Mobix Labs(MOBX) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q3 2022 financial statements show significant asset reduction from share redemptions, a net loss, and a subsequent business combination agreement with Mobix Labs Condensed Balance Sheets Total assets significantly decreased to $9.75 million by September 30, 2022, primarily due to shareholder redemptions from the trust account Condensed Balance Sheet Comparison (Unaudited) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $80,209 | $240,706 | | Investment held in trust account | $9,672,901 | $80,002,777 | | Total Assets | $9,753,110 | $80,676,074 | | Liabilities & Equity | | | | Warrant liability | $136,000 | $1,667,262 | | Total Liabilities | $810,508 | $1,736,264 | | Ordinary shares subject to possible redemption | $9,572,901 | $80,000,000 | | Total Shareholders' Deficit | ($630,299) | ($1,060,190) | Condensed Statements of Operations Q3 2022 saw a net loss of $63,074, a reversal from 2021 net income, primarily due to warrant liability fair value changes Statement of Operations Highlights (Unaudited) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Loss from operations | ($292,902) | ($362,248) | ($1,104,243) | ($410,235) | | Gain from change in fair value of warrant liability | $119,000 | $1,156,000 | $1,531,262 | $1,156,000 | | Interest earned on trust account | $110,828 | $789 | $149,051 | $789 | | Net Income (Loss) | ($63,074) | $794,541 | $576,070 | $746,554 | Condensed Statements of Cash Flows Net cash decreased by $160,497 for the nine months ended September 30, 2022, driven by significant cash outflows for ordinary share redemptions - The most significant cash flow event was the redemption of ordinary shares, with $70.57 million withdrawn from the Trust Account and paid to shareholders[18] Cash Flow Summary (Nine Months Ended Sep 30, 2022) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($428,146) | | Net cash from investing activities | $70,478,927 | | Net cash from financing activities | ($70,211,278) | | Net Change in Cash | ($160,497) | Notes to Financial Statements Notes detail SPAC formation, July 2022 share redemptions, going concern doubts due to limited cash, and the November 2022 Mobix Labs business combination - On July 14, 2022, shareholders approved extending the business combination deadline to January 22, 2023 In connection with this, shareholders holding 7,046,967 shares redeemed them for approximately $70.6 million[28] - The company's cash of $80,209 held outside the Trust Account is not sufficient to operate for the next 12 months, raising substantial doubt about its ability to continue as a going concern[41] - On November 15, 2022, the company entered into a definitive business combination agreement with Mobix Labs, Inc The transaction is expected to close in the first half of 2023[106] - To fund working capital, the Sponsor has provided loans, with $362,000 drawn as of September 30, 2022, and an additional $200,000 drawn in October 2022[84][105] Management's Discussion and Analysis of Financial Condition and Results of Operations As a blank check company, it reported a Q3 2022 net loss and faces going concern doubts due to limited cash, with a Mobix Labs business combination pending - The company is a 'shell company' formed for the purpose of effecting a business combination and has not engaged in any operations or generated revenue to date[110] - On November 15, 2022, the company entered into a business combination agreement with Mobix Labs, Inc., which is expected to close in the first half of 2023[118] - The company's limited cash of $80,209 and working capital deficiency of $730,299 as of September 30, 2022, raise substantial doubt about its ability to continue as a going concern for the next 12 months[131] - To fund operations, the company has drawn down $562,000 under Working Capital Loans from its Sponsor as of November 17, 2022[130] Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide information for this item - As a smaller reporting company defined by Rule 12b-2 of the Exchange Act, the company is not required to provide the information otherwise required under this item[141] Controls and Procedures Disclosure controls were ineffective as of September 30, 2022, due to a material weakness in earnings per share presentation, with a remediation plan underway - Disclosure controls and procedures were deemed not effective as of September 30, 2022[143] - The ineffectiveness was due to a material weakness in internal control over financial reporting concerning the presentation of earnings per share[143] - Management plans to remediate the weakness by enhancing processes and increasing communication with accounting professionals[144] PART II. OTHER INFORMATION Legal Proceedings The company has reported no legal proceedings - There are no legal proceedings to report[147] Risk Factors Key risks include a new 1% excise tax on redemptions, potential investment company classification, and possible CFIUS review impacting the Mobix Labs business combination - The company may be subject to a new 1% non-deductible U.S. federal excise tax on stock redemptions occurring after December 31, 2022, under the Inflation Reduction Act of 2022, which could reduce cash available for a business combination[148] - There is a risk of being deemed an investment company under the Investment Company Act, particularly if a business combination is not completed within 24 months of the IPO To mitigate this, the company may liquidate securities in its Trust Account and hold cash, which would reduce returns for shareholders[150][153] - The proposed business combination with Mobix Labs may be subject to review by CFIUS due to the Sponsor's substantial ties to non-U.S. persons A CFIUS review could delay, modify, or prevent the transaction[156][157] Unregistered Sales of Equity Securities and Use of Proceeds The company sold 3.4 million private placement warrants for $3.4 million, with proceeds deposited into a trust account, reduced to $9.67 million after July 2022 redemptions - Simultaneously with the IPO, the company sold 3,400,000 Private Placement Warrants at $1.00 per warrant, raising $3,400,000 in a private sale exempt from registration[160] - Gross proceeds of $80,000,000 from the IPO and proceeds from the warrant sale were placed in a trust account[159][162] - In July 2022, $70,573,278 was paid out of the trust account to redeem 7,046,967 ordinary shares, leaving a balance of $9,672,901 in the trust account as of September 30, 2022[163] Defaults Upon Senior Securities The company has reported no defaults upon senior securities - None[164] Mine Safety Disclosures This item is not applicable to the company - Not applicable[165] Other Information The company has reported no other information - None[166] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, which include certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act, and Inline XBRL documents - The exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL data files (Exhibits 101 and 104)[170] Signatures - The report was duly signed on November 17, 2022, by Michael Lee, the Chief Financial Officer[173][175]