Aspire-Lakewood Holdings, Inc. quarterly report, Q3 FY2023

Full document

Business context and reporting period

The supplied filing is PowerUp Acquisition Corp.’s unaudited Form 10-Q for the quarter ended September 30, 2023, filed November 7, 2023. This differs from the requested company name, Aspire-Lakewood Holdings, Inc.; verify that this is the intended filing. PowerUp is a Cayman Islands blank-check company seeking a business combination. It had not commenced operations or selected a target, and had no operating revenue.

Financial highlights

  • Q3 2023: Net loss was $69,258, comprising $324,742 in general and administrative expenses, partly offset by $255,484 of trust investment interest. In Q3 2022, net income was $1,077,216, including $1,332,473 of interest income.
  • Nine months ended September 30: 2023 net income was $4,614,992, versus $1,110,084 in 2022. Interest income was $5,552,545 versus $1,772,399; general and administrative expenses were $937,553 versus $662,315. Earnings primarily reflect trust interest, not business operations; operating margins are not meaningful.
  • Liquidity at September 30, 2023: Cash outside the trust was $280; trust investments were $19,640,501. Current assets were $253,362 and current liabilities $316,316, a $62,954 working-capital deficit. Total liabilities were $316,316; the company reported no long-term debt.
  • Cash flows, nine months: Operating activities used $496,979. Investing activities provided $284,916,127 and financing activities used $284,916,127, principally reflecting withdrawals from the trust for redemptions and corresponding redemption payments. Cash fell from $497,259 at year-end 2022 to $280.

Material changes and unusual items

  • At the May 18, 2023 extension meeting, shareholders extended the business-combination deadline from May 23, 2023 to May 23, 2024. Holders redeemed 26,946,271 shares for approximately $284 million; a further $632,968 true-up payment was made in August after the per-share redemption calculation was corrected.
  • Redeemable shares declined from 28,750,000 at December 31, 2022 to 1,803,729 at September 30, 2023. On May 18, founder shares converted one-for-one into 7,187,500 Class A shares.
  • On June 28, underwriters waived $10,812,500 of deferred underwriting commissions; the company recorded the waiver as additional paid-in capital. A new sponsor acquired specified shares and warrants from the former sponsor in a transaction that closed August 18 for a stated $1.00, payable at the initial business combination.
  • Q3 changed from income in 2022 to a loss in 2023 as trust interest fell while expenses increased. Nine-month income rose substantially, mainly because trust interest increased.

Outlook, risks and contingencies

  • The company must complete a business combination by May 23, 2024 unless shareholders approve a further extension. If it fails, it must cease operations, redeem public shares and liquidate, subject to applicable terms. No target, transaction guidance or forecast is provided.
  • Management states that the $280 operating cash balance and working-capital deficit may require additional funding. Sponsor, officer and director loans are possible but not committed. Management concludes these conditions raise substantial doubt about the company’s ability to continue as a going concern for one year from issuance.
  • Public shareholders may redeem shares in connection with a business combination; high redemptions could reduce available transaction cash. If no combination is completed, warrants may expire worthless. Sponsor indemnification for certain trust-account claims has stated limitations.
  • The filing reports no off-balance-sheet arrangements. Management concluded disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.

Important facts for investors to verify

  1. Confirm the filing issuer: this document is for PowerUp Acquisition Corp., not Aspire-Lakewood Holdings, Inc.
  2. Check subsequent filings for a proposed or completed business combination, any further deadline extension, and redemption activity.
  3. Verify the trust balance, public shares remaining, and cash available outside the trust; the filing reports only $280 of operating cash at quarter-end.
  4. Review financing needs and related-party balances, including $211,937 due to the new sponsor, and confirm whether any funding was subsequently provided.
  5. Assess transaction-related dilution and costs, including warrants, the advisor’s 80,000-share contingent fee, and sponsor arrangements.