References to "we", "us", "our" or the "Company" are to Bannix Acquisition
Corp., except where the context requires otherwise. The following discussion
should be read in conjunction with our unaudited condensed financial statements
and related notes thereto included elsewhere in this report.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated on January 21, 2021 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses.
On September 14, 2021, we consummated our IPO of 6,900,000 units at $10.00 per
unit (the "Units"). The units sold included the full exercise of the
underwriters' over-allotment. Each Unit consists of one share of our common
stock (the "Public Shares"), one redeemable warrant to purchase one share of our
common stock at a price of $11.50 per share and one right. Each right entitles
the holder thereof to receive one-tenth (1/10) of one share of our common stock
upon the consummation of the Business Combination.
Simultaneously with the closing of the IPO and the over-allotment, we
consummated the issuance of 406,000 private placement units (the "Private
Placement Units") as follows: we sold 181,000 Private Placement Units to certain
investors for aggregate cash proceeds of $2,460,000 and issued an additional
225,000 private placement units to our Sponsor in exchange for the cancellation
of $1,105,000 in loans and a promissory note due to them. Each Private Placement
Unit consists of one share of our common stock, one redeemable warrant to
purchase one share of our common stock at a price of $11.50 per whole share and
one right. Each right entitles the holder thereof to receive one-tenth (1/10) of
one share of our common stock upon the consummation of our Business Combination.
Our management has broad discretion with respect to the specific application of
the net proceeds of the IPO and the Private Placement Units, although
substantially all of the net proceeds are intended to be generally applied
toward consummating our Business Combination.
Upon the closing of the initial public offering on September 14, 2021, a total
of $69,690,000 of the net proceeds from the IPO, the Over-Allotment and the
Private Placement were deposited in a trust account established for the benefit
of our public stockholders.
If we have not completed our initial business combination within 15 months, we
will: (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter,
redeem the public shares, at a per-share price, payable in cash, equal to the
aggregate amount then on deposit in the trust account, including interest (which
interest shall be net of taxes payable, and less up to $100,000 of interest to
pay dissolution expenses) divided by the number of then outstanding public
shares, which redemption will completely extinguish public stockholders' rights
as stockholders (including the right to receive further liquidation
distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of our
remaining stockholders and our board of directors, dissolve and liquidate,
subject in each case to our obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
We cannot assure you that our plans to complete our initial business combination
will be successful.
Results of Operations
Our entire activity since inception up to March 31, 2022 was in preparation for
our initial public offering. We will not generate any operating revenues until
the closing and completion of our initial business combination, at the earliest.
For the three months ended March 31, 2022, we had a net income of $1,497,256,
which consisted of formation and operating costs of $184,880, an unrealized gain
from the change in fair value of warrant liabilities of $1,680,380, and interest
income on the trust account of $1,756.
For the period from January 21, 2021 through March 31, 2021, we had a net loss
of $1,033, which consisted of formation and operating costs.
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Liquidity and Capital Resources
As of March 31, 2022, we had $228,182 in cash and a working capital of $178,333.
Our liquidity needs up to March 31, 2022 had been satisfied through a capital
contribution from the Sponsors of $28,750 for common stock and from loans from a
Sponsor and related parties in order to pay offering costs. In addition, in
order to finance transaction costs in connection with a business combination,
our sponsors or an affiliate of our sponsors or certain of our officers and
directors may, but are not obligated to, provide us working capital loans. As of
March 31, 2022, there was $43,890 owed to Sponsors and related parties and no
other amounts outstanding under any Working Capital, Sponsor or related party
loans.
Based on the foregoing, management believes that we will not have sufficient
working capital and borrowing capacity to meet our needs through the earlier of
the consummation of a business combination or one year from this filing. Over
this time period, we will be using these funds for paying existing accounts
payable, identifying and evaluating prospective initial business combination
candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge with or acquire,
and structuring, negotiating and consummating the business combination.
We are within 12 months of our mandatory liquidation date as of the time of
filing of this Quarterly Report on Form 10-Q. In connection with our assessment
of going concern considerations in accordance with Accounting Standards Update
("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to
Continue as a Going Concern," we have until December 14, 2022 to consummate a
business combination. It is uncertain that we will be able to consummate a
business combination by this time. If a business combination is not consummated
by this date, there will be a mandatory liquidation and subsequent dissolution.
We have determined that the mandatory liquidation, should a business combination
not occur, and potential subsequent dissolution raises substantial doubt about
our ability to continue as a going concern.
These financial statements do not include any adjustments relating to the
recovery of the recorded assets or the classification of the liabilities that
might be necessary should we unable to continue as a going concern.
Critical Accounting Policies
The preparation of these unaudited condensed financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the unaudited condensed financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates. We have identified the
following as our critical accounting policies:
Fair Value of Warrant Liability
The Company accounted for the warrants issued in connection with the IPO and
private placement in accordance with the guidance contained in ASC Topic 815,
"Derivatives and Hedging" whereby under that provision, the warrants did not
meet the criteria for equity treatment and were recorded as a liability.
Accordingly, the Company classified the warrants as a liability at fair value in
the three months ended March 31, 2022 and will adjust them to fair value at each
reporting period. This liability will be re-measured at each balance sheet date
until the warrants are exercised or expire, and any change in fair value will be
recognized in the Company's statement of operations.
Common Stock Subject to Redemption
The Company accounts for its common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480, "Distinguishing Liabilities from
Equity." Common stock subject to mandatory redemption (if any) are classified as
a liability instrument and measured at fair value. Conditionally redeemable
common stock (including common stock that feature redemption rights that are
either within the control of the holder or subject to redemption upon the
occurrence of uncertain events not solely within the Company's control) are
classified as temporary equity and subsequently measured at redemption value. At
all other times, shares of common stock are classified as stockholders' equity.
The Company's shares of common stock sold as part of the IPO feature certain
redemption rights that are considered to be outside of the Company's control and
subject to the occurrence of uncertain future events. Accordingly, all shares of
common stock subject to possible redemption are presented at their net carrying
value and classified as temporary equity, outside of the stockholders' equity
section of the Company's balance sheet. The initial carrying value of the common
stock subject to redemption is recorded at an amount equal to the proceeds of
the public offering less (i) the fair value of the public warrants and less (ii)
offering costs allocable to the common stock sold as part of the units in the
public offering. In accordance with the alternative methods described in ASC
Subtopic 480-10-S99-3A(15), "Classification and Measurement of Redeemable
Securities." the Company has made an accounting policy election to accrete
changes in the difference between the initial carrying amount and the redemption
amount ($10.10 per share) over the period form the IPO date to the expected
redemption date. For purposes of accretion, the Company has estimated that it
will take 15 months for a business combination to occur and accordingly will
accrete the carrying amount to the redemption value using the effective interest
method over that period. Such changes are reflected in additional paid in
capital, or in the absence of additional paid-in capital, in accumulated
deficit.
Deferred Offering Costs
We comply with the requirements of ASC Subtopic 340-10-S99-1, "Expenses of
Offering." Our offering costs consist of legal, accounting, underwriting fees
and other costs incurred through March 31, 2022 that were directly related to
the IPO. Upon consummation of the IPO, offering costs were allocated to the
separable financial instruments issued in the IPO on a relative fair value basis
compared to total proceeds received. Offering costs associated with our warrant
liabilities were expensed as incurred and presented as non-operating expenses in
our statement of operations. Offering costs associated with the shares of our
common stock were charged to temporary equity (common stock subject to possible
redemption) upon the completion of the IPO.
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Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 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) ("ASU 2020-06") to simplify accounting
for certain financial instruments. ASU 2020-06 eliminates the current models
that require separation of beneficial conversion and cash conversion features
from convertible instruments and simplifies the derivative scope exception
guidance pertaining to equity classification of contracts in an entity's own
equity. The new standard also introduces additional disclosures for convertible
debt and freestanding instruments that are indexed to and settled in an entity's
own equity. ASU 2020-06 amends the diluted earnings per share guidance,
including the requirement to use the if-converted method for all convertible
instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a
full or modified retrospective basis, with early adoption permitted beginning on
January 1, 2021. We are 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 financial statements.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
Registration Rights
Pursuant to a registration rights agreement entered into on September 14, 2021,
The holders of the founder shares, the private placement units and private
placement units that may be issued upon conversion of working capital loans will
be entitled to registration rights pursuant to a registration rights agreement
to be signed prior to or on the closing date of this offering requiring us to
register such securities for resale. 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
the completion of our initial business combination. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriters Agreement
We granted the underwriters a 30-day option from the date of the initial public
offering to purchase up to an additional 900,000 units to cover over-allotments,
if any at the initial public offering price less the underwriting discounts and
commissions. This option was fully exercised at the time of the IPO.
The underwriters are entitled to a cash underwriting discount of 3% of the gross
proceeds of the initial public offering, or $2,070,000, which includes a
deferred underwriting discount of $225,000 in the aggregate if the underwriters'
over-allotment option is exercised in full which will be payable to the
underwriters from the amounts to be brought in by the sponsors solely in the
event that we complete a business combination, subject to the terms of the
underwriting agreement. Additionally, the underwriters will be entitled to a
Business Combination marketing fee of 3.5% of the gross proceeds of the sale of
Units in the initial public offering held in the trust account upon the
completion of the initial Business Combination subject to the terms of the
underwriting agreement.
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