum Investment Amount”) and amended one of the SAFE Agreements previously executed on May 13, 2024. Additionally, on July 8, 2024, the Company canceled the other SAFE Agreement that was entered into on May 13, 2024. Furthermore, on June 26, 2024, the Company and AERKOMM entered into one new SAFE Agreement. As a result, as of August 12, 2024, SAFE Agreements for an aggregate of $
On October 9, 2024, the Company held an extraordinary general meeting of its shareholders. At the meeting, the Third Extension Amendment Proposal to give the Board the right to extend the date by which the Company must consummate a Business Combination from October 12, 2024 on a monthly basis up to
Nasdaq listing
On October 9, 2023, the Company received a letter (the “Total Shareholders Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that it was not in compliance with Nasdaq Listing Rule 5450(a)(2), which required the Company to main at least 400 total holders for continued listing on the Nasdaq Global Market (the “Minimum Total Holders Rule”). The Total Shareholders Notice stated that the Company had until November 24, 2023 to provide Nasdaq with a plan to regain compliance. If the plan was accepted, Nasdaq might grant an extension of up to 180 calendar days from the date of the Total Shareholders Notice to evidence compliance. If Nasdaq did not accept the Company’s plan, the Company would have the opportunity to appeal that decision to a Nasdaq Hearings Panel (the “Panel”). The Total Shareholders Notice had no immediate effect on the listing of the Company’s securities, and the Company’s securities continued to trade on the Nasdaq Global Market. On November 24, 2023, the Company provided plan to Nasdaq for meeting the requirements under Nasdaq Listing Rule 5450(a)(2), and evaluated available options to regain compliance. However, there could be no assurance that the Company would be able to regain compliance under Nasdaq Listing Rule 5450(a)(2), or would otherwise be in compliance with other Nasdaq listing criteria. On October 12, 2023, the Company filed a Current Report on Form 8-K with the SEC (the “Oct. 2023 Current Report”) to disclose its receipt of the Total Shareholders Notice in accordance with Nasdaq Listing Rule 5810(b). On January 18, 2024 the Company provided an update to Nasdaq of its progress on fulfilling the plan to regain compliance and received a request to provide an additional update to Nasdaq on February 20, 2024. On February 20, 2024 the Company again updated Nasdaq on its progress in fulfilling the plan to regain compliance and continues to be proactive in regaining compliance. Pursuant to the 180-day deadline from the letter received October 9, 2023, the
10
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
date for the Company to demonstrate compliance is April 6, 2024. In the event that the Company is not able to demonstrate compliance to Nasdaq on such date, there is a reasonable possibility that the Company may receive a de-list letter from Nasdaq, at which point the Company would need to request a hearing.
On April 30, 2024, the Company received a Total Shareholders Notice from Nasdaq indicating that the Company did not regain compliance with the Minimum Total Holders Rule. The Company timely requested a hearing before the Panel to appeal the Total Shareholders Notice from Nasdaq and the hearing was held on June 18, 2024. On August 5, 2024, the Panel granted the Company’s request for continued listing on the Nasdaq Global Market and confirmed that the Company was in compliance with the Minimum Total Holders Rule. (see Note 10 for subsequent update on Nasdaq listing status).
On October 7, 2024, the Company received a notice from the Nasdaq’s Listing Qualifications’ Staff stating that as the Company had not completed an initial business combination within 36 months of the effective date of its registration statement in connection with its initial public offering, it was not in compliance with Nasdaq IM 5101-2 and was therefore subject to delisting. The Company had until October 14, 2024 to request a hearing before the Panel. The Company decided to request a hearing before the Panel. Trading in the Company’s securities was suspended at the opening of business on October 14, 2024. The hearing is scheduled for December 10, 2024.
Additionally, on October 7, 2024, the Company submitted its initial listing application for conducting a change of control combination for the combined company on the Nasdaq Global Market—the application used for de-SPAC (special purpose acquisition company) business combinations. On October 11, 2024, Nasdaq provided the Company with a comment letter and required documentation that the Company will need to close the initial business combination.
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GOING CONCERN
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, certain disclosures included in the annual financial statements have been condensed or omitted from these condensed consolidated financial statements as they are not required for interim condensed consolidated financial statements under GAAP and the rules of the SEC. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any future period.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on March 28, 2024 (the “2023 Annual Report”), which contains the audited financial statements and notes thereto. The financial information as of September 30, 2024, is derived from the audited financial statements presented in the 2023 Annual Report.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, which was formed on March 15, 2024. All significant intercompany balances and transactions have been eliminated in consolidation.
11
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Going Concern Consideration
As of September 30, 2024, the Company had $
Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution of the Company raises substantial doubt about its ability to continue as a going concern for a period of time within
Management plans to address this uncertainty through the initial Business Combination as discussed above. There is no assurance that the Company’s plans to consummate the initial Business Combination will be successful or successful within the Combination Period. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012 (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 shareholder 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 an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such 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 accompanying condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company that 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 accompanying condensed consolidated 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 accompanying condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. The most significant estimates are related to the fair value of the warrants.
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 condensed consolidated financial statements, which Management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ from those estimates.
12
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation coverage limit of $250,000. As of September 30, 2024 and December 31, 2023, the Company has not experienced losses on these accounts.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did
Cash Held in the Trust Account
The Company’s portfolio of investments was initially comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account were comprised of U.S. government securities, the investments were classified as “trading securities”. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at “fair value”. Trading securities and investments in money market funds are presented on the accompanying balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income from investments held in the Trust Account in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
To mitigate the risk that the Company might be deemed to be an investment company for purposes of the Investment Company Act, on November 13, 2023 the Company instructed Continental to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at a bank, with Continental continuing to act as trustee, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account to the Company’s shareholders (see Note 1). As of September 30, 2024 and December 31, 2023, the assets held in the Trust Account were in cash.
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 FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). 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 accompanying statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. The Company evaluated the Public Warrants and Private Placement Warrants in accordance with ASC 480 and ASC 815 and concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Public Warrants and Private Placement Warrants from being accounted for as components of equity. As the Public Warrants and Private Placement Warrants meet the definition of a derivative as contemplated in ASC 815, they were recorded as derivative liabilities on the accompanying balance sheets and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with FASB ASC Topic 820, “Fair Value Measurement” (“ASC 820”), with changes in fair value recognized in the accompanying statements of operations in the period of change. The determination of fair value for the warrant liabilities represents a significant estimate within the accompanying condensed consolidated financial statements.
13
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Convertible Instruments
The Company accounts for that feature conversion options in its promissory notes in accordance with ASC 815. ASC 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
Fair Value of Financial Instruments
“Fair value” is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment, characteristics specific to the investment, market conditions and other factors. 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). Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets will typically have a higher degree of input observability and a lesser degree of judgment applied in determining fair value.
The carrying amounts reflected in the accompanying balance sheets for cash, due from related party, and accounts payable approximate fair value due to their short-term nature. The three levels of the fair value hierarchy under ASC 820 are as follows:
| ● | “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. |
In some cases, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment is categorized in its entirety is determined based on the lowest level input that is significant to the investment. Assessing the significance of a particular input to the valuation of an investment in its entirety requires judgment and considers factors specific to the investment. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the perceived risk of that investment.
See Note 9 for additional information on assets and liabilities measured at fair value.
Class A Ordinary Shares Subject to Possible Redemption
All of the
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
14
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
As of September 30, 2024 and December 31, 2023, the Class A ordinary shares subject to redemption reflected in the accompanying balance sheets are reconciled in the following table:
Class A ordinary shares subject to possible redemption — January 1, 2023 |
| $ | |
Less: | |||
Redemption of ordinary shares |
| ( | |
Plus: | |||
Increase in redemption value of Class A ordinary shares subject to redemption | |||
Class A ordinary shares subject to possible redemption — December 31, 2023 | $ | | |
Plus: | |||
Increase in redemption value of Class A ordinary shares subject to redemption | | ||
Class A ordinary shares subject to possible redemption — March 31, 2024 | $ | | |
Plus: | |||
Increase in redemption value of Class A ordinary shares subject to redemption | | ||
Class A ordinary shares subject to possible redemption — June 30, 2024 | $ | | |
Plus: | |||
Increase in redemption value of Class A ordinary shares subject to redemption | | ||
Class A ordinary shares subject to possible redemption — September 30, 2024 | $ | |
Offering Costs associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities were expensed as incurred and presented as non-operating expenses in the accompanying statements of operations. Offering costs associated with the Class A ordinary shares were charged against the carrying value of Class A ordinary shares subject to possible redemption upon the completion of the Initial Public Offering. Deferred underwriting commissions are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Income Taxes
The Company accounts for income taxes under FASB ASC Topic 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the condensed consolidated financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s condensed consolidated financial statements and prescribes a recognition threshold and measurement process for condensed consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transitions. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the accompanying condensed consolidated financial statements.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were
15
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Net (Loss) Income Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share” (“ASC 260”). The Company has two classes of shares, the Class A ordinary shares and Class B ordinary shares. Income is shared pro rata between the two classes of shares.
Net (loss) income per ordinary share is computed by dividing net (loss) income by the weighted-average number of ordinary shares outstanding during the period. Remeasurement associated with the redeemable Class A ordinary shares is excluded from net (loss) income per share as the redemption value approximates fair value. Therefore, the (loss) income per share calculation allocates income shared pro rata between redeemable and non - redeemable ordinary shares. The Company has not considered the effect of the exercise of the Public Warrants and Private Placement Warrants to purchase an aggregate of
The following tables reflect the calculation of basic and diluted net (loss) income per ordinary share (in dollars, except per share amounts):
For the Three Months | For the Nine Months Ended | |||||||||||
Ended September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Class A Ordinary Shares subject to possible redemption | ||||||||||||
Numerator: Net (loss) income allocable to Class A ordinary shares (Redeemable) | $ | ( | $ | | $ | ( | $ | | ||||
Denominator: Weighted Average Class A ordinary shares (Redeemable) | ||||||||||||
Basic and diluted weighted average shares outstanding |
| |
| |
| |
| | ||||
Basic and diluted net (loss) income per share | $ | ( | $ | | $ | ( | $ | | ||||
Class A (non-redeemable) and Class B Ordinary Shares |
|
|
|
|
|
|
|
| ||||
Numerator: Net (loss) income allocable to Class A ordinary shares (non-redeemable) and Class B ordinary shares |
| ( |
| |
| ( |
| | ||||
Denominator: |
|
|
|
|
|
|
|
| ||||
Weighted Average Class A (non-redeemable) and Class B ordinary shares — Basic and diluted weighted average shares outstanding | ||||||||||||
Basic and diluted net (loss) income per share | $ | ( | $ | | $ | ( | $ | |||||
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its condensed consolidated financial statements and disclosures.
Management does not believe there are any material recently issued, but not yet effective, accounting standards that, if currently adopted, would have a material effect on the accompanying condensed consolidated financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, which was consummated on October 12, 2021, the Company sold
16
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor, Cantor and Odeon purchased an aggregate of
Each Private Placement Warrant is exercisable to purchase
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On March 11, 2021, the Sponsor was issued
On May 9, 2023, pursuant to the terms of the Amended and Restated Memorandum and Articles of Association, the Sponsor elected to convert all
The Initial Shareholders agreed that, subject to certain limited exceptions, the Founder Shares will not be transferred, assigned, or sold until the earlier of (i)
A total of (i)
Each Anchor Investor entered into separate investment agreements (the “Anchor Investment Agreements”) with the Company and the Sponsor pursuant to which each Anchor Investor purchased a specified number of Founder Shares, or an aggregate of
17
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
the Business Combination and (b) subject any Founder Shares held by them to the same lock-up restrictions as the Founder Shares held by the Sponsor and independent directors.
The Company estimated the fair value of the Founder Shares attributable to the Anchor Investors to be $
Prior to the First Extension vote in April 12, 2023, the owners of all of the Founders Shares distributed pursuant to the Anchor Investment Agreements all entered into a first amendment of such agreement, such that the transferred shares shall, in the same proportion applicable to the Founder Shares held by the Sponsor, be automatically, and without further action of any of the parties, subject to any cut-back, reduction, mandatory repurchase, redemption, forfeiture, vesting or revesting, earnouts or other concessions agreed upon by the Company and the Sponsor in connection with the Company’s entry into an agreement with respect to, or the consummation of, an initial business combination.
Administrative Support Agreement
On October 6, 2021, the Company entered into an agreement with IX Services, to pay up to $
Related Party Loans
The Sponsor has committed to loan the Company an aggregate of up to $
In connection with the Contribution and advances the Sponsor may make in the future to the Company for working capital expenses, on April 13, 2023, the Company issued the Extension Promissory Note to the Sponsor with a principal amount up to $
18
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
On September 8, 2023, the Company issued the Amended and Restated Extension Promissory Note in the principal amount of up to $
On April 18, 2024, the Company amended and restated the convertible promissory note, dated as of September 8, 2023, previously issued to Sponsor, to increase the aggregate principal amount to up to $
On September 20, 2024, the Company amended and restated the convertible promissory note, dated as of September 8, 2023, previously issued to Sponsor, to increase the aggregate principal amount to up to $
At the election of the Sponsor, up to $
As of September 30, 2024 and December 31, 2023, the Company had a total of $
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights Agreement
The holders of the Founder Shares, Private Placement Warrants and Public Warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants issued upon conversion of the Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the Registration Statement. The holders of these securities are entitled to make up to
Underwriting Agreement
In connection with the Initial Public Offering, the underwriters were granted a
The underwriters were paid a cash underwriting discount of $
19
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
event that the Company completes a Business Combination, subject to the terms of that certain underwriting agreement, dated as of October 6, 2021 (the “Underwriting Agreement”).
On April 12, 2023, the Company entered into a fee reduction agreement (the “Fee Reduction Agreement”), which amends the Underwriting Agreement. According to the Underwriting Agreement, the Company previously agreed to pay to the underwriters of the Initial Public Offering an aggregate of $
On April 4, 2024, the Company entered into an Amended & Restated Fee Reduction Agreement, which amends the Underwriting Agreement with Cantor Fitzgerald & Co. (“CF&CO”). Pursuant to the Amended and Restated Fee Reduction Agreement with CF&CO, in the event that the Company consummates the Business Combination with AERKOMM, CF&CO agrees that it will forfeit $
On April 4, 2024, the Company entered into an Amended & Restated Fee Reduction Agreement, which amends the Underwriting Agreement with Odeon Capital Group LLC (“Odeon”). Pursuant to the Amended and Restated Fee Reduction Agreement with Odeon, in the event that the Company consummates the Business Combination with AERKOMM, Odeon agrees that it will forfeit $
Merger Agreement
On March 29, 2024, the Company, a Cayman Islands exempted company (which will de-register from the Register of Companies in the Cayman Islands by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate to and domesticate as a Delaware corporation prior to the closing date) entered into a Merger Agreement, by and among the Company, AKOM Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and AERKOMM Inc., a Nevada corporation (the “AERKOMM”) (as it may be amended and/or restated from time to time, the “Merger Agreement”).
On September 25, 2024, the Company, Merger Sub and AERKOMM entered into an amendment to the Merger Agreement to (1) provide that any lock-up period applicable to the Sponsor or any officers, directors or affiliates of the Company will terminate at the closing of the Merger, (2) change the percentage of the Founder Shares being treated as Escrowed Sponsor Shares from
The PIPE Investment
Concurrently with the execution of the Merger Agreement, the Company and AERKOMM entered into subscription agreements (the “Subscription Agreements”) with certain accredited investors providing for investments in the Company’s Common Stock in a private placement for an aggregate cash amount of $
20
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
AERKOMM will exercise reasonable best efforts to obtain a PIPE Investment Amount of at least $
The SAFE Investment
On March 29, 2024, the Company entered into a Merger Agreement, by and among Merger Sub. and AERKOMM (as it may be amended and/or restated from time to time, the “Merger Agreement”). Pursuant to the Merger Agreement, the Company was obligated to enter into simple agreements for future equity (the “SAFE Agreements”) with certain investors providing for investments in shares of the Company's Common Stock in a private placement in an aggregate amount of not less than $
As of August 12, 2024, an aggregate of $
The Company analyzed the SAFE agreement under ASC 480 and ASC 815, noting that the Common Stock and Incentive Shares issuable under the SAFE Agreement do NOT meets the requirements for equity classification. As a result, the Common Stock and Incentive Shares are required to be classified as a liability and measured at fair value with changes in fair value recorded in earnings, the SAFE notes were issued by AERKOMM and as such the liability has been reflected in the financial statement of AERKOMM at issuance and as of September 30, 2024.
Sponsor Support Agreement
In connection with the execution of the Merger Agreement, the Company entered into a support agreement (the “Sponsor Support Agreement”) with the Sponsor and AERKOMM, pursuant to which the Sponsor agreed to, among other things, (i) vote all of its shares in favor of each the Company Proposal sought by the Company with respect to the Merger Agreement or the transactions contemplated thereby, (ii) vote against any Alternative Proposal or proposal relating to a business combination transaction, (iii) vote against any merger agreement or merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company (other than the Merger Agreement and transactions relating to the Merger), (iv) vote against any change in the business, management or Board of Directors of the Company (other than in connection with the Merger), (v) vote against any proposal that would impede the Merger or that would result in a breach with respect to any obligation or agreement of the Company, Merger Sub or the Sponsor under the Merger Agreement or the Company Support Agreement, and (vi) vote in favor of any proposal to extend the period of time the Company is afforded under its organizational documents to consummate an initial business combination, in each case, subject to the terms and conditions of the Company Support Agreement.
AERKOMM Support Agreement
In connection with the execution of the Merger Agreement, the Company entered into a support agreement (the “AERKOMM Support Agreement”) with AERKOMM and certain shareholders of AERKOMM (the “AERKOMM Supporting Shareholders”) pursuant to which the AERKOMM Supporting Shareholders agreed to, among other things,(i) vote to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger (“AERKOMM Transaction Proposals”); (ii) vote against any merger agreement or merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by AERKOMM (other than the Merger Agreement and the transactions relating to the Merger); (iii) vote against any change in the business (to the extent in violation of the Merger Agreement), management or Board of Directors of AERKOMM (other than in connection with AERKOMM Transaction Proposals and the transactions contemplated thereby); and (iv) vote against any proposal that would impede the Merger or that would result in a breach with respect to any obligation or agreement of AERKOMM or AERKOMM Securityholders under the Merger Agreement or the AERKOMM Support Agreement.
21
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Registration Rights Agreement
The Merger Agreement contemplates that, at the closing, Pubco, the Sponsor and certain former shareholders of AERKOMM (collectively, the “Holders”) will enter into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which Pubco will agree to register for resale, pursuant to Rule 415 under the Securities Act, certain the Company’s Common Shares and Domesticated the Company Warrants that are held by the Holders from time to time.
The Registration Rights Agreement amends and restates the registration rights agreement that was entered into the Company, the Sponsor and the other parties thereto in connection with the Company’s initial public offering. The Registration Rights Agreement will terminate on the earlier of (a) the five year anniversary of the date of the Registration Rights Agreement or (b) with respect to any Holder, on the date that such Holder no longer holds any Registrable Securities.
Capital Markets Advisory Agreement
On September 29, 2024, the Company and AERKOMM signed an engagement letter to appoint Benchmark to serve as a non-exclusive PIPE placement agent for a private placement of securities of approximately $
NOTE 7. WARRANTS
As of September 30, 2024 and December 31, 2023, there were an aggregate of
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a)
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying the obligations described below with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue Class A ordinary shares upon exercise of a warrant unless the Class A ordinary shares issuable upon such warrant exercise have been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any warrant.
22
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
The Company agreed that as soon as practicable, but in no event later than fifteen () business days after the closing of an initial Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the sixtieth (th) business day after the closing of an initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy 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, and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable, the Company may call the warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the closing price of the ordinary shares equals or exceeds $ |
The Company will not redeem the warrants for cash unless an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A ordinary shares is available throughout the
If the Company calls the warrants for redemption as described above, Management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” Management will consider, among other factors, its cash position, the number of warrants that are outstanding and the dilutive effect on the Company’s shareholders of issuing the maximum number of Class A ordinary shares issuable upon the exercise of the warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of Class A ordinary shares equal to the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied by the excess of the “fair market value” of the Class A ordinary shares over the exercise price of the warrants by (y) the fair market value. The “fair market value” will mean the average reported closing price of the Class A ordinary shares for the
23
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of an initial Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until
The accounting treatment of derivative financial instruments requires that the Company record the warrants as derivative liabilities at fair value upon the closing of the Initial Public Offering. The Public Warrants have been allocated a portion of the proceeds from the issuance of the Units equal to their fair value. The warrant liabilities are subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liabilities will be adjusted to its current fair value, with the change in fair value recognized in the Company’s statements of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification.
NOTE 8. CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT
Preference Shares
The Company is authorized to issue
Class A Ordinary Shares
The Company is authorized to issue
Class B Ordinary Shares
The Company is authorized to issue
24
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Ordinary shareholders of record are entitled to
The Board of Directors is divided into
NOTE 9. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Amount at Fair |
|
|
| ||||||||
Description | Value | Level 1 | Level 2 | Level 3 | ||||||||
September 30, 2024 |
|
|
|
| ||||||||
Liabilities |
|
|
|
|
|
|
|
| ||||
Warrant liability – Public Warrants | $ | | $ | — | $ | | $ | — | ||||
Warrant liability – Private Placement Warrants | | — | — | | ||||||||
Total Liabilities | $ | | $ | — | $ | | $ | | ||||
| Amount at Fair |
|
|
| ||||||||
Description | Value | Level 1 | Level 2 | Level 3 | ||||||||
December 31, 2023 |
|
|
|
| ||||||||
Liabilities |
|
|
|
|
|
|
|
| ||||
Warrant liability – Public Warrants | $ | | $ | — | $ | | $ | — | ||||
Warrant liability – Private Placement Warrants | | — | — | | ||||||||
Total Liabilities | $ | | $ | — | $ | | $ | | ||||
Cash Held in Trust Account
As of September 30, 2024, assets held in the Trust Account were comprised of approximately $
25
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Fair Value Measurements
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement in November 2021, when the Public Warrants were separately listed and traded, and subsequently transferred to a Level 2 measurement during the quarter ended March 31, 2022 due to low trading volume.
The Company utilized a Monte-Carlo simulation model for the initial valuation of the Public Warrants. Beginning in November 2021, the fair value of Public Warrants has been measured based on the listed market price of such Public Warrants under the ticker “IXAQW”.
The Company utilized a probability-adjusted Black-Scholes method to value the Private Placement Warrants at each reporting period, with changes in fair value recognized in the statements of operations. The estimated fair value of the Private Placement Warrant liabilities is determined using Level 3 inputs. Inherent in pricing models are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The following table provides the significant inputs to the probability-adjusted Black-Scholes method for the fair value of the Private Placement Warrants:
| September 30, 2024 |
| December 31, 2023 | ||||
Stock price | $ | | $ | | |||
Exercise price | $ | | $ | | |||
Dividend yield | — | % | — | % | |||
Expected term (in years) | |
| | ||||
Volatility | | % |
| | % | ||
Risk-free rate | | % | | % | |||
Fair value | $ | | $ | | |||
Probability of Business Combination | | % | $ | | % | ||
26
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
The following table provides a summary of the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis:
Fair value at December 31, 2023 |
| $ | |
| |||
Fair value at March 31, 2024 | $ | | |
| |||
Fair value at June 30, 2024 | $ | | |
| |||
Fair value at September 30, 2024 | $ | | |
Fair value at December 31, 2022 | $ | | |
| |||
Fair value at March 31, 2023 | $ | | |
( | |||
Fair value at June 30, 2023 | $ | | |
Fair value at September 30, 2023 | $ |
The Company recognized $
Derivative Liability-Conversion Feature
The Company utilizes a Monte Carlo model to estimate the fair value of the conversion feature within the Extension Promissory Note, which is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the conversion feature are recognized as non-cash gains or losses in the accompanying statements of operations.
The key assumptions in the model relate to expected share-price volatility, risk-free interest rate, exercise price, expected term and the probability of occurrence of the transaction. The expected volatility was based on the average volatility of special purpose acquisition companies that are searching for an acquisition target. The risk-free interest rate is based on interpolation of Treasury yields with a term commensurate with the term of the warrants. The Company anticipates the dividend yield to be
The estimated fair value of the conversion feature related to the Extension Promissory Note as of issuance and for the period ended September 30, 2024 is
27
IX ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the accompanying unaudited condensed consolidated financial statements were issued. Based upon this review, other than below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the accompanying unaudited condensed consolidated financial statements.
On September 23, 2024, Karen Bach, the Company’s Chief Executive Officer and Director, notified the Board of her intention to resign as both officer and director of the Company, effective upon both of the Board’s acceptance of such resignations and the shareholders’ approval of the Company’s third extension of the deadline to consummate its Business Combination-which was held on October 9, 2024.
On October 9, 2024, the Company held an extraordinary general meeting of its shareholders. At the meeting, the Third Extension Amendment Proposal to give the Board the right to extend the date by which the Company must consummate a Business Combination from October 12, 2024 on a monthly basis up to
On October 7, 2024, the Company received a notice from the Nasdaq’s Listing Qualifications’ Staff stating that as the Company had not completed an initial business combination within 36 months of the effective date of its registration statement in connection with its initial public offering, it was not in compliance with Nasdaq IM 5101-2 and was therefore subject to delisting. The Company had until October 14, 2024 to request a hearing before the Panel. The Company decided to request a hearing before the Panel. Trading in the Company’s securities was suspended at the opening of business on October 14, 2024. The hearing is scheduled for December 10, 2024.
Additionally, on October 7, 2024, the Company submitted its initial listing application for conducting a change of control combination for the combined company on the Nasdaq Global Market—the application used for de-SPAC (special purpose acquisition company) business combinations. On October 11, 2024, Nasdaq provided the Company with a comment letter and required documentation that the Company will need to close the initial business combination.
28
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this quarterly report on Form 10-Q (this “Report”) including, without limitation, statements in this section regarding our financial position, business strategy and the plans and objectives of Management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our Management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of our Management, as well as assumptions made by, and information currently available to, our Management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in this Report under “Item 1. Financial Statements”.
Overview
We are a blank check company incorporated on March 1, 2021 as a Cayman Islands exempted company for the purpose of effecting a business combination. We have not selected any business combination target, but we have had substantive discussions with potential business combination targets. We intend to effectuate our initial business combination using cash from the proceeds of our Initial Public Offering and the Private Placement, the proceeds of the sale of our shares in connection with our initial business combination pursuant to the forward purchase agreements (or backstop agreements we may enter into or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing or other sources.
The registration statement was declared effective on October 6, 2021. On October 12, 2021, we consummated the Initial Public Offering of 23,000,000 Units, including 3,000,000 Units that were issued pursuant to the underwriters’ exercise of their over-allotment option in full, at $10.00 per Unit, generating total gross proceeds of $230,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,150,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in the Private Placement to our sponsor, Cantor and Odeon, generating gross proceeds of $7,150,000.
Upon the closing of the Initial Public Offering on October 12, 2021, an amount of $231,150,000 from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants in the Private Placement was placed in the Trust Account and was initially invested in Treasury obligations with maturities of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct Treasury obligations. To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, on November 13, 2023 we instructed Continental to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at a bank, with Continental continuing to act as trustee, until the earliest of: (i) the completion of the initial business combination; (ii) the redemption of any public shares properly tendered in connection with a shareholder vote to amend the Amended and Restated Memorandum and Articles of Association to modify the substance or timing of our obligation to redeem 100% of the public shares if we do not complete the initial business combination within the Combination Period; and (iii) absent an initial business combination within the Combination Period, the return of the funds held in the Trust Account to the Public Shareholders as part of the redemption of the public shares.
Merger Agreement
On March 29, 2024, the Company, a Cayman Islands exempted company, entered into a Merger Agreement, by and among the Company, AKOM Merger Sub Inc., a Nevada corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and AERKOMM Inc., a Nevada corporation (“AERKOMM”) (as it may be amended and/or restated from time to time, the “Merger Agreement”), pursuant to which the Company will acquire AERKOMM. Pursuant to the Merger Agreement, the Company will de-register from the Register of Companies in the Cayman Islands by way of continuation out of the Cayman Islands and into the State of Delaware so as to migrate to and domesticate as a Delaware corporation prior to the closing date.
29
On September 25, 2024, the Company, Merger Sub and AERKOMM entered into an amendment to the Merger Agreement to (1) provide that any lock-up period applicable to the Sponsor or any officers, directors or affiliates of the Company will terminate at the closing of the Merger, (2) change the percentage of the Founder Shares being treated as Escrowed Sponsor Shares from 50% to 25%, (3) add a provision providing for AERKOMM to pay certain amounts to the Company to cover its working capital and extension expenses, and (4) add a provision that the Company may terminate the Merger Agreement at any time prior to the closing date if AERKOMM or any Subsidiary of AERKOMM enters into voluntary bankruptcy or fails to remove within 60 days any petition in bankruptcy filed against it prior to closing.
The PIPE Investment
Concurrently with the execution of the Merger Agreement, the Company and AERKOMM entered into subscription agreements (the “Subscription Agreements”) with certain accredited investors providing for investments in the Company’s Common Stock in a private placement for an aggregate cash amount of $35,000,000 at $11.50 per share of the Company’s Common Stock (the “PIPE Investment”).
AERKOMM will exercise reasonable best efforts to obtain a PIPE Investment Amount of at least $65,000,000 (inclusive of investment amounts under SAFE Agreements (as defined below)) pursuant to PIPE arrangements, and will obtain a minimum PIPE Investment Amount, unless waived by the Company, of at least $ 45,000,000 minus the investment amount obtained pursuant to SAFE Agreements (the “PIPE Minimum Investment Amount”) and will consummate the transactions contemplated by the Subscription Agreements.
The SAFE Investment
On March 29, 2024, the Company entered into a Merger Agreement, by and among the Company, the Merger Sub, and AERKOMM (as it may be amended and/or restated from time to time, the “Merger Agreement”). Capitalized terms used but not otherwise defined herein have the meanings given to them in the Merger Agreement.
Pursuant to the Merger Agreement, the Company was obligated to enter into simple agreements for future equity (the “SAFE Agreements”) with certain investors providing for investments in shares of the Company’s Common Stock in a private placement in an aggregate amount of not less than $15,000,000 (exercising reasonable best efforts to secure $5,000,000 within twenty (20) Business Days of the date of the Merger Agreement, another $5,000,000 within forty (40) Business Days of the date of the Merger Agreement, and another $5,000,000 within sixty (60) Business Days of the date of the Merger Agreement) that will automatically convert upon the closing at $11.50 per share of the the Company’s Common Stock and in accordance with such SAFE Agreements and the Merger Agreement (such investments in the aggregate, the “SAFE Investment”).
As of August 12, 2024, an aggregate of $2.6 million of SAFE Investment has been made. The SAFE Investment will initially be placed in an escrow account and may be released from such escrow account to an account of the Company pursuant to the joint written instructions of the Company and the Company.
Sponsor Support Agreement
In connection with the execution of the Merger Agreement, the Company entered into a support agreement (the “Sponsor Support Agreement”) with the Sponsor and AERKOMM, pursuant to which the Sponsor agreed to, among other things, (i) vote all of its shares in favor of each the Company Proposal sought by the Company with respect to the Merger Agreement or the transactions contemplated thereby, (ii) vote against any Alternative Proposal or proposal relating to a business combination transaction, (iii) vote against any merger agreement or merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company (other than the Merger Agreement and transactions relating to the Merger), (iv) vote against any change in the business, management or Board of Directors of the Company (other than in connection with the Merger), (v) vote against any proposal that would impede the Merger or that would result in a breach with respect to any obligation or agreement of the Company, Merger Sub or the Sponsor under the Merger Agreement or the Company Support Agreement, and (vi) vote in favor of any proposal to extend the period of time the Company is afforded under its organizational documents to consummate an initial business combination, in each case, subject to the terms and conditions of the Company Support Agreement.
30
AERKOMM Support Agreement
In connection with the execution of the Merger Agreement, the Company entered into a support agreement (the “AERKOMM Support Agreement”) with AERKOMM and certain shareholders of AERKOMM (the “AERKOMM Supporting Shareholders”) pursuant to which the AERKOMM Supporting Shareholders agreed to, among other things,(i) vote to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger (“AERKOMM Transaction Proposals”); (ii) vote against any merger agreement or merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by AERKOMM (other than the Merger Agreement and the transactions relating to the Merger); (iii) vote against any change in the business (to the extent in violation of the Merger Agreement), management or Board of Directors of AERKOMM (other than in connection with AERKOMM Transaction Proposals and the transactions contemplated thereby); and (iv) vote against any proposal that would impede the Merger or that would result in a breach with respect to any obligation or agreement of AERKOMM or AERKOMM Securityholders under the Merger Agreement or the AERKOMM Support Agreement.
Registration Rights Agreement
The Merger Agreement contemplates that, at the closing, Pubco, the Sponsor and certain former shareholders of AERKOMM (collectively, the “Holders”) will enter into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which Pubco will agree to register for resale, pursuant to Rule 415 under the Securities Act, certain the Company Common Shares and Domesticated the Company Warrants that are held by the Holders from time to time.
The Registration Rights Agreement amends and restates the registration rights agreement that was entered into the Company, the Sponsor and the other parties thereto in connection with the Company’s initial public offering. The Registration Rights Agreement will terminate on the earlier of (a) the five year anniversary of the date of the Registration Rights Agreement or (b) with respect to any Holder, on the date that such Holder no longer holds any Registrable Securities.
Capital Markets Advisory Agreement
On September 29, 2024, the Company and AERKOMM signed an engagement letter to appoint Benchmark to serve as a non-exclusive PIPE placement agent for a private placement of securities of approximately $30,000,000 or such other amount as will be determined by the parties. Upon successful completion of the private offering, the Company and AERKOMM will pay Benchmark 5% of the gross proceeds of any equity or equity linked securities raised in the private offering plus 2.5% of the gross proceeds of any equity or equity linked securities raised in the private offering from purchasers of securities not introduced by Benchmark, up to a cap of $400,000. Both the 35,000,000 in PIPE subscriptions and the Safenotes will not be assessed with regard to non-Benchmark introductions.
Extension of Our Combination Period
On April 10, 2023, we held the 2023 extraordinary meeting, at which, our shareholders approved, among other things: (i) the Extension Proposal; (ii) the Redemption Limitation Amendment Proposal; and (iii) the Founder Share Amendment Proposal. Under Cayman Islands law, the amendments to the Amended and Restated Memorandum and Articles of Association took effect upon approval of the Extension Proposal, Founder Share Amendment Proposal and Redemption Limitation Amendment Proposal.
In connection with the votes to approve the Extension Proposal, the Redemption Limitation Amendment Proposal and the Founder Share Amendment Proposal, the holders of 18,336,279 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.31 per share, for an aggregate redemption amount of approximately $189 million. After the satisfaction of the Redemptions, the balance in the Trust Account was approximately $48 million.
As disclosed in the definitive proxy statement filed by the Company with the SEC on March 23, 2023, relating to the extraordinary general meeting of shareholders, the Sponsor agreed that if the Extension Proposal is approved, it or its designee will deposit into the Trust Account established in connection with the Company’s initial public offering as a loan, an amount equal to the lesser of (x) $160,000 or (y) $0.04 per public share multiplied by the number of public shares outstanding, on each of the following dates: (i) April 13, 2023; and (ii) one business day following the public announcement by the Company disclosing that the board of directors of the Company has determined to extend the Deadline Date (as defined below) for an additional month in accordance with the extension. On April 13, 2023, the Sponsor advanced $160,000 to the Company for the first month of extension.
On May 9, 2023, the Company issued a press release announcing that the board has elected to extend the date by which the Company has to consummate a business combination (the “Deadline Date”) from May 12, 2023 for an additional month to June 12,
31
2023. The Company’s Amended and Restated Memorandum and Articles of Association provides the Company the right to extend the Deadline Date twelve times for an additional one month each time, from April 12, 2023, the initial Deadline Date, to up to April 12, 2024. In connection with the second Extension, the board delivered the Sponsor a written request to draw down $160,000 under its previously-disclosed promissory note for the second month of the extension. On or before May 12, 2023, the Sponsor deposited $160,000 into the Company’s Trust Account in connection with the second extension.
On June 9, 2023, the Company issued a press release announcing that its board of directors has elected to extend the date by which the Company has to consummate a business combination from June 12, 2023 for an additional month to July 12, 2023. In connection with the third extension, the board of directors delivered the Sponsor a written request to draw down $160,000 under its previously-disclosed promissory note for the third extension. On or before June 12, 2023, the Sponsor deposited $160,000 into the Company’s Trust Account in connection with the third extension.
On July 11, 2023, the Company issued a press release announcing that its board of directors has elected to extend the date by which the Company has to consummate a business combination from July 12, 2023 for an additional month to August 12, 2023. In connection with the fourth extension, the board of directors delivered the Sponsor a written request to draw down $160,000 under its previously-disclosed promissory note for the fourth extension. On or before July 12, 2023, the Sponsor deposited $160,000 into the Company’s Trust Account in connection with the fourth extension.
On August 9, 2023, the Company issued a press release announcing that its board of directors has elected to extend the date by which the Company has to consummate a business combination from August 12, 2023 for an additional month to September 12, 2023. In connection with the fifth extension, the board of directors delivered the Sponsor a written request to draw down $160,000 under its previously-disclosed promissory note for the fifth extension. On or before August 12, 2023, the Sponsor deposited $160,000 into the Company’s Trust Account in connection with the fifth extension.
On September 7, 2023, the Company issued a press release announcing that its board of directors has elected to extend the date by which the Company has to consummate a business combination from September 12, 2023 for an additional month to October 12, 2023. In connection with the sixth extension, the board of directors delivered the Sponsor a written request to draw down $160,000 under its previously-disclosed promissory note for the sixth extension. On or before September 12, 2023, the Sponsor will deposit $160,000 into the Company’s Trust Account in connection with the nineth extension.
On October 12, 2023, we issued a press release announcing that the board of directors has elected to extend the Combination Period for an additional month, from October 12, 2023 to November 12, 2023. In connection with the seventh extension of the extended date, the board of directors delivered the Sponsor a written request to draw down $160,000 under the extension promissory note. On October 13, 2023, the Sponsor deposited $160,000 into the Trust Account in connection with this seventh extension.
On November 13, 2023, we issued a press release announcing that the board of directors has elected to extend the Combination Period for an additional month, from November 12, 2023 to December 12, 2023. In connection with the eighth extension of the extended date, the board of directors delivered the Sponsor a written request to draw down $160,000 under the extension promissory note. On November 13, 2023, the Sponsor deposited $160,000 into the Trust Account in connection with this eighth extension.
On December 11, 2023, the Second Extension Amendment Proposal to give the board of directors the right to extend the date by which we must consummate a business combination from December 12, 2023 on a monthly basis up to ten (10) times until October 12, 2024 (or such earlier date as determined by the board of directors) (the “Second Extension Amendment”) was approved. We filed the Second Extension Amendment with the Cayman Islands Registrar of Companies on December 12, 2023. On December 12, 2023, the Sponsor deposited $50,000 into the Trust Account in connection with this ninth extension to extend the liquidation to January 12, 2024.
In connection with the vote to approve the Second Extension Amendment Proposal, the holders of 1,817,650 public shares properly exercised their right to redeem such shares for cash at a redemption price of approximately $11.00 per share, for an aggregate redemption amount of approximately $19.99 million. Consequently, the Contribution will be $50,000 per month needed for us to continue to extend the Combination Period monthly.
On January 19, 2024, we issued a press release announcing that its board of directors had elected to extend the date by which the Company has to consummate a business combination (the “Deadline Date”) from January 12, 2024 for an additional month to February 12, 2024. The Company’s Amended and Restated Memorandum and Articles of Association provides the Company with the right to extend the Deadline Date eighteen times for an additional one month each time, from April 12, 2023, the initial Deadline Date,
32
to up to October 12, 2024. In connection with the tenth Extension, the Board delivered the Sponsor a written request to draw down $50,000 under its previously-disclosed promissory note. The Sponsor deposited $50,000 each into our trust account in connection with the tenth, eleventh, twelfth, thirteenth, fourteenth, fifteenth, sixteenth and seventeenth, Extension on January 12, 2024, February 17, 2024, March 12, 2024, April 19, 2024, May 17, 2024, June 20, 2024, July 23, 2024, August 16, 2024, September 20, 2024, respectively, to extend the life until October 12, 2024.
On October 9, 2024, the Company held an extraordinary general meeting of its shareholders. At the meeting, the Third Extension Amendment Proposal to give the Board the right to extend the date by which the Company must consummate a Business Combination from October 12, 2024 on a monthly basis up to twelve (12) times until October 12, 2025 (or such earlier date as determined by the Board) (the “Third Extension Amendment”) was approved by depositing into the Company’s trust account for each one-month extension the lesser of (a) $50,000 and (b) $0.03 for each then outstanding share after giving effect to any redemptions. In connection with the shareholders’ vote at the meeting, 1,235,698 shares were tendered for redemption for cash at an approximate price of $11.58 per share, for an aggregate of approximately $14.3 million. On October 12 and November 13, 2024, the Company made two deposits of $48,311 for November and December extension contributions, respectively, to extend the life until December 12, 2024.
The board of directors furthermore confirmed their intention and policy to continue to extend the Deadline Date on a monthly basis, but will not be issuing a press release every month. Therefore, investors can expect that the Sponsor will continue to deposit the lesser of (a) $50,000 and (b) $0.03 for each then outstanding share into the Company’s Trust Account in connection with each extension on the 12th day of each month. In the event that the board of directors elects not to extend, they will issue a press release announcing this change in policy.
Contribution and Extension Promissory Note
On April 10, 2023, the Company held the 2023 Extraordinary Meeting. At the 2023 Extraordinary Meeting, the Company’s shareholders approved, among other things, a proposal to grant the Company the right to extend the Combination Period to the Extended Date, and to allow the Company, without another shareholder vote, by resolution of the Company’s board of directors, to elect to further extend the Extended Date in one-month increments up to eleven additional times, or a total of up to twelve months total, up to April 12, 2024 (the “Extension Proposal”) by amending the Amended and Restated Memorandum and Articles of Association (the “First Extension”). Under Cayman Islands law, such amendment of the Amended and Restated Memorandum and Articles of Association took effect upon approval of the Extension Proposal. In connection with the vote to approve the Extension Proposal, the holders of 18,336,279 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.31 per share, for an aggregate redemption amount of approximately $189 million. In connection with each monthly extension in accordance with the First Extension, the Sponsor deposited $160,000 into the Trust Account every month from April to November 2023.
Additionally, the Sponsor agreed that if the Extension Proposal was approved, it or its designee would deposit into the Trust Account, as a loan, the Contribution on each of the following dates: (i) April 13, 2023; and (ii) one business day following our public announcement disclosing that the board of directors has determined to extend the extended date for an additional month in accordance with the Extension Proposal. Subsequently, the Sponsor agreed that if the Second Extension Proposal was approved, it or its designee would deposit into the Trust Account, as a loan, the Contribution within seven days of the 12th day of each month pursuant to the board of directors determining to extend the extended date for an additional month in accordance with the Second Extension Proposal. In connection with the Contribution and advances the Sponsor may make in the future to us for working capital expenses, on April 13, 2023, we issued the original extension promissory note, a convertible promissory note to the Sponsor with a principal amount up to $1 million (the “Original Extension Promissory Note”). On September 8, 2023, we issued the amended and restated promissory note in the principal amount of up to $2.5 million to the Sponsor (the “Amended and Restated Extension Promissory Note”), to amend and restate the Original Extension Promissory Note. On April 18, 2024, we amended and restated the convertible promissory note, dated as of September 8, 2023, previously issued to the Sponsor to increase the aggregate principal amount to up to $3,500,000 (as amended and restated, the “ Third Amended and Restated Extension Promissory Note ”). On September 20, 2024, we amended and restated the convertible promissory note, dated as of April 28, 2024, previously issued to the Sponsor to increase the aggregate principal amount to up to $4,500,000 (as amended and restated, the “Fourth Amended and Restated Promissory Note”). The Fourth Amended and Restated Extension Promissory Note was issued in connection with advances the Sponsor may make, in its discretion, to us for working capital expenses. The Fourth Amended and Restated Extension Promissory Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which the Company consummates its initial business combination and (ii) the date of the Company’s liquidation. At the election of the Sponsor, up to $1,500,000 of the unpaid principal balance under the Fourth Amended and Restated Extension Promissory Note may be converted into conversion warrants at the price of $1.00 per warrant. Such conversion warrants will have terms identical to the warrants issued to the Sponsor in the Private Placement.
33
As of September 30, 2024, the outstanding principal under the Fourth Amended and Restated Extension Promissory Note was $3,548,268.
On December 11, 2023, the Company held an extraordinary general meeting. At the meeting, the Second Extension Amendment Proposal to give the board of directors the right to extend the date by which the Company must consummate a Business Combination from December 12, 2023 on a monthly basis up to ten (10) times until October 12, 2024 (or such earlier date as determined by the Board) (the “Second Extension Amendment”) was approved. Under the law of the Cayman Islands, upon approval of the Second Extension Amendment Proposal by the affirmative vote of at least two-thirds (2/3) of the shareholders entitled to vote, who attended and voted at the meeting (including those who voted online), the Second Extension Amendment became effective. The Company filed the Second Extension Amendment with the Cayman Islands Registrar of Companies on December 12, 2023. In connection with the vote to approve the Second Extension Amendment Proposal, the holders of 1,817,650 Public Shares properly exercised their right to redeem such shares for cash at a redemption price of approximately $11.00 per share, for an aggregate redemption amount of approximately $19.99 million. Consequently, the Contribution will be $50,000 per month needed for the Company to complete a Business Combination.
On October 9, 2024, the Company held an extraordinary general meeting of its shareholders. At the meeting, the Third Extension Amendment Proposal to give the Board the right to extend the date by which the Company must consummate a Business Combination from October 12, 2024 on a monthly basis up to twelve (12) times until October 12, 2025 (or such earlier date as determined by the Board) (the “Third Extension Amendment”) was approved by depositing into the Company’s trust account for each one-month extension the lesser of (a) $50,000 and (b) $0.03 for each then outstanding share after giving effect to any redemptions. In connection with the shareholders’ vote at the meeting, 1,235,698 shares were tendered for redemption for cash at an approximate price of $11.58 per share, for an aggregate of approximately $14.3 million. On October 12 and November 13, 2024, the Company made two deposits of $48,311 for November and December extension contributions, respectively, to extend the life until December 12, 2024.
Founder Conversion
On May 9, 2023, pursuant to the terms of the Amended and Restated Memorandum and Articles of Association and the approval of the Founder Share Amendment Proposal, the Sponsor, the holder of an aggregate of 4,002,121 of the Class B ordinary shares, elected to convert each outstanding Class B ordinary share held by it on a one-for-one basis into Class A ordinary shares, with immediate effect in the founder conversion. Following this founder conversion and the redemptions, we had an aggregate of 8,665,842 Class A ordinary shares and 1,747,879 Class B ordinary shares issued and outstanding.
Recent Developments
Nasdaq listing
On October 9, 2023, the Company received a letter (the “Total Shareholders Notice”) from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that it was not in compliance with Nasdaq Listing Rule 5450(a)(2), which required the Company to main at least 400 total holders for continued listing on the Nasdaq Global Market (the “Minimum Total Holders Rule”). The Total Shareholders Notice stated that the Company had until November 24, 2023 to provide Nasdaq with a plan to regain compliance. If the plan was accepted, Nasdaq might grant an extension of up to 180 calendar days from the date of the Total Shareholders Notice to evidence compliance. If Nasdaq did not accept the Company’s plan, the Company would have the opportunity to appeal that decision to a Nasdaq Hearings Panel (the “Panel”). The Total Shareholders Notice had no immediate effect on the listing of the Company’s securities, and the Company’s securities continued to trade on the Nasdaq Global Market. On November 24, 2023, the Company provided plan to Nasdaq for meeting the requirements under Nasdaq Listing Rule 5450(a)(2), and evaluated available options to regain compliance. However, there could be no assurance that the Company would be able to regain compliance under Nasdaq Listing Rule 5450(a)(2), or would otherwise be in compliance with other Nasdaq listing criteria. On October 12, 2023, the Company filed a Current Report on Form 8-K with the SEC (the “Oct. 2023 Current Report”) to disclose its receipt of the Total Shareholders Notice in accordance with Nasdaq Listing Rule 5810(b). On January 18, 2024 the Company provided an update to Nasdaq of its progress on fulfilling the plan to regain compliance and received a request to provide an additional update to Nasdaq on February 20, 2024. On February 20, 2024 the Company again updated Nasdaq on its progress in fulfilling the plan to regain compliance and continues to be proactive in regaining compliance. Pursuant to the 180-day deadline from the letter received October 9, 2023, the date for the Company to demonstrate compliance is April 6, 2024. In the event that the Company is not able to demonstrate compliance to Nasdaq on such date, there is a reasonable possibility that the Company may receive a de-list letter from Nasdaq, at which point the Company would need to request a hearing.
34
On April 30, 2024, the Company received a Total Shareholders Notice from Nasdaq indicating that the Company did not regain compliance with the Minimum Total Holders Rule. The Company timely requested a hearing before the Panel to appeal the Total Shareholders Notice from Nasdaq and the hearing was held on June 18, 2024. On August 5, 2024, the Panel granted the Company’s request for continued listing on the Nasdaq Global Market and confirmed that the Company was in compliance with the Minimum Total Holders Rule.
On October 7, 2024, the Company received a notice from the Nasdaq’s Listing Qualifications’ Staff stating that as the Company had not completed an initial business combination within 36 months of the effective date of its registration statement in connection with its initial public offering, it was not in compliance with Nasdaq IM 5101-2 and was therefore subject to delisting. The Company had until October 14, 2024 to request a hearing before the Panel. The Company decided to request a hearing before the Panel. Trading in the Company’s securities was suspended at the opening of business on October 14, 2024. The hearing is scheduled for December 10, 2024.
Additionally, on October 7, 2024, the Company submitted its initial listing application for conducting a change of control combination for the combined company on the Nasdaq Global Market—the application used for de-SPAC (special purpose acquisition company) business combinations. On October 11, 2024, Nasdaq provided the Company with a comment letter and required documentation that the Company will need to close the initial business combination.
Results of Operations
Our entire activity since inception up to September 30, 2024 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial business combination target. We will not be generating any operating revenues until the closing and completion of our initial business combination, at the earliest. We will generate non - operating income in the form of interest income from the amount held in the Trust Account.
For the three months ended September 30, 2024, we had net loss of approximately $281,000, which consisted of approximately $631,000 in operating and formation expenses which were partially offset by approximately $350,000 in income from cash held in the Trust Account.
For the nine months ended September 30, 2024, we had net loss of approximately $2.3 million, which consisted of approximately $2.2 million in operating and formation expenses and approximately $70 interest expense from bank and a loss of approximately $1.1 million from change in fair value of derivative warrant liability, which were partially offset by approximately $1 million in income from cash held in the Trust Account.
For the three months ended September 30, 2023, we had net income of approximately $477,000, which consisted of approximately $646,000 in income from investments held in the Trust Account and interest income on an operating account, which were partially offset by approximately $169,000 in operating and formation expenses.
For the nine months ended September 30, 2023, we had net income of approximately $3.6 million, which consisted of approximately $4.1 million in income from investments held in the Trust Account and interest income on an operating account, gain of approximately $337,000 from the forfeiture of deferred underwriting fees, which were partially offset by a loss of approximately $187,000 from the change in fair value of derivative warrant liabilities and approximately $673,000 in operating and formation expenses.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business combination may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond our control. Our business could be impacted by, among other things, downturns in the financial markets or in economic conditions, increases in oil prices, inflation, increases in interest rates, supply chain disruptions, declines in consumer confidence and spending, and geopolitical instability, such as the military conflict in Ukraine and the Middle East. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business and our ability to complete an initial business combination.
Liquidity, Capital Resources and Going Concern
Our liquidity needs to date have been satisfied through the payment of $25,000 from our Sponsor to cover for certain offering expenses on behalf of us in exchange for issuance of Founder Shares, a loan under the Initial Public Offering’s promissory note in the
35
amount of $250,000 and advances from our Sponsor to cover for certain expenses on our behalf, and net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. We fully repaid the Initial Public Offering’s promissory note balance on October 12, 2021. We also paid for certain expenses on behalf of a related party. As of December 31, 2021, we had approximately $3,500 in amount due from related party outstanding, which was fully paid in April 2022. Subsequently, we borrowed an additional amount of approximately $2,800 and fully settled the balance in July 2022.
As of September 30, 2024, we had approximately $9,000 in cash held outside of the Trust Account and a working capital deficit of approximately $5.8 million.
For the nine months ended September 30, 2024, net cash used in operating activities was approximately $1.2 million. Net loss of approximately $2.3 million was affected by income from cash held in the Trust Account of approximately $1 million, change in fair value of warrant liabilities of approximately $1.1 million and changes in operating assets and liabilities provided approximately $1 million of cash for operating activities. Cash used in investing activities resulted from monthly extension deposits into the Trust Account of $450,000. Cash provided by financing activities resulted from the proceeds from the Extension Promissory Note of approximately $1.7 million .
For the nine months ended September 30, 2023, net cash used in operating activities was approximately $455,000. Net income of approximately $3.6 million was affected by change in fair value of derivative warrant liabilities of approximately $187,000, income from investments held in the Trust Account of approximately $4.1 million, gain on forfeiture deferred underwriting commission of approximately $337,000 and changes in operating assets and liabilities provided approximately $218,000 of cash for operating activities. Cash provided by investing activities resulted from the redemption from the Trust Account of approximately $189 million and cash deposited into the Trust Account of $960,000. Cash used in financing activities resulted from the proceeds from the Extension Promissory Note of approximately $1.4 million and redemption of Class A ordinary shares of $189 million.
As of September 30, 2024, we had cash held in the Trust Account of approximately $33 million. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable, if applicable, and deferred underwriting commissions) to complete our initial business combination. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We have incurred and expect to continue to incur significant costs in pursuit of our acquisition plans. In connection with our assessment of going concern considerations in accordance with ASC 205-40, we have until October 12, 2025, if all extensions of the extended date are exercised, to consummate a business combination. It is uncertain that we will be able to consummate a business combination by this time, and if a business combination is not consummated by this date, then there will be a mandatory liquidation and subsequent dissolution of our Company.
Our management has determined that the liquidity condition and mandatory liquidation, should a business combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern for a period of time within one year after the date that the condensed consolidated financial statements included in this Report under “Item 1. Financial Statements” are issued.
We plan to address this uncertainty through the initial business combination. There is no assurance that our plans to consummate the initial business combination will be successful or successful within the Combination Period. The condensed consolidated financial statements and notes thereto included in this Report under “Item 1. Financial Statements” do not include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations
Registration Rights Agreement
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants issued upon conversion of working capital loans) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the registration statement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to consummation of a business combination. We have granted Cantor and Odeon or their designees or
36
affiliates certain registration rights relating to these securities. The underwriters of the Initial Public Offering may not exercise their demand and “piggyback” registration rights after five and seven years, respectively, after the effective date of the registration statement and may not exercise demand rights on more than one occasion. We bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
In connection with the Initial Public Offering, the underwriters were granted a 45-day option from the date of the prospectus to purchase up to 3,000,000 additional Units to cover over-allotments. On October 12, 2021, the underwriters fully exercised the over-allotment option to purchase an additional 3,000,000 Units at an offering price of $10.00 per Unit, generating additional gross proceeds of $30,000,000 to us.
The underwriters were paid a cash underwriting discount of $0.20 per Unit (excluding over-allotment Units) in the Initial Public Offering, or $4,000,000 in the aggregate upon the closing of the Initial Public Offering. In addition, $0.50 per Unit (excluding over-allotment Units), and $0.70 per over-allotment Unit (totaling $12,100,000 in aggregate) is payable to the underwriters for deferred underwriting commission. The deferred fee is 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.
On April 12, 2023, we entered into a Fee Reduction Agreement, which amends the Underwriting Agreement. According to the Underwriting Agreement, we previously agreed to pay to the underwriters of the Initial Public Offering an aggregate of $12,100,000 as deferred underwriting commissions, a portion of which fee is payable to each underwriter in proportion to their respective commitments pursuant to the Underwriting Agreement, upon the consummation of a business combination. Pursuant to the Fee Reduction Agreement, the underwriters have agreed to forfeit sixty-six and 94/100 percent (66.94%) of the aggregate deferred underwriting commissions of $12,100,000 for a total reduction of $8,100,000. However, if we enter into a business combination with a target at a pre-money valuation above $100 million, the forfeiture percentage for underwriters will be reduced to no less than fifty percent (50%) to each, an approximate reduction of $6,050,000. On April 4, 2024, we entered into an Amended & Restated Fee Reduction Agreement, which amends the Underwriting Agreement with Cantor Fitzgerald & Co. (“CF&CO”). Pursuant to the Amended and Restated Fee Reduction Agreement with CF&CO, in the event that we consummates the Business Combination, CF&CO agrees that it will forfeit $6,475,000 of the aggregate original deferred fee that would otherwise be payable by us to CF&CO, resulting in a remainder of $1,995,000. On April 4, 2024, we entered into an Amended & Restated Fee Reduction Agreement, which amends the Underwriting Agreement with Odeon Capital Group LLC (“Odeon”). Pursuant to the Amended and Restated Fee Reduction Agreement with Odeon, in the event that we consummates the Business Combination with AERKOMM, Odeon agrees that it will forfeit $2,775,000 of the aggregate original deferred fee that would otherwise be payable by us to Odeon, resulting in a remainder of $855,000. 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.
Administrative Support Agreement
On October 6, 2021, we entered into an agreement with IX Acquisition Services LLC, to pay up to $10,000 per month for office space, secretarial and administrative services. Upon completion of a business combination or our liquidation, we will cease paying these monthly fees, however, IX Services waived these fees for the year ended December 31, 2023 and three and nine-months ended September 30, 2024.
Off-Balance Sheet Arrangements
As of September 30, 2024, we did not have any off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of the condensed consolidated financial statements included in this Report under “Item 1. Financial Statements” and related disclosures in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting estimates:
Class A Ordinary Shares Subject to Possible Redemption
37
All of the 23,000,000 Class A ordinary shares sold as part of the Units in the Initial Public Offering and subsequent full exercise of the underwriters’ over-allotment option contain a redemption feature, which allows for the redemption of such public shares in connection with our liquidation, if there is a shareholder vote or tender offer in connection with the business combination and in connection with certain amendments to the Amended and Restated Memorandum and Articles of Association. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480, redemption provisions not solely within the control of our Company require ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all public shares have been classified outside of permanent equity.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
Derivative Financial Instruments
We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815. 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 statements of operations included in this Report under “Item 1. Financial Statements”. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
We evaluated the Public Warrants and Private Placement Warrants in accordance with ASC 480 and ASC 815 and concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Public Warrants and Private Placement Warrants from being accounted for as components of equity. As the Public Warrants and Private Placement Warrants meet the definition of a derivative as contemplated in ASC 815, they were recorded as derivative liabilities on the balance sheets included in this Report under “Item 1. Financial Statements” and measured at fair value at inception (on the date of the Initial Public Offering) and at each reporting date in accordance with ASC 820, with changes in fair value recognized in the statements of operations included in this Report under “Item 1. Financial Statements” in the period of change. The determination of fair value for the warrant liabilities represents a significant estimate within the financial statements included in this Report under “Item 1. Financial Statements”.
Convertible Instruments
The Company accounts for its promissory notes that feature conversion options in accordance with ASC 815. ASC 815 requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) a promissory note that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its condensed consolidated financial statements and disclosures.
Management does not believe there are any material recently issued, but not yet effective, accounting standards that, if currently adopted, would have a material effect on our condensed consolidated financial statements included in this Report under “Item 1. Financial Statements”.
38
39
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), 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 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
There have been no changes to our internal control over financial reporting during the quarterly period ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
40
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
To the knowledge of our Management Team, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.
Item 1A. Risk Factors.
As a smaller reporting company under Rule 12b-2 of the Exchange Act, we are not required to include risk factors in this Report. However, as of the date of this Report, other than as set forth below, there have been no material changes with respect to those risk factors previously disclosed in our (i) Registration Statement, (ii) Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on April 13, 2022 and as amended May 9, 2022 (the “2021 Annual Report”) (iii) 2022 Annual Report, (iv) Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, September 30, 2022 and March 31, 2023, as filed with the SEC on May 13, 2022, November 10, 2022 and May 22, 2023, respectively (v) Definitive Proxy Statement on Schedule 14A, as filed with the SEC on March 23, 2023, and (vi) the Registration Statement on Form S-4 as filed with the SEC on May 13, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risks could arise that may also affect our business or ability to consummate an initial Business Combination. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
There is substantial doubt about our ability to continue as a “going concern.”
In connection with our assessment of going concern considerations under applicable accounting standards, Management has determined that our possible need for additional financing to enable us negotiate and complete our initial Business Combination, as well as the deadline by which we may be required to liquidate our trust account, raises substantial doubt about our ability to continue as a going concern through approximately one year from the date the unaudited condensed consolidated financial statements included in this Report under “Item 1. Financial Statements” were issued.
To mitigate the risk that we might be deemed to be an investment company for purposes of the Investment Company Act, on November 13, 2023, we instructed the trustee to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at a bank until the earlier of the consummation of our initial Business Combination or our liquidation. As a result, we may receive less interest on the funds held in the Trust Account than the interest we would have received pursuant to our original Trust Account investments, which could reduce the dollar amount our Public Shareholders would receive upon any redemption or our liquidation.
The funds in the Trust Account had, since our Initial Public Offering, been held in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However on November 13, 2023, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we instructed Continental, the trustee with respect to the trust account, to liquidate the U.S. government treasury obligations or money market funds held in the Trust Account and thereafter to hold all funds in the Trust Account in an interest-bearing demand deposit account at a bank until the earlier of the consummation of our initial Business Combination or liquidation. Following such liquidation, we may receive less interest on the funds held in the Trust Account than the interest we would have received pursuant to our original Trust Account investments; however, interest previously earned on the funds held in the Trust Account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. Consequently, the transfer of the funds in the Trust Account to an interest-bearing demand deposit account could reduce the dollar amount our Public Shareholders would receive upon any redemption or our liquidation.
In the event that we may be deemed to be an investment company, we may be required to liquidate the Company.
41
Military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of potential target companies, which could make it more difficult for us to consummate an initial Business Combination.
Military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of potential target companies, and to other company or industry-specific, national, regional or international economic disruptions and economic uncertainty, any of which could make it more difficult for us to identify a Business Combination target and consummate an initial Business Combination on acceptable commercial terms or at all.
If the Company is deemed to be an investment company for purposes of the Investment Company Act, the Company may be forced to abandon its efforts to complete the Business Combination and instead be required to liquidate. To mitigate the risk of that result, as of November 13, 2023, the Company has moved its Trust Account from investments in securities to an interest-bearing bank demand deposit account.
There is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC. It is possible that a claim could be made that the Company has been operating as an unregistered investment company, including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act, based on the current views of the SEC. If the Company was deemed to be an investment company for purposes of the Investment Company Act, the Company might be forced to abandon its efforts to complete the Business Combination and instead be required to liquidate. If the Company is required to liquidate, the Company would not be able to complete the Business Combination and investors would not be able to realize the benefits of owning shares in AKOM Inc., including the potential appreciation in the value of the shares and warrants following such a transaction, and the the Company’s warrants would expire worthless.
Prior to December 31, 2023, the funds in the Trust Account were held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Nevertheless, to mitigate the risk of the Company being deemed to have been operating as an unregistered investment company under the Investment Company Act, as of November 13, 2023, the Company has instructed Continental Stock Transfer & Trust Company, the trustee with respect to the Trust Account, to liquidate the U.S. government securities or money market funds held in the Trust Account and, thereafter, to hold all funds in the Trust Account in an interest-bearing bank demand deposit account until the earlier of the consummation of our business combination or our liquidation.
The SEC has recently issued final rules relating to certain activities of SPACs. Certain of the procedures that we, a potential business combination target, or others may determine to undertake in connection with such proposals may increase our costs and the time needed to complete a business combination and may make it more difficult to complete a business combination. The need for compliance with the SPAC Final Rules may cause us to liquidate the Company at an earlier time than we might otherwise choose.
On January 24, 2024, the SEC adopted final rules (the “SPAC Rules”) relating, among other things, to disclosures in SEC filings in connection with business combination transactions between special purpose acquisition companies (“SPACs”) such as us and private operating companies; the financial statement requirements applicable to transactions involving shell companies; and the use of projections by SPACs in SEC filings in connection with proposed business combination transactions. SPACs will be required to comply with the SPAC Rules beginning July 1, 2024. In connection with the issuance of the SPAC Rules, the SEC also issued guidance (the “SPAC Guidance”) regarding the potential liability of certain participants in business combination transactions and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The need for compliance with the SPAC Rules and the SPAC Guidance may cause us to liquidate the Company at an earlier time than we might otherwise choose. Certain of the procedures that we or others may determine to undertake in connection with the SPAC Rules, the SPAC Guidance, or before July 1, 2024 as a matter of practice in light of the SEC’s previously expressed views, may increase the costs and time of negotiating and completing an initial business combination, including the transaction with respect to the Merger Agreement, and may constrain the circumstances under which we could complete an initial business combination. The need for compliance with the SPAC Rules and the SPAC Guidance may cause us to liquidate the Company at an earlier time than we might otherwise choose. Were we to liquidate, our warrants would expire worthless, and our securityholders would lose the investment opportunity associated with an investment in the combined company, including any potential price appreciation of our securities.
42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
Use of Proceeds
For a description of the use of proceeds generated in our Initial Public Offering and Private Placement, see Part II, Item 5 of the 2021 Annual Report. There has been no material change in the planned use of proceeds from the Initial Public Offering and Private Placement as described in the Registration Statement. The specific investments in our Trust Account may change from time to time.
On November 13, 2023 we instructed Continental to liquidate the investments held in the Trust Account and instead to hold the funds in the Trust Account in an interest-bearing demand deposit account at a bank, with Continental continuing to act as trustee, As a result, following the liquidation of investments in the Trust Account, the remaining proceeds from the Initial Public Offering and Private Placement are no longer invested in U.S. government securities or money market funds.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
43
Item 6. Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Report.3
10.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document.* | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document.* | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.* | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.* | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.* | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.* | |
104 | Cover Page Interactive Data File (Embedded as Inline XBRL document and contained in Exhibit 101).* |
* Filed herewith.
** Furnished herewith.
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: November 13, 2024 | IX Acquisition Corp. | |
|
| |
By: | /s/ Noah Aptekar | |
Name: | Noah Aptekar | |
Title | Chief Executive Officer, Chief Financial Officer and Chief Operating Officer | |
(Principal Executive Officer and Principal Financial Officer) | ||
45