UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ______ to _____
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter) |
| ||
(State or Other Jurisdiction of Incorporation) |
| (I.R.S. Employer Identification No.) |
| ||
(Address of Principal Executive Offices) | (Zip Code) |
( |
(Registrant’s telephone number, including area code) |
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 Data File required to be submitted 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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 by Rule 12b-2 of the Exchange Act). Yes
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
| Trading symbol(s) |
|
| Name of each exchange on which registered |
|
| |||||
|
| |||||
|
|
As of August 11th, 2022,
BANNER ACQUISITION CORP.
Form 10-Q
Table of Contents
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
BANNER ACQUISITION CORP.
CONDENSED BALANCE SHEETS
JUNE 30, 2022 | DECEMBER 31, 2021 | |||||
(Unaudited) | (Audited) | |||||
ASSETS |
|
| ||||
Cash and cash equivalents | $ | | $ | | ||
Prepaid expenses |
| |
| | ||
Total current assets | | | ||||
Marketable Securities held in Trust Account |
| |
| | ||
Other assets | | | ||||
Total Assets | $ | | $ | | ||
LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ DEFICIT |
|
|
|
| ||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Income tax payable | | — | ||||
Franchise tax payable | | | ||||
Accrued expenses | | | ||||
Total current liabilities | | | ||||
Deferred underwriting fees payable |
| |
| | ||
Total liabilities |
| |
| | ||
|
|
|
| |||
Commitments and Contingencies (Note 6) |
|
|
|
| ||
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, Common Stock Subject to Possible Redemption, and Stockholders’ Deficit | $ | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
BANNER ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For The Period | ||||||||||||
From March 12, | ||||||||||||
For The | For The | For The | 2021 (Inception) | |||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Through | |||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Formation costs | $ | — | $ | — | $ | — | $ | | ||||
General and administrative expenses | | | | | ||||||||
Franchise tax expenses | | — | | — | ||||||||
Loss from operations | ( | ( | ( | ( | ||||||||
Gain on marketable securities (net), dividends and interest, held in Trust Account | | — | | — | ||||||||
Loss before income tax expense | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Income tax expense | | — | | — | ||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average shares outstanding of Class A common stock subject to possible redemption, basic and diluted |
| | — |
| | — | ||||||
Basic and diluted net loss per share, Class A subject to possible redemption | ( | | ( | |||||||||
Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted | | |
| |
| | ||||||
Basic and diluted net loss per share, Class B non-redeemable common stock | ( | ( | ( | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
BANNER ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND FOR THE THREE MONTHS
ENDED AND THE PERIOD FROM MARCH 12, 2021 (INCEPTION) THROUGH JUNE 30, 2021
Common Stock Subject to | ||||||||||||||||||||
Possible Redemption | Common Stock | Additional | Total | |||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||
| Amount |
| Shares | Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | ||||||||
Balance as of January 1, 2022 (audited) | | $ | | | $ | | $ | — | $ | ( | $ | ( | ||||||||
Issuance of common stock to Directors | — | — | | | | | ||||||||||||||
Forfeiture of Founder Shares by Sponsor | — | — | ( | ( | | | — | |||||||||||||
Net loss | — | — | — | — | — | ( | ( | |||||||||||||
Balance as of March 31, 2022 (unaudited) | | $ | | | $ | | $ | | $ | ( | $ | ( | ||||||||
Net loss |
| — |
| — | — | — |
| — |
| ( |
| ( | ||||||||
Balance as of June 30, 2022 (unaudited) |
| | $ | | | $ | | $ | | $ | ( | $ | ( |
Common Stock Subject to | ||||||||||||||||||||
Possible Redemption | Common Stock | Additional | Total | |||||||||||||||||
Class A | Class B | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||
| Shares |
| Amount | Shares |
| Amount |
| Capital |
| Deficit |
| Equity (Deficit) | ||||||||
Balance as of March 12, 2021 (inception) | | $ | | | | $ | | $ | | $ | | |||||||||
Issuance of common stock to Sponsor | — | — | | | | — | | |||||||||||||
Net loss | — | — | — | — | — | ( | ( | |||||||||||||
Balance as of March 31, 2021 (unaudited) | — | — | | $ | | $ | | $ | ( | $ | | |||||||||
Net loss |
| — |
| — | — | — |
| — |
| ( |
| ( | ||||||||
Balance as of June 30, 2021 (unaudited) |
| — | $ | — | | $ | | $ | | $ | ( | $ | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
BANNER ACQUISITION CORP.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For The Period | ||||||
From March 12, | ||||||
For The Six | 2021 (Inception) | |||||
Months Ended | Through June | |||||
June 30, 2022 | 30, 2021 | |||||
Cash Flows from Operating Activities |
|
|
| |||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
| |||
Gain on marketable securities (net), dividends and interest, held in Trust Account | ( | — | ||||
Formation and operating expenses paid in exchange for Founder Shares | — | | ||||
Changes in operating assets and liabilities: |
|
|
|
| ||
Prepaid and other assets | | — | ||||
Accounts payable |
| |
| | ||
Accrued expenses (including franchise tax payable and income tax payable) | ( | — | ||||
Net cash used in operating activities |
| ( |
| — | ||
Cash Flows from investing activities | ||||||
Withdrawal from Trust Account for tax payment | | — | ||||
Net cash provided by investing activities | | — | ||||
Cash Flows from Financing Activities |
|
|
|
| ||
Proceeds from the issuance of common stock to directors |
| |
| — | ||
Net cash provided by financing activities |
| |
| — | ||
Net decrease in cash | ( | — | ||||
Cash — beginning of period |
| |
| | ||
Cash — end of period | $ | | $ | | ||
Supplemental disclosure of noncash investing and financing activities: |
|
|
| |||
Offering costs included in accounts payable | $ | — | $ | | ||
Offering costs included in accrued expenses | — | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
1. Description of Organization, Business Operations, Liquidity and Capital Resources, and Basis of Presentation
Organization and General
Banner Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on March 12, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with
As of June 30, 2022, the Company had not yet commenced operations. All activity for the period from March 12, 2021 (inception) through June 30, 2022 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), described below, and since the closing of the Initial Public Offering, the search for a prospective acquisition target for a Business Combination. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Banner SPAC Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The Registration Statement for the Initial Public Offering was declared effective on September 7, 2021. In September 2021, the Company consummated its Initial Public Offering of
On September 10, 2021, simultaneously with the closing of the Initial Public Offering and pursuant to the Private Placement Warrants Purchase Agreement, dated September 7, 2021, between the Company and the Sponsor (the “Private Warrant Purchase Agreement”), the Company completed the private sale (the “Private Placement”) of
A total of $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete
5
The Company will provide the holders (the “Public Stockholders”) of the Company’s issued and outstanding Class A Common Stock, par value $
The Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
6
If the Company is unable to complete a Business Combination within
The initial stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriter has agreed to waive its rights to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. 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 only $
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the 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 statements, operating results and cash flows for the period presented.
The interim results for the period ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
7
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
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 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 election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a 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 standard. This may make comparison of the Company’s unaudited 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.
Liquidity and Capital Resources
As of June 30, 2022, the Company had $
The Company’s liquidity needs through June 30, 2022 and December 31, 2021, were satisfied through loans from the Sponsor and the proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (defined below, see Note 5). As of June 30, 2022 and December 31, 2021, there were
Management has determined that the Company has access to funds from the Sponsors, and the Sponsors have the financial wherewithal to fund the Company, that are sufficient to fund its working capital needs until the consummation of a Business Combination or for a minimum of
Going Concern
On a routine basis, we assess going concern considerations in accordance with FASB ASC 205-40 “Presentation of Financial Statements - Going Concern”. As of June 30, 2022 and December 31, 2021, we had $
8
We have until March 10, 2023 to consummate a Business Combination. If a Business Combination is not consummated by this date and an extension is not requested by the Sponsor there will be a mandatory liquidation and subsequent dissolution of the Company. While Management expects to complete a Business Combination prior to March 10, 2023, this date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with 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 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 at the date of the financial statements, 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.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $
Marketable Securities Held in Trust Account
As of June 30, 2022 and December 31, 2021, the assets held in the Trust Account were invested in money market funds. Money market funds are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in gain on marketable securities, dividends and interest held in the Trust Account in the accompanying statement of operations. The fair value for money market funds is determined using quoted market prices in active markets. As a result, the assets held in the Trust Account as of June 30, 2022 and December 31, 2021 were assessed as Level 1 assets.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of June 30, 2022 and as of December 31, 2021, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity (deficit) section of the Company’s balance sheet.
9
Gross proceeds |
| | |
Less: |
|
| |
Fair value of Public Warrants at issuance |
| ( | |
Class A common stock issuance costs |
| ( | |
Plus: |
|
| |
Re-measurement of carrying value to redemption value |
| | |
Class A common stock subject to possible redemption | |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $
Fair Value Measurements
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. 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 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.
As of June 30, 2022 and December 31, 2021, the carrying values of cash, prepaid expenses, other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of the instruments. The Company’s portfolio of marketable securities held in the Trust Account is comprised of money market funds.
Offering Costs Associated with the Initial Public Offering
Offering costs consist of legal, accounting, underwriting and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering. Upon the completion of the Initial Public Offering, the offering costs were allocated using the relative fair values of the Company’s Class A Common Stock and its Public Warrants and Private Placement Warrants. The costs allocated to Public and Private Placement warrants were recognized as a charge against additional paid-in capital, and those related to the Company’s Class A Common Stock were recognized as a charge against the carrying value of Class A Common Stock.
10
Net Loss Per Share of Common Stock
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the periods.
A reconciliation of the net loss per share is below:
For The Period | ||||||||||||
From March 12, | ||||||||||||
For The Three | For The Three | For The Six | 2021 (Inception) | |||||||||
Months Ended | Months Ended | Months Ended | Through June 30, | |||||||||
| June 30, 2022 |
| June 30, 2021 |
| June 30, 2022 |
| 2021 | |||||
Redeemable Class A Common Stock |
|
| ||||||||||
Numerator: Net loss allocable to Redeemable Class A Common Stock | $ | ( | $ | | $ | ( | $ | | ||||
| ||||||||||||
Denominator: Weighted Average Share Outstanding, Redeemable Class A Common Stock | ||||||||||||
Basic and diluted weighted average shares outstanding, Redeemable Class A | | | | | ||||||||
Basic and diluted net loss per share, Class A subject to possible redemption | ( | | ( | | ||||||||
Non-Redeemable Class B Common Stock | ||||||||||||
Numerator: Net loss allocable to non-redeemable Class B Common Stock | ||||||||||||
Net loss allocable to non-redeemable Class B Common Stock | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Denominator: Weighted Average Non-Redeemable Class B Common Stock | | | | | ||||||||
Basic and diluted net loss per share, Class B non-redeemable Common Stock | ( | ( | ( | ( |
The shares of Class B Common Stock will automatically convert into shares of Class A Common Stock at the time of the Company’s initial Business Combination on a
The Company’s statement of operations includes a presentation of loss per share for shares of common stock subject to possible redemption in a manner similar to the two-class method of loss per share. With respect to the adjustment of the Class A Common Stock subject to possible redemption and consistent with ASC Topic 480-10-S99-3A, the Company has treated the adjustment in the same manner as a dividend in the calculation of the net loss per common stock.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements 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.
11
ASC Topic 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. The Company’s management determined that the United States is the Company’s only major tax jurisdiction. There were
Recent Accounting Pronouncements
In August 2020 the FASB issued a new standard (ASU 2020-06) to reduce the complexity of accounting for convertible debt and other equity-linked instruments. For certain convertible debt instruments with a cash conversion feature, the changes are a trade-off between simplifications in the accounting model (no separation of an “equity” component to impute a market interest rate, and simpler analysis of embedded equity features) and a potentially adverse impact to diluted EPS by requiring the use of the if-converted method. The new standard will also impact other financial instruments commonly issued by both public and private companies. For example, the separation model for beneficial conversion features is eliminated simplifying the analysis for issuers of convertible debt and convertible preferred stock. Also, certain specific requirements to achieve equity classification and/ or qualify for the derivative scope exception for contracts indexed to an entity’s own equity are removed, enabling more freestanding instruments and embedded features to avoid mark-to-market accounting. The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods within that year, and two years later for other companies. Companies can early adopt the standard at the start of a fiscal year beginning after December 15, 2020. The standard can either be adopted on a modified retrospective or a full retrospective basis. The Company is currently reviewing the newly issued standard and does not believe it will materially impact the Company.
3. Initial Public Offering
In September 2021, the Company consummated its Initial Public Offering of
4. Private Placement Warrants
On September 10, 2021, simultaneously with the closing of the Initial Public Offering and pursuant to the Private Warrant Purchase Agreement, the Company completed the private sale of
12
5. Related Party Transactions
Founder Shares
In March 2021, the Sponsor acquired
Class B Founder Shares
The Class B Common Stock is convertible into shares of our Class A Common Stock on a
Certain qualified institutional buyers or institutional accredited investors not affiliated with the Company, the Sponsor or any member of the Company’s management expressed to the Company an interest in purchasing up to
Related Party Working Capital Loan
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lender’s discretion, up to $
13
Related Party Promissory Note
On March 12, 2021, the Sponsor agreed to loan the Company an aggregate of up to $
Administrative Support Agreement
Commencing on the date the Units are first listed on NASDAQ, the Company has agreed to reimburse the Sponsor or an affiliate thereof in an amount equal to $
6. Commitments & Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any Class A Common Stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans), will be entitled to registration rights pursuant to a registration rights agreement signed on the date of the prospectus for the Initial Public Offering, and the Anchor Investors will be entitled to certain registration rights pursuant to their investment agreements. These holders will be entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company paid an underwriting discount of
The Company granted the underwriter a
7. Stockholders’ Deficit
Preferred Stock - The Company is authorized to issue
Class A Common Stock - The Company is authorized to issue
14
Class B Common Stock - The Company is authorized to issue
Holders of the Class A Common Stock and holders of the Class B Common Stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required by law or applicable stock exchange rule; provided that only holders of the Class B Common Stock shall have the right to vote on the election of the Company’s directors prior to the Business Combination.
The shares of Class B Common Stock outstanding upon the completion of the Initial Public Offering, will automatically convert into Class A Common Stock at the time of the Business Combination on a
Warrants - Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a)
The warrants have an exercise price of $
The Private Placement Warrants are identical to the Public Warrants, except that (i) they will not be redeemable by the Company, (ii) they (including the Class A Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until
15
Redemption of Public Warrants: Once the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants for cash (except as described herein with respect to the Private Placement Warrants):
● | in whole and not in part; |
● | at a price of $ |
● | upon a minimum of |
● | if, and only if, the reported closing price of Class A Common Stock equals or exceeds $ |
The Company will not redeem the Public Warrants as described above unless a registration statement under the Securities Act covering the sale of the shares of Class A Common Stock issuable upon exercise of the Public Warrants is effective and a current prospectus relating to those shares of Class A Common Stock is available throughout the
If the Company calls the Public Warrants for redemption as described above, its management will have the option to require any holders that wishes to exercise its Public Warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” management will consider, among other factors, the Company’s cash position, the number of Public Warrants that are outstanding and the dilutive effect on its stockholders of issuing the maximum number of shares of Class A Common Stock issuable upon the exercise of the Company’s Public Warrants.
If the Company takes advantage of this option, all holders of Public Warrants would pay the exercise price by surrendering their Public Warrants for that number of shares of Class A Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Common Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” means the 10-day average closing price (defined below) as of the date on which the notice of redemption is sent to the holders of the warrants. The “10-day average closing price” means, as of any date, the average last reported sale price of the Class A Common Stock as reported during the
8. Fair Value Measurements
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2022 including the fair value hierarchy of the valuation inputs that the Company utilized to determine such fair value.
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Assets |
|
|
|
|
|
|
|
| ||||
Marketable securities held in Trust Account | $ | | $ | — | $ | — | $ | | ||||
Total assets | $ | | $ | — | $ | — | $ | |
16
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of December 31, 2021 including the fair value hierarchy of the valuation inputs that the Company utilized to determine such fair value.
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Assets |
|
|
|
|
|
|
|
| ||||
Marketable securities held in Trust Account | $ | | $ | — | $ | — | $ | | ||||
Total assets | $ | | $ | — | $ | — | $ | |
There were
9. Income Taxes
The Company’s taxable income primarily consists of interest income on the Trust Account, less any franchise taxes. The Company’s formation costs are generally considered start-up costs and are not currently deductible.
We recorded an income tax provision of $
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of deferred tax assets and therefore established a full valuation allowance of $
The Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities. There were
10. Subsequent Events
Management has evaluated the impact of subsequent events through August 11, 2022, the date the financial statements are available to be issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” are to Banner Acquisition Corp., except where the context requires otherwise. 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. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering (the “Initial Public Offering”) filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in Delaware on March 12, 2021 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses that we have not yet identified (the “Business Combination”).
Our entire activity through June 30, 2022 relates to our formation and Initial Public Offering, described below, and since the closing of the Initial Public Offering, the search for a prospective acquisition target for a Business Combination. We have selected December 31 as our fiscal year end.
Our sponsor is Banner SPAC Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Initial Public Offering was declared effective on September 7, 2021. In September 2021, we consummated its Initial Public Offering of 15,700,000 units (the “Units”), including 700,000 Units that were issued pursuant to the underwriter’s partial exercise of its over-allotment option. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (“Class A Common Stock”), and one-half of one redeemable warrant of the Company (“Public Warrant”), with each whole Public Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $157,000,000.
In connection with the Initial Public Offering, the underwriter was granted an option to purchase up to an additional 2,250,000 Units to cover over-allotments, if any. On September 22, 2021, the underwriter partially exercised its over-allotment option and, on September 27, 2021, the underwriter purchased 700,000 Units (the “Over-allotment Units”) at a price of $10.00 per Unit, generating gross proceeds to the Company of $7,000,000.
18
On September 10, 2021, simultaneously with the closing of the Initial Public Offering and pursuant to the Private Placement Warrants Purchase Agreement, dated September 7, 2021, between the Company and the Sponsor (the “Private Warrant Purchase Agreement”), we completed the private sale (the “Private Placement”) of 8,000,000 warrants (the “Private Placement Warrants”) at a purchase price of $1.00 per Private Placement Warrant to the Sponsor, generating gross proceeds of $8,000,000. On September 27, 2021, simultaneously with the sale of the Over-allotment Units, we completed a private placement with the Sponsor for an additional 210,000 warrants at a price of $1.00 per warrant (the “Additional Private Placement Warrants”), generating gross proceeds to the Company of $210,000. The total gross proceeds following the sale of the Additional Private Placement Warrants is $8,210,000.
A total of $158,570,000, comprised of $153,860,000 of the net proceeds from the Initial Public Offering (including the Over-allotment Units) and $4,710,000 of the proceeds of the sale of the Private Placement Warrants (including the Additional Private Placement Warrants) has been deposited in a U.S. based trust account (the “Trust Account”) maintained by American Stock Transfer & Trust Company, LLC, acting as trustee.
Further, we expect to incur significant costs in the pursuit of our initial Business Combination plans. We cannot assure you that we will identify any suitable target candidates or, if identified, that we will be able to complete the acquisition of such candidates on favorable terms or at all.
Results of Operations
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 effectuate the Initial Public Offering. We will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating revenue in the form of interest income on cash and cash equivalents. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective Business Combination candidates.
For the six months ended June 30, 2022, we had a net loss of $834,109, which consisted of $915,542 in general and administrative expenses, $114,658 in franchise tax expense and $29,164 in income tax expense, offset by a $225,255 gain on marketable securities held in the Trust Account.
For the three months ended June 30, 2022, we had a net loss of $336,277, which consisted of $452,633 in general and administrative expenses, $64,658 in franchise tax expense and $29,164 in income tax expense, offset by a $210,178 gain on marketable securities held in the Trust Account.
Liquidity and Capital Resources
As of June 30, 2022 we had cash of $515,140 outside of the Trust Account, and working capital of $593,534. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial Business Combination, we would repay such loaned amounts. 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 loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our Sponsor, officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor 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.
19
We do not currently believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking due diligence and negotiating a Business Combination are more than we estimate, 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 issued and outstanding Class A Common Stock sold in the Initial Public Offering upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. 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.
For the six months ended June 30, 2022, cash used in operating activities was $874,234. Net loss of $834,109 was affected by $185,130 in changes in operating assets and liabilities, offset by a $225,255 gain on marketable securities held in the Trust Account.
As of June 30, 2022, we had cash held in Trust Account of $158,794,545. We intend to use substantially all of the funds held in the Trust Account (less taxes paid and deferred underwriting commissions) to complete our initial Business Combination. 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.
Going Concern
On a routine basis, we assess going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40 “Presentation of Financial Statements - Going Concern”. As of June 30, 2022, we had $515,140 in our operating bank account, $593,534 of working capital and $158,794,545 of cash held in the Trust Account, to be used for a Business Combination or to repurchase or redeem our common stock in connection therewith. We believe that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing, however, there is a risk that our liquidity may not be sufficient. The Sponsor intends, but is not obligated to, loan us funds to sustain operations in the event of a liquidity deficiency.
We have until March 10, 2023 to consummate a Business Combination. If a Business Combination is not consummated by this date and an extension is not requested by the Sponsor there will be a mandatory liquidation and subsequent dissolution of the Company. While management expects to complete a Business Combination prior to March 10, 2023, this date for mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
As of June 30, 2022, we did not have any off-balance sheet arrangements.
Contractual Obligations
As of June 30, 2022, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. The Company has agreed to reimburse the Sponsor or an affiliate thereof in an amount equal to $15,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three and six months ended June 30, 2022, the Company paid $45,000 and $90,000, respectively, for the administrative support and no amounts were accrued for.
The underwriters of the Initial Public Offering were entitled to underwriting discounts and commissions of 5.5%, of which 2% (approximately $3,140,000) was paid at the closing of the Initial Public Offering and 3.5% (approximately $5,495,000) was deferred. The deferred underwriting discounts and commissions will become payable to the underwriters upon the consummation of the initial Business Combination and will be paid from the amounts held in the Trust Account. The underwriters are not entitled to any interest accrued on the deferred underwriting discounts and commissions.
20
Critical Accounting Policies and Estimates
The preparation of unaudited financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America 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 expenses during the period reported. Actual results could materially differ from those estimates. We have identified the following critical accounting estimates effecting our financial statements:
Class A Common Stock Subject to Possible Redemption
We account for our Class A Common Stock subject to possible redemption in accordance with the guidance in FASB ASC Topic 480. Class A Common Stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A Common Stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class A Common Stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our balance sheet.
Net Loss per Share
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share.” Net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the periods.
The shares of the Company’s Class B common stock, par value $0.0001 per share (“Class B Common Stock”) will automatically convert into shares of Class A Common Stock at the time of the Company’s initial Business Combination on a one-for-one basis, subject to adjustment.
The Company’s statement of operations includes a presentation of loss per share for shares of common stock subject to possible redemption in a manner similar to the two-class method of loss per share.
Adjustment associated with the redeemable shares of Class A Common Stock is excluded from loss per share as the redemption value approximates fair value.
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 our financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined in Item 10 of Regulation S-K and are not required to provide the information otherwise required by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
21
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Changes in Internal Control over Financial Reporting
As of June 30, 2022, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
In addition to the other information set forth in this Form 10-Q, you should carefully consider the risks discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on From 10-K for that period ended December 31, 2021, as filed with the SEC on April 7, 2022. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition or future results. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Except as set forth below, as of the date of this Quarterly Report, there have been no material changes to the risks disclosed in our Annual Report on From 10-K filed with the SEC on April 7, 2022.
Changes in laws or regulations, or a failure to comply with any laws or regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we are required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination, and results of operations.
On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving Special Purpose Acquisition Companies (“SPACs”) and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; effectively limiting the use of projections in SEC filings in connection with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940. These rules, if adopted, whether in the form proposed or in revised form, may impact the involvement of target companies and other market participants, including investment banks, in the SPAC market, may materially adversely affect our ability to identify a target company and our ability to negotiate and complete our initial business combination and, furthermore, may materially increase the costs and time related thereto.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Use of Proceeds
The securities sold in the Initial Public Offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-257906) (the “Registration Statement”). The SEC declared the Registration Statement effective on September 7, 2021. There has been no material change in the planned use of proceeds from the Initial Public Offering as described in our final prospectus filed with the SEC on September 9, 2021 and other periodic reports previously filed with the SEC.
22
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibits designated by an asterisk (*) are filed herewith and those designated by two asterisks (**) are furnished herewith; all exhibits not so designated are incorporated by reference to a prior filing as indicated.
Exhibit |
| Description |
---|---|---|
3.1 | ||
3.2 | ||
31.1* | ||
31.2* | ||
32.1** | ||
32.2** | ||
101.INS* | Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
23
SIGNATURES
Pursuant to 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 on this 11th day of August 2022.
BANNER ACQUISITION CORP. | ||
/s/ Tanner Ainge | ||
Name: | Tanner Ainge | |
Title: | Chief Executive Officer | |
/s/ Greg Woodward | ||
Name: | Greg Woodward | |
Title: | Chief Financial Officer |
24