Integrated Wellness Acquisition Corp 10-Q for FY2023 Q3
Integrated Wellness Acquisition Corp (WELNF)
About this 10-Q
Integrated Wellness Acquisition Corp filed this 10-Q on December 4, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $344.08K
- up 213.4% from net income of $109.79K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
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(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
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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.
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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 December 4, 2023, there were
INTEGRATED WELLNESS ACQUISITION CORP
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
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| | Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 | 1 | |||
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| | Notes to Condensed Consolidated Financial Statements (unaudited) | 5 | |||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 | ||||
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
INTEGRATED WELLNESS ACQUISITION CORP
CONDENSED CONSOLIDATED BALANCE SHEETS
| | September 30, | | December 31, | ||
| | 2023 | | 2022 | ||
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ASSETS |
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Current assets |
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Cash |
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Prepaid expenses |
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Total Current Assets |
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Non-current assets: |
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Marketable securities held in Trust Account |
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Total Non-current Assets |
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TOTAL ASSETS |
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LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT |
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Current liabilities |
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Accrued expenses |
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Accounts payable |
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Due to related party |
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Promissory note – related party | | | | | | — |
Total Current Liabilities |
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Non-current liabilities: |
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Deferred underwriter’s fee payable |
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Total Noncurrent Liabilities |
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Total Liabilities |
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Commitments and Contingencies (Note 5) |
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Class A ordinary shares subject to possible redemption, $ |
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Stockholders’ Deficit |
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Preference shares, $ |
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Class A ordinary shares subject to possible redemption, $ |
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Class B ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Shareholders’ Deficit |
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TOTAL LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT |
| $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
INTEGRATED WELLNESS ACQUISITION CORP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
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| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||
Formation and operating costs | | $ | | | $ | | | $ | | | $ | |
Accounting and legal expenses | |
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Listing fees | |
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Insurance expense | |
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Advertising and marketing | |
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Administrative expenses | |
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Operating expenses | |
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Loss from operations | |
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Other income (expense): | |
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Earnings on marketable securities held in the Trust Account | |
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Unrealized (loss) gain on marketable securities held in Trust Account | |
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Total other income | |
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Net income (loss) | | $ | | | $ | | | $ | | | $ | ( |
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Basic and diluted weighted average shares outstanding of redeemable Class A ordinary shares | |
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Basic and diluted net income (loss) per share, redeemable Class A ordinary shares | | $ | | | $ | | | $ | | | $ | ( |
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Basic and diluted weighted average shares outstanding of non-redeemable Class B ordinary shares | |
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Basic and diluted net loss per share, non-redeemable Class B ordinary shares | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
INTEGRATED WELLNESS ACQUISITION CORP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CLASS A ORDINARY SHARES SUBJECT TO
POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
| | Class A | | | Class B | | Additional | | | | | Total | ||||||||
| | Ordinary Shares Subject to Possible Redemption | | | Ordinary Shares | | Paid-in | | Accumulated | | Shareholders’ | |||||||||
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| Deficit |
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Balance – January 1, 2023 | | | | $ | | | | | | $ | | | $ | — | | $ | ( | | $ | ( |
Accretion of Class A ordinary shares to redemption amount |
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Net income |
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Balance – March 31, 2023 |
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Redemption of Class A ordinary shares | | ( | | | ( | | | — | | | — | | | — | | | — | | | — |
Accretion of Class A ordinary shares to redemption amount |
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Net income |
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Balance – June 30, 2023 |
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Accretion of Class A ordinary shares to redemption amount | | — | | | | | | — | | | — | | | — | | | ( | | | ( |
Net income | | — | | | — | | | — | | | — | | | — | | | | | | |
Balance – September 30, 2023 | | | | $ | | | | | | $ | | | $ | — | | $ | ( | | $ | ( |
| | Class A | | | Class B | | Additional | | | | | Total | ||||||||
| | Ordinary Shares Subject to Possible Redemption | | | Ordinary Shares | | Paid-in | | Accumulated | | Shareholders’ | |||||||||
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| Capital |
| Deficit |
| Deficit | |||||
Balance – January 1, 2022 | | | | $ | | | | | | $ | | | $ | — | | $ | ( | | $ | ( |
Accretion of Class A ordinary shares to redemption amount | | — | |
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Net loss | | — | |
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Balance – March 31, 2022 | | | | | | |
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Accretion of Class A ordinary shares to redemption amount | | — | |
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Net loss | | — | |
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Balance –June 30, 2022 | | | | | | |
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Accretion of Class A ordinary shares to redemption amount | | — | | | | | | — | | | — | | | — | | | ( | | | ( |
Net income | | — | | | — | | | — | | | — | | | — | | | | | | |
Balance – September 30, 2022 | | | | $ | | | | | | $ | | | $ | — | | $ | ( | | $ | ( |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
INTEGRATED WELLNESS ACQUISITION CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | Nine Months Ended | ||||
| | September 30, | ||||
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| 2022 | ||
Cash Flows from Operating Activities: |
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Net income (loss) |
| $ | | | $ | ( |
Adjustments to reconcile net income to net cash used in operating activities: |
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Earnings on marketable securities held in Trust Account | | | — | | | ( |
Unrealized earnings on marketable securities held in Trust Account |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
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Accounts payable and accrued expenses |
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Due to related party | | | | | | — |
Accrued offering costs |
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Net cash provided by (used in) operating activities |
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Cash Flows from Investing Activities: |
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Purchase of marketable securities in Trust Account |
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Dividends received from earnings on Trust Account | | | — | | | |
Reinvestment of earnings in Trust Account |
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Proceeds from redemption of marketable securities held in Trust Account | | | | | | — |
Net cash provided by investing activities |
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Cash Flows from Financing Activities: |
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Proceeds from promissory note – related party |
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Payment of shareholder redemptions | | | ( | | | — |
Net cash used in financing activities |
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Net Change in Cash |
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Cash – Beginning |
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Cash – Ending |
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Non-Cash Investing and Financing Activities: |
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Accretion of Class A ordinary shares subject to possible redemption |
| $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
INTEGRATED WELLNESS ACQUISITION CORP
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 — ORGANIZATION AND BUSINESS OPERATIONS
Organization and General
Integrated Wellness Acquisition Corp (the “Company”) is a blank check company incorporated in the Cayman Islands as an exempted company on July 7, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with
Sponsor and Initial Financing
As of September 30, 2023, the Company had not commenced any operations. All activity for the period from July 7, 2021 (inception) through September 30, 2023 relates to the Company’s formation, the initial public offering (the “Initial Public Offering” or “IPO”), which is described below, and identifying a target for a Business Combination. The Company generates non-operating income in the form of earnings on marketable securities held in the Trust Account (as defined below) from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the IPO was declared effective on December 8, 2021. On December 13, 2021, the Company consummated the IPO of
Simultaneously with the closing of the IPO, the Company consummated the sale of
Transaction costs of the IPO amounted to $
The Trust Account
Following the closing of the IPO on December 13, 2021, an amount of $
5
Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO, although substantially all of the net proceeds from the Initial Public Offering are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein, “Target Business” means one or more operating businesses that together have an aggregate fair market value equal to at least
The Company will provide its 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 public shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account, calculated as of two business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations. The per-share amount to be distributed to the public shareholders who redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter (as discussed in Note 5). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. As a result, Class A ordinary shares are recorded at their redemption amount and classified as temporary equity, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity” (“ASC 480”).
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $
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 Amended and Restated Memorandum and Articles of Association of the Company provides that only Public Shares and not any Founder Shares are entitled to redemption rights. In addition, the Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem
6
The Company originally had until
On June 2, 2023, the Company held an extraordinary general meeting of shareholders (the “Meeting”). At the Meeting, the following proposals were considered by the shareholders of the Company (a) a proposal to amend by special resolution the Company’s amended and restated memorandum and articles of association (the “Charter Amendment”) to extend the date by which the Company has to consummate an initial business combination from June 13, 2023 to December 13, 2023 (or such earlier date as determined by the Company's Board in its sole discretion) (the “Extension Amendment Proposal”); (b) a proposal to amend by special resolution the Company’s amended and restated memorandum and articles of association to permit the Board, in its sole discretion, to elect to wind up the Company’s operations on an earlier date than December 13, 2023 (the “Liquidation Amendment Proposal”); and (c) a proposal to approve by ordinary resolution the adjournment of the Meeting i) to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of any of the foregoing proposals; or ii) sine die in the event that the holders of public shares elected to redeem an amount of shares in connection with the forgoing proposals such that if such redemptions were consummated, the Company would not adhere to the continued listing requirements of the New York Stock Exchange, and the Board therefore determines that approval of the Extension Amendment Proposal and the Liquidation Amendment Proposal is no longer in the best interests of the Company, and in such event the Company will ask its shareholders to vote only upon the Adjournment Proposal and not on the Extension Amendment Proposal or the Liquidation Amendment Proposal (the “Adjournment Proposal”). Shareholders approved the Extension Amendment Proposal and Liquidation Amendment Proposal. As there were sufficient votes at the time of the Meeting to approve each of the above proposals, the Adjournment Proposal was not presented to shareholders at the Meeting.
In connection with the Meeting, holders of
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by the Termination Date. However, if the Sponsor acquires Public Shares in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination by the Termination Date. The underwriter has agreed to waive it right to its deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination by the Termination Date and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the per share amount in the Trust Account, which was initially $
7
The Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered (other than its independent registered public accounting firm) 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) $
On February 10, 2023, the Company entered into an Agreement and Plan of Merger (as it may be amended or supplemented from time to time, the “Merger Agreement”) with Refreshing USA, LLC, a Washington limited liability company (“Refreshing”), IWAC Holdings Inc. (“Pubco”), a Delaware corporation and wholly-owned subsidiary of IWAC, IWAC Purchaser Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Pubco (“Purchaser Merger Sub”), Refreshing USA Merger Sub LLC, a Washington limited liability company and a wholly-owned subsidiary of Pubco (“Refreshing Merger Sub”), the Sponsor, as the representative from and after the Effective Time (as defined in the Merger Agreement) of the stockholders of Pubco (other than the Sellers (as defined below) and their successors and assignees), and Ryan Wear, in the capacity as the representative of the equity holders of Refreshing (the “Sellers”) from and after the Effective Time.
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior to the effective time, the Company will transfer by way of continuation out of the Cayman Islands and into the State of Delaware to re-domicile and become a Delaware corporation, (ii) following the Domestication, Purchaser Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and wholly-owned subsidiary of Pubco, in connection with which all of the existing securities of the Company will be exchanged for rights to receive securities of Pubco as follows: (a) each ordinary share of the Company, par value $
Pursuant to the terms of the Merger Agreement, the merger consideration to be delivered to the Sellers in connection with the transaction will be a number of newly-issued shares of Pubco common stock with an aggregate value equal to $
On September 26, 2023, the Company notified Refreshing that the Company had elected to terminate the Merger Agreement, effective immediately, pursuant to Section 8.1(b) thereof, since conditions to the closing of the initial business combination were not satisfied or waived by the outside date of July 31, 2023. As a result, the Merger Agreement is of no further force and effect, with the exception of certain specified provisions in the Merger Agreement, which shall survive the Termination and remain in full force and effect in accordance with their respective terms.
Liquidity and Going Concern
As of September 30, 2023 and December 31, 2022, the Company had $
8
additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Risks and Uncertainties
Results of operations and the Company’s 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 its control. The business could be impacted by, among other things, downturns in the financial markets or in economic conditions, inflation, increases in interest rates, adverse developments affecting the financial services industry, and geopolitical instability, such as the military conflict in Ukraine and in the Middle East. The Company 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. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair statement of the financial position, operating results and cash flows for the periods presented. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, IWAC Holdings Inc. and are presented on a condensed consolidated basis.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on March 31, 2023, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2022 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The interim results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by 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.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s 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.
9
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the 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 significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company does
Marketable Securities Held in Trust Account
Following the closing of the IPO on December 13, 2021, an amount of $
Derivative Financial Instruments
The Company accounts for derivative liabilities as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of issuance and as of each subsequent quarterly period end date while the instruments are outstanding. Management concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
Fair Value Measurements
Fair value is defined as the price that would be received for the sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
10
| ● | 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 calculations derived from valuation techniques in which one or more significant inputs or significant value drivers are observable. |
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The fair value of the Company’s financial assets and liabilities approximates the carrying amounts represented in the condensed consolidated balance sheets, primarily due to its short-term nature.
Income taxes
The Company accounts for income taxes in accordance with the provisions of ASC Topic 740, “Income Taxes” using the asset and liability method and deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities in the condensed consolidated financial statements and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to the period when assets are realized or liability is settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in the operation of statement in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. Deferred tax assets were deemed immaterial and the Company has recorded a full valuation allowance as of September 30, 2023 and December 31, 2022.
Tax positions must initially be recognized in the condensed consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. There were
There is currently no taxation imposed on income by the government of the Cayman Islands. In accordance with federal income tax regulations, income taxes are not levied on the Company, but rather on the individual owners. United States taxation would occur on the individual owners if certain tax elections are made by U.S. owners and the Company were treated as a passive foreign investment company. Additionally, U.S. taxation could occur to the Company itself if the Company is engaged in a U.S. trade or business. The Company is not expected to be treated as engaged in a U.S. trade or business at this time.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at September 30, 2023, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s condensed consolidated balance sheets.
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The Company recognizes changes in redemption value at the end of each reporting period and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Such changes are reflected in additional paid-in capital, or in the absence of additional capital, in accumulated deficit. In connection with the Meeting on June 2, 2023, holders of
As of September 30, 2023, the Class A ordinary shares, classified as temporary equity in the condensed consolidated balance sheets, are reconciled in the following table:
Gross proceeds from Initial Public Offering |
| $ | |
Less: | |
| |
Proceeds allocated to Public Warrants | |
| ( |
Offering costs allocated to Class A ordinary shares subject to possible redemption | |
| ( |
Add: | |
| |
Re-measurement of Class A ordinary shares subject to possible redemption | |
| |
Class A ordinary shares subject to possible redemption, December 31, 2021 | |
| |
Re-measurement of Class A ordinary shares subject to possible redemption | |
| |
Class A ordinary shares subject to possible redemption, December 31, 2022 | | | |
Re-measurement of Class A ordinary shares subject to possible redemption | | | |
Class A ordinary shares subject to possible redemption, March 31, 2023 | | | |
Redemption of Class A ordinary shares subject to possible redemption | | | ( |
Re-measurement of Class A ordinary shares subject to possible redemption | | | |
Class A ordinary shares subject to possible redemption, June 30, 2023 | | | |
Re-measurement of Class A ordinary shares subject to possible redemption | | | |
Class A ordinary shares subject to possible redemption, September 30, 2023 | | $ |
Net Income (Loss) Per Ordinary Share
The condensed consolidated statements of operations includes a presentation of income (loss) per Class A redeemable ordinary share and loss per Class B non-redeemable ordinary share following the two-class method of income per ordinary share. In order to determine the net income (loss) attributable to both the Class A redeemable ordinary shares and Class B non-redeemable ordinary shares, the Company first considered the total income (loss) allocable to both sets of shares.
This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the Class A ordinary shares subject to possible redemption was treated as dividends paid to the public shareholders. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated using the weighted average shares outstanding for the Class A redeemable ordinary shares and the Class B non-redeemable ordinary shares for the three and nine months ended September 30, 2023 and 2022, reflective of the respective participation rights.
The following table reflects the calculation of basic and diluted net loss per ordinary share for the three and nine months ended September 30, 2023:
|
| For the Three Months Ended | |
| | September 30, 2023 | |
Net income | | $ | |
Accretion of temporary equity to redemption value | |
| ( |
Net loss including accretion of temporary equity to redemption value | | $ | ( |
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| | For the Three Months Ended | ||||
| | September 30, 2023 | ||||
| | Class A | | Class B | ||
Basic and diluted net income (loss) per share: |
| |
|
| |
|
Numerator: |
| |
|
| |
|
Allocation of net loss including accretion of temporary equity | | $ | ( | | $ | ( |
Allocation of accretion of temporary equity to redemption value | |
| | | | — |
Allocation of net income (loss) | | $ | | | $ | ( |
| | | | | | |
Denominator: | |
| | |
| |
Weighted-average shares outstanding | |
| | | | |
Basic and diluted net income (loss) per share | | $ | | | $ | ( |
|
| For the Nine Months Ended | |
| | September 30, 2023 | |
Net income | | $ | |
Accretion of temporary equity to redemption value | |
| ( |
Net loss including accretion of temporary equity to redemption value | | $ | ( |
| | For the Nine Months Ended | ||||
| | September 30, 2023 | ||||
| | Class A | | Class B | ||
Basic and diluted net income (loss) per share: |
| |
|
| |
|
Numerator: |
| |
|
| |
|
Allocation of net loss including accretion of temporary equity | | $ | ( | | $ | ( |
Allocation of accretion of temporary equity to redemption value | |
| | | | — |
Allocation of net income (loss) | | $ | | | $ | ( |
| | | | | | |
Denominator: | |
|
| |
|
|
Weighted-average shares outstanding | |
| | | | |
Basic and diluted net income (loss) per share | | $ | | | $ | ( |
The following table reflects the calculation of basic and diluted net loss per ordinary share for the three and nine months ended September 30, 2022:
| | For the Three Months Ended | |
| | September 30, 2022 | |
Net income |
| $ | |
Accretion of temporary equity to redemption value | |
| ( |
Net loss including accretion of temporary equity to redemption value | | $ | ( |
| | For the Three Months Ended | ||||
| | September 30, 2022 | ||||
| | Class A | | Class B | ||
Basic and diluted net loss per share: |
| |
|
| |
|
Numerator: |
| |
|
| |
|
Allocation of net loss including accretion of temporary equity | | $ | ( | | $ | ( |
Allocation of accretion of temporary equity to redemption value | |
| | | | — |
Allocation of net income (loss) | | $ | | | $ | ( |
| | | | | | |
Denominator: | |
| | |
| |
Weighted-average shares outstanding | |
| | |
| |
Basic and diluted net loss per share | | $ | | | $ | ( |
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|
| For the Nine Months Ended | |
| | September 30, 2022 | |
Net loss | | $ | ( |
Accretion of temporary equity to redemption value | |
| ( |
Net loss including accretion of temporary equity to redemption value | | $ | ( |
| | For the Nine Months Ended | ||||
| | September 30, 2022 | ||||
|
| Class A |
| Class B | ||
Basic and diluted net loss per share: |
| |
|
| |
|
Numerator: |
| |
|
| |
|
Allocation of net loss including accretion of temporary equity | | $ | ( | | $ | ( |
Allocation of accretion of temporary equity to redemption value | |
| | | | — |
Allocation of net loss | | $ | ( | | $ | ( |
| | | | | | |
Denominator: | |
|
| |
|
|
Weighted-average shares outstanding | |
| | | | |
Basic and diluted net loss per share | | $ | ( | | $ | ( |
Related Parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed Federally insured limits. Exposure to cash and cash equivalents credit risk is reduced by placing such deposits with major financial institutions and monitoring their credit ratings. At September 30, 2023 and December 31, 2022, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
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NOTE 3 — RELATED PARTY TRANSACTIONS
Founder Shares
On July 7, 2021, the Sponsor paid an aggregate of $
The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (A)
Promissory Note — Related Party
In March 2023, the Sponsor issued an unsecured promissory note to the Company (the “Extension Note”) in connection with the extension payment made by the Sponsor to extend the Termination Date from March 13, 2023 to June 13, 2023. The Extension Note is non-interest bearing and payable on the earlier of the date the business combination is consummated or the liquidation of the Company. As of September 30, 2023, the Company had borrowed $
In June 2023, the Sponsor issued an additional unsecured promissory note to the Company (the “Second Extension Note”) in connection with the shareholder approval of the extension of the date by which the Company must consummate an initial business combination from June 13, 2023 for up to an additional six months to December 13, 2023. The Second Extension Note is non-interest bearing and payable on the earlier of the date the business combination is consummated or the liquidation of the Company. The Second Extension Note has a principal amount up to $
Administrative Services Agreement
The Company has agreed to pay the Sponsor a total of $
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $
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Due to Related Party
As of September 30, 2023 and December 31, 2022, the Company owed the Sponsor $
NOTE 4 — SHAREHOLDERS’ EQUITY
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
With respect to any matter submitted to a vote of our shareholders, including any vote in connection with a Business Combination, except as required by law, holders of our Founder Shares and holders of our Public Shares will vote together as a single class, with each share entitling the holder to one vote. However, prior to the consummation of the Business Combination, holders of the Class B ordinary shares will have the right to elect all of the Company’s directors and may remove members of the board of directors for any reason.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination on a
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. Accordingly, unless a unit holder purchases at least two units, they will not be able to receive or trade a whole warrant. 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 Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No Public Warrant will be exercisable, and the Company will not be obligated to issue any Class A ordinary shares upon exercise of a Public Warrant unless the Class A ordinary shares issuable upon such Public 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 Public Warrants.
16
The Company has agreed that as soon as practicable, but in no event later than
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the closing price of the Class A ordinary shares equals or exceeds $ |
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
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 a Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants are identical to the Public Warrants included in the Units sold in the IPO, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants are not transferable, assignable or saleable until
17
NOTE 5 — COMMITMENTS AND CONTINGENCIES
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 that may be issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the IPO, requiring the Company to register such securities for resale. The holders will have the right to require the Company to register for resale these securities pursuant to a shelf registration under Rule 415 under the Securities Act. The holders of a majority of these securities will also be entitled to make up to three demands, plus short form registration demands, that the Company register such securities. In addition, the holders will be entitled to certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of the Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a option from the date of the IPO to purchase up to
NOTE 6 — FAIR VALUE MEASUREMENTS
At September 30, 2023 and December 31, 2022, the Company’s marketable securities held in the Trust Account were valued at $
The following tables presents the fair value information, as of September 30, 2023 and December 31, 2022, of the Company’s financial assets that were accounted for at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. The Company’s marketable securities held in the Trust Account are based on interest income and market fluctuations in the value of invested marketable securities, which are considered observable. The fair value of the marketable securities held in trust is classified within Level 1 of the fair value hierarchy.
The following table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value on a recurring basis:
| | September 30, 2023 | |||||||
| | Level 1 | | Level 2 | | Level 3 | |||
Assets: |
| |
|
| |
|
| |
|
Marketable Securities held in Trust Account | | $ | | | $ | — | | $ | — |
| | December 31, 2022 | |||||||
| | Level 1 | | Level 2 | | Level 3 | |||
Assets: |
| |
|
| |
|
| |
|
Marketable Securities held in Trust Account | | $ | | | $ | — | | $ | — |
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NOTE 7 — SUBSEQUENT EVENTS
In November 2023, the Sponsor or its designee deposited $
On November 8, 2023, the Company entered into a purchase agreement (the “Purchase Agreement”) with the Sponsor and Sriram Associates, LLC (the “Acquirer”), pursuant to which, the Sponsor agreed to transfer to the Acquirer (i)
The consummation of the Sponsor Handover is subject to a number of conditions, including but not limited to, approval of the Transfer by the Company’s board of directors and Sponsor, payment by the Acquirer of the costs associated with the Company’s extensions through December 13, 2023, and assumption of certain vendor payables currently outstanding by the Company and future expenditures.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “Integrated Wellness Acquisition Corp,” “our,” “us” or “we” refer to Integrated Wellness Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or similar business combination with one or more businesses or entities, which we refer to throughout this Quarterly Report as our initial business combination. While we may pursue an initial business combination target in any industry, we currently intend to concentrate our efforts in identifying businesses in the health, nutrition, fitness, wellness and beauty sectors and the products, devices, applications and technology driving growth within these verticals.
The issuance of additional shares in connection with a business combination to the owners of the target or other investors:
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Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
We expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern.
On February 10, 2023, the Company entered into an Agreement and Plan of Merger (as it may be amended or supplemented from time to time, the “Merger Agreement”) with Refreshing USA, LLC, a Washington limited liability company (“Refreshing”), IWAC Holdings Inc. (“Pubco”), a Delaware corporation and wholly-owned subsidiary of IWAC, IWAC Purchaser Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Pubco (“Purchaser Merger Sub”), Refreshing USA Merger Sub LLC, a Washington limited liability company and a wholly-owned subsidiary of Pubco (“Refreshing Merger Sub”), the Sponsor, as the representative from and after the Effective Time (as defined in the Merger Agreement) of the stockholders of Pubco (other than the Sellers (as defined below) and their successors and assignees), and Ryan Wear, in the capacity as the representative of the equity holders of Refreshing (the “Sellers”) from and after the Effective Time.
Pursuant to the Merger Agreement, subject to the terms and conditions set forth therein, (i) prior to the effective time, the Company will transfer by way of continuation out of the Cayman Islands and into the State of Delaware to re-domicile and become a Delaware corporation, (ii) following the Domestication, Purchaser Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and wholly-owned subsidiary of Pubco, in connection with which all of the existing securities of the Company will be exchanged for rights to receive securities of Pubco as follows: (a) each ordinary share of the Company, par value $0.0001, outstanding immediately prior to the effective time shall automatically convert into one share of Pubco common stock and (b) each whole public warrant and each private placement warrant shall automatically convert into one Pubco warrant on substantially the same terms and conditions; and (iii) Refreshing Merger Sub will merge with and into Refreshing, with Refreshing continuing as the surviving entity and wholly-owned subsidiary of Pubco, pursuant to which all Refreshing Units issued and outstanding immediately prior to the effective time will be converted into the right to receive the applicable portion of the merger consideration.
20
Pursuant to the terms of the Merger Agreement, the merger consideration to be delivered to the Sellers in connection with the transaction will be a number of newly-issued shares of Pubco common stock with an aggregate value equal to $160,000,000, subject to adjustments for Refreshing’s net working capital, closing debt (net of cash) and accrued but unpaid expenses related to the transaction.
On September 26, 2023, the Company notified Refreshing that the Company had elected to terminate the Merger Agreement, effective immediately, pursuant to Section 8.1(b) thereof, since conditions to the closing of the initial business combination were not satisfied or waived by the outside date of July 31, 2023. As a result, the Merger Agreement is of no further force and effect, with the exception of certain specified provisions in the Merger Agreement, which shall survive the Termination and remain in full force and effect in accordance with their respective terms.
On November 8, 2023, the Company entered into a purchase agreement (the “Purchase Agreement”) with the Sponsor and Sriram Associates, LLC (the “Acquirer”), pursuant to which, the Sponsor agreed to transfer to the Acquirer (i) 2,012,500 of the Company’s Class B ordinary shares and (ii) 4,795,000 of the Company’s private placement warrants for a total purchase price of one dollar (the “Transfer”). In connection with the Transfer, the Acquirer may, in its sole discretion, replace any new officers or directors to the Company and the Company agreed to take such actions necessary to effectuate such changes (the “Management Change”). The Transfer, the Management Change, and the other transactions contemplated by the Purchase Agreement are referred to as the “Sponsor Handover”.
The consummation of the Sponsor Handover is subject to a number of conditions, including but not limited to, approval of the Transfer by the Company’s board of directors and Sponsor, payment by the Acquirer of the costs associated with the Company’s extensions through December 13, 2023, and assumption of certain vendor payables currently outstanding by the Company and future expenditures.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been related to the Company’s formation, the initial public offering, and identifying a target for a Business Combination. We will not generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of earnings on marketable securities held in the Trust Account. Our expenses have increased substantially after the closing of our initial public offering as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2023, we had net income of $344,075. Net income is comprised of earnings on marketable securities held in the Trust Account of $797,857, offset by formation and operating costs of $93,992, legal and accounting services of $201,383, listing fees of $21,250, insurance expense of $88,555, administrative expenses of $210, advertising and marketing expense of $6,668, and unrealized loss on marketable securities held in the Trust Account of $41,724.
For the nine months ended September 30, 2023, we had net income of $1,030,372. Net income is comprised of earnings on marketable securities held in the Trust Account of $3,002,579 and unrealized earnings on marketable securities held in the Trust Account of $251,339, offset by formation and operating costs of $338,141, legal and accounting services of $1,338,932, listing fees of $63,750, insurance expense of $320,545, administrative expenses of $522, and advertising and marketing expense of $161,656.
For the three months ended September 30, 2022, we had net income of $109,787. Net income is comprised of earnings on marketable securities held in the Trust Account of $315,343, offset by formation, general and administrative costs of $15,052, legal and accounting services of $45,232, listing fees of $21,250, insurance expense of $115,995, administrative expenses of $215, and advertising and marketing expense of $7,812.
For the nine months ended September 30, 2022, we had a net loss of $241,975. Net loss is comprised primarily of formation, general and administrative costs of $51,941, legal and accounting services of $155,496, listing fees of $154,107, insurance expense of $347,985, administrative expenses of $3,117, and advertising and marketing expense of $11,303, offset by earnings on marketable securities held in the Trust Account of $480,989 and unrealized gains on marketable securities held in the Trust Account of $985.
Liquidity, Capital Resources and Going Concern
On December 13, 2021, we consummated the initial public offering of 11,500,000 units, at $10.00 per unit, which included the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 units, generating gross proceeds of $115,000,000.
21
Simultaneously with the closing of the initial public offering, we completed the private sale of an aggregate of 6,850,000 warrants to our sponsor at a purchase price of $1.00 per private placement warrant, generating gross proceeds of $6,850,000.
A total of $117,300,000 of the proceeds from the initial public offering and the sale of the private placement warrants was placed in a U.S.-based trust account maintained by Continental, acting as trustee (the “Trust Account”).
Transaction costs of the initial public offering amounted to $6,822,078, consisting of $2,300,000 of underwriting discount, $4,025,000 of deferred underwriting discount, and $497,078 of actual offering costs. Of these amounts, $302,696 was allocated to the public warrants and charged against additional paid-in capital and $6,519,382 were allocated to Class A ordinary shares reducing the initial carrying amount of such shares.
For the nine months ended September 30, 2023, net cash provided by operating activities was $2,577,654. Net income of $1,030,372 was decreased by $251,339 of unrealized earnings on marketable securities held in the Trust Account and increased by $1,798,621 relating to changes in operating assets and liabilities.
For the nine months ended September 30, 2022, net cash used in operating activities was $1,229,303. Net loss of $241,975 was increased by realized and unrealized earnings on marketable securities held in the Trust Account of $481,974 and $505,354 related to changes in operating assets and liabilities.
As of September 30, 2023, we had marketable securities held in the Trust Account of $59,055,248 (including redemptions of $64,980,943, $3,002,579 of earnings, $251,339 of unrealized earnings, and $1,790,000 of deposit for Extension payments for the nine months ended September 30, 2023) consisting of securities held in a money market fund that invests in U.S. Treasury securities with a maturity of 185 days or less.
As of September 30, 2023, we had cash of $12,047 held outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to complete an initial business combination.
We may need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial business combination. We expect to incur significant costs to complete an initial business combination. These conditions raise substantial doubt about our ability to continue as a going concern for a period of time within one year from the date that the condensed consolidated financial statements are issued. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor, its affiliates or an affiliate of our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities, other than described below.
We have an agreement to pay our sponsor a monthly fee of $10,000 for office space, utilities and administrative support until the earlier of the completion of an initial business combination and our liquidation. For the three and nine months ended September 30, 2023, the Sponsor has waived any payments under this agreement.
The underwriters of the initial public offering are entitled to a deferred fee $4,025,000. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete our initial business combination, subject to the terms of the underwriting agreement
22
In March 2023, the Sponsor issued an unsecured promissory note to the Company (the “Extension Note”) in connection with the extension payment made by the Sponsor to extend the Termination Date from March 13, 2023 to June 13, 2023. The Extension Note is non-interest bearing and payable on the earlier of the date the business combination is consummated or the liquidation of the Company. As of September 30, 2023, the Company had borrowed $1,150,000, the maximum amount under the Extension Note.
In June 2023, the Sponsor issued an additional unsecured promissory note to the Company (the “Second Extension Note”) in connection with the shareholder approval to extend the date which the Company must consummate an initial business combination from June 13, 2023 for up to an additional six months to December 13, 2023. The Second Extension Note is non-interest bearing and payable on the earlier of the date the business combination is consummated or the liquidation of the Company. The Second Extension Note has a principal amount up to $960,000, of which the Company has borrowed $640,000 as of September 30, 2023 to pay for four of six additional extensions from June 13, 2023 to October 13, 2023.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. We have not identified any critical accounting estimates as of September 30, 2023.
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 in 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 initial business combination.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officers and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the fiscal quarter ended September 30, 2023. Based on this evaluation, our principal executive officers and principal financial officer have concluded that as of September 30, 2023, our disclosure controls and procedures were not effective due to the material weakness previously disclosed in our 2022 Annual Report on Form 10-K.
At December 31, 2022, a material weakness was identified related to the fact that we had not yet designed and maintained effective controls relating to the financial statement close process. The material weakness identified relates to the fact that we had not yet designed and maintained effective controls relating to the financial statement close process which resulted in errors in the classification of investing activities in our condensed consolidated statements of cash flows. Specifically, we incorrectly presented dividends earned and reinvested in money market funds on the Trust Account within the cash flows from operating activities section on our condensed consolidated statement of cash flows. This material weakness continued to exist as of September 30, 2023.
23
To remediate this material weakness, our Chief Financial Officer performed, and will continue to perform, additional post-closing review procedures including a review of the classification of earnings on the trust account and confirmation of amounts and balances with the trustee.
Changes in Internal Control over Financial Reporting
Other than the above, there was no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Sales of Unregistered Securities – Not Applicable.
(b) Use of Proceeds - Not Applicable.
(c) Issuer Purchases of Securities – Not Applicable.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| | | |
No. |
| Description of Exhibit | |
|
| | |
31.1* |
| | |
31.2* |
| | |
32.1** |
| | |
32.2** |
| | |
101.INS* |
| Inline XBRL Instance Document | |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.SCH* | | Inline XBRL Taxonomy Extension Schema 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. |
26
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.
| INTEGRATED WELLNESS ACQUISITION CORP | |
| | |
Date: December 4, 2023 | By: | /s/ James MacPherson |
| Name: | James MacPherson |
| Title: | Chief Financial Officer |
27
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steven Schapera, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Integrated Wellness Acquisition Corp;
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: December 4, 2023 | By: | /s/ Steven Schapera |
| | Steven Schapera |
| | Chief Executive Officer |
| | (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James MacPherson, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Integrated Wellness Acquisition Corp; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: December 4, 2023 | By: | /s/ James MacPherson |
| | James MacPherson |
| | Chief Financial Officer |
| | (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 of Integrated Wellness Acquisition Corp (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Schapera, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: December 4, 2023 | | |
| /s/ Steven Schapera | |
| Name: | Steven Schapera |
| Title: | Chief Executive Officer |
| | (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 of Integrated Wellness Acquisition Corp (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James MacPherson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: December 4, 2023 | | |
| /s/ James MacPherson | |
| Name: | James MacPherson |
| Title: | Chief Financial Officer |
| | (Principal Financial Officer) |