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Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-10-05 · 37 added, 39 removed, 72 unchanged (51% of the section changed)

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Unless otherwise stated or the context otherwise requires, references in this quarterly report to (i) the “Company,” “us” or “we” are to Southport Acquisition Corporation, a Delaware corporation;

(ii) “founder shares” are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to our IPO (as defined herein), and the shares of our Class A common stock issued upon the conversion thereof;

(ii) “founder shares” are to shares of our Class B common stock initially purchased by our Sponsor in a Private Placement (as defined herein) prior to our IPO (as defined herein), and the shares of our Class A common stock issued upon the conversion thereof;

and (iii) “Sponsor” are to Southport Acquisition Sponsor LLC, a Delaware limited liability company.

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For information identifying some of the important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the discussion under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A.

Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2022 and our quarterly report on Form 10-Q for the quarter ended March 31, 2023 filed with the U.S.

Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2022 and our quarterly reports on Form 10-Q filed with the U.S.

Securities and Exchange Commission (the “SEC”).

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Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

We are a blank check company incorporated as a Delaware corporation on April 13, 2021 and formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

We have not identified any Business Combination target.

We intend to effectuate our initial Business Combination using cash from the proceeds from our IPO and the Private Placement, our capital stock, debt or a combination of cash, capital stock and debt.

On December 14, 2021, we consummated our initial public offering (our “IPO”) of 23,000,000 units (the “units”), each unit consisting of one share of Class A common stock of the Company, par value $0.0001 per share (the “Class A Common Stock”) and one-half of one warrant of the Company, each whole warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share (subject to adjustment).

On December 14, 2021, we consummated our initial public offering (our “IPO”) of 23,000,000 units (the “Units”), each unit consisting of one share of Class A common stock of the Company, par value $0.0001 per share and one-half of one warrant of the Company, each whole warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share (subject to adjustment).

The 23,000,000 Units sold in our IPO include 3,000,000 Units sold to BofA Securities, Inc., the underwriter for our IPO (the “underwriter”), pursuant to the underwriter’s full exercise of its option under the underwriting agreement for our IPO to purchase up to 3,000,000 additional Units solely to cover over-allotments.

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government treasury obligations.

On June 9, 2023, the Company’s stockholders approved a proposal to amend the Company’s amended and restated certificate of incorporation (the “Extension Amendment Proposal”) to extend the time that the Company has to consummate its initial business combination from June 14, 2023 to September 14, 2023 (the “Extended Date”) and to allow the board of directors of the Company, without another stockholder vote, to elect to further extend the date to consummate an initial business combination after the Extended Date up to six times, by an additional month each time, up to March 14, 2024, providing the Company a 21-month period (or up to 27-month period) from the closing of the IPO to consummate its initial Business Combination.

As of June 30, 2023, we had not yet commenced any operations.

All activity from inception through June 30, 2023 relates to our formation, our IPO and our pursuit of a target company with which to effect our initial business combination.

On June 9, 2023, the Company’s stockholders approved a proposal to amend the Company’s amended and restated certificate of incorporation (the “Extension Amendment Proposal”) to extend the time that the Company has to consummate its initial Business Combination (the “Extension”) from June 14, 2023 to September 14, 2023 (the “Extended Date”) and to allow the board of directors of the Company, without another stockholder vote, to elect to further extend the date to consummate an initial Business Combination after the Extended Date up to six times, by an additional month each time, up to March 14, 2024, providing the Company a 21-month period (or up to 27-month period) from the closing of the IPO to consummate its initial Business Combination.

On September 11, 2023, the board of directors of the Company approved the extension of the date by which the Company must consummate an initial Business Combination from September 14, 2023 to October 14, 2023 (the “First Extension”).

The First Extension is the first of six one-month extensions permitted under the Company’s Amended and Restated Certificate of Incorporation.

On October 11, 2023, the board of directors of the Company approved the further extension of the date by which the Company must consummate an initial Business Combination from October 14, 2023 to November 14, 2023 (the “Second Extension”).

The Second Extension is the second of six one-month extension permitted under the Company’s Amended and Restated Certificate of Incorporation.

As of September 30, 2023, we had not yet commenced any operations.

All activity from inception through September 30, 2023 relates to our formation, our IPO and our pursuit of a target company with which to effect our initial Business Combination.

The Company has selected December 31 as its fiscal year end.

Results of Operations and Known Trends or Future Events

Our entire activity from inception through June 30, 2023 relates solely to our formation, our IPO and, since the closing of our IPO, a search for a business combination candidate.

Our entire activity from inception through September 30, 2023 relates solely to our formation, our IPO and, since the closing of our IPO, a search for a Business Combination candidate.

We have not generated any operating revenues to date, and we will not generate any operating revenues until after completion of our initial Business Combination.

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We have incurred and expect to continue to incur increased 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, 2023, we had net income of $1,657,247, which consisted of $2,864,209 dividend income on marketable securities held in the Trust Account, and a gain of $141,150 on the change in fair value of the warrant liability, offset by a $386,961 financing expense related to the excess fair value of Class B common stock transferred by the Sponsor, provision for income tax of $591,012, $78,770 in legal and accounting expenses, $49,863 of franchise tax expense, $98,532 of insurance expense, $98,311 of administrative expenses, $42,500 of listing fees, and $2,163 of bank fees.

For the six months ended June 30, 2023, we had net income of $2,841,712, which consisted of $5,389,508 dividend income on marketable securities held in the Trust Account, offset by a loss of $400,950 on the change in fair value of the warrant liability, a $386,961 financing expense related to the excess fair value of Class B common stock transferred by the Sponsor, provision for income tax of $1,110,969, $155,441 in legal and accounting expenses, $99,178 of franchise tax expense, $227,594 of insurance expense, $120,403 of administrative expenses, $42,500 of listing fees, and $3,800 of bank fees.

For the three months ended June 30, 2022, we had net income of $3,371,189, which consisted of a $3,427,000 gain on the change in fair value of warrant liabilities and $310,960 of dividend income on marketable securities held in the Trust Account, offset by $83,098 in legal and accounting expenses, $49,863 of franchise tax expense, $129,063 of insurance expense, $90,124 of listing fees, and $14,623 of administrative expenses and bank fees expenses.

For the six months ended June 30, 2022, we had net income of $13,741,030, which consisted of a $14,279,000 gain on the change in fair value of warrant liabilities and $333,264 of dividend income on marketable securities held in the Trust Account, offset by

$347,128 in legal and accounting expenses, $99,178 of franchise tax expense, $258,125 of insurance expense, $90,124 of listing fees, and $76,679 of administrative expenses and bank fees expenses.

For the three months ended September 30, 2023, we had net loss of $10,518, which consisted of $731,196 dividend income on marketable securities held in the Trust Account, offset by a loss of $325,000 on the change in fair value of the warrant liability, a $135,986 financing expense related to the excess fair value of Class B common stock transferred by the Sponsor, provision for income tax of $142,965, $56,330 in legal and accounting expenses, $50,411 of franchise tax expense, $7,845 of administrative expenses, $21,250 of listing fees, and $1,927 of bank fees.

For nine months ended September 30, 2023, we had net income of $2,831,194, which consisted of $6,120,704 dividend income on marketable securities held in the Trust Account, offset by a loss of $725,950 on the change in fair value of the warrant liability, $522,948 of financing expenses related to the excess fair value of Class B common stock transferred by the Sponsor, provision for income tax of $1,253,934, $211,771 in legal and accounting expenses, $149,589 of franchise tax expense, $227,594 of insurance expense, $128,248 of administrative expenses, $63,750 of listing fees, and $5,726 of bank fees.

For the three months ended September 30, 2022, we had net income of $1,306,458, which consisted of a $593,000 gain on the change in fair value of warrant liabilities and $1,065,967 of dividend income on marketable securities held in the Trust Account, offset by $82,705 in legal and accounting expenses, $50,411 of franchise tax expense, $129,063 of insurance expense, $63,750 of listing fees, $25,895 of administrative expenses, and $685 bank fees.

For the nine months ended September 30, 2022, we had net income of $15,047,487, which consisted of a $14,872,000 gain on the change in fair value of warrant liabilities and $1,399,231 of dividend income on marketable securities held in the Trust Account, offset by $429,833 in legal and accounting expenses, $153,874 of franchise tax expense, $387,189 of insurance expense, $153,874 of listing fees, $101,395 of administrative expenses, and $1,864 bank fees expenses.

Liquidity and Capital Resources

As of June 30, 2023 and December 31, 2022, we had cash of $461,464 and $50,858, respectively, and working capital deficit of $199,924,069 and $929,527, respectively.

As of June 30, 2023, net cash provided by operating activities was $4,334,318.

Net income of $2,841,712 was increased by a $400,950 loss on the fair value of the warrant liability, a $386,961 non-cash financing expense related to the transfer of Class B shares by the Sponsor, and a $1,710,491 increase in changes in operating assets and liabilities, offset by a decrease for $1,005,796 of accrued dividends on marketable securities held in the Trust Account.

As of June 30, 2022, net cash used in operating activities was $1,541,262.

As of September 30, 2023 and December 31, 2022, we had cash of $2,351,814 and $50,858, respectively, and working capital deficit of $2,459,358 and $929,527, respectively.

As of September 30, 2023, net cash provided by operating activities was $5,745,670.

Net income of $2,831,194 was increased by a $725,950 loss on the fair value of the warrant liability, $522,948 of non-cash financing expense related to the transfer of Class B shares by the Sponsor, and a $1,853,840 increase in changes in operating assets and liabilities, offset by a decrease for $188,262 of accrued dividends on marketable securities held in the Trust Account.

As of September 30, 2022, net cash used in operating activities was $1,053,342.

Net income of $15,047,487 was decreased by a $14,872,000 gain on the fair value of the warrant liability, $435,286 of accrued dividends on marketable securities held in the Trust Account, and a $793,543 decrease in changes in operating assets and liabilities.

As of June 30, 2023, net cash used in investing activities was $3,923,712, comprised of purchases of marketable securities held in the Trust Account of $4,383,712, offset by proceeds from marketable securities held in the Trust Account of $460,000.

As of June 30, 2022, net cash used in investing activities was $176,790 comprised of purchases of marketable securities held in the Trust Account.

As of June 30, 2023, there was no net cash provided by financing activities.

As of June 30, 2022, net cash provided by financing activities was $240,131, comprised of $156,550 of payments made by the Sponsor on behalf of the Company and receipt of $83,581 repayment for due from related party balance.

As of September 30, 2023, net cash provided by investing activities was $194,049,943, comprised of purchases of marketable securities held in the Trust Account of $5,932,443, offset by proceeds from marketable securities held in the Trust Account of $199,982,386.

As of September 30, 2022, net cash used in investing activities was $963,945 comprised of purchases of marketable securities held in the Trust Account.

As of September 30, 2023, net cash used in financing activities was $197,494,657, comprised of payments for stockholder redemptions of $197,694,657 and offset by a $200,000 cash capital contribution from the Sponsor.

As of September 30, 2022, net cash provided by financing activities was $240,131, comprised of $156,550 of payments made by the Sponsor on behalf of the Company and receipt of $83,581 repayment for due from related party balance.

We expect to use our working capital primarily for legal and accounting fees related to our regulatory reporting requirements, fees for office space, utilities, and secretarial and administrative services, continued listing fees on the New York Stock Exchange (“NYSE”), and for expenses in connection with identifying and evaluating target businesses, performing business due diligence on prospective target businesses, travelling to and from the offices or similar locations of prospective target businesses or their representatives or owners, reviewing corporate documents and material agreements of prospective target businesses and structuring, negotiating and completing a Business Combination.

Specifically, we expect that our primary liquidity requirements over the next 12 months from June 30, 2023 will include, among other things, approximately $180,000 for office space, utilities, and secretarial and administrative services pursuant to our agreement with our sponsor to pay our sponsor $15,000 per month for these services until our initial business combination or liquidation;

$300,000 for legal, accounting, due diligence, travel and other expenses in connection with any business combination;

$300,000 for legal and accounting fees related to regulatory reporting requirements;

$85,000 for NYSE continued listing fees;

and approximately $200,000 for working capital to cover miscellaneous expenses (including Delaware franchise taxes, net of anticipated interest income).

These amounts are estimates and may differ materially from our actual expenses.

In light of the above, our management does not expect that we will be able to fund our liquidity requirements in the next 12 months from our current working capital.

In order to fund the expected working capital deficiency or to finance transaction costs in connection with an intended initial business combination, our management plans to seek loans from our management team or our sponsor or any of their respective affiliates.

However, neither our management team nor our sponsor or their respective affiliates are obligated to loan us these funds, and, as such, there is no assurance that we will be able to obtain sufficient loans to fund any working capital deficiency.

Our management does not expect that we will be able to fund our liquidity requirements in the next 12 months from our current working capital.

In order to fund the expected working capital deficiency or to finance transaction costs in connection with an intended initial Business Combination, our management plans to seek capital contributions or loans from our management team or our Sponsor or any of their respective affiliates.

However, neither our management team nor our Sponsor or their respective affiliates are obligated to provide capital contributions or loan us these funds, and, as such, there is no assurance that we will be able to obtain sufficient loans to fund any working capital deficiency.

For the three and nine months ended September 30, 2023, the Sponsor has provided $200,000 in cash through a capital contribution.

If we receive such loans, 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.

These warrants would be identical to the Private Placement Warrants.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of time within 12 months from June 30, 2023.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of time within 12 months from September 30, 2023.

Moreover, we may need to obtain additional financing either to complete our initial Business Combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.

In addition, we may target businesses

with enterprise values that are greater than we could acquire with the net proceeds from our IPO and the Private Placement, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy redemptions by public stockholders, we may be required to seek additional financing to complete such proposed initial business combination.

In addition, we may target businesses with enterprise values that are greater than we could acquire with the net proceeds from our IPO and the Private Placement, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy redemptions by public stockholders, we may be required to seek additional financing to complete such proposed initial Business Combination.

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.

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Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2023 or December 31, 2022.

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2023 or December 31, 2022.

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.

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Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities as of June 30, 2023 or December 31, 2022.

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities as of September 30, 2023 or December 31, 2022.

Pursuant to the underwriting agreement for our IPO, the underwriter of our IPO was entitled to a deferred fee of $0.35 per unit, or $8,050,000 in the aggregate, payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

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In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s consummation of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).

However, the registration rights agreement provides that the Company is not required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period with respect to such securities.

However, the registration rights agreement provides that the Company is not required

to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period with respect to such securities.

The Company will bear the expenses incurred in connection with the filing of any such registration statements.

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The Company accounted for the Non-Redemption Agreements in accordance with Staff Accounting Bulletin Topic 5T (“SAB Topic 5T”).

The Company considered the Sponsor’s transfer of Class B common stock to the unaffiliated third parties in exchange for the Non-Redemption Agreements as a capital contribution by the Sponsor, and recognized the excess fair value of the transferred Class B common stock as a financing expense on the condensed statements of operations for the three and six months ended June 30, 2023.

The Company determined the excess fair value of the 500,000 Class B shares transferred to such third parties upon the consummation of the Extension to be $386,961.

The Company determined the excess fair value of the 500,000 Class B shares transferred to such third parties upon the consummation of the Extension to be $386,961 and the 166,666 Class B shares transferred in connection with the First Extension to be $135,986.

Critical Accounting Estimates

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Actual results could materially differ from those estimates.

We have not identified any critical accounting estimates as of June 30, 2023.

We have not identified any critical accounting estimates as of September 30, 2023.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis