UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Not applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| The | ||||
| The | ||||
| The |
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Date File required to be submitted and pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes
As of May 15, 2024, there were
HENNESSY CAPITAL INVESTMENT CORP. VI
Table of Contents
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HENNESSY CAPITAL INVESTMENT CORP. VI
CONDENSED BALANCE SHEETS
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Non-current asset – cash held in Trust Account | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, CLASS A COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Extension notes payable | ||||||||
| Working capital loans – related party | ||||||||
| Deferred compensation – related parties | ||||||||
| Excise tax payable | ||||||||
| Franchise and income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Other liabilities: | ||||||||
| Derivative warrant liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Class A common stock subject to possible redemption; | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities, Class A common stock subject to possible redemption and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements
1
HENNESSY CAPITAL INVESTMENT CORP. VI
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
| For the three months ended March 31, |
||||||||
| 2024 | 2023 | |||||||
| General and administrative expenses | $ | $ | ||||||
| Estimated fair value of Founder Shares provided in Non-Redemption Agreements | ||||||||
| Loss from operations | ( |
) | ( |
) | ||||
| Other income (expense): | ||||||||
| Interest income earned on Trust Account | ||||||||
| Change in fair value of Extension Notes payable | ( |
) | ||||||
| Change in fair value of derivative warrant liabilities | ( |
) | ( |
) | ||||
| Total other income (expense) | ( |
) | ||||||
| Income (loss) before provision for income tax | ||||||||
| Provision for income tax | ( |
) | ( |
) | ||||
| Net income (loss) | $ | ( |
) | $ | ||||
| $ | ( |
) | $ | |||||
| $ | ( |
) | $ | |||||
See accompanying notes to unaudited condensed financial statements
2
HENNESSY CAPITAL INVESTMENT CORP. VI
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the three months ended March 31, 2024:
| Common Stock | Additional | |||||||||||||||||||||||||||
| Class A Shares |
Amount | Class B Shares |
Amount | Paid-in Capital |
Accumulated Deficit |
Stockholders’ Deficit |
||||||||||||||||||||||
| Balances, December 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
| Accretion of Class A common stock subject to possible redemption | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Estimated fair value of deemed contribution Founders Shares | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Balances, March 31, 2024 (unaudited) | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
For the three months ended March 31, 2023:
| Common Stock | Additional | |||||||||||||||||||||||||||
| Class A Shares |
Amount | Class B Shares |
Amount | Paid-in Capital |
Accumulated Deficit |
Stockholders’ Deficit |
||||||||||||||||||||||
| Balances, December 31, 2022 | - | $ | - | $ | $ | - | $ | ( |
) | $ | ( |
) | ||||||||||||||||
| Accretion of Class A common stock subject to possible redemption | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balances, March 31, 2023 (unaudited) | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||
See accompanying notes to unaudited condensed financial statements
3
HENNESSY CAPITAL INVESTMENT CORP. VI
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
| For the three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest income earned in the Trust Account | ( | ) | ( | ) | ||||
| Estimated fair value of Founders Shares provided in Non-Redemption Agreements | ||||||||
| Change in fair value of derivative liabilities | ||||||||
| Change in fair value of extension notes payable | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in prepaid expenses | ( | ) | ||||||
| Increase (decrease) in accounts payable | ||||||||
| Increase in accrued liabilities | ||||||||
| Increase in deferred compensation – related parties | ||||||||
| Increase (decrease) in franchise and income taxes payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash withdrawn from Trust account for redemptions | ||||||||
| Cash withdrawn from Trust Account for taxes | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Redemption of Class A common stock | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
See accompanying notes to unaudited condensed financial statements
4
HENNESSY CAPITAL INVESTMENT CORP. VI
Unaudited Notes to Condensed Financial Statements
NOTE 1 - DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General:
Hennessy Capital Investment Corp. VI (the “Company”) was incorporated in Delaware on January 22, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
At March 31, 2024, the Company had not commenced any operations. All activity for the period from January 22, 2021 (inception) through March 31, 2024 relates to the Company’s formation and the initial public offering (“Public Offering”) described below and, subsequent to the Public Offering, identifying and completing a suitable Business Combination. The Company will not generate any operating revenues until after completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Public Offering.
All dollar amounts are rounded to the nearest thousand dollars.
Sponsor and Financing:
The Company’s sponsor is Hennessy Capital
Partners VI LLC, a Delaware limited liability company (the “Sponsor”). The Company intends to finance a Business Combination
with proceeds from the $
The Trust Account:
The funds in the Trust Account have been held in an interest-bearing demand deposit account or invested only in U.S. government treasury bills with a maturity of one hundred and eighty-five (185) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the initial Business Combination or (ii) the distribution of the Trust Account as described below. The remaining funds outside the Trust Account have been used to pay for business, legal and accounting due diligence on prospective acquisition targets and continuing general and administrative expenses.
Extensions of Time to Complete Business Combination, Related Redemptions of Shares of Class A Common Stock and Related Excise Tax:
At a special meeting of stockholders held on September
29, 2023 (the “2023 Extension Meeting”), the Company’s stockholders approved the proposal (the “2023 Extension
Amendment”) to amend and restate the Company’s certificate of incorporation to extend the date by which the Company must (i)
consummate an initial Business Combination, (ii) cease all operations except for the purpose of winding up, and (iii) redeem or repurchase
5
At a special meeting of stockholders held on January
10, 2024 (the “2024 Extension Meeting”), the Company’s stockholders approved the proposal (the “2024 Extension
Amendment”) to amend and restate the Company’s certificate of incorporation to extend the date by which the Company must (i)
consummate an initial Business Combination, (ii) cease all operations except for the purpose of winding up, and (iii) redeem or repurchase
On September 29, 2023, in connection with the 2023
Extension Meeting, stockholders holding
In January 2024, in connection with the 2024 Extension
Meeting, stockholders holding
Management has evaluated the requirements of the Inflation Reduction
Act and the Company’s operations, and has recorded a liability of
Business Combination:
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Public Offering and the sale of the Private Placement Warrants, although
substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination
with (or acquisition of) a Target Business. As used herein, “Target Business” is one or more target businesses that together
have a fair market value equal to at least
6
The Company, after signing a definitive agreement
for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose
in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination,
for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the
consummation of the initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity
to have their shares redeemed by the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount
in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement
of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval
of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its
discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would
otherwise require the Company to seek stockholder approval unless a vote is required by the rules of the Nasdaq Global Market. If the
Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of Class A
and Class B common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem its public
shares in an amount that would cause its net tangible assets to be less than $
If the Company holds a stockholder vote or there
is a tender offer for shares in connection with a Business Combination, a public stockholder will have the right to redeem its shares
for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days
prior to the consummation of the initial Business Combination, including interest but less taxes payable. As a result, such shares of
Class A common stock are recorded at redemption amount and classified as temporary equity, in accordance with the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from
Equity.” The amount in the Trust Account was initially $
The Company has until the Extended Date, September
30, 2024, to complete its initial Business Combination unless stockholders approve an extension of such date. If the Company does not
complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii)
as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of Class A common stock for
a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $
If stockholders were to approve an extension beyond the Extended Date, the Company would expect to receive a delisting notice from NASDAQ under their requirement that special purpose acquisition companies complete a business combination within three years of the effectiveness of its IPO registration statement. However, such delisting notice can be appealed and up to 180 days grace period given to the Company at the listing committee’s discretion.
In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the price per Unit in the Public Offering.
7
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated under the Securities Act. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 29, 2024. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the period ending December 31, 2024 or for any other future periods.
Mandatory Liquidation, Liquidity and Going Concern:
The Company had approximately $
Emerging Growth Company:
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standards. This may make comparison of the Company’s unaudited condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
8
Net Income (Loss) per Share of Common Stock:
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income or loss per share of common stock is computed by dividing net income or loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period plus, to the extent dilutive, the incremental number of shares of common stock to settle Warrants, as calculated using the treasury stock method.
The Company has not considered the effect of the
Warrants sold in the Public Offering and Private Placement to purchase an aggregate of
The Company has two classes of common stock, which are referred to as shares of Class A common stock and shares of Class B common stock. Income and losses are shared pro rata among the two classes of common stock. Net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the respective period. The changes in redemption value that are accreted to Class A common stock subject to redemption (see below) are representative of fair value and therefore is not factored into the calculation of earnings per share.
| Three months ended March 31, 2024 | Three months ended March 31, 2023 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Numerator: | ||||||||||||||||
| Basic and diluted net income (loss) per share of common stock: | ||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | $ | |||||||||
| Denominator: | ||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | $ | |||||||||
Cash and Cash Equivalents:
The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. The Company had no cash equivalents at March 31, 2024 or December 31, 2023.
Concentration of Credit Risk:
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal
Deposit Insurance Corporation coverage of $
Fair Value of Financial Instruments:
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the unaudited condensed balance sheets primarily due to their short-term nature, except for derivative warrant liabilities (see Note 6).
9
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Use of Estimates:
The preparation of the unaudited condensed financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed as of March 31, 2024 and December 31, 2023, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Offering Costs:
The Company complies with the requirements of FASB
ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A - “Expenses of Offering.” Costs incurred in connection with
preparation for the Public Offering totaled approximately $
Income Taxes:
The Company follows the asset and liability method of accounting for income taxes under FASB ASC, 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the unaudited condensed balance sheet carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company’s currently taxable income consists
of interest income on the Trust Account net of taxes. The Company’s general and administrative costs are generally considered either
start-up or business combination costs and are not currently deductible. Further, warrant costs and income from change in fair value of
derivative warrant liabilities may not be deductible or includible in taxable income. During the three months ended March 31, 2024 and
2023, the Company recorded income tax expense of approximately $
10
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2024 or December 31, 2023. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at March 31, 2024 or December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company has been subject to income tax examinations by major taxing authorities since inception.
Redeemable Common Stock:
As discussed in Note 3, all of the
While redemptions cannot cause the Company’s
net tangible assets to fall below $
The Company recognizes changes immediately as they occur and adjusts
the carrying value of the securities at the end of each reporting period. Increases or decreases in the carrying amount of redeemable
Class A common stock are affected by adjustments to accumulated deficit. Accordingly, at March 31, 2024 and December 31, 2023, all of
the
| Dollars | Shares | |||||||
| Gross proceeds of Public Offering | $ | |||||||
| Less: Proceeds allocated to Public Warrants | ( | ) | - | |||||
| Offering costs | ( | ) | - | |||||
| Plus: Accretion of carrying value to redemption value in 2021 | - | |||||||
| Subtotal at date of Public Offering and December 31, 2021 | ||||||||
| Plus: Accretion of carrying value to redemption value in 2022 | - | |||||||
| Subtotal at December 31, 2022 | ||||||||
| Less: Redemptions at September 29, 2023 | ( | ) | ( | ) | ||||
| Plus: Forgiveness of deferred underwriting compensation | - | |||||||
| Plus: Accretion of carrying value to redemption value in 2023 | - | |||||||
| Shares of Class A common stock subject to possible redemption at December 31, 2023 | $ | |||||||
| Less: Redemptions in January 2024 | ( | ) | ( | ) | ||||
| Plus: Accretion of carrying value to possible redemption value to March 31, 2024 | ||||||||
| Shares of Class A common stock subject to possible redemption at March 31, 2024 | $ | |||||||
11
Derivative Warrant Liabilities:
The Company accounts for Warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the Warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the Warrants meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to the Company’s own shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the Warrants are outstanding.
For issued or modified Warrants that meet all of the criteria for equity classification, the Warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified Warrants that do not meet all the criteria for equity classification, the Warrants are required to be recorded at their initial fair value on the date of issuance, and each unaudited condensed balance sheet date thereafter. Changes in the estimated fair value of the Warrants are recognized as a non-cash gain or loss on the statements of operations. Costs associated with issuing the Warrants accounted for as liabilities are charged to operations when the Warrants are issued. The fair value of the Warrants as described below in Note 6, is based upon or derived from the trading price of our warrants issued initially as part of the units offered in our initial public offering (the “Public Warrants”) but now trade separately in an active, open market.
Subscription Agreement/Extension Notes
The Company elected the fair value option to account for amounts received from its 2023 Subscription Agreement, as defined and described in Note 7. Similarly, the Company will elect the fair value option for the 2024 Subscription Agreement, as defined and described in Note 7, when it was drawn down in April 2024. As a result of applying the fair value option, the Company recognizes the amounts received at fair value, with subsequent changes in fair value recognized as a change in fair value in the statements of operations. The fair value is based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own estimates about the assumptions a market participant would use in pricing the liability.
Founder Shares Granted Under Non-Redemption Agreements
The Company accounts for the aggregate fair value of founder shares to be transferred pursuant to the 2023 and 2024 Non-Redemption Agreements as a deemed contribution to the capital of the Company from our sponsor in the unaudited condensed statements of stockholders’ deficit in accordance with Staff Accounting Bulletin (“SAB”) Topic 5T, and as a business combination cost in the unaudited statement of operations.
Recent Accounting Pronouncements:
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Subsequent Events:
Management has evaluated subsequent events and transactions occurring after March 31, 2024 (the unaudited condensed balance sheet date), up to the date of the unaudited condensed financial statements were issued. The Company has concluded that all such events and transactions that would require adjustment or disclosure in the unaudited condensed financial statements have been recognized or disclosed. See Notes 4 and 7.
NOTE 3 - PUBLIC OFFERING
In October 2021, the Company consummated the Public
Offering of
12
The Company granted the underwriters a 45-day option
to purchase up to
The Company paid an underwriting discount of
The Company intends to finance a Business Combination
with proceeds of approximately $
In July and August 2021, the Company entered into
subscription agreements with the Direct Anchor Investors (as defined below) and the Other Anchor Investors (as defined below) to purchase
As indicated in Notes 1 and 2, in connection with
the 2023 Extension Amendment, holders of
NOTE 4 - RELATED PARTY TRANSACTIONS
Founder Shares
In January 2021 the Sponsor purchased
13
The Company’s initial stockholders have agreed
not to transfer, assign or sell any of their Founder Shares until the earlier of (A) one year after the completion of the Company’s
initial Business Combination, or (B) subsequent to the Company’s initial Business Combination, if (x) the last reported sale price
of the Company’s Class A common stock equals or exceeds $
Private Placement Warrants
Simultaneously with the closing of the Public Offering
on October 1, 2021 and the partial exercise of the underwriters’ over-allotment option on October 21, 2021, the Sponsor and certain
funds and accounts managed by subsidiaries of BlackRock, Inc., Arena Capital Advisors, LLC, for and on behalf of the funds and accounts
it manages, D. E. Shaw Valence Investments (Cayman) Limited and D. E. Shaw Valence Portfolios, L.L.C., certain funds managed by affiliates
of Apollo Global Management, Inc., certain funds managed by Highbridge Capital Management, LLC and Antara Capital Total Return SPAC Master
Fund LP (collectively, the “Direct Anchor Investors”), and four other unaffiliated qualified institutional buyers or institutional
accredited investors, on behalf of one or more funds that they advise or manage (collectively, the “Other Anchor Investors”),
purchased from the Company in a private placement an aggregate of
If the Company does not complete a Business Combination, then the proceeds from the sale of the Private Placement Warrants deposited in the Trust Account will be part of the liquidating distribution to the public stockholders and the Private Placement Warrants issued to the Sponsor, the Direct Anchor Investors and the Other Investors will expire worthless.
Registration Rights
The Company’s initial stockholders and the holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement executed on the date of the prospectus for the Public Offering. These holders are entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements. There will be no penalties associated with delays in registering the securities under the registration rights agreement.
14
Related Party Loans
If the Sponsor, an affiliate of the Sponsor or
the Company’s officers and directors make any working capital loans, up to $
Administrative Support Agreement and Payments to Certain Officers
The Company has agreed to pay $
Also, commencing on September 29, 2021, the Company
began to compensate each of its President and Chief Operating Officer as well as its Chief Financial Officer $
During September 2023, payments under the agreements to the Company’s Chief Operating Officer ceased in connection with his resignation as an officer (but not as a director) of the Company.
Related Party Agreement in Connection with the 2024 Subscription Agreement
The Company’s Chairman and Chief Executive Officer has agreed (in his individual capacity) to purchase from Polar (as defined in Note 7) all of Polar’s remaining rights under the 2024 Subscription Agreement (excluding the right to receive the Subscription Shares, which shall remain with Polar) for a cash amount equal to the portion of the 2024 Capital Contribution (as defined in Note 7) not repaid by the Company. See Note 7 Working Capital Subscription Agreements – 2024 Subscription Agreement.
NOTE 5 - TRUST ACCOUNT AND FAIR VALUE MEASUREMENT OF TRUST ACCOUNT
The Company complies with FASB ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
Upon the closing of the Public Offering and the
Private Placement, a total of $
15
As indicated in Notes 1 and 2, in connection with
the 2023 Extension Amendment, holders of
At March 31, 2024 and December 31, 2023, the balance
in the Trust Account was held in a demand deposit account. The balance in the Trust Account is presented at fair value. During the three
months ended March 31, 2024 and 2023, the Company withdrew approximately $
When it has them, the Company classifies its U.S. government treasury bills and equivalent securities as held-to-maturity in accordance with FASB ASC 320, “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity U.S. government treasury bills are recorded at amortized cost and adjusted for the amortization of discounts. There are no held-to-maturity securities held by the Company at March 31, 2024 or December 31, 2023.
NOTE 6 - WARRANT LIABILITIES
At March 31, 2024 and December 31, 2023, the Company
has
| Description | March 31, 2024 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
||||||||||||
| Warrant Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Derivative warrant liabilities at March 31, 2024 | $ | $ | $ | $ | ||||||||||||
| Description | December 31, 2023 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | ||||||||||||
| Warrant Liabilities: | ||||||||||||||||
| Public Warrants | $ | $ | $ | $ | ||||||||||||
| Private Placement Warrants | ||||||||||||||||
| Derivative warrant liabilities at December 31, 2023 | $ | $ | $ | $ | ||||||||||||
16
There were no transfers between levels during three months ended March 31, 2024 and the year ended December 31, 2023.
At March 31, 2024 and December 31, 2023, the Company valued its Public
Warrants based on publicly observable inputs (Level 1 inputs) from the trading of the Public Warrants in an active market ($
The derivative warrant liabilities are not subject to qualified hedge accounting.
Public Warrants
At March 31, 2024 and December 31, 2023, there
were
The Warrants have an exercise price of $
17
Redemption of Warrants when the price per share
of Class A common stock equals or exceeds $
| ● | in whole and not in part; |
| ● | at
a price of $ |
| ● | upon a minimum of 30 days’ prior written notice of redemption; and |
| ● | if,
and only if, the closing price of Class A common stock equals or exceeds $ |
Redemption of Warrants when the price per share
of Class A common stock equals or exceeds $
| ● | in whole and not in part; |
| ● | at
$ |
| ● | if,
and only if, the closing price of the shares of Class A common stock equals or exceeds $ |
| ● | if
the Reference Value is less than $ |
In no event will the Company be required to net cash settle any Warrant. If the Company is unable to complete a Business Combination within the 24-month period to complete the Business Combination (i.e. by October 1, 2023), or such later date if stockholders approve and extension of such date, and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such Warrants. Accordingly, the Warrants may expire worthless.
Private Placement Warrants
See Note 4 for information about the Company’s
outstanding Private Placement Warrants to purchase
18
NOTE 7 - WORKING CAPITAL SUBSCRIPTION AGREEMENTS
2023 Subscription Agreement
On October 13, 2023, the Company entered into a
subscription agreement (the “2023 Subscription Agreement”) with Hennessy Capital Group LLC, a Delaware limited liability company
(“HCG”), the Sponsor, and Polar Multi-Strategy Master Fund (“Polar”), pursuant to which Polar agreed to make a
$
The Company elected the fair value option to account for amounts received from the 2023 Subscription Agreement. As a result of applying the fair value option, the Company recognizes the amounts received at fair value, with subsequent changes in fair value recognized as a change in fair value in the consolidated statements of operations. The fair value is based on prices or valuation techniques that require significant inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own estimates about the assumptions a market participant would use in pricing the liability.
The estimated fair value of the 2023 Subscription
Agreement was $
The estimated fair value of the 2023 Subscription
Agreement was $
19
2024 Subscription Agreement
On January 16, 2024, the Company entered into a
subscription agreement (the “2024 Subscription Agreement”) with its Sponsor, Daniel J. Hennessy and Polar Multi-Strategy Master
Fund (“Polar”), pursuant to which Polar agreed to make a $
Subsequent to March 31, 2024, on April 1, 2024,
the Company received proceeds of $
The Company elected the fair value option to account for amounts received from the 2024 Subscription Agreement. As a result of applying the fair value option, the Company recognizes the amounts received at fair value, with subsequent changes in fair value recognized as a change in fair value in the consolidated statements of operations. The fair value is based on prices or valuation techniques that require significant inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own estimates about the assumptions a market participant would use in pricing the liability.
The estimated fair value of the 2024 Subscription Agreement was approximately
$
NOTE 8 - STOCKHOLDERS’ DEFICIT
Common Stock
The authorized common stock of the Company is
20
At March 31, 2024 and December 31, 2023, all
As indicated in Notes 1, 2 and 3, in connection
with the 2023 Extension Amendment, holders of
Non-Redemption Agreements
2023 Non-Redemption Agreements - In September
2023, the Company and its Sponsor entered into agreements (“2023 Non-Redemption Agreements”) with twenty-one unaffiliated
third-party investors in exchange for such investors agreeing not to redeem an aggregate of
The Company has estimated, with the assistance
of valuation professionals, the aggregate fair value of
2024 Non-Redemption Agreements - In January
2024, the Company and its Sponsor entered into agreements (“2024 Non-Redemption Agreements”) with fourteen unaffiliated third-party
investors in exchange for such investors agreeing not to redeem an aggregate of
The Company has estimated, with the assistance
of valuation professionals, the aggregate fair value of
Preferred Stock
The Company is authorized to issue
21
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties —
Conflict in Ukraine — In February 2022, the Russian Federation and Belarus commenced a military action against the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. The impact of this action and related sanctions on the world economy are not determinable as of the date of these unaudited condensed financial statements.
Excise Tax on Certain Repurchases of Stock (Including Redemptions) By Publicly Traded Domestic Corporations —
On August 16, 2022, the Inflation Reduction
Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
As discussed in Note 1 and elsewhere, during September
2023, holders of
Management is continuing to evaluate the requirements of the Inflation Reduction Act and the Company’s operations with respect to the January 2024 redemptions and has concluded that substantial uncertainties exist as to whether such redemptions would result in additional liability at March 31, 2024. As such no amount of potential additionally liability has been recorded at this time.
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (this “Quarterly Report”) to “we,” “us” or the “Company” refer to Hennessy Capital Investment Corp. VI. References to our “management” or our “management team” refer to our officers and directors. References to the “Sponsor” refer to Hennessy Capital Partners VI LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report.
Special Note Regarding Forward-Looking Statements
This Quarterly Report (including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future and any other statements that are not statements of current or historical facts. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements may be identified by the use of forward-looking terminology, including the words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “plans,” “may,” “might,” “plan,” “possible,” “potential,” “projects,” “predicts,” “will,” “would,” or “should,” or, in each case, their negative or other variations or comparable terminology, but the absence of these words does not mean that a statement is not forward-looking.
We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report, and undue reliance should not be placed on forward-looking statements. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods. The forward-looking statements contained in this Quarterly Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
These risks, uncertainties and assumptions include, but are not limited to, the following risks, uncertainties, assumptions and other factors:
| ● | our ability to select an appropriate target business or businesses; |
| ● | our ability to complete our initial business combination (our “Business Combination”); |
| ● | our expectations around the performance of a prospective target business or businesses; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial Business Combination; |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial Business Combination; |
| ● | our potential ability to obtain additional financing to complete our initial Business Combination; |
| ● | our pool of prospective target businesses, including the location and industry of such target businesses; |
23
| ● | the ability of our officers and directors to generate a number of potential business combination opportunities; |
| ● | our public securities’ potential liquidity and trading; |
| ● | the lack of a market for our securities; |
| ● | the availability to us of funds from interest income on the balance of the trust account into which certain proceeds of our initial public offering were placed (the “Trust Account”); |
| ● | the Trust Account not being subject to claims of third parties; |
| ● | our financial performance; or |
| ● | the other risks and uncertainties discussed under the heading “Risk Factors” and elsewhere in this Quarterly Report, in our Annual Report on Form 10-K for the year ended December 31, 2023 and in our registration statement on Form S-1 (File No. 333-254062) filed in connection with our initial public offering. |
The foregoing risks and uncertainties may not be exhaustive. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Overview
We are an early-stage blank check company incorporated on January 22, 2021 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We are actively pursuing discussions with potential business combination partners, and we have not yet entered into a definitive business combination agreement with any specific business combination target. However, our management team has engaged in discussions with potential business combination partners in their capacity as officers of Hennessy Capital Investment Corp. V (“Hennessy V”), and we may pursue potential business combination partners that had previously been in discussions with Hennessy V’s management team. We intend to effectuate our initial Business Combination using cash from the proceeds of our initial public offering and the sale of the private placement warrants, each of which entitles the holder to purchase one share of our Class A common stock at $11.50 per share (the “Private Placement Warrants”), our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our common or preferred stock in our initial Business Combination:
| ● | may significantly dilute the equity interest of investors in our initial public offering; |
| ● | may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock; |
| ● | could cause a change of control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and |
| ● | may adversely affect prevailing market prices for our Class A common stock and/or Public Warrants. |
24
Similarly, if we issue debt securities or otherwise incur significant indebtedness to finance our initial Business Combination, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; |
| ● | our inability to pay dividends on our common stock; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes; and |
| ● | other disadvantages compared to our competitors who have less debt. |
As of March 31, 2024, we had cash of approximately $6,000 and negative working capital of approximately $7,708,000, excluding income and franchise taxes that are paid from the trust account. Further, we are incurring, and expect to continue to incur, significant costs in the pursuit of an initial business combination. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Recent Events
Extensions of Time to Complete Business Combination, Related Redemptions of Shares of Class A Common Stock and Related Excise Tax
At a special meeting of stockholders held on September 29, 2023 (the “2023 Extension Meeting”), the Company’s stockholders approved the proposal (the “2023 Extension Amendment”) to amend and restate the Company’s certificate of incorporation to extend the date by which the Company must (i) consummate an initial Business Combination, (ii) cease all operations except for the purpose of winding up, and (iii) redeem or repurchase 100% of the public shares that was consummated on October 1, 2021, from October 1, 2023 to January 10, 2024 (or such earlier date as determined by the board of directors of the Company, the “Initial Extended Date”). At a special meeting of stockholders held on January 10, 2024 (the “2024 Extension Meeting”), the Company’s stockholders approved the proposal (the “2024 Extension Amendment”) to amend and restate the Company’s certificate of incorporation to extend the date by which the Company must (i) consummate an initial business combination, (ii) cease all operations except for the purpose of winding up, and (iii) redeem or repurchase 100% of the public shares from the Initial Extended Date, January 10, 2024 to September 30, 2024 (or such earlier date as determined by the board of directors of the Company, the “Extended Date”). The Company’s amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay tax obligations, if any (less up to $100,000 of interest to pay dissolution expenses), none of the funds held in trust will be released until the earliest of: (a) the completion of the initial business combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (i) to modify the substance or timing of the Company’s obligation to redeem 100% of the public shares if the Company does not complete the initial business combination by the Extended Date, or such later date if stockholders approve an extension of such date, or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, and (c) the redemption of the public shares if the Company is unable to complete the initial business combination prior to the Extended Date, or such later date if stockholders approve an extension of such date, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of creditors, if any, which could have priority over the claims of the Company’s public stockholders.
25
If stockholders were to approve an extension beyond the Extended Date, the Company would expect to receive a delisting notice from NASDAQ under their requirement that special purpose acquisition companies complete a business combination within three years of the effectiveness of its IPO registration statement. However, such delisting notice can be appealed and up to 180 days grace period given to the Company at the listing committee’s discretion.
On September 29, 2023, in connection with the 2023 Extension Meeting, stockholders holding 8,295,189 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As such, on October 12, 2023, the Company redeemed 8,295,189 shares of public shares for approximately $86,171,000, or approximately $10.39 per share. Subsequent to December 31, 2023, in January 2024, in connection with the 2024 Extension Meeting, stockholders holding 20,528,851 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As such, subsequent to December 31, 2023, in January 2024, the Company redeemed 20,528,851 shares of public shares for approximately $215,340,000, or approximately $10.49 per share. Following the redemptions in connection with the 2023 Extension Meeting and the 2024 Extension Meeting, the Company had 5,268,914 public shares outstanding.
In January 2024, in connection with the 2024 Extension Meeting, stockholders holding 20,528,851 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account. As such, in January 2024, the Company redeemed 20,528,851 shares of Class A common stock for approximately $215,340,000, or approximately $10.49 per share.
Management has evaluated the requirements of the Inflation Reduction Act and the Company’s operations, and has recorded a liability of 1% of the amount of the October 2023 redemptions, approximately $861,000, as of December 31, 2023. This liability is recorded as a reduction to accumulated deficit as it is related to the capital stock of the Company. Management is continuing to evaluate the requirements of the Inflation Reduction Act and the Company’s operations, with respect to the January 2024 redemptions and has concluded that substantial uncertainties exist as to whether such redemptions would result in additional liability at March 31, 2024 as such no amount of potential additionally liability has been recorded.
Non-Redemption Agreements
In September 2023, the Company and its sponsor entered into non-redemption agreements (“Non-Redemption Agreements”) with twenty-one unaffiliated third-party investors in exchange for such investors agreeing not to redeem an aggregate of 25,688,054 public shares (“September 2023 Non-Redeemed Shares”) at the 2023 Extension Meeting. In exchange for the foregoing commitment not to redeem the September 2023 Non-Redeemed Shares, our sponsor agreed to transfer to such investors an aggregate of 2,568,805 founder shares held by our sponsor, promptly following the closing of the Company’s initial business combination if they did not exercise their redemption rights with respect to the September 2023 Non-Redeemed Shares in connection with the 2023 Extension Meeting and the 2023 Extension Amendment was approved and effected by the Company’s filing with the Secretary of the State of Delaware of the First Amendment to the amended and restated certificate of incorporation.
The Company has estimated, with the assistance of valuation professionals, the aggregate fair value of 2,568,805 founder shares to be transferred pursuant to the Non-Redemption Agreements to be approximately $0.71 per founder share. The estimated fair value, approximately $1,825,000, was determined to be a deemed contribution to the capital of the Company from our sponsor in the statements of stockholders’ equity in accordance with Staff Accounting Bulletin (“SAB”) Topic 5T, and a business combination cost in the statement of operations. Pursuant to the Non-Redemption Agreements, the Company agreed not to satisfy any of its excise tax obligations from the interest earned on the funds in the trust account.
26
In January 2024, the Company and its sponsor entered into Non-Redemption Agreements with fourteen unaffiliated third-party investors in exchange for such investors agreeing not to redeem an aggregate of 5,112,264 public shares (“January 2024 Non-Redeemed Shares”) at the 2024 Extension Meeting. In exchange for the foregoing commitment not to redeem the January 2024 Non-Redeemed Shares, our Sponsor agreed to transfer to such investors an aggregate of 1,022,453 founder shares held by our sponsor, promptly following the closing of the Company’s initial business combination if they did not exercise their redemption rights with respect to the January 2024 Non-Redeemed Shares in connection with the 2024 Extension Meeting and that the 2024 Extension Amendment was approved and effected by the Company’s filing with the Secretary of the State of Delaware of the Second Amendment to the amended and restated certificate of incorporation.
The Company has estimated, with the assistance of valuation professionals, the aggregate fair value of 1,022,453 founder shares to be transferred pursuant to the Non-Redemption Agreements to be approximately $1.47 per founder share. The estimated fair value, approximately $1,500,000, was determined to be a deemed contribution to the capital of the Company from our sponsor in the statements of stockholders’ equity in accordance with Staff Accounting Bulletin (“SAB”) Topic 5T, and a business combination cost in the statement of operations. Pursuant to the Non-Redemption Agreements, the Company agreed not to satisfy any of its excise tax obligations from the interest earned on the funds in the trust account.
Subscription Agreements
On October 13, 2023, the Company entered into a subscription agreement (the “Polar Subscription Agreement I”) with HCG, our sponsor and Polar Multi-Strategy Master Fund (“Polar”), pursuant to which Polar agreed to make a $900,000 cash contribution to the Company (the “First Capital Contribution”) to cover working capital expenses of the Company in accordance with the terms and conditions set forth therein. Pursuant to the Polar Subscription Agreement I, the First Capital Contribution shall be repaid to Polar by the Company upon closing of an initial business combination (the “Closing”). Polar may elect to receive such repayment (i) in cash or (ii) in shares of Class A common stock of the surviving entity in such initial business combination (the “Surviving Entity”) at a rate of one share of Class A common stock for each ten dollars ($10.00) of the First Capital Contribution. In consideration of the foregoing First Capital Contribution, the Company has agreed to issue, or to cause the Surviving Entity to issue, 0.9 of a share of Class A common stock of the Surviving Entity for each dollar ($1.00) of the First Capital Contribution funded as of or prior to the Closing. Pursuant to the Polar Subscription Agreement I, the Surviving Entity shall use its reasonable best efforts to cause any shares of Class A common stock issued to Polar pursuant to the Polar Subscription Agreement I to be registered on the first registration statement filed by the Surviving Company following the Closing, which shall be filed no later than 30 days following the Closing and declared effective no later than 90 days following the Closing. Upon certain events of default under the Polar Subscription Agreement I or if the Surviving Entity fails to file a registration statement to register the shares of Class A common stock issued to Polar within 30 days after the Closing and to have such registration statement declared effective within 90 days after the Closing, the Company (or the Surviving Entity, as applicable) shall issue to Polar an additional 0.1 of a share of Class A common stock for each dollar of the First Capital Contribution funded as of the date of such default, and for each month thereafter until such default of failure is cured, subject to certain limitations provided for therein. In the event the Company liquidates without consummating an initial business combination, any amounts remaining in the Company’s cash accounts (excluding the Company’s trust account) will be paid to Polar by the Company within five (5) calendar days of the liquidation, and such amounts shall be the sole recourse for Polar.
HCG agreed to purchase from Polar, and Polar agreed to transfer to HCG, effective upon execution of the Polar Subscription Agreement I, (i) 100,000 redeemable private placement warrants and (2) 37.5% of Polar’s right under its existing 2021 subscription agreement (entered into in connection with our initial public offering) to purchase up to 150,000 shares of the Class B common stock from our sponsor, for an aggregate cash purchase price of $150,000.
27
On January 16, 2024, the Company entered into the Polar Subscription Agreement II with the Sponsor and Polar pursuant to which Polar agreed to make the Second Capital Contribution to cover working capital expenses and certain potential excise tax obligations of the Company in accordance with the terms and conditions set forth therein. Pursuant to the Polar Subscription Agreement II, the Second Capital Contribution shall be repaid to Polar by the Company upon Closing. Polar may elect to receive such repayment (i) in cash or (ii) in shares of Class A common stock of the Surviving Entity at a rate of one share of Class A common stock for each ten dollars ($10.00) of the Second Capital Contribution. In consideration of the foregoing Second Capital Contribution, the Company has agreed to issue, or to cause the Surviving Entity to issue, 70,000 shares of Class A common stock of the Surviving Entity (the “Subscription Shares”) to Polar as of or prior to the Closing. Pursuant to the Polar Subscription Agreement II, the Surviving Entity shall use its reasonable best efforts to cause the Subscription Shares issued to Polar pursuant to the Polar Subscription Agreement II to be registered on the first registration statement filed by the Surviving Company following the Closing, which shall be filed no later than 30 days following the Closing and declared effective no later than 90 days following the Closing. Upon certain events of default under the Polar Subscription Agreement II or if the Surviving Entity fails to file a registration statement to register the Subscription Shares issued to Polar within 30 days after the Closing and to have such registration statement declared effective within 90 days after the Closing, the Company (or the Surviving Entity, as applicable) shall issue to Polar an additional 0.1 of a share of Class A common stock for each one dollar ($1.00) of the Second Capital Contribution funded as of the date of such default, and for each month thereafter until such default of failure is cured, subject to certain limitations provided for therein. In the event the Company (1) liquidates without consummating an initial business combination or (2) consummates an initial business combination, the Company shall repay the Second Capital Contribution within 30 calendar days of the liquidation or within five (5) business days of the Closing (as applicable, the “Specified Period”). In the event that such Second Capital Contribution is not repaid in full within the Specified Period, Daniel J. Hennessy, our Chairman and Chief Executive Officer, has agreed (in his individual capacity) to purchase from Polar all of Polar’s remaining rights under the Polar Subscription Agreement II (excluding the right to receive the Subscription Shares, which shall remain with Polar) for a cash amount equal to the portion of the Second Capital Contribution not repaid by the Company.
Subsequent to March 31, 2024, on April 1, 2024, the Company received proceeds of $1,750,000 under the Polar Subscription Agreement II.
The Company elected the fair value option to account for amounts received from the Polar Subscription Agreement I and II. As a result of applying the fair value option, the Company recognizes the amounts received at fair value, with subsequent changes in fair value recognized as a change in fair value in the consolidated statements of operations. The fair value is based on prices or valuation techniques that require significant inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own estimates about the assumptions a market participant would use in pricing the liability.
The estimated fair value of the 2024 Subscription Agreement was approximately $1,750,000 upon subscription at January 16, 2024; however, the subscription was not funded until after March 31, 2024 on April 1, 2024. The estimated fair value at issuance, was determined by summing the future cash payment discounted at a risk-adjusted discount rate, which is an income approach, then adjusting such amount by the probability of merger. The significant unobservable inputs, or Level 3 measurements, at the date of issuance and January 16, 2024. included the risk-adjusted discount rate of 12.5% and probability of merger closing of 14%.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for and consummate our initial public offering and, subsequent to completion of our initial public offering on October 1, 2021, identifying and completing a suitable initial Business Combination. Following our initial public offering, we do not and will not generate any operating revenues until after completion of our initial Business Combination, if at all. We currently generate non-operating income in the form of interest income on cash and investments after our initial public offering. Since our initial public offering, we have incurred increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for professional and consulting fees and travel associated with evaluating various initial Business Combination candidates, as well as costs in connection with negotiating and executing a definitive agreement and related agreements and proxy materials. Our expenses have increased, and will likely continue to increase, substantially since the closing of our initial public offering on October 1, 2021.
28
We account for the Public Warrants and Private Placement Warrants issued in connection with our initial public offering as warrant liabilities and not equity. As a result, we are required to measure the fair value of the Warrants when they are issued and then at the end of each reporting period and to recognize changes in the fair value from the prior period in our operating results for each current period. Such amounts can be material and can be either other income or other expense. We account for all of the Class A common stock issued in our initial public offering as redeemable stock and not permanent equity and so we report negative stockholders’ deficit and expect to continue to do so.
The Company elected the fair value option to account for amounts received from the Polar Subscription Agreement I and II. As a result of applying the fair value option, the Company recognizes the amounts received at fair value, with subsequent changes in fair value recognized as a change in fair value in the consolidated statements of operations. The fair value is based on prices or valuation techniques that require significant inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own estimates about the assumptions a market participant would use in pricing the liability.
The Company accounts for the aggregate fair value of founder shares to be transferred pursuant to the 2023 and 2024 Non-Redemption Agreements as a deemed contribution to the capital of the Company from its sponsor in the unaudited condensed statements of stockholders’ equity in accordance with Staff Accounting Bulletin (“SAB”) Topic 5T, and as a business combination cost in the unaudited statement of operations.
General and administrative expenses — For the three months ended March 31, 2024, we had a loss from operations of approximately $2,322,000, consisting primarily of costs associated with the estimated fair value of founder shares provided as compensation to investors for entering into the Non-Redemption Agreements of approximately $1,500,000, costs for being a public company of approximately $240,000 (including approximately $55,000 of proxy-related costs), compensation of approximately $162,000, respectively (approximately $80,000 of which is deferred), approximately $50,000 of franchise taxes, approximately $45,000 of administrative fees to our Sponsor, and approximately $325,000 of costs associated with searching for a suitable business combination and other costs.
- For the three months ended March 31, 2023, we had a loss from operations of approximately $1,045,000 consisting primarily of costs for being a public company of approximately $183,000, compensation of approximately $249,000, respectively (approximately $122,000 of which is deferred), approximately $50,000 of franchise taxes, approximately $45,000 of administrative fees to our Sponsor, and approximately $518,000 of costs associated with searching for a suitable business combination and other costs.
Other income (expense) — In addition to operating costs, for the three March 31, 2024, we had other expense of approximately $1,733,000, representing the increase in fair value of our warrant liability during the period of approximately $744,000 plus the increase in fair value of our Extension Notes payable of $1,916,000, partially offset by interest income of approximately $927,000 on our demand deposits in the Trust Account.
For the three months ended March 31, 2023, we had other income of approximately $2,541,000 consisting of approximately $3,655,000 of interest income partially offset by other expense of approximately $1,114,000 representing the increase in fair value of our warrant liability during the period.
The change in the interest income is the result of market conditions as well as significant decreases in the Trust Account due to redemptions in September 2023 and January 2024.
Provision for income taxes — The provision for income taxes in the three months ended March 31, 2024, $213,000 results from taxable interest income offset by deductible franchise taxes. Since the Company’s operating expenses are considered non-deductible start-up costs or business combination expenses, they are not deductible for income tax purposes. Further, the change in value of our derivative warrant liabilities and our Extension Notes, as well as the estimated fair value of founder shares provided in Non-Redemption Agreements do not result in taxable income or expense.
The provision for income tax in the three months ended March 31, 2024 was approximately $770,000 and resulted from taxable interest income offset by deductible franchise taxes.
29
Liquidity and Capital Resources
Our liquidity needs prior to the completion of our initial public offering were satisfied through receipt of $25,000 from the sale of the founder shares and up to $500,000 in loans from our Sponsor under an unsecured promissory note, $195,000 of which was borrowed prior to, and then fully repaid at, the October 1, 2021 closing of our initial public offering. The net proceeds from: (1) the sale of our units in our initial public offering (including the additional units sold on October 21, 2021 pursuant to the partial exercise of the underwriters’ over-allotment option), after deducting offering expenses of approximately $990,000 and underwriting commissions of approximately $6,819,000 (excluding total deferred underwriting commissions of $11,933,000 at the time of our initial public offering), and (2) the sale of the Private Placement Warrants (including the additional Private Placement Warrants sold on October 21, 2021 in connection with the partial exercise of the underwriters’ over-allotment option) for a purchase price of approximately $10,819,000, was $343,940,000. Of this amount, approximately $340,930,000, which includes approximately $11,933,000 of total deferred underwriting commissions at the time of our initial public offering, was deposited into the Trust Account. The remaining approximately $3,010,000 will not be held in the Trust Account. The funds in the Trust Account have been held in an interest-bearing demand deposit account or invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940 and that invest only in direct U.S. government obligations.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (which interest shall be net of taxes payable), if any, to complete our initial Business Combination. We have made and will make withdrawals from the Trust Account to pay our taxes, including franchise taxes and income taxes. Delaware franchise tax is based on our authorized shares or on our assumed par and non-par capital, whichever yields a lower result. Under the authorized shares method, each share is taxed at a graduated rate based on the number of authorized shares with a maximum aggregate tax of $200,000 per year. Under the assumed par value capital method, Delaware taxes each $1,000,000 of assumed par value capital at the rate of $400; where assumed par value would be (1) our total gross assets divided by (2) our total issued shares of common stock, multiplied by (3) the number of our authorized shares. Based on the number of shares of our common stock authorized and outstanding and our total gross assets, our annual franchise tax obligation is expected to be capped at the maximum amount of annual franchise taxes payable by us as a Delaware corporation of $200,000. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We expect the only taxes payable by us out of the funds in the Trust Account will be income and franchise taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
Prior to the completion of our initial Business Combination, in addition to our costs associated with operating as a listed public company, our principal use of working capital will be to fund our activities to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete an initial Business Combination.
In addition, we may pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
30
In June 2023, the Sponsor loaned $200,000 to the Company. In October 2023, Polar made a capital contribution to the Company of $900,000. In January 2024, Polar agreed to make an additional capital contribution to the Company of $1,750,000, which contribution was made subsequent to March 31, 2024 on April 1, 2024.
On September 29, 2023, in connection with the 2023 Extension Meeting, stockholders holding 8,295,189 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As such, on October 12, 2023, the Company redeemed 8,295,189 shares of Class A common stock for approximately $86,171,000, or approximately $10.39 per share. Management has evaluated the requirements of the Inflation Reduction Act and the Company’s operations, and has an excise tax liability of 1% of the redemption amount, approximately $861,000 accrued on its unaudited condensed balance sheet at March 31, 2024 and its balance sheet at December 31, 2024. This liability was recorded as a reduction to stockholders’ deficit as it is related to the capital stock of the Company.
In January 2024, in connection with the 2024 Extension Meeting, stockholders holding 20,528,851 shares of Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the Trust Account. As such, in January 2024, the Company redeemed 20,528,851 shares of Class A common stock for approximately $215,340,000, or approximately $10.49 per share. Management is continuing to evaluate the requirements of the Inflation Reduction Act and the Company’s operations with respect to the January 2024 redemptions and has concluded that substantial uncertainties exist as to whether such redemptions would result in additional liability at March 31, 2024. As such no amount of potential additionally liability has been recorded at this time.
Mandatory Liquidation, Liquidity and Going Concern:
The Company had approximately $6,000 in cash and approximately 7,708,000 of negative working capital (excluding approximately $304,000 of taxes payable that will be paid from interest income earned on assets held in the Trust Account) at March 31, 2024. Subsequent to March 31, 2024, on April 2024, the Company consummated a commitment for $1,750,000 of additional capital which was funded on April 1, 2024, as further discussed in Note 7. However, if the Company cannot complete a Business Combination before the Extended Date, September 30, 2024, or such later date if stockholders approve an extension of such date, it could be forced to wind up its operations and liquidate unless it receives an extension approval from its stockholders. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the unaudited condensed financial statements are issued. The Company’s plan to deal with this uncertainty is to complete a Business Combination prior to the Extended Date, or such later date if stockholders approve an extension of such date, to receive working capital from its Sponsor and another investor to the extent necessary and to work with creditors to defer payments. There is no assurance that the Company’s plans to consummate a Business Combination, work with creditors to defer payments and continue to receive loans, if available, from its Sponsor and another investor will be successful or successful within the required timeframe. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.
We cannot assure you that our plans to raise capital or to consummate an initial Business Combination will be successful.
Our Sponsor, an affiliate of our Sponsor or our officers and directors may, but none of them is obligated to, loan us funds as may be required to fund our working capital requirements. Up to $1,500,000 of such loans may be convertible into Warrants at a price of $1.50 per Warrant at the option of the lender. The Warrants would be identical to the Private Placement Warrants issued to our Sponsor, our direct anchor investors and our other anchor investors. The terms of such loans by our Sponsor, an affiliate of our Sponsor or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. In June 2023, the Sponsor loaned $200,000 to the Company. Such loan bears no interest and may be converted to 133,333 Warrants at the option of the lender as described above. The Company has determined that the fair value of the conversion feature is immaterial and therefore the loan has been recorded at par value. As of March 31, 2024 and December 31, 2023, there was $200,000 and $200,000 outstanding under the working capital loan.
31
On October 13, 2023, the Company entered into the Polar Subscription Agreement I with HCG, the Sponsor, and Polar, pursuant to which Polar agreed to make a $900,000, cash contribution to the Company to cover working capital expenses of the Company in accordance with the terms and conditions set forth therein and as further described in “—Recent Events—Subscription Agreements” above.
On January 10, 2024, the Company entered into the Polar Subscription Agreement II with HCG, Daniel J. Hennessy, the Sponsor, and Polar, pursuant to which Polar agreed to make a $1,750,000 cash contribution to the Company to cover working capital expenses of the Company in accordance with the terms and conditions set forth therein and as further provided in “—Recent Events—Subscription Agreements” above.
If we complete our initial Business Combination, we would repay amounts loaned under the Sponsor’s working capital loan and return the Capital Contribution made by Polar pursuant to the terms of the Polar Subscription Agreement I and II out of the proceeds of the trust account released to us. In the event that our initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such amounts but no proceeds from our trust account would be used for such repayment.
We do not expect to seek loans from parties other than our Sponsor, Polar, an affiliate of our Sponsor or our officers and directors, if any, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.
If our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial Business Combination exceed our expectations, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such initial Business Combination. In addition, we intend to target businesses with enterprise values that are greater than we could acquire with the net proceeds of our initial public offering and the sale of the Private Placement Warrants, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy redemptions by public stockholders, we may be required to seek additional financing to complete such proposed initial Business Combination. We may also obtain financing prior to the closing of our initial Business Combination to fund our working capital needs and transaction costs in connection with our search for and completion of our initial Business Combination. There is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances or other indebtedness in connection with our initial Business Combination, including pursuant to forward purchase agreements or backstop arrangements we may enter into following the consummation of our initial public offering. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial Business Combination. If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Off-balance sheet financing arrangements
As of March 31, 2024, we have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any agreements for non-financial assets.
32
Contractual obligations
At March 31, 2024, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. In connection with our initial public offering, we entered into an Administrative Support Agreement with Hennessy Capital Group LLC, an affiliate of our Sponsor, pursuant to which the Company pays Hennessy Capital Group LLC $15,000 per month for office space, utilities and secretarial and administrative support.
In June 30, 2023, the Sponsor loaned $200,000 to the Company. Such loan bears no interest and may be converted to 133,333 Warrants at the option of the lender as described in “—Liquidity and Capital Resources— Mandatory Liquidation, Liquidity and Going Concern” above.
In October 2023, the Company entered into the Polar Subscription Agreement I with HCG, the Sponsor and Polar, pursuant to which the Company agreed to return the First Capital Contribution to Polar. Polar may elect to receive such repayment (i) in cash or (ii) in shares of Common Stock at a rate of one share of Common Stock for each ten dollars ($10.00) of the First Capital Contribution. The Company must also issue to Polar 0.9 of a share of Common Stock for each dollar ($1.00) of the First Capital Contribution funded as of or prior to the Closing. The terms and conditions of the Subscription Agreement are described in additional detail in “—Recent Events—Subscription Agreements” above.
On January 16, 2024, the Company entered into the Polar Subscription Agreement II with the Sponsor and Polar pursuant to which Polar agreed to make the Second Capital Contribution to cover working capital expenses and certain potential excise tax obligations of the Company in accordance with the terms and conditions set forth therein. Pursuant to the Polar Subscription Agreement II, the Second Capital Contribution shall be repaid to Polar by the Company upon Closing. Polar may elect to receive such repayment (i) in cash or (ii) in shares of Class A common stock of the Surviving Entity at a rate of one share of Class A common stock for each ten dollars ($10.00) of the Second Capital Contribution. In consideration of the foregoing Second Capital Contribution, the Company has agreed to issue, or to cause the Surviving Entity to issue, 70,000 shares of Class A common stock of the Surviving Entity (the “Subscription Shares”) to Polar as of or prior to the Closing. The terms and conditions of the Subscription Agreement are described in additional detail in “—Recent Events—Subscription Agreements” above.
Also, commencing on September 29, 2021, the date our securities were first listed on the Nasdaq Global Market, we have agreed to compensate each of our President and Chief Operating Officer as well as our Chief Financial Officer $29,000 per month prior to the consummation of our initial Business Combination, of which $14,000 per month is payable upon the completion of our initial Business Combination and $15,000 per month is payable currently for their services. Since January 1, 2022, we have been compensating a Vice President at the rate of $25,000 per month, $12,500 of which is paid currently for his services and $12,500 of which is payable upon the closing of our initial Business Combination. An aggregate of approximately $162,000 and $249,000, respectively, was charged for operations for the three months ended March 31, 2024. Deferred compensation – related parties includes approximately $1,080,000 under this obligation for the period from September 29, 2021 to March 31, 2024.
During August 2023, payments under the agreements to the Company’s Chief Operating Officer ceased in connection with his resignation as an officer (but not as a director) of the Company.
Upon completion of the initial Business Combination or our liquidation, the Company will cease paying or accruing these monthly fees.
In connection with identifying an initial Business Combination candidate and negotiating an initial Business Combination, we may enter into engagement letters or agreements with various consultants, advisors, professionals and others in connection with an initial Business Combination. The services under these engagement letters and agreements can be material in amount and in some instances can include contingent or success fees. Contingent or success fees (but not deferred underwriting compensation) would be charged to operations in the quarter that our initial Business Combination is consummated. In most instances (except with respect to our independent registered public accounting firm), these engagement letters and agreements are expected to specifically provide that such counterparties waive their rights to seek repayment from the funds in the Trust Account.
33
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. In October 2023 and January 2024, the Company entered into the 2023 and 2024 Subscription Agreements for which the Company was to receive cash contributions to the Company of $900,000 and $1,750,000 to cover working capital expenses of the Company in accordance with the terms and conditions set forth therein. Such contributions shall be repaid upon closing of an initial business combination and contain various conversion or share issuance opportunities that make them complex financial instruments. The Company has adopted the fair value option in accounting for such agreements. The fair value option requires that a valuation be made of each instrument at each reporting date. Because there are limited observable inputs, such valuations are made using Level 3 estimates of value using unobservable inputs. Making such judgments of value are subjective and involves professional valuation skill. Because of that, the Company employs valuation professionals to make such fair value assessments. As such, the fair value of the Company’s extension promissory notes is a critical accounting estimate. A key metric used to calculate fair value is the probability of the closing of a business combination. Since the initial October 2023 subscription agreement this valuation metric has varied from 9.7% at inception in October and again at December 31, 2024, then 14% at inception of the 2024 Subscription Agreement and 30% at March 31, 2024. The change from 9.7% at inception in October 2023 to 30% at March 31, 2024 had a $1,916,000 impact (increase) on the amount initially recorded at inception ($900,000).
Management does not believe that the Company has any other critical accounting estimates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of March 31, 2024, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of March 31, 2024, our disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
34
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the knowledge of our management, there is no litigation currently pending against us, any of our officers or directors in their capacity as such or against any of our property.
ITEM 1A. RISK FACTORS
As of the date of this Quarterly Report there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 29, 2024. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(c) During the three months ended March 31, 2024,
no director or officer of the Company
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q:
| * | Filed herewith |
| ** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
35
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HENNESSY CAPITAL INVESTMENT CORP. VI | ||
| Dated: May 15, 2024 | /s/ Daniel J. Hennessy | |
| Name: | Daniel J. Hennessy | |
| Title: | Chairman of the Board of Directors and | |
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: May 15, 2024 | /s/ Nicholas A. Petruska | |
| Name: | Nicholas A. Petruska | |
| Title: | Executive Vice President, Chief | |
| Financial Officer and Secretary | ||
| (Principal Financial and Accounting Officer) | ||
36