Bannix Acquisition (BNIX) - 2023 Q4 - Annual Report

PART I Business The company is a SPAC seeking a business combination by its September 2024 deadline, now targeting VisionWave Technologies - The company is a blank check company that consummated its IPO of 6,900,000 units at $10.00 per unit on September 14, 2021[268][269] - Instant Fame LLC became the new sponsor on October 20, 2022, after acquiring shares from the original sponsors[283] - The deadline to complete an initial business combination has been extended to September 14, 2024[302][371] - A business combination agreement with Evie Autonomous Group Ltd was terminated on March 11, 2024[275][314] - On March 26, 2024, the company entered a new Business Combination Agreement with VisionWave Technologies Inc., proposing to acquire it for 3,000,000 shares of common stock[276] - The acquisition strategy targets businesses with high growth potential, a leading market position, and a talented management team[298][321] Risk Factors The company faces significant risks related to completing a business combination, potential conflicts of interest, and securities delisting Risks Related to Business Combination The company risks liquidation if a business combination is not completed by the deadline, facing competition and redemption pressures - Failure to complete a business combination by the September 14, 2024 deadline would result in liquidation and the redemption of public shares[3][418] - High redemption rates by public stockholders could increase the probability of the business combination being unsuccessful[2][441] - Sponsors, executive officers, and directors have a conflict of interest as they will lose their entire investment if a business combination is not completed[6][471] - Intense competition from other SPACs may make attractive target businesses scarcer and more expensive[24][387] - The company may lack sufficient funds outside the trust account to operate, potentially forcing it to borrow from insiders or liquidate[16][17] Risks Relating to the Post-Business Combination Company Post-combination, the company will face concentration risk, potential asset write-downs, and challenges retaining key personnel - The company will likely complete only one business combination, making it solely dependent on a single business and its limited products or services[389][429][475] - The company may be forced to write-down or write-off assets or incur impairment charges post-combination, which could negatively affect its financial condition[25][480] - If the company combines with a business with international operations, it will be subject to additional risks like currency fluctuations and political instability[32][33] - The company's success is highly dependent on its key personnel, and their loss could negatively impact operations[34][35][469] - Executive officers and directors may have conflicts of interest due to their affiliations with other entities engaged in similar business activities[36][411] Risks Relating to Our Securities Securities are subject to delisting risk, dilution, and potential worthlessness of warrants, with a material weakness identified - The company received a notice from Nasdaq on April 25, 2024, for non-compliance with listing rules, which could lead to delisting[64] - Third-party claims could reduce funds in the trust account, resulting in a per-share redemption amount of less than $10.95[42][66] - The company's warrants are accounted for as a liability, which may adversely affect the stock price due to fair value changes[44] - There is a risk that warrants may not be registered, precluding exercise except on a cashless basis and potentially expiring worthless[52][72] - The issuance of additional shares to complete a business combination would dilute the equity interest of existing investors[74][101] - Initial stockholders control a substantial interest and can exert significant influence on stockholder votes[56][77] - The company has identified a material weakness in its internal control over financial reporting as of December 31, 2023[94][96] Unresolved Staff Comments The company reports no unresolved comments from the SEC - Not applicable[97] Cybersecurity The company acknowledges cybersecurity risks but has not yet established a formal enterprise risk management framework - The company's operations involve storing and processing data, making it subject to privacy laws and vulnerable to cyberattacks[98][132] - A formal enterprise risk management program to address cybersecurity risks has not been established, though an incident response plan exists[124][134] - The company experienced no cybersecurity incidents during the last fiscal year[126] Properties The company utilizes a virtual office provided by its Sponsors under a monthly administrative services agreement - The company maintains a virtual executive office in Wilmington, DE, provided by its Sponsors[135] - An agreement exists to pay the initial Sponsors $5,000 per month for office space and administrative services, terminating upon a business combination or liquidation[135] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material litigation or legal proceedings[154] Mine Safety Disclosures This item is not applicable to the company's operations - Not Applicable[136] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's securities trade on Nasdaq, with no dividends paid, and details 4,081,747 shares outstanding | Security | Trading Symbol | Exchange | | :--- | :--- | :--- | | Common Stock | BNIX | The Nasdaq Capital Market | | Warrants | BNIXW | The Nasdaq Capital Market | | Rights | BNIXR | The Nasdaq Capital Market | - As of May 30, 2024, there were 4,081,747 shares of common stock outstanding held by eighteen stockholders of record[129] - The company has not paid cash dividends and does not intend to prior to completing an initial business combination[137] - Simultaneously with the IPO, the company sold 406,000 Private Placement Units, consisting of common stock, warrants, and rights[130] [Reserved] This item is not applicable - Not applicable[160] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss for 2023 and faces substantial doubt about its ability to continue as a going concern Overview and Recent Developments The company extended its combination deadline and entered a new agreement with VisionWave Technologies after terminating a prior deal - The deadline to complete a business combination has been extended to September 14, 2024, through monthly extensions funded by the Sponsor[147][165] - The proposed business combination with Evie Group was terminated on March 11, 2024, due to Evie Group's failure to provide a required loan[150][169] - On March 26, 2024, Bannix entered into a new business combination agreement to acquire VisionWave Technologies Inc in exchange for 3,000,000 shares of Bannix common stock[190] - In connection with the March 2024 extension, stockholders redeemed 1,381,866 shares, resulting in a $15,134,429 removal from the Trust Account[168] Results of Operations The company shifted from a net income in 2022 to a net loss of $56,839 in 2023 due to higher operating costs | Metric | For the Year Ended Dec 31, 2023 | For the Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Operating Costs | $1,504,995 | $1,000,944 | | Interest Income on Trust Account | $1,769,666 | $1,088,633 | | Change in Fair Value of Warrant Liability | $8,120 (Gain) | $182,700 (Gain) | | Provision for Income Taxes | $329,630 | $223,282 | | Net (Loss) / Income | ($56,839) | $47,107 | Liquidity, Capital Resources, and Going Concern A working capital deficit and impending liquidation deadline raise substantial doubt about the company's going concern status - As of December 31, 2023, the company had $232,278 in cash and a working capital deficit of $3.7 million[202] - The company has until September 14, 2024, to consummate a business combination, which combined with insufficient funds, raises substantial doubt about its ability to continue as a going concern[184][224] - Liquidity needs have been satisfied through capital contributions and loans from sponsors, with $1,213,600 owed as of December 31, 2023[183] - The proposed Business Combination Agreement with VisionWave is considered a potential cure for the going concern assessment[185] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, this disclosure is not required - As a smaller reporting company, disclosures under this item are not required[229] Financial Statements and Supplementary Data This section references the company's audited financial statements included elsewhere in the report - The company's financial statements and related notes begin on page F-1 of the Annual Report[230] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company changed its independent accounting firm in September 2023, reporting no disagreements with the former auditor - On September 8, 2023, the company dismissed Marcum LLP and engaged RBSM LLP as its new independent registered public accounting firm[231] - There were no disagreements with the former accountant on accounting principles, financial statement disclosure, or auditing scope[210] - The company previously identified material weaknesses in internal controls related to accounting for complex financial instruments, which resulted in restatements of financial statements[209][232] Controls and Procedures Management concluded that disclosure controls were ineffective due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of December 31, 2023[234] - A material weakness in internal control over financial reporting was identified, relating to accounting for complex financial instruments and fair value measurements[213][238] - The material weakness stems from issues identified in April 2021 by the SEC Staff regarding SPAC warrants, which required reevaluation[213] - Management has implemented remediation steps, including enhancing the review process for complex securities[240] Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading plans in 2023 - No director or executive officer adopted or terminated a Rule 10b5-1 trading plan or other non-Rule 10b5-1 trading arrangement during the year ended December 31, 2023[241][242] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not Applicable[220] PART III Directors, Executive Officers and Corporate Governance The company details its board composition, committee structure, and the appointment of a new CFO in April 2024 | Name | Age | Title | | :--- | :--- | :--- | | Douglas Davis | 65 | Co-Chairman of the Board, CEO, Secretary | | Craig J. Marshak | 64 | Co-Chairman of the Board | | Jamal "Jamie" Khurshid | 47 | Director | | Eric T. Shuss | 58 | Director | | Ned L. Siegel | 72 | Director | | Subash Menon | 58 | Director | | Erik Klinger | * | Chief Financial Officer (appointed Apr 2024) | - The board consists of six directors, a majority of whom are independent[509][512] - The board has two standing committees: an Audit Committee and a Compensation Committee, both composed entirely of independent directors[513] - The company has adopted a code of ethics and has provisions to address potential conflicts of interest regarding business opportunities[519][521] Executive Compensation Executive compensation is limited to salaries for the CEO and newly appointed CFO, with no other cash compensation paid - CEO Douglas Davis has an Executive Retention Agreement with an annual salary of $240,000, with $160,000 compensated in 2023[705][732] - On April 10, 2024, Erik Klinger was appointed CFO with an annual salary of $120,000[688] - Other than the CEO and CFO, no executive officers receive cash compensation, but they are reimbursed for out-of-pocket expenses[706] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Directors and executive officers beneficially own approximately 26% of the company's outstanding common stock | Name of Beneficial Owner | Approximate Percentage of Outstanding Common Stock | | :--- | :--- | | All directors and executive officers as a group (6 individuals) | 25.99% | | Subash Menon (Director) | 14.35% | | Suresh Yezhuvath | 14.35% | | Instant Fame, LLC (controlled by Douglas Davis) | 11.64% | | Karpus Investment Management | 10.43% | | Sea Otter Holdings LLC | 8.12% | | Sixth Borough Capital Fund LP | 8.12% | Certain Relationships and Related Transactions, and Director Independence The company discloses several related party transactions with its sponsors, including loans and service agreements - Sponsors and anchor investors purchased an aggregate of 406,000 private placement units[717] - The company has an Administrative Services Agreement to pay an affiliate $5,000 per month for office space and support services[719] - Sponsors or affiliates may provide up to $1,500,000 in loans for transaction costs, which may be convertible into units at $10.00 per unit[720] - The audit committee has a policy to review and approve all related party transactions[726] Principal Accountant Fees and Services The company reports approximately $80,000 in audit fees paid to its principal accountant for each of the last two fiscal years | Fee Category | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Audit Fees | ~$80,000 | ~$80,000 | | Audit-Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | - The audit committee pre-approves all auditing services and permitted non-audit services[729] PART IV Exhibits and Financial Statement Schedules This section lists all financial statements and exhibits filed with the annual report - Lists all financial statements and exhibits filed with the report, which are available on the SEC's website[730] - Key filed exhibits include the Business Combination Agreement with VisionWave, the Investment Management Trust Agreement, and various executive agreements[731][765] Form 10-K Summary This item is not applicable and no summary is provided - None[766]