APx Acquisition Corp. I(APXIU) - 2023 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed financial statements for APx Acquisition Corp. I, including balance sheets, statements of operations, changes in shareholders' deficit, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial instruments and transactions Condensed Balance Sheets The company's total assets significantly decreased from $178.5 million at December 31, 2022, to $70.8 million at June 30, 2023, primarily due to a substantial reduction in investments held in the Trust Account Condensed Balance Sheets | Metric | June 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $70,826,808 | $178,502,908 | | Total Liabilities | $4,540,513 | $1,103,038 | | Investment held in Trust Account | $70,672,456 | $177,952,202 | | Accrued expenses and accounts payable | $1,592,482 | $751,538 | | Note Payable | $1,589,584 | - | | Warrant liabilities | $1,358,447 | $351,500 | | Total Shareholders' Deficit | $(4,386,161) | $(552,332) | Condensed Statements of Operations The company reported a net income of $232,706 for the six months ended June 30, 2023, a significant decrease from $10,343,389 in the prior year period, driven by higher operating expenses and a lower gain from warrant liability fair value changes Condensed Statements of Operations | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Formation costs and other operating expenses | $1,362,299 | $566,363 | | Income earned on investments in Trust Account | $2,566,535 | $259,302 | | Interest expense | $(57,903) | - | | Change in FV of warrant liability | $(913,627) | $10,650,450 | | Net income | $232,706 | $10,343,389 | | Basic and diluted net income per share, Class A ordinary shares | $0.02 | $0.48 | Condensed Statements of Changes in Shareholders' Deficit The company's total shareholders' deficit increased significantly to $(4,386,161) at June 30, 2023, primarily due to the remeasurement of Class A ordinary shares to their redemption amount Changes in Shareholders' Deficit (2023 vs 2022) | Metric | December 31, 2022 | June 30, 2023 | | :--- | :--- | :--- | | Total Shareholders' Deficit (Beginning of Period) | $(552,332) | $(552,332) | | Remeasurement of Class A ordinary shares to redemption amount | $(1,769,011) (March 31, 2023) | $(2,297,524) (June 30, 2023) | | Net income (March 31, 2023) | $120,845 | - | | Net income (June 30, 2023) | - | $111,861 | | Total Shareholders' Deficit (End of Period) | - | $(4,386,161) | Changes in Shareholders' Deficit (2022 vs 2021) | Metric | December 31, 2021 | June 30, 2022 | | :--- | :--- | :--- | | Total Shareholders' Deficit (Beginning of Period) | $(17,175,093) | $(17,175,093) | | Net income (March 31, 2022) | $7,660,967 | - | | Remeasurement of Class A ordinary share to redemption | - | $(260,196) | | Net income (June 30, 2022) | - | $2,682,422 | | Total Shareholders' Deficit (End of Period) | - | $(7,091,900) | Condensed Statements of Cash Flows For the six months ended June 30, 2023, the company experienced a net decrease in cash of $321,354, driven by cash outflows from financing activities related to share redemptions Condensed Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(446,354) | $(287,658) | | Net cash provided by investing activities | $109,846,281 | - | | Net cash used in financing activities | $(109,721,281) | - | | Net Change in Cash | $(321,354) | $(287,658) | | Cash - End of period | $91,852 | $665,774 | Notes to Unaudited Condensed Financial Statements These notes provide critical context for the financial statements, covering the company's operations, accounting policies, IPO details, related party transactions, and fair value measurements NOTE 1. Description of Organization, Business Operations and Going Concern APx Acquisition Corp. I is a blank check company facing substantial doubt about its ability to continue as a going concern due to a working capital deficit and an impending business combination deadline - The Company is a blank check company incorporated in May 2021, formed for the purpose of a business combination, and has not yet commenced operations[15][16] - In February 2023, shareholders approved an extension, leading to redemptions of 10,693,417 public shares for approximately $111.3 million, leaving $68.3 million in the trust account[20] - As of June 30, 2023, the Company had $91,852 in cash and a working capital deficit of $3,027,714, raising substantial doubt about its ability to continue as a going concern[29][35][36] NOTE 2. Summary of Significant Accounting Policies This note outlines key accounting principles, including its emerging growth company status, use of estimates, and treatment of warrants and redeemable shares - The Company is an 'emerging growth company' and has elected to use the extended transition period for new accounting standards, which may affect comparability[38][39] - As of June 30, 2023, the Company had $70,672,456 held in the Trust Account, invested in U.S. government treasury obligations[42] - Warrants are accounted for as liabilities and re-measured at fair value each reporting period, with changes recognized in the statements of operations[54][55] - Class A ordinary shares subject to possible redemption are classified as temporary equity at redemption value[64] NOTE 3. Initial Public Offering The company completed its IPO on December 9, 2021, generating $172.5 million, with deferred underwriting fees of $6 million subsequently waived - On December 9, 2021, the Company sold 17,250,000 Units at $10.00 per Unit, generating gross proceeds of $172.5 million[65] - Each Unit consisted of one Class A ordinary share and one-half of one redeemable warrant, exercisable at $11.50 per share[66] - In September 2022, the underwriters waived their right to $6,037,500 in deferred underwriting fees[67] NOTE 4. Private Placement Concurrently with the IPO, the Sponsor purchased 8,950,000 Private Placement Warrants for $8,950,000 - The Sponsor purchased 8,950,000 Private Placement Warrants at $1.00 per warrant, generating $8,950,000[68] - Private Placement Warrants are identical to Public Warrants except they lack redemption rights and are subject to transfer restrictions[69] NOTE 5. Related Party Transactions This note details transactions with related parties, including the issuance of Founder Shares, potential loans, and an administrative support agreement - The Company issued 4,312,500 Class B ordinary shares (Founder Shares) to the Sponsor for $25,000[70] - The Sponsor agreed to loan up to $300,000 for IPO expenses (Initial Note), which remained undrawn as of June 30, 2023[72] - The Company may receive Working Capital Loans from the Sponsor or affiliates to finance business combination transaction costs[73] - An affiliate of the Sponsor may be reimbursed up to $10,000 per month for administrative support[75] NOTE 6. Promissory Note Payable The company issued two unsecured promissory notes totaling $1,625,000 to finance extensions of the business combination termination date - On February 28, 2023, the Company issued a First Promissory Note for $875,000 to facilitate the first extension of the termination date[76] - On May 26, 2023, a Second Promissory Note for $750,000 was issued for a subsequent extension[77] - Both notes are payable by December 31, 2023, with interest paid in newly issued warrants[76][77] - Interest expense (debt discount amortization) on these notes was $57,904 for the six months ended June 30, 2023[78] NOTE 7. Commitments and Contingencies This note details the company's commitments, including registration rights, a waived underwriter's agreement, and a structuring services agreement - Holders of Founder Shares, Private Placement Warrants, and warrants from loans are entitled to registration rights[79] - The underwriter's deferred fee of $6,037,500 was waived in September 2022, resulting in a gain on settlement[81][82] - The Company entered into a structuring services agreement with Prodi Capital on May 18, 2023, for potential business combination transactions[83] NOTE 8. Warrant Liability The company accounts for its public and private warrants as liabilities measured at fair value, with specific redemption conditions - The 17,575,000 warrants (Public and Private Placement) are classified as liabilities and re-measured at fair value each balance sheet date[84] - Public Warrants become exercisable 30 days after a business combination and expire five years from the business combination[85] - The Company may redeem warrants if the Class A ordinary share price equals or exceeds $18.00 (at $0.01 per warrant) or $10.00 (at $0.10 per warrant)[88][90] - Private Placement Warrants are non-redeemable and exercisable on a cashless basis as long as held by initial purchasers[94] NOTE 9. Shareholders' Deficit This note outlines the company's authorized and outstanding share capital, including preferred and Class B ordinary shares - The Company is authorized to issue 1,000,000 preferred shares, with none issued or outstanding[95] - 4,312,500 Class B ordinary shares were issued and outstanding as of June 30, 2023, and December 31, 2022[96] - Class B ordinary shares automatically convert into Class A ordinary shares on a one-for-one basis upon a business combination[97][98] NOTE 10. Class A Ordinary Shares Subject to Possible Redemption In February 2023, 10,693,417 public shares were redeemed for approximately $111.3 million, reducing the shares classified as temporary equity - Class A ordinary shares subject to possible redemption are presented as temporary equity at redemption value[100] - In February 2023, 10,693,417 Public Shares were redeemed for approximately $111,346,281, reducing the outstanding public shares to 6,556,583[102] Redemption of Class A Ordinary Shares | Metric | Amount | | :--- | :--- | | Class A ordinary shares subject to possible redemption at December 31, 2022 | $177,952,202 | | Less: Shares redeemed in February 2023 | $(111,346,281) | | Add: Remeasurement of carrying value to redemption value | $4,066,535 | | Class A ordinary shares subject to possible redemption at June 30, 2023 | $70,672,456 | NOTE 11. Fair Value Measurements This note details the fair value hierarchy for financial assets and liabilities, highlighting the reclassification of warrants due to increased market observability Fair Value of Financial Instruments | Asset/Liability | Fair Value Hierarchy Level | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | :--- | | Investments held in Trust Account | Level 1 | $70,672,456 | $177,952,202 | | Warrant Liability - Public Warrants | Level 1 | $608,063 | $172,500 | | Warrant Liability - Private Warrants | Level 2 | $750,384 | $179,000 | - The fair value of Public Warrants was transferred from a Level 3 to a Level 1 measurement in 2022 due to active market listing[106] - The fair value of Private Warrants was transferred from a Level 3 to a Level 2 measurement in 2022 as key inputs became observable[106] - Warrants were initially valued using a Monte Carlo simulation model (Level 3)[108][109] NOTE 12. Subsequent Events Management identified no subsequent events requiring adjustment or disclosure after the reporting period - No subsequent events requiring adjustment or disclosure were identified by management up to the date of financial statement issuance[113] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, liquidity challenges, and critical accounting policies Overview APx Acquisition Corp. I is a blank check company seeking a business combination, having significantly reduced its Trust Account balance following share redemptions in February 2023 - The Company is a blank check company incorporated in May 2021, aiming for a business combination, with a focus on companies in Spanish-speaking markets[115] - The IPO in December 2021 raised $172.5 million, and the Sponsor purchased 8,950,000 private placement warrants for $8.95 million[116][117] - In February 2023, 10,693,417 public shares were redeemed for approximately $111.3 million, leaving $68.3 million in the trust account[120][121] - The Company issued two unsecured promissory notes totaling $1,625,000 in February and May 2023 to extend the business combination termination date[122][123][124] Results of Operations For the six months ended June 30, 2023, net income decreased substantially to $232,706 from $10,343,389 in the prior year, driven by higher costs and a negative change in warrant fair value Results of Operations Summary | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net income | $232,706 | $10,343,389 | | Operating costs | $1,362,299 | $566,363 | | Interest income from Trust Account | $2,566,535 | $259,302 | | Interest expense | $57,903 | - | | Unrealized gain on fair value changes of warrants | $(913,627) | $10,650,450 | Liquidity and Capital Resources The company's limited cash and significant working capital deficit raise substantial doubt about its ability to continue as a going concern without securing additional liquidity - As of June 30, 2023, the Company had $91,852 in cash and a working capital deficit of $3,027,714[127] - Management believes the Company will not have sufficient working capital to meet its needs, raising substantial doubt about its going concern ability[128][130] - Liquidity needs have been met through Sponsor payments, IPO proceeds, Private Placement Warrants, and Promissory Notes[128] Contractual Obligations The company's contractual obligations include an administrative services agreement, registration rights, and a structuring services agreement, with deferred underwriting fees having been waived - The Company may reimburse an affiliate of the Sponsor up to $10,000 per month for administrative support[131] - Holders of Founder Shares, Private Placement Warrants, and potential working capital loan securities are entitled to registration rights[132] - The deferred underwriting fee of $6,037,500 was waived by the underwriters in September 2022[133][134] - A structuring services agreement was signed with Prodi Capital on May 18, 2023[135] Critical Accounting Policies The company's critical accounting policies involve significant judgments, particularly concerning the valuation of warrant liabilities and the classification of redeemable shares - Warrant liabilities are classified as liabilities and re-measured at fair value with changes recognized in operations[138][139] - Class A ordinary shares subject to possible redemption are classified as temporary equity at redemption value[140] - Net income per ordinary share is calculated using the two-class method, with warrants considered anti-dilutive[141][142] Recent Accounting Standards The company is assessing the impact of ASU 2020-06, which simplifies accounting for certain financial instruments, and does not expect other new standards to have a material effect - The Company is currently assessing the impact of ASU 2020-06, which simplifies accounting for convertible debt and derivatives, effective for fiscal years beginning after December 15, 2023[144] - Management does not believe other recently issued accounting pronouncements would have a material effect on the financial statements[145] JOBS Act As an 'emerging growth company', the company is electing to delay the adoption of new accounting standards, which may affect the comparability of its financial statements - As an 'emerging growth company' under the JOBS Act, the Company is electing to delay the adoption of new or revised accounting standards[146] - This election may make the Company's financial statements not comparable to non-emerging growth companies[146] - The Company is evaluating other reduced reporting requirements under the JOBS Act[147] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, APx Acquisition Corp. I is not required to provide these disclosures - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[148] Item 4. Control and Procedures Management concluded that disclosure controls were not effective as of June 30, 2023, due to several material weaknesses in financial reporting - As of June 30, 2023, the CEO and CFO concluded that disclosure controls and procedures were not effective due to material weaknesses[150] - Material weaknesses identified include errors in warrant liabilities, equity classification, cash flow statements, and accounts payable[150] - A remediation plan is being implemented to improve internal control over financial reporting[152] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings as of the reporting date - There are no legal proceedings[156] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report - No material changes to risk factors disclosed in the Annual Report on Form 10-K[157] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section details unregistered sales of Founder Shares and warrants, and confirms the use of IPO proceeds as planned - 4,312,500 Class B ordinary shares (Founder Shares) were issued to the Sponsor for $25,000[157] - 8,950,000 Private Placement Warrants were purchased by the Sponsor for $1.00 each[159] - Warrants were issued as interest-in-kind for the First and Second Promissory Notes[160][161] - Following the IPO and private placement, $175,950,000 was placed in the Trust Account, with no material change in the planned use of proceeds[165] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There are no defaults upon senior securities[167] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[167] Item 5. Other Information The company reported no other information for this item - There is no other information to report[167] Item 6. Exhibits This section lists the exhibits filed as part of the Quarterly Report, including XBRL documents and certifications - The exhibits include Inline XBRL documents and various CEO/CFO certifications pursuant to the Sarbanes-Oxley Act[163][169]