AP Acquisition (APCA) - 2023 Q3 - Quarterly Report

Part I. Financial Information Condensed Balance Sheets The balance sheet as of September 30, 2023, shows increased assets and liabilities, driven by Trust Account growth and new promissory notes, expanding the accumulated deficit Key Balance Sheet Metrics | Metric | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :------------------------------------- | :----------------------- | :----------- | | Cash | $141,905 | $314,229 | | Prepaid expense | $57,092 | $143,034 | | Cash and Investments held in Trust Account | $188,643,526 | $180,237,929 | | Total assets | $188,842,523 | $180,695,192 | | Accrued offering costs and expenses | $3,307,647 | $288,154 | | Promissory note - related party | $2,085,000 | — | | Due to related party | $215,333 | $126,393 | | Total current liabilities | $5,607,980 | $414,547 | | Total liabilities | $11,645,480 | $6,452,047 | | Accumulated deficit | $(11,446,914) | $(5,995,215) | | Total shareholders' deficit | $(11,446,483) | $(5,994,784) | Unaudited Condensed Statements of Operations Net income significantly increased for both periods ended September 30, 2023, primarily due to higher interest earned on Trust Account investments Key Income Statement Metrics | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating costs | $953,299 | $227,804 | $3,526,699 | $674,549 | | Stock Compensation Expense | $(95,288) | $(95,288) | $(282,756) | $(282,756) | | Interest earned on Trust Account | $2,396,423 | $801,953 | $6,480,597 | $1,059,691 | | Total other income, net | $2,301,135 | $706,665 | $6,197,841 | $776,935 | | Net income | $1,347,836 | $478,861 | $2,671,142 | $102,386 | | Basic and diluted net income per share (Class A) | $0.06 | $0.02 | $0.12 | $0.00 | | Basic and diluted net income per share (Class B) | $0.06 | $0.02 | $0.12 | $0.00 | - Net income for the three months ended September 30, 2023, increased by 181.5% year-over-year, from $478,861 to $1,347,836, primarily due to a 198.8% increase in interest earned on cash and investments held in the Trust Account[13] - For the nine months ended September 30, 2023, net income surged by 2508.7% year-over-year, from $102,386 to $2,671,142, largely driven by a 511.5% increase in interest earned on Trust Account assets[13] Unaudited Condensed Statements of Changes in Shareholders' Deficit Shareholders' deficit significantly increased from December 2022 to September 2023, driven by share remeasurement and Trust Account deposits, partially offset by net income Key Shareholders' Deficit Metrics | Metric | Dec 31, 2022 | Sep 30, 2023 | | :-------------------------------------------------------------------------------- | :----------- | :----------- | | Total Shareholders' Deficit (Beginning Balance) | $(5,994,784) | $(5,994,784) | | Stock Compensation Expense | $282,756 | $282,756 | | Remeasurement of Class A ordinary shares subject to possible redemption | $(6,480,597) | $(6,480,597) | | Net income | $2,671,142 | $2,671,142 | | Additional amount deposited into Trust Account | $(1,925,000) | $(1,925,000) | | Total Shareholders' Deficit (Ending Balance) | $(5,994,784) | $(11,446,483) | - The accumulated deficit increased from $(5,995,215) at December 31, 2022, to $(11,446,914) at September 30, 2023, reflecting the financial impact of operations and share remeasurements[19] Unaudited Condensed Statements of Cash Flows Net cash outflows from operating and investing activities for the nine months ended September 30, 2023, were partially offset by financing inflows, resulting in a net cash decrease Key Cash Flow Metrics | Metric | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(332,324) | $(706,523) | | Net cash used in investing activities | $(1,925,000) | — | | Net cash provided by financing activities | $2,085,000 | — | | Net Change in Cash | $(172,324) | $(706,523) | | Cash - Ending | $141,905 | $365,612 | - Net cash used in operating activities decreased by 53% from $(706,523) in 2022 to $(332,324) in 2023, primarily due to an increase in accounts payable and accrued expenses[24] - Investing activities for 2023 included a $1,925,000 deposit to the Trust Account, which was not present in 2022[24] - Financing activities in 2023 generated $2,085,000 from the issuance of a promissory note, a new source of cash compared to 2022[24] Notes to Unaudited Condensed Financial Statements These notes detail the company's SPAC organization, business combination efforts, accounting policies, and related party transactions, including deadline extensions, redemptions, and promissory notes Note 1 - Organization, Business Operation AP Acquisition Corp, a SPAC, incorporated in April 2021, extended its business combination deadline to June 2024, resulting in $64.95 million in Class A share redemptions - The company was incorporated on April 22, 2021, as a Cayman Islands exempted company for the purpose of effecting a Business Combination, specifically excluding targets headquartered or primarily operating in China[28] - As of September 30, 2023, the company had not commenced any operations, with all activity related to its formation, IPO, and identifying/completing a Business Combination. Non-operating income is generated from interest on IPO proceeds held in the Trust Account[29] - Shareholders approved an Extension Amendment on September 15, 2023, extending the deadline to consummate a business combination from September 21, 2023, to June 21, 2024[34] - In connection with the Extension Amendment vote, 5,947,466 Class A Ordinary Shares were redeemed for approximately $64.95 million (paid October 3, 2023), leaving about $123.69 million in the Trust Account[34] Business Combination On June 16, 2023, the company entered a Business Combination Agreement with JEPLAN, outlining a two-step merger process, with the Sponsor committing $5 million for PubCo ADSs and Tokyo Century Corporation agreeing to non-redemption of 500,000 Class A shares - On June 16, 2023, the Company entered into a Business Combination Agreement with JEPLAN Holdings, Inc., JEPLAN MS, Inc., and JEPLAN, Inc[42][43] - The Business Combination involves a Share Exchange where JEPLAN becomes a wholly-owned subsidiary of PubCo, and a subsequent Merger where SPAC becomes a wholly-owned subsidiary of PubCo[45] - The Sponsor agreed to purchase 500,000 PubCo ADSs for $5,000,000 in a private placement, contingent upon the closing of the Merger[48] - Tokyo Century Corporation entered a non-redemption agreement for 500,000 Class A ordinary shares, committing not to redeem or transfer these shares prior to the Business Combination closing[49][50][52] Liquidity, Capital Resources and Going Concern As of September 30, 2023, the company had limited cash and a working capital deficit, relying on Sponsor promissory notes, raising substantial doubt about its going concern ability if the Business Combination is not completed - As of September 30, 2023, the Company had cash of $141,905 and a working capital deficit of $5,408,983[53] - The Sponsor provided a $1,725,000 loan in June 2023 to extend the Termination Date and issued an Extension Note for up to $1,800,000 (with $200,000 outstanding as of Sep 30, 2023) and a Working Capital Note for up to $160,000 (fully received) in September 2023[54][55] - Management has determined that the mandatory liquidation, should a business combination not occur by the Extended Date, raises substantial doubt about the Company's ability to continue as a going concern[57] Risks and Uncertainties The company acknowledges potential negative effects from the COVID-19 pandemic and ongoing military conflicts on its financial position, operations, and ability to consummate a Business Combination - Management continues to evaluate the impact of the COVID-19 pandemic, concluding a possible negative effect on financial position and search for a target company, though the specific impact is not readily determinable[58][59] - Ongoing military conflicts (Russia-Ukraine, Israel-Hamas) and related economic sanctions may materially and adversely affect the company's ability to consummate a Business Combination or the operations of a target business, including impacts on equity and debt financing[61] Note 2 - Significant Accounting Policies The company's financial statements conform to US GAAP, utilizing the extended transition period for new accounting standards as an 'emerging growth company,' with key policies for Trust Account investments, warrants, and redeemable Class A shares - The financial statements are presented in conformity with US GAAP for interim financial information and SEC rules for interim reporting[62] - 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[64][65] - Investments held in the Trust Account were liquidated from money market funds to an interest-bearing demand deposit account in August 2023 and are classified as trading securities at fair value (Level 1)[68][71][125] - Warrants are classified as equity instruments, and Class A ordinary shares subject to possible redemption are presented as temporary equity at redemption value[75][79] Stock Compensation Expense | Period | 2023 | 2022 | | :-------------------------- | :------- | :------- | | Three months ended Sep 30 | $95,288 | $95,288 | | Nine months ended Sep 30 | $282,756 | $282,756 | Note 3 - Initial Public Offering The IPO on December 21, 2021, issued 17.25 million units at $10.00 each, comprising one Class A ordinary share and one-half redeemable warrant - The IPO was consummated on December 21, 2021, with 17,250,000 units issued at $10.00 per unit, including the full exercise of the over-allotment option[89] - Each unit consisted of one Class A ordinary share and one-half of one redeemable warrant[89] Note 4 - Private Placement Concurrently with the IPO, the Sponsor purchased 10.625 million Private Placement Warrants for $1.00 each, generating $10.625 million in proceeds, subject to transfer restrictions and cashless exercise - The Sponsor purchased 10,625,000 Private Placement Warrants at $1.00 per warrant, generating $10,625,000 in gross proceeds[91] - These warrants are subject to transfer restrictions and are exercisable on a cashless basis by the Sponsor or its permitted transferees[91] Note 5 - Related Party Transactions Related party transactions involve the Sponsor's Founder Shares, independent director stock compensation, various Sponsor promissory notes for funding, and monthly administrative service fees - The Sponsor initially acquired 5,750,000 Class B ordinary shares for $25,000, later reduced to 4,312,500 shares[92] - Stock compensation expense of $95,288 for the three months and $282,756 for the nine months ended September 30, 2023 and 2022, was recognized for independent directors' Founder Shares[93] - The company has outstanding promissory notes from the Sponsor totaling $1,725,000 (for extension), $200,000 (Extension Note), and $160,000 (Working Capital Note) as of September 30, 2023[97][98][99] - The company pays the Sponsor $10,000 per month for administrative services, with $215,333 due to related party as of September 30, 2023[101] Note 6 - Commitments & Contingencies Commitments include registration rights for Founder Shares and Private Placement Warrants, an underwriting agreement with a $6.04 million waived deferred fee, and the Sponsor's $5 million PubCo ADSs purchase commitment - Holders of Founder Shares, Private Placement Warrants, and potential Working Capital Loan warrants are entitled to registration rights[102] - Credit Suisse waived the $6,037,500 deferred underwriting fee on April 12, 2023, related to the proposed Business Combination with JEPLAN[108] - The Sponsor agreed to purchase 500,000 PubCo ADSs for $5,000,000 in a private placement, contingent on the Merger closing[109] Note 7 - Shareholders' Deficit The company has authorized preference, Class A, and 4,312,500 outstanding Class B ordinary shares, with Class A and B generally voting together, but Founder Shares (Class B) having exclusive pre-Business Combination director election rights - The company has 5,000,000 authorized preference shares and 500,000,000 authorized Class A ordinary shares, with none issued or outstanding (excluding Class A shares subject to redemption)[110] - There are 4,312,500 Class B ordinary shares issued and outstanding, which were initially acquired by the Sponsor[111][114] - Class A and Class B ordinary shares vote together as a single class, except that only Founder Shares (Class B) vote on director elections prior to the initial Business Combination[115] - Founder Shares will automatically convert into Class A ordinary shares upon the initial Business Combination at a specified ratio[116] Warrants As of September 30, 2023, 8.625 million Public Warrants and 10.625 million Private Placement Warrants were outstanding, exercisable at $11.50 per Class A share, and redeemable under specific conditions - As of September 30, 2023, there were 8,625,000 Public Warrants and 10,625,000 Private Placement Warrants outstanding[117] - Each whole warrant entitles the holder to purchase one Class A ordinary share at an exercise price of $11.50 per share[117] - Warrants become exercisable on the later of 30 days after the completion of the initial Business Combination and 12 months from the IPO closing, expiring five years after the Business Combination[118] - The company may redeem outstanding warrants (excluding Private Placement Warrants unless specific conditions are met) at $0.01 per warrant if the Class A ordinary share closing price equals or exceeds $18.00 for 20 trading days within a 30-day period[122][123] Note 8 - Recurring Fair Value Measurements As of September 30, 2023, Trust Account amounts were in an interest-bearing deposit account, with investments classified as Level 1 in the fair value hierarchy, valued using quoted prices in active markets - As of September 30, 2023, all amounts in the Trust Account were deposited in an interest-bearing demand deposit account[124] - Investments held in the Trust Account are classified as Level 1 in the fair value hierarchy, indicating their fair value is determined using unadjusted quoted prices in active markets[125] Note 9 - Subsequent Events Subsequent to September 30, 2023, the company paid $64.95 million for 5.95 million Class A share redemptions, and the Sponsor deposited an additional $200,000 into the Trust Account, increasing the Extension Note balance - On October 3, 2023, the Company paid $64,953,170 to public shareholders for the redemption of 5,947,466 Class A ordinary shares, leaving approximately $123.69 million in the Trust Account[128] - On October 23, 2023, the Sponsor deposited an additional $200,000 into the Trust Account, increasing the total outstanding balance of the Extension Note to $400,000[128] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and operations as a SPAC, detailing the JEPLAN merger, net income growth from Trust Account interest, liquidity challenges, going concern risks, and critical accounting policies Overview AP Acquisition Corp, a SPAC, seeks a business combination, extended its deadline to June 2024, and generates income solely from its Trust Account, following significant Class A share redemptions - AP Acquisition Corp was incorporated on April 22, 2021, as a SPAC to effect a Business Combination, with a restriction against targets headquartered or primarily conducting business in China[132] - The company has not commenced operations as of September 30, 2023, and generates non-operating income from interest on IPO proceeds held in the Trust Account[133] - The deadline for completing an initial Business Combination was extended from September 21, 2023, to June 21, 2024, following shareholder approval of the Extension Amendment[135] - In connection with the extension, 5,947,466 Class A ordinary shares were redeemed for $64,953,170 (paid October 3, 2023), leaving approximately $123.69 million in the Trust Account[137] Business Combination On June 16, 2023, the company entered a Business Combination Agreement with JEPLAN, outlining a two-step merger process, with the Sponsor committing $5 million for PubCo ADSs and Tokyo Century Corporation agreeing to non-redemption of 500,000 Class A shares - A Business Combination Agreement was signed on June 16, 2023, with JEPLAN Holdings, JEPLAN MS, and JEPLAN[138] - The transaction involves a Pre-Merger Reorganization (Share Exchange) and a Merger, resulting in SPAC becoming a wholly-owned subsidiary of PubCo[139] - The Sponsor agreed to purchase 500,000 PubCo ADSs for $5,000,000 in a private placement, contingent on the Merger closing[145] - Tokyo Century Corporation entered a non-redemption agreement for 500,000 Class A ordinary shares, committing not to redeem or transfer them prior to the Business Combination[142][144] Results of Operations Net income significantly increased for both the three and nine months ended September 30, 2023, primarily due to higher interest income from the Trust Account Key Income Statement Metrics | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $1,347,836 | $478,861 | $2,671,142 | $102,386 | | Interest earned on Trust Account | $2,396,423 | $801,953 | $6,480,597 | $1,059,691 | | Operating costs | $953,299 | $227,804 | $3,526,699 | $674,549 | - Net income for the three months ended September 30, 2023, was $1,347,836, a substantial increase from $478,861 in the prior year, driven by a significant rise in interest income from the Trust Account[146] - For the nine months ended September 30, 2023, net income reached $2,671,142, up from $102,386 in the previous year, primarily due to increased interest earnings[146] Liquidity, Capital Resources and Going Concern As of September 30, 2023, the company had limited cash and a working capital deficit, relying on Sponsor promissory notes, raising substantial doubt about its going concern ability if the Business Combination is not completed - As of September 30, 2023, the company had $141,905 in cash outside its Trust Account and a working capital deficit[148] - Net cash used in operating activities for the nine months ended September 30, 2023, was $332,324, while financing activities provided $2,085,000 from promissory notes[148][149] - The Sponsor provided promissory notes totaling $1,725,000 for extension, an Extension Note for up to $1,800,000 ($200,000 outstanding), and a Working Capital Note for up to $160,000[151][152][153] - Management has determined that the mandatory liquidation, if a business combination does not occur by the Extended Date, raises substantial doubt about the company's ability to continue as a going concern[156] Off-Balance Sheet Financing Arrangements As of September 30, 2023, the company had no off-balance sheet arrangements, obligations, assets, or liabilities - The company has no obligations, assets, or liabilities that would be considered off-balance sheet arrangements as of September 30, 2023[157] Contractual Obligations As of September 30, 2023, the company had no long-term debt or lease obligations, with primary commitments being a $10,000 monthly administrative fee and the Sponsor's $5 million PubCo ADSs purchase - As of September 30, 2023, the company did not have any long-term debt, capital, or operating lease obligations[159] - The company is obligated to pay the Sponsor $10,000 per month for office space, secretarial, and administrative support services[159] - The Sponsor agreed to purchase 500,000 PubCo ADSs for $5,000,000 in a private placement, contingent upon the closing of the Merger[159] Registration and Shareholder Rights Holders of Founder Shares, Private Placement Warrants, and Working Capital Loan warrants are entitled to registration rights, with Founder Shares subject to a lock-up period, and the Sponsor nominating three post-Business Combination directors - Holders of Founder Shares, Private Placement Warrants, and warrants from Working Capital Loans are entitled to registration rights[160] - Founder Shares are subject to a lock-up period, generally one year after the Business Combination or until certain share price thresholds are met[161] - The Sponsor is entitled to nominate three individuals to the company's board of directors following the consummation of an initial Business Combination[162] Promissory Notes The company holds several non-interest bearing, unsecured promissory notes from its Sponsor, including a $1.725 million extension loan, an Extension Note up to $1.8 million ($200,000 outstanding), and a Working Capital Note up to $160,000 - The Sponsor loaned the company $1,725,000 in June 2023 to extend the business combination deadline to September 21, 2023, with this balance outstanding as of September 30, 2023[164] - An Extension Note for up to $1,800,000 was issued in September 2023, with $200,000 outstanding as of September 30, 2023, for monthly deposits into the Trust Account[164][165][167] - A Working Capital Note for up to $160,000 was issued in September 2023, with the full amount outstanding as of September 30, 2023, for working capital purposes[167] Underwriting Agreement The company paid a $3.45 million cash underwriting commission for its IPO, and Credit Suisse waived the $6.04 million deferred underwriting discount on April 12, 2023 - The company paid a cash underwriting commission of $3,450,000 for its IPO[168] - Credit Suisse waived the deferred underwriting fee of $6,037,500 on April 12, 2023, related to the proposed Business Combination with JEPLAN[168] Critical Accounting Policies Critical accounting policies include classifying redeemable Class A ordinary shares as temporary equity and excluding warrants from diluted EPS due to unmet contingencies - Class A ordinary shares subject to possible redemption are classified as temporary equity and measured at redemption value, as their redemption rights are outside the company's control[170] - Basic and diluted net income per ordinary share are the same because outstanding warrants are excluded from diluted EPS calculations due to unmet contingencies for exercisability[171] Recent Accounting Pronouncements The company is assessing ASU 2020-06, effective January 1, 2024, which simplifies financial instrument accounting and amends diluted EPS guidance, and has not early adopted it - The company is assessing the impact of ASU 2020-06, which simplifies accounting for certain financial instruments and amends diluted earnings per share guidance[172][174] - ASU 2020-06 is effective January 1, 2024, for the company, and it has determined not to early adopt it[174] JOBS Act As an 'emerging growth company' under the JOBS Act, the company has elected to delay adopting new accounting standards, potentially affecting comparability with other public companies - The company qualifies as an 'emerging growth company' under the JOBS Act[176] - It has elected to delay the adoption of new or revised accounting standards, complying with private company effective dates, which may impact comparability with other public companies[176] 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 - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[178] Item 4. Controls and Procedures As of September 30, 2023, the CEO and principal financial officer concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting Disclosure Controls and Procedures As of September 30, 2023, the CEO and principal financial officer concluded that the company's disclosure controls and procedures were effective - As of September 30, 2023, the Chief Executive Officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[180] Internal Control over Financial Reporting This report omits management's assessment or attestation on internal control over financial reporting due to the company's 'emerging growth company' status, with no material changes during the nine months ended September 30, 2023 - This report does not include a management's assessment or an attestation report on internal control over financial reporting due to the company's status as a newly public and 'emerging growth company'[182] - There has been no change in the company's internal control over financial reporting that materially affected, or is reasonably likely to materially affect, its internal control over financial reporting during the nine months ended September 30, 2023[182] Part II. Other Information Item 1. Legal Proceedings The company reported no legal proceedings as of the date of this Quarterly Report - There are no legal proceedings to report[184] Item 1A. Risk Factors As of this Quarterly Report, there are no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report on Form 10-K as of the date of this Quarterly Report[185] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the IPO of 17.25 million units at $10.00 each and the private placement of 10.625 million warrants, with $177.675 million placed in the Trust Account and a $6.04 million deferred underwriting fee waived - The Initial Public Offering on December 21, 2021, involved 17,250,000 units at $10.00 per unit, generating $172,500,000 in gross proceeds[186] - Simultaneously, 10,625,000 Private Placement Warrants were sold to the Sponsor for $1.00 each, raising $10,625,000[187] - A total of $177,675,000 from the IPO and private placement proceeds was placed in the Trust Account[188] - Credit Suisse waived the $6,037,500 deferred underwriting fee on April 12, 2023[188] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There are no defaults upon senior securities[188] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[189] Item 5. Other Information The company reported no other information - There is no other information to report[189] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL taxonomy documents - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act of 2002) and various XBRL taxonomy documents[191] SIGNATURES The report was signed on behalf of AP Acquisition Corp by Keiichi Suzuki (CEO and Director) and Richard Lee Folsom (Chairman and Director, Principal Financial and Accounting Officer) on November 13, 2023 - The report was signed by Keiichi Suzuki, Chief Executive Officer and Director, and Richard Lee Folsom, Chairman and Director (Principal Financial and Accounting Officer), on November 13, 2023[193]