AP Acquisition (APCA) - 2023 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements Presents AP Acquisition Corp's unaudited condensed financial statements, covering balance sheets, operations, cash flows, and related accounting notes Condensed Balance Sheets Condensed Balance Sheets | Metric | March 31, 2023 | December 31, 2022 | | :----- | :------------- | :---------------- | | Cash | $147,090 | $314,229 | | Marketable security held in Trust Account | $182,150,344 | $180,237,929 | | Total assets | $182,481,513 | $180,695,192 | | Total current liabilities | $1,885,268 | $414,547 | | Total liabilities | $7,922,768 | $6,452,047 | | Total shareholders' deficit | $(7,591,599) | $(5,994,784) | Unaudited Condensed Statements of Operations Unaudited Condensed Statements of Operations | Metric | 3 Months Ended March 31, 2023 | 3 Months Ended March 31, 2022 | | :----- | :---------------------------- | :---------------------------- | | Operating costs | $1,596,815 | $198,867 | | Loss from operations | $(1,596,815) | $(198,867) | | Interest earned on investments held in Trust Account | $1,912,415 | $17,817 | | Net income (loss) | $222,384 | $(274,266) | | Basic and diluted net income (loss) per share, Class A ordinary shares | $0.01 | $(0.01) | Unaudited Condensed Statement of Changes in Shareholders' Deficit for the Three Months Ended March 31, 2023 Unaudited Condensed Statement of Changes in Shareholders' Deficit for the Three Months Ended March 31, 2023 | Metric | December 31, 2022 | March 31, 2023 | | :----- | :---------------- | :------------- | | Total Shareholders' Deficit | $(5,994,784) | $(7,591,599) | | Stock Compensation Expense | — | $93,216 | | Remeasurement of Class A ordinary shares subject to possible redemption | — | $(1,912,415) | | Net income | — | $222,384 | Unaudited Condensed Statement of Changes in Shareholders' Deficit for the Three Months Ended March 31, 2022 Unaudited Condensed Statement of Changes in Shareholders' Deficit for the Three Months Ended March 31, 2022 | Metric | December 31, 2021 | March 31, 2022 | | :----- | :---------------- | :------------- | | Total Shareholders' Deficit | $(5,036,579) | $(5,235,446) | | Stock Compensation Expense | — | $93,216 | | Remeasurement of Class A ordinary shares subject to possible redemption | — | $(17,817) | | Net loss | — | $(274,266) | Unaudited Condensed Statements of Cash Flows Unaudited Condensed Statements of Cash Flows | Metric | 3 Months Ended March 31, 2023 | 3 Months Ended March 31, 2022 | | :----- | :---------------------------- | :---------------------------- | | Net income (loss) | $222,384 | $(274,266) | | Interest earned on cash held in Trust Account | $(1,912,415) | $(17,817) | | Net cash used in operating activities | $(167,139) | $(343,103) | | Cash - Ending | $147,090 | $729,032 | Notes to Unaudited Condensed Financial Statements Provides detailed explanations for the unaudited condensed financial statements, covering organization, accounting policies, and specific transactions Note 1 - Organization, Business Operation Details AP Acquisition Corp's formation as a SPAC, its business combination objectives, and operational status - AP Acquisition Corp was incorporated on April 22, 2021, as a SPAC to pursue a Business Combination, excluding targets headquartered or primarily operating in China (including Hong Kong and Macau)[24][102] - The company has not commenced operations and generates non-operating income from interest on IPO proceeds held in the Trust Account[25][103] IPO and Private Placement Proceeds | Event | Date | Proceeds | | :---- | :--- | :------- | | IPO Consummation | Dec 21, 2021 | $172,500,000 (17,250,000 units at $10.00/unit) | | Private Placement Warrants Sale | Dec 21, 2021 | $10,625,000 (10,625,000 warrants at $1.00/warrant) | - The company must complete a Business Combination with an aggregate fair market value of at least 80% of the net assets in the Trust Account[28] - As of March 31, 2023, the company had a working capital deficit of $1,554,099 and faces a mandatory liquidation date of June 21, 2023 (assuming no extension) if a Business Combination is not consummated, raising substantial doubt about its ability to continue as a going concern[38][41][108] Note 2 - Significant Accounting Policies Outlines AP Acquisition Corp's significant accounting policies, including basis of presentation, estimates, investments, warrants, income taxes, and share classifications Basis of Presentation - Financial statements are prepared in conformity with US GAAP for interim financial information and SEC rules, with certain disclosures condensed or omitted[43] Emerging Growth Company Status - 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, aligning with private company adoption dates[46][47][122] Use of Estimates - Financial statement preparation involves management estimates and assumptions, and actual results could differ[48] Cash and Cash Equivalents Cash and Cash Equivalents | Metric | March 31, 2023 | December 31, 2022 | | :----- | :------------- | :---------------- | | Cash | $147,090 | $314,229 | | Cash Equivalents | $0 | $0 | Investments Held in Trust Account - Investments in the Trust Account are classified as trading securities, primarily U.S. government securities or money market funds, and are reported at fair value[50] Investments Held in Trust Account | Metric | March 31, 2023 | December 31, 2022 | | :----- | :------------- | :---------------- | | Investments held in Trust Account | $182,150,344 | $180,237,929 | Concentration of Credit Risk - Cash accounts may exceed FDIC coverage, but management does not believe the company is exposed to significant credit risks[52] Fair Value of Financial Instruments - Fair value of financial instruments approximates carrying amounts due to their short-term nature[53] - Fair value hierarchy categorizes inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[53] Warrants - Warrants are classified as equity instruments as they meet all criteria for equity classification under ASC 815[54][55] Income Taxes - The company accounts for income taxes under ASC 740, but no income taxes are levied by the Cayman Islands government, so none are reflected in the financial statements[56][59] - No unrecognized tax benefits or accrued interest and penalties related to unrecognized tax benefits as of March 31, 2023, and December 31, 2022[57] Class A Ordinary Shares Subject to Possible Redemption - Class A ordinary shares subject to possible redemption are classified as temporary equity at redemption value due to redemption rights outside the company's control[60][118] Class A Ordinary Shares Subject to Possible Redemption | Metric | March 31, 2023 | December 31, 2022 | | :----- | :------------- | :---------------- | | Class A ordinary shares subject to possible redemption | $182,150,344 | $180,237,929 | Stock Compensation Expense Stock Compensation Expense | Metric | 3 Months Ended March 31, 2023 | 3 Months Ended March 31, 2022 | | :----- | :---------------------------- | :---------------------------- | | Share-based compensation expenses | $93,216 | $93,216 | Net Income (Loss) per Ordinary Share - Warrants were excluded from diluted earnings per share calculations for the three months ended March 31, 2023 and 2022, as they are contingently exercisable and contingencies have not been met[63][119] Net Income (Loss) per Ordinary Share | Metric | 3 Months Ended March 31, 2023 (Class A) | 3 Months Ended March 31, 2023 (Class B) | 3 Months Ended March 31, 2022 (Class A) | 3 Months Ended March 31, 2022 (Class B) | | :----- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Basic and diluted net income (loss) per share | $0.01 | $0.01 | $(0.00) | $(0.01) | Offering Costs associated with the Initial Public Offering Offering Cost Components | Offering Cost Component | Amount | | :---------------------- | :----- | | Underwriting commissions | $3,450,000 | | Deferred underwriting commissions | $6,037,500 | | Other offering costs | $986,923 | | Total Offering Costs | $10,474,423 | - $10,024,022 of offering costs were recorded as a reduction of temporary equity in connection with Class A ordinary shares[67] Recent Accounting Pronouncements - The company has elected not to early adopt ASU 2020-06, which simplifies accounting for certain financial instruments[68][120] - Management does not believe other recently issued, but not yet effective, accounting pronouncements would have a material effect on the financial statements[69][121] Note 3 - Initial Public Offering Details the IPO consummation, including the issuance of units and the full exercise of the over-allotment option - IPO consummated on December 21, 2021, issuing 17,250,000 units at $10.00 per unit, including the full exercise of the over-allotment option[26][70][130] Note 4 - Private Placement Describes the private placement of warrants to the Sponsor and their associated terms and restrictions Private Placement Details | Item | Details | | :--- | :------ | | Purchaser | Sponsor | | Number of Warrants | 10,625,000 | | Price per Warrant | $1.00 | | Gross Proceeds | $10,625,000 | - Private Placement Warrants are subject to transfer restrictions and are exercisable on a cashless basis by the Sponsor[71][131] Note 5 - Related Party Transactions Outlines transactions with related parties, including founder shares, promissory notes, working capital loans, and administrative services agreements Founder Shares - Sponsor initially acquired 5,750,000 Class B ordinary shares for $25,000[73][86] - 1,437,500 founder shares were surrendered, resulting in 4,312,500 Class B ordinary shares outstanding[74][87] - 90,000 Class B ordinary shares were transferred to independent directors, resulting in a stock compensation expense of $93,216 for the three months ended March 31, 2023 and 2022[75] Promissory Note - Related Party - Sponsor loaned the company up to $300,000 for IPO expenses[77][115] - Outstanding balance of $142,882 was fully repaid on December 21, 2021, and the note was terminated[77][115] Working Capital Loans - Sponsor or affiliates may provide Working Capital Loans for Business Combination transaction costs, convertible into warrants up to $1,500,000[78][106] - No borrowings were outstanding under Working Capital Loans as of March 31, 2023[78] Administrative Services Agreement - The company pays the Sponsor $10,000 per month for administrative support[79][110] Administrative Services Agreement Accruals | Metric | March 31, 2023 | December 31, 2022 | | :----- | :------------- | :---------------- | | Accrued under Administrative Services Agreement (3 months) | $30,000 | $30,000 | | Balance due to related party | $155,333 | $125,333 | Note 6 - Commitments & Contingencies Details the company's commitments and contingencies, including registration rights, transfer restrictions, and underwriting agreements Registration and Shareholder Rights - Holders of Founder Shares, Private Placement Warrants, and warrants from Working Capital Loans have registration rights[80][112] - Founder Shares are subject to transfer restrictions (lock-up) until one year after Business Combination or specific share price thresholds are met[76][81][113] - The Sponsor is entitled to nominate three individuals to the board of directors post-Business Combination[82][114] Underwriting Agreement - Underwriter fully exercised its over-allotment option on December 21, 2021[84] Underwriting Agreement Commissions | Item | Amount | | :--- | :----- | | Cash underwriting commission | $3,450,000 | | Deferred underwriting discount | $6,037,500 | Note 7 - Shareholders' Deficit Provides details on the company's preference shares, Class A and Class B ordinary shares, and warrants Preference shares - 5,000,000 preference shares authorized; none issued or outstanding as of March 31, 2023, and December 31, 2022[85] Class A ordinary shares - 500,000,000 Class A ordinary shares authorized; none issued or outstanding (excluding 17,250,000 subject to redemption) as of March 31, 2023, and December 31, 2022[85] Class B ordinary shares - 50,000,000 Class B ordinary shares authorized; 4,312,500 issued and outstanding as of March 31, 2023, and December 31, 2022[86][87] - Prior to Business Combination, only Founder Share holders (Class B) vote on director elections; Class B shares convert to Class A upon Business Combination[88][89] Warrants Warrant Details | Warrant Type | Outstanding (March 31, 2023) | Exercise Price | | :----------- | :--------------------------- | :------------- | | Public Warrants | 8,625,000 | $11.50 per share | | Private Placement Warrants | 10,625,000 | $11.50 per share | - Warrants become exercisable on the later of 30 days after Business Combination or 12 months from IPO closing, and expire five years after Business Combination[92] - The company may redeem outstanding warrants (excluding Private Placement Warrants under certain conditions) at $0.01 per warrant if Class A ordinary share price equals or exceeds $18.00 for 20 trading days within a 30-day period[95][96] Note 8 - Recurring Fair Value Measurements Investments Held in Trust Account - Money Market Fund | Asset | Carrying Value (March 31, 2023) | Level 1 Fair Value | | :---- | :------------------------------ | :----------------- | | Investments held in Trust Account - Money Market Fund | $182,150,344 | $182,150,344 | - Investments in the Trust Account are classified as Level 1 fair value measurements, indicating quoted prices in active markets[97][98] Note 9 - Subsequent Events - No subsequent events requiring adjustment or disclosure were identified up to the financial statement issuance date[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operating results, liquidity, capital resources, critical accounting policies, and going concern uncertainty Special Note Regarding Forward-Looking Statements - The report contains forward-looking statements regarding financial position, business strategy, and future operations, subject to risks and uncertainties[101] Overview - AP Acquisition Corp is a SPAC incorporated on April 22, 2021, to effect a Business Combination, excluding targets headquartered or primarily operating in China (including Hong Kong and Macau)[102] Results of Operations - The company has not commenced operations and generates non-operating income from interest on IPO proceeds in the Trust Account[103] Results of Operations Summary | Metric | 3 Months Ended March 31, 2023 | 3 Months Ended March 31, 2022 | | :----- | :---------------------------- | :---------------------------- | | Net income (loss) | $222,384 | $(274,266) | | Interest income from Trust Account | $1,912,415 | $17,817 | | Operating costs | $1,596,815 | $198,867 | | Stock compensation expense | $93,216 | $93,216 | Liquidity, Capital Resources and Going Concern Cash Outside Trust Account | Metric | March 31, 2023 | | :----- | :------------- | | Cash outside Trust Account | $147,090 | - The company faces a mandatory liquidation date of June 21, 2023 (assuming no extension) if a Business Combination is not consummated, raising substantial doubt about its ability to continue as a going concern[108] - The company may need additional financing to complete a Business Combination or if a significant number of public shares are redeemed[107] Off-Balance Sheet Financing Arrangements - As of March 31, 2023, the company had no off-balance sheet arrangements[109] Contractual Obligations - As of March 31, 2023, the company had no long-term debt, capital, or operating lease obligations[110] - The company has an administrative services agreement to pay the Sponsor $10,000 per month[110] Critical Accounting Policies Discusses key accounting policies that require significant judgment and estimation, impacting the financial statements Class A Ordinary Share Subject to Possible Redemption - Class A ordinary shares subject to possible redemption are classified as temporary equity at redemption value due to redemption rights outside the company's control[118] Net Income (Loss) Per Ordinary Share - Warrants are excluded from diluted EPS calculations as their exercise contingencies have not been met[119] Recent Accounting Pronouncements - The company is assessing the impact of ASU 2020-06 but has not early adopted it[120] JOBS Act - As an "emerging growth company" under the JOBS Act, the company can delay adopting new accounting pronouncements, potentially affecting comparability[122] - The company is evaluating other reduced reporting requirements under the JOBS Act, such as exemptions from auditor attestation, certain compensation disclosures, and PCAOB requirements[123] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, AP Acquisition Corp is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk[124] Item 4. Controls and Procedures This section addresses the effectiveness of disclosure controls and procedures and internal control over financial reporting Disclosure Controls and Procedures - As of March 31, 2023, the CEO and principal financial officer concluded that disclosure controls and procedures were effective[126] Internal Control over Financial Reporting - No management's assessment or auditor attestation report on internal control over financial reporting is included due to the company's status as a newly public and emerging growth company[127] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2023[127] Part II. Other Information Item 1. Legal Proceedings. The company reported no legal proceedings for the period - No legal proceedings were reported[128] Item 1A. Risk Factors. There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors since the Annual Report on Form 10-K filed March 3, 2023[129] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section details the private placement of warrants to the Sponsor and the allocation of proceeds from both the IPO and private placement into the Trust Account - Private placement of 10,625,000 Private Placement Warrants to the Sponsor for $10,625,000, issued under Section 4(a)(2) of the Securities Act[131] - Private Placement Warrants are subject to transfer restrictions and are exercisable on a cashless basis[131] - $177,675,000 from IPO and Private Placement Warrants was placed in the Trust Account[132] Item 3. Defaults Upon Senior Securities. The company reported no defaults upon senior securities - No defaults upon senior securities were reported[132] Item 4. Mine Safety Disclosures. This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable[132] Item 5. Other Information. The company reported no other information for this item - No other information was reported for this item[132] Item 6. Exhibits. This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications, XBRL documents, and the cover page interactive data file - The exhibits include certifications (31.1, 31.2, 32.1, 32.2), XBRL taxonomy extension documents (101.INS, 101.CAL, 101.SCH, 101.DEF, 101.LAB, 101.PRE), and the Cover Page Interactive Data File (104)[134] SIGNATURES Signatures The report was duly signed on May 12, 2023, by Keiichi Suzuki, Chief Executive Officer and Director, and Richard Lee Folsom, Chairman and Director (Principal Financial and Accounting Officer) - The report was signed on May 12, 2023, by Keiichi Suzuki (CEO and Director) and Richard Lee Folsom (Chairman, Director, Principal Financial and Accounting Officer)[137]