byNordic Acquisition Corp: Form 10-Q for the period ended Jun 30, 2024

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to byNordic Acquisition Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Water by Nordic AB. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the 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.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of 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 Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Business Combination, 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, including that the conditions of the Business Combination are not satisfied. 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 and in the Company’s Form 10-K for the year ended December 31, 2023 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 (http://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 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 not presently engaged in, and we will not engage in, any operations until we consummate our business combination. We intend to effectuate our business combination using cash from the proceeds of our initial public offering, the private placement of the private shares, the private placement of the forward purchase shares, the proceeds of the sale of our shares in connection with our business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the closing of our initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We have not selected any specific business combination target.

The issuance of additional shares in connection with a business combination to the owners of the target or other investors, including the forward purchase shares:

• may significantly dilute the equity interest of our public stockholders, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of shares of Class A Common Stock on a greater than one-to-one basis upon conversion of the Class B common stock;
• may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;
• could cause a change in control if a substantial number of shares of our common stock is 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;
• may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
• may adversely affect prevailing market prices for our Class A common stock and/or warrants.

Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:

• default and foreclosure on our assets if our operating revenues after a 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 security is payable on demand;
• our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security 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, our ability to pay expenses, make capital expenditures and acquisitions, and fund 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, and execution of our strategy; and
• other disadvantages compared to our competitors who have less debt.

Recent Developments

Promissory Note

On April 10, 2024, the Company issued a promissory note (the “April 2024 Note”) in the principal amount of $300,000 to DDM Debt AB (the “Lender”), an affiliate of Water by Nordic AB, the Company’s sponsor. The proceeds of the April 2024 Note will be used to provide the Company with general working capital.

The April 2024 Note bears no interest and is payable in full upon the consummation of the Company’s initial Business Combination (the “Maturity Date”). A failure to pay the principal on the Maturity Date shall be deemed an event of default, in which case the April 2024 Note may be accelerated. If the Company does not consummate an initial Business Combination, the April 2024 Note will be repaid solely to the extent the Company has funds available outside its Trust Account established in connection with the Company’s initial public offering.

On June 17, 2024, Company issued a promissory note (the “June 2024 Note”) in the principal amount of $200,000 to the Lender. The proceeds of the June 2024 Note will be used to provide the Company with general working capital.

The June 2024 Note bears no interest and is payable in full upon the consummation of the Company’s initial Business Combination (the “Maturity Date”). A failure to pay the principal on the Maturity Date shall be deemed an event of default, in which case the June 2024 Note may be accelerated. If the Company does not consummate an initial Business Combination, the June 2024 Note will be repaid solely to the extent the Company has funds available outside its Trust Account established in connection with the Company’s Initial Public Offering.

Departure of Director

On April 30, 2024, Mats Karlsson resigned as Director of Acquisition of the Company in order to pursue other opportunities. Mr. Karlsson’s decision to resign was not the result of any dispute or disagreement with the Company or any matter relating to the Company’s operations, policies or practices.

Trust Account Funding

In July 2024, the Company deposited $105,000 in the Trust Account with the Company’s board of directors’ election to exercise a one-month extension of the Combination Period to August 12, 2024. On August 9, 2024 the Company exercised a further extension of the Combination Period to September 12, 2024 and deposited $40,312 into the Trust Account in connection with such extension.

Execution of Non-Binding Letter of Intent

On August 6, 2024, the Company issued a press release announcing that on August 6, 2024, it signed a non-binding letter of intent (“LOI”) with Sivers Semiconductors AB (“Sivers”, STO: SIVE), a leading supplier of wireless and photonic integrated chips and modules for communications and sensor solutions, to merge its wholly owned Sivers Photonics Ltd subsidiary (“Sivers Photonics”) with the Company. Under the terms of the non-binding LOI, the Company and Sivers intend to enter into a definitive agreement for the acquisition of Sivers Photonics. The completion of the business combination is subject to the completion of due diligence, the negotiation and execution of definitive documentation and satisfaction of the conditions contained therein.

Additional Extensions and Founder Shares Conversion

At an annual meeting on August 7, 2024, the stockholders of the Company approved amendments to the Company’s Amended and Restated Certificate of Incorporation to extend the Combination Period by one month each time from August 12, 2024 to August 12, 2025, or such earlier date as determined by the Board in its sole discretion, unless the closing of a Business Combination shall have occurred prior thereto. In connection with the amendments to the Amended and Restated Certificate of Incorporation, the Company funded a deposit of $40,312 into the Trust Account to extend the Combination Period to September 12, 2024. The Company will only exercise any further monthly extension if the sponsor or one of its affiliates or designees deposits into the Trust Account the lesser of $0.04 per outstanding Public Share or $50,000 with respect to each such extension. The Company issued to DDM Debt AB a promissory note in the amount of $200,000 in connection with the sponsor’s funding of the $40,312 extension deposit.

Further in connection with the annual meeting, the stockholders of the Company approved amendments to the Company’s Amended and Restated Certificate of Incorporation to provide for the right of a stockholder of the Company’s Class B common stock, par value $0.0001 per share, to convert into shares of the Company’s Class A common stock, par value $0.0001 per share on a one-for-one basis at any time, and from time to time, prior to the closing of a business combination at the election of the holder.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard

As previously disclosed, on April 10, 2024, The Nasdaq Stock Market LLC (“Nasdaq”) notified byNordic Acquisition Corporation (the “Company”) that it did not comply with the minimum 400 total shareholders requirement for continued inclusion set forth in Nasdaq’s Listing Rule 5450(a)(2) (the “Rule”). The Company submitted a plan of compliance on May 24, 2024 demonstrating how it would cure the deficiency in compliance.

On August 1, 2024, Nasdaq notified the Company that it had determined that it would be unable to grant the Company’s request for continued listing on Nasdaq. The Company requested an appeal of the determination and a hearing has been scheduled for September 12, 2024

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from December 27, 2019 (inception) through June 30, 2024 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended June 30, 2024, we had net income of $79,448 which consisted of interest earned on investments held in trust account and cash of $532,914, partially offset by operating costs of $351,383 and federal income taxes of $102,083.

For the three months ended June 30, 2023, we had a net income of $1,392,953, which consisted of earnings on cash and investments in the Trust Account of $2,225,880 partially offset by operating costs of $375,992 and federal income taxes of $456,935.

For the six months ended June 30, 2024, we had a net income of $174,181, which consisted of interest earned on investments held in trust account of $1,059,494 partially offset by operating costs of $682,224 and federal income taxes of $203,089.

For the six months ended June 30, 2023, we had a net income of $2,439,478, which consisted of earnings on cash and investments in the Trust Account of $4,188,403 partially offset by operating costs of $891,234 and federal income taxes of $857,691.

Liquidity, Capital Resources and Going Concern

On February 11, 2022, we completed our Initial Public Offering of 15,000,000 Units at $10.00 per Unit, generating gross proceeds of $150,000,000. Simultaneously with the closing of the Initial Public Offering, we completed the sale of 850,000 Private Shares at a price of $10.00 per Private Share in a private placement to our sponsor, generating gross proceeds of $8,500,000.

On February 18, 2022, in connection with the underwriters’ exercise of their over-allotment option in full, we consummated the sale of an additional 2,250,000 Units at a price of $10.00 per Unit, generating an additional $22,500,000 of gross proceeds. In addition, we also consummated the sale of an additional 90,000 Private Shares at a price of $10.00 per Private Share, generating an additional $900,000 of gross proceeds.

Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Shares, a total of $175,950,000 was placed in the Trust Account.

For the six months ended June 30, 2024, cash used in operating activities was $709,453. Net income of $174,181 was affected by interest earned on investments in the Trust Account of $1,044,559 and unrealized losses on investments in the Trust Account of $1,903. Changes in operating assets and liabilities used $159,022 of cash for operating activities. Cash used in investing activities was $195,588 including $329,412 withdrawn from the Trust Account to pay taxes partially offset by $525,000 of deposits to the Trust Account. Cash provided by financing activities includes $500,000 of proceeds from the promissory notes to related party.

For the six months ended June 30, 2023, cash used in operating activities was $2,032,013. Net income of $2,439,478 was affected by interest earned on investments in the Trust Account of $4,036,072 and unrealized gain on investments in the Trust Account of $148,262. Changes in operating assets and liabilities used $287,157 of cash for operating activities. Cash used in investing activities includes $1,725,000 of funding for the Trust Account and $1,377,280 withdrawn from the Trust Account to pay taxes. Cash provided by financing activities includes $2,500,000 of proceeds from the Initial Extension Loan and the Initial Working Capital Loan.

As of June 30, 2024, we had marketable securities held in the Trust Account of $40,754,881 consisting of money market funds which are invested primarily in U.S. Treasury securities. Interest income on the balance in the Trust Account may be used by us to pay taxes. For the six months ended June 30, 2024, we have withdrawn $329,412 of interest earned on the Trust Account for the payment of franchise or income taxes.

We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our 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.

As of June 30, 2024, the Company had cash of $1,901,694 not held in the Trust Account and available for working capital purposes. On May 8, 2023, the Company announced that its Board of Directors elected to extend the date by which the Company has to consummate a business combination from May 11, 2023 to August 11, 2023 and the Company’s Sponsor subsequently deposited $1,725,000 to the Trust Account with respect to the extension. On May 9, 2023, the Company received the Initial Extension Loan from the Sponsor and on May 12, 2023, the Company received the Initial Working Capital Loan from the Sponsor. In connection with certain amendments to the Certificate of Incorporation approved by stockholders on August 10, 2023, (i) the deadline for the Company to complete a business combination was extended, (ii) the Company’s Sponsor funded a $625,000 deposit into the Trust Account, and (iii) the Company issued to the Sponsor a convertible promissory note in the amount of $625,000 in connection with the Sponsor’s funding of the extension (the “Additional Extension Loan” and collectively with the Initial Extension Loan, the “Extension Loans”) and a convertible promissory note to the sponsor in the amount of $710,000 in connection with the Sponsor’s funding of the Company’s working capital needs, of which $110,000 was funded on August 10, 2023 and $600,000 is available for future borrowings (the “Additional Working Capital Loan”). The amendments to the Amended and Restated Certificate of Incorporation extended the Combination Period to February 12, 2024, or such earlier date as determined by the Company’s Board of Directors, and allowed the Company to further extend the Combination Period by one month up to a total of six months, until August 12, 2024, unless the closing of a business combination shall have occurred prior thereto, provided that the Company’s Sponsor or its designee deposits the lesser of $105,000 or $0.04 per outstanding Public Share into the Trust Account with respect to each such one-month extension.

On December 15, 2023, the Company issued a promissory note in the principal amount of $1,700,000 to DDM Debt AB (the “December 2023 Note”), an affiliate of the sponsor. On April 10, 2024 the Company issued a promissory note in the principal amount of $300,000 to DDM Debt AB (the “April 2024 Note”) and on June 17, 2024, Company issued a promissory note in the principal amount of $200,000 to DDM Debt AB (the “June 2024 Note”) . The proceeds of the promissory notes will be used to provide the Company with general working capital.

From February 2024 to July 2024, the Company’s board of directors elected to exercise six one-month extensions of the Combination Period to August 12, 2024. In connection with each such extension, $105,000 was deposited in the Trust Account.

Pursuant to an amendment of the Company’s Certificate of Incorporation approved by stockholders on August 7, 2024, the Company can exercise up to 12 monthly extensions of the Combination Period until August 12, 2025. On August 9, 2024 the Company exercised a further extension of the Combination Period to September 12, 2024 and deposited $40,312 into the Trust Account in connection with such extension. In connection with the August 2024 amendments to the Company’s Certificate of Incorporation and related transactions, DDM Debt AB funded a loan of $200,000 to the Company to fund ongoing working capital needs and the Company issued a promissory note to the DDM Debt AB in the amount of $200,000 (the “August 2024 Note”).

If the Company completes a Business Combination, the Company would expect to repay the Extension Loans, the Initial Working Capital Loan, the Additional Working Capital Loan, the December 2023 Note, the April 2024 Note, the June 2024 Note and the August 2024 Note from funds that are released to the Company from the Trust Account or, at the option of the Sponsor, convert all or a portion of the Extension Loans, the Initial Working Capital Loan and the Additional Working Capital Loan into Private Shares at a price of $10.00 per private share, which Private Shares will be identical to the Private Shares described herein. If the Company does not complete a Business Combination, the Company will repay the Extension Loans, the Initial Working Capital Loan, the Additional Working Capital Loan, the December 2023 Note, the April 2024 Note, the June 2024 Note and the August 2024 Note only from funds held outside of the Trust Account. Following receipt of proceeds from (i) the Extension Loans, (ii) the Initial Working Capital Loan (iii) the Additional Working Capital Loan, (iv) the December 2023 Note, (v) the April 2024 Note, (vi) the June 2024 Note and (vii) the August 2024 Note, the Company believes that the funds held outside the Trust Account will be sufficient to meet the expenditures required for operating its business through September 12, 2024 (the current expiration date of the business combination period. However, if the estimate of the costs of (i) legal, accounting, due diligence, travel and other expenses related to identifying, negotiating and closing a business combination, (ii) legal and accounting fees related to regulatory reporting requirements, (iii) administrative expenses, and (iv) working capital used for miscellaneous expenses and reserves, are less than the actual amount of such costs, the Company may have insufficient funds available to operate its business prior to a business combination. Moreover, if the Combination Period is extended beyond September 12, 2024, the Company would need to obtain additional financing to fund its cash needs during any such further extension period, including the amount required to be deposited in the Trust Account to fund the cost of any further extension and working capital to pay its operating costs during any such further extension period, including expenses relating to its business acquisition activities, and ongoing corporate and administrative expenses. If the Company is unable to raise sufficient funds to continue its operations until completion of a business combination, the Company would be forced to cease operations and liquidate. In addition, the Company may need to obtain additional financing either to complete a business combination or because it becomes obligated to redeem a significant number of the Public Shares in connection with a further extension of the Combination Period beyond September 12, 2024 or upon consummation of a business combination, in which case the Company may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, the Company would only complete such financing simultaneously with the completion of our business combination. If the Company is unable to complete the business combination because it does not have sufficient funds available, the Company will be forced to cease operations and liquidate the Trust Account. In addition, following the business combination, if cash on hand is insufficient, the Company may need to obtain additional financing in order to meet its obligations.

The Company has until September 12, 2024 or the end of any further extension period to consummate a business combination beyond September 12, 2024 pursuant to an amendment of its Amended and Restated Certificate of Incorporation. It is uncertain that the Company will be able to consummate a business combination by September 12, 2024 or such later date to which the business combination period may be extended. If a business combination is not consummated by September 12, 2024 or during any further extension period, there will be a mandatory liquidation and subsequent dissolution.

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that (i) uncertainty with respect to the Company’s ability to obtain the cash needed to fund professional fees and other expenses related to its target search activities, SEC reports, tax returns, Nasdaq listing, trust and stock transfer administration and other business and corporate activities, and trust deposits required for further extensions to the business combination period, and (ii) the mandatory liquidation and subsequent dissolution, should the Company be unable to complete a business combination by the end of the business combination period, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after September 12, 2024 or at the end of any further extension period.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2024. 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 purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement pay the Sponsor a total of $10,000 per month for administrative support services and the Initial Extension Loan, the Initial Working Capital Loan, the Additional Extension Loan, the Additional Working Capital Loan and the December 2023 Note. We began incurring the administrative support services fees on February 8, 2022 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.

The underwriters are entitled to a deferred underwriting discount of 3.5% of the gross proceeds of the IPO and exercise of the over-allotment option, or $6,037,500, upon the completion of the Company’s business combination. The Company’s former legal counsel agreed to defer legal fees in the amount of $175,000, which is payable (without interest) upon and concurrently with the completion of a business combination.

Critical Accounting Policies

We describe our significant accounting policies in Note 2 - Summary of Significant Accounting Policies, of the Notes to Financial Statements included in this report. Our audited financial statements have been prepared in accordance with U.S. GAAP. Certain of our accounting policies require that the Company’s management apply significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, the Company’s management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and, therefore, actual results could differ from our estimates.

Evaluation of Disclosure Controls and Procedures

In February 2022, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer (together, the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report due to the material weakness in our internal control over financial reporting related to the Company’s accounting for certain deferred contingent transaction costs. As a result, we performed additional analysis as deemed necessary to ensure that the financial statements included in this Form 10-Q were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

Disclosure controls and procedures are controls and other procedures 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 our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for accrued, deferred or contingent expenses and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identifying third-party professionals with whom to consult on complex questions regarding accounting for accrued, deferred or contingent expenses, and improving the processes for sharing, approving and evaluating contractual arrangements and invoices related to accrued, deferred or contingent expenses. We believe that the actions described above will be sufficient to remediate the identified material weakness and strengthen our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

Other than as described above and elsewhere in this Report, 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.

Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our final prospectus for our Initial Public Offering filed with the SEC. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. As of the date of this Report, there have been no material changes to the risk factors disclosed in our Form 10-K for the year ended December 31, 2023 filed with the SEC.