Bannix Acquisition (BNIX) - 2021 Q3 - Quarterly Report

Report Details - Bannix Acquisition Corp. filed a Form 10-Q for the quarterly period ended September 30, 2021[1][2] - As of November 15, 2021, 9,424,000 shares of common stock were issued and outstanding[5] Company Filer Status | Status | Indication | | :--- | :--- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company| ☒ | | Emerging growth company | ☒ | Part I. Financial Information Item 1. Financial Statements This section presents the company's unaudited condensed financial statements as of September 30, 2021 Unaudited Condensed Balance Sheet Unaudited Condensed Balance Sheet (September 30, 2021) | Item | Amount ($) | | :--- | :--- | | ASSETS | | | Cash | 514,343 | | Cash held in Trust Account | 69,690,000 | | Total Assets | 70,427,294 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | Total current liabilities | 98,422 | | Warrant liability | 6,068,040 | | Total Liabilities | 6,391,462 | | Common stock subject to possible redemption | 59,251,410 | | Total Stockholders' Equity | 4,784,422 | | Total Liabilities and Stockholders' Equity | 70,427,294 | Unaudited Condensed Statements of Operations Unaudited Condensed Statements of Operations | Item | Three months ended Sep 30, 2021 ($) | Inception through Sep 30, 2021 ($) | | :--- | :--- | :--- | | Formation and operating costs | 118,827 | 120,043 | | Loss from operations | (118,827) | (120,043) | | Change in fair value of warrant liabilities | 73,060 | 73,060 | | Offering expenses related to warrant issuance | (463,377) | (463,377) | | Total other income (loss) | (390,317) | (390,317) | | Net loss | (509,144) | (510,360) | | Basic and diluted net loss per share | (0.16) | (0.16) | Unaudited Condensed Statement of Changes in Stockholders' Equity Changes in Stockholders' Equity (Inception to Sep 30, 2021) | Item | Common Stock Shares | Common Stock Amount ($) | Additional Paid-in Capital ($) | Accumulated Deficit ($) | Treasury Stock ($) | Total Stockholders' Equity ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as of January 21, 2021 (Inception) | — | — | — | — | — | — | | Issuance of common stock to Sponsors | 3,162,500 | 31,625 | (2,875) | — | — | 28,750 | | Net loss (March 31, 2021) | | | — | (1,033) | — | (1,033) | | Balance as of March 31, 2021 | 3,162,500 | 31,625 | (2,875) | (1,033) | — | 27,717 | | Purchase of common stock from Sponsors | — | — | — | — | (14,375) | (14,375) | | Net loss (June 30, 2021) | — | — | — | (183) | — | (183) | | Balance as of June 30, 2021 | 3,162,500 | 31,625 | (2,875) | (1,216) | (14,375) | 13,159 | | Sale of 6,900,000 Units through initial public offering | 6,900,000 | 69,000 | 68,931,000 | — | — | 69,000,000 | | Sale of 406,000 Private Placement Units | 406,000 | 4,060 | 3,561,310 | — | — | 3,565,370 | | Issuance of 393,000 Representative Shares | 393,000 | 3,930 | 2,861,040 | — | — | 2,864,970 | | Additional capital contribution via forfeiture of loan from Sponsor | — | — | 270,000 | — | — | 270,000 | | Underwriters' discount | — | — | (1,845,000) | — | — | (1,845,000) | | Deferred underwriter discount | — | — | (225,000) | — | — | (225,000) | | Other offering expenses | — | — | (3,420,800) | — | — | (3,420,800) | | Offering costs related to warrants | — | — | 463,377 | — | — | 463,377 | | Initial classification of warrant liability - public | — | — | (5,796,000) | | — | (5,796,000) | | Initial classification of warrant liability - private | — | — | (345,100) | — | — | (345,100) | | Net loss (September 30, 2021) | — | — | — | (509,144) | — | (509,144) | | Common stock subject to possible redemption accretion | (6,900,000) | (69,000) | (59,182,410) | — | — | (59,251,410) | | Balance as of September 30, 2021 | 3,961,500 | 39,615 | 5,269,542 | (510,360) | (14,375) | 4,784,422 | Unaudited Condensed Statement of Cash Flows - Significant noncash financing activities included the initial value of warrant liabilities ($6,141,100) and common stock subject to possible redemption ($58,863,702)[21] Unaudited Condensed Statement of Cash Flows (Inception to Sep 30, 2021) | Cash Flow Activity | Amount ($) | | :--- | :--- | | Net cash used in operating activities | (247,642) | | Net cash used in investing activities | (69,690,000) | | Net cash provided by financing activities | 70,451,985 | | Net change in cash | 514,343 | | Cash end of the period | 514,343 | Notes to Unaudited Condensed Financial Statements These notes detail the company's formation, accounting policies, IPO, and other financial disclosures Note 1—Organization and Business Operations - Bannix Acquisition Corp is a newly organized blank check company (SPAC) incorporated on January 21, 2021, for the purpose of effecting a business combination[24] - The company consummated its IPO on September 14, 2021, selling 6,900,000 units at $10.00 per unit, each consisting of one common stock share, one redeemable warrant, and one right[28] - Concurrent with the IPO, 406,000 private placement units were issued, generating $2,460,000 in cash proceeds and cancelling $1,105,000 in loans/promissory notes from the Sponsor[29] - A total of $69,690,000 from the IPO and private placement proceeds was placed in a Trust Account, to be invested in U.S government securities or money market funds[32] - The company has 15 months from the IPO closing to consummate an initial Business Combination, with potential extensions up to 21 months if Sponsors deposit additional funds[33] Liquidity and Capital Resources (September 30, 2021) | Item | Amount ($) | | :--- | :--- | | Cash | 514,343 | | Working Capital | 540,201 | Note 2—Significant Accounting Policies - The financial statements are presented in U.S dollars in conformity with US GAAP for interim financial information[48] - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[50][51] - Offering costs related to warrant liabilities were expensed as incurred, while those associated with common stock were charged to temporary equity[56] - Warrants are classified as a liability at fair value and re-measured at each reporting period, with changes recognized in the statement of operations[60] - The company recorded no income tax expense and provided a valuation allowance against net deferred tax assets due to the unlikelihood of realization[65] - The company is assessing the impact of ASU 2020-06, which simplifies accounting for certain financial instruments and amends diluted EPS guidance, effective January 1, 2022[66] Note 3—Initial Public Offering - On September 14, 2021, the company consummated its IPO, selling 6,900,000 units at $10.00 per unit, generating gross proceeds of $69,000,000[68] - Each unit consisted of one share of common stock, one warrant to purchase one share at $11.50, and one right entitling the holder to one-tenth of one common stock share[68] Note 4—Private Placement - Simultaneously with the IPO, the company sold 181,000 Private Placement Units for $2,460,000 cash and issued an additional 225,000 units to a Sponsor in exchange for cancelling $1,105,000 in loans and a promissory note[69] Note 5—Related Party Transactions - Sponsors subscribed for 2,875,000 Founder Shares at $0.01 per share in February 2021, with 1,437,500 shares repurchased in June 2021 and an additional 287,500 shares issued via stock dividend[71] - Founder Shares are subject to a lock-up period until one year after the business combination or earlier under specific conditions[72] - Pre-IPO loans and a promissory note from Sponsors totaling approximately $1,105,000 were repaid or forfeited upon the IPO closing, partly through the issuance of Private Placement Units[74][75][76][78] - The company pays an affiliate of the Sponsor $5,000 per month for office space and administrative services, commencing from the IPO date[83] Due to Related Parties (September 30, 2021) | Item | Amount ($) | | :--- | :--- | | Expenses paid by Subash Menon on behalf of the Company | 3,557 | | Repurchase of 700,000 common shares from Bannix Management LLP | 7,000 | | Accrued administrative services for September | 3,333 | | Total Due to Related Parties | 13,890 | Note 6—Commitments and Contingencies - Holders of Founder Shares, Private Placement Units, and warrants from related party loans have registration rights for their securities[84] - Underwriters were granted a 30-day over-allotment option, which was fully exercised at IPO[85] - Underwriters are entitled to a 3% cash underwriting discount ($2,070,000 total, including $225,000 deferred) and a 3.5% Business Combination marketing fee upon completion of a business combination[86] - The company issued 393,000 Representative Shares to the underwriter, valued at $2,861,000, which are subject to transfer restrictions and waiver of redemption/liquidation rights[87] Note 7—Warrant Liability - The 7,306,000 warrants issued in connection with the IPO and private placement are classified as a liability at fair value, re-measured at each balance sheet date[88] - Each warrant entitles the holder to purchase one common stock share at $11.50, exercisable 12 months from IPO closing or upon business combination, expiring five years after the business combination[91][92] - The company may redeem warrants (excluding private warrants) at $0.01 per warrant if the common stock price equals or exceeds $18.00 for 20 trading days within a 30-day period, provided a registration statement is effective[94] Fair Value Hierarchy of Warrant Liabilities (September 30, 2021) | Item | Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Public warrants | — | — | 5,727,000 | 5,727,000 | | Private placement warrants | — | — | 341,040 | 341,040 | | Total | — | — | 6,068,040 | 6,068,040 | Key Inputs for Warrant Valuation (September 30, 2021) | Input | Public Warrants (Modified Monte Carlo) | Private Placement Warrants (Modified Black Scholes) | | :--- | :--- | :--- | | Stock Price | $10.00 | $10.00 | | Exercise Price | $11.50 | $11.50 | | Expected Term | 5.0 years | 5.0 years | | Volatility | 13.6% | 13.6% | | Risk-free rate | 1.01% | 1.01% | Changes in Level 3 Warrant Liabilities (Inception to Sep 30, 2021) | Item | Amount ($) | | :--- | :--- | | Fair value at January 21, 2021 (Inception) | - | | Initial fair value of public and private warrants at September 14, 2021 | 6,141,100 | | Change in fair value of public and private warrants | (73,060) | | Fair value of public and private warrants at September 30, 2021 | 6,068,040 | Note 8—Stockholders' Equity - The company's certificate of incorporation was amended to authorize 1,000,000 shares of preferred stock and increased common stock authorization to 100,000,000 shares[101][102] - As of September 30, 2021, there were 3,961,500 common shares issued and 2,524,000 outstanding (excluding 6,900,000 shares subject to redemption)[102] - Each right automatically converts into one-tenth (1/10) of a common stock share upon consummation of a business combination[104] Note 9—Subsequent Events - On November 1, 2021, a 25-NSE filing allowed warrants, rights, and shares underlying the units to commence separate trading, ceasing unit trading[106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, and critical accounting policies Overview - Bannix Acquisition Corp is a blank check company formed on January 21, 2021, to effect a business combination[110] - The company consummated its IPO on September 14, 2021, selling 6,900,000 units, and simultaneously issued 406,000 private placement units[111][112] - A total of $69,690,000 from the IPO and private placement was deposited into a trust account for public stockholders[113] - If a business combination is not completed within 15 months, the company will redeem public shares and liquidate[114] Results of Operations - The company has not generated operating revenues since inception, with all activity related to its IPO[116] - Net loss was primarily driven by formation and operating costs and offering expenses related to warrant issuance, partially offset by an unrealized gain from the change in fair value of warrant liabilities[117][118] Net Loss Summary | Period | Net Loss ($) | | :--- | :--- | | Three months ended September 30, 2021 | (509,144) | | Inception (Jan 21, 2021) through September 30, 2021 | (510,360) | Liquidity and Capital Resources - Liquidity needs were met through a $28,750 capital contribution from Sponsors for common stock and loans from Sponsors and related parties to cover offering costs[121] - Management believes the company has sufficient working capital and borrowing capacity for one year or until a business combination is consummated, using funds for identifying targets, due diligence, and consummating the combination[123] Liquidity Position (September 30, 2021) | Item | Amount ($) | | :--- | :--- | | Cash | 514,343 | | Working Capital | 540,201 | Critical Accounting Policies - The preparation of financial statements requires management to make estimates and assumptions, which could differ from actual results[124] - Offering costs are allocated to separable financial instruments issued in the IPO; costs for warrant liabilities are expensed, while those for common stock are charged to temporary equity[125] - The company is assessing the impact of ASU 2020-06, which simplifies accounting for certain financial instruments and amends diluted earnings per share guidance, effective January 1, 2022[126] Off-Balance Sheet Arrangements; Commitments and Contractual Obligations - Holders of founder shares, private placement units, and warrants from working capital loans are entitled to registration rights[128] - The underwriters' over-allotment option was fully exercised at the IPO[130] - Underwriters are entitled to a 3% cash underwriting discount and a 3.5% Business Combination marketing fee upon completion of the initial Business Combination[131] Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk The company is exempt from market risk disclosures as a smaller reporting company - The company is a smaller reporting company and is not required to provide disclosures regarding market risk[132] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of the reporting date - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2021[133] - No material changes in internal control over financial reporting occurred during the quarter, other than engaging an outsourced bookkeeping and financial reporting firm in September 2021[135][136] Part II. Other Information Item 1. Legal Proceedings The company reports no current legal proceedings - There are no legal proceedings[137] Item 1A. Risk Factors The company reports no material changes to its previously disclosed risk factors - There are no risk factors[138] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section references Form 8-K filings for details on unregistered equity sales and use of proceeds - Disclosure for this item is incorporated by reference to the company's Current Reports on Form 8-K filed on September 15, 2021, and September 20, 2021[151] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - There are no defaults upon senior securities[152] Item 4. Mine Safety Disclosures This section is not applicable as the company has no mining operations - There are no mine safety disclosures[153] Item 5. Other Information The company reports no other material information for the period - There is no other information[154] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements and certifications - Exhibits include the Amended and Restated Certificate of Incorporation, specimen certificates for units, common stock, warrants, and rights, various agreements (Warrant, Rights, Letter, Investment Management Trust, Registration Rights, Administrative Support, Indemnity), and certifications (302 and 906 of Sarbanes-Oxley Act)[141][142][143][144][145][146][147][148][149][150][151][157][158] Part III. Signatures - The report was signed on November 15, 2021, by Subash Menon, Chief Executive Officer, and Nicholos Hellyer, Chief Financial Officer[162][163][164]