10-K
1
tm2210532d1_10k.htm
FORM 10-K
or
Commission file number: 001-41150
Southport Acquisition Corporation
(Exact name of registrant as specified in its charter)
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including
area code: (917) 503-9722
Securities registered pursuant to Section
12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Securities registered pursuant to Section 12(g)
of the Act: None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ̈ No x
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ̈ No
x
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. Yes x No ̈
Indicate by check mark whether the registrant
(1) has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports) and has been subject to such filing
requirements for the past 90 days. Yes x No ̈
Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ̈ Accelerated filer ̈
Non-accelerated filer x Smaller reporting company x
Emerging growth company x
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 has
filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ̈
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes x No ̈
The aggregate market value of the common stock
held by non-affiliates of the registrant, computed as of June 30, 2021 (the last business day of the registrant’s most recently
completed second fiscal quarter) was $0, because the registrant had no securities held by non-affiliates as of that date and none of the
registrant’s securities were publicly traded as of that date. The registrant’s units commenced public trading on the New York
Stock Exchange on December 10, 2021, and its Class A common stock and warrants commenced separate public trading on the New York Stock
Exchange on January 31, 2022.
As of March 22, 2022, there were 23,000,000 shares
of Class A common stock and 5,750,000 shares of Class B common stock of the registrant issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements 1
Item 1. Business 2
Item 1A. Risk Factors 9
Item 1B. Unresolved Staff Comments 42
Item 2. Properties 42
Item 3. Legal Proceedings 42
Item 4. Mine Safety Disclosures 42
Item 6. [Reserved] 44
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 46
Item 8. Financial Statements and Supplementary Data 46
Item 9A. Controls and Procedures 46
Item 9B. Other Information 47
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 47
Item 10. Directors, Executive Officers and Corporate Governance 47
Item 11. Executive Compensation 51
Item 14. Principal Accountant Fees and Services 57
Item 15. Exhibit and Financial Statement Schedules 57
Index to Financial Statements F-1
Signatures 59
i
Cautionary Note
Regarding Forward-Looking Statements
This report, including, without limitation, statements
under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Those forward-looking statements include, but are not limited to, statements regarding our or our management team’s
expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts
or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The
words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions may identify forward-looking statements, but
the absence of these words does not mean that a statement is not a forward-looking statement. Forward-looking statements in this report
may include, for example, statements about:
· our ability to select an attractive target business or businesses;
· our public securities’ potential liquidity and trading;
· the lack of an active trading market for our securities;
· the Trust Account not being subject to claims of third parties; or
· our financial performance.
The forward-looking statements contained in this
report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be
no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a
number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include,
but are not limited to, those factors described under the heading “Item 1A. Risk Factors.” Should one or more of these risks
or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those
projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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PART I
Unless otherwise stated or the context otherwise
requires, references in this report to: (i) “we,” “us,” “our,” “company” or “our
company” are to Southport Acquisition 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; (iii) “initial business combination” has the meaning set forth in the immediately following paragraph;
(iv) “management” or our “management team” are to our officers and directors; (v) “permitted withdrawals
for tax” are to amounts withdrawn from interest earned on the funds held in the Trust Account (as defined herein) in order to pay
our taxes; (vi) “private placement warrants” are to our warrants purchased by our sponsor in the Private Placement (as defined
herein); (vii) “public shares” are to shares of our Class A common stock included in the units sold in our IPO (whether they
were purchased in our IPO or thereafter in the open marked); (viii) “public stockholders” are to the holders of our public
shares, including our sponsor and management team to the extent our sponsor and/or members of our management team purchase public shares,
provided that the status of our sponsor and each member of our management team as a “public stockholder” shall only exist
with respect to such public shares; (ix) “public warrants” are to our warrants included in the units sold in our IPO
(whether they were purchased in our IPO or thereafter in the open market) and to the private placement warrants if held by third parties
other than our sponsor or its permitted transferees; (x) “sponsor” are to Southport Acquisition Sponsor LLC, a Delaware limited
liability company; (xi) “underwriter” are to BofA Securities, Inc., the underwriter of our IPO; and (xi) “warrants”
are to the public warrants and the private placement warrants.
Item 1. Business.
General
We are a blank check company incorporated as a
Delaware corporation on April 13, 2021 and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses, which we refer to throughout this report as our “initial
business combination.” We have neither engaged in any operations nor generated any revenue to date. Based on our business activities,
we are a “shell company” as defined under the Exchange Act of 1934 (the “Exchange Act”) because we have no operations
and nominal assets consisting almost entirely of cash.
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).
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. The units were sold at a price of $10.00 per unit, and our IPO generated gross proceeds
of $230,000,000. Simultaneously with the closing of our IPO, we consummated a private placement (the “Private Placement”)
with our sponsor of an aggregate of 11,700,000 warrants (the “private placement warrants”) at a price of $1.00 per private
placement warrant, generating gross proceeds to the Company of $11,700,000.
On December 14, 2021, a total of $234,600,000 of the net proceeds from our IPO and the Private Placement were deposited in a trust account
(the “Trust Account”) established for the benefit of the Company’s public stockholders at JPMorgan Chase Bank, N.A.,
with Continental Stock Transfer & Trust Company, acting as trustee. The net proceeds deposited into the Trust Account remain on deposit
in the Trust Account earning interest and are available for a business combination, assuming no redemptions, after payment of $8,050,000
of deferred underwriting fees, before fees and expenses associated with our initial business combination.
Except with respect to interest earned on the
funds held in the Trust Account that may be released to us to pay our tax obligations (less up to $100,000 of interest to pay
dissolution expenses), the proceeds deposited in the Trust Account will not be released from the Trust Account until the earliest of
(a) the completion of our initial business combination, (b) the redemption of any public shares properly submitted in connection
with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our
obligation to provide our public stockholders the right to have their public shares redeemed in connection with our initial business
combination or to redeem 100% of our public shares if we do not complete our initial business combination by June 14, 2023 or during
any extended time we have to consummate our initial business combination beyond June 14, 2023 as a result of a stockholder vote to
amend our amended and restated certificate of incorporation (an “Extension Period”) or (ii) with respect to any other
provision relating to stockholders’ rights or pre-initial business combination activity, and (c) the redemption of all of our
public shares if we are unable to complete our initial business combination by June 14, 2023 or during any Extension Period, subject
to applicable law. The proceeds held in the Trust Account may only be invested in U.S. government securities with a maturity of 185
days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as
amended (the “Investment Company Act”), which invest only in direct U.S. government treasury obligations.
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Our sponsor,
Southport Acquisition Sponsor LLC, is a Delaware limited liability company that is owned by Jeb Spencer, our Chief Executive Officer,
and other investors, including certain of our directors. Our sponsor is controlled by Mr. Spencer and Mr. Jared Stone, the Chairman of
our board of directors.
While efforts to identify a target business may span many industries, our focus will be predominantly within the financial software space
with particular focus on mortgage and real estate verticals in the United States. We plan to look for a leading financial services software
or Financial Technology (“FinTech”) partner, with particular focus on mortgage and real estate software verticals, that generates
between $50 million and $100 million of revenues and is valued between $1 billion and $2 billion.
Acquisition Criteria
The maturity and judgment of our management team
will guide our acquisition process. When evaluating candidate companies, we expect to use the following non-exclusive guidelines and characteristics
for determining opportunities:
1. Competitive Advantage
We will look for mission-critical companies with
leading position, technology and product capability. Our focus will be on businesses whose products or services are differentiated which
creates strong barriers to entry and opportunity to create value by implementing best practices. We will opportunistically pursue a business
with proven technology and market acceptance and that can be scaled for additional growth in the future.
2. Promising Financial Model
We expect to target a business that has historically
been an efficient, leading provider of Software-as-a-Service (“SaaS”) technologies. We will look to invest in companies that
we believe have a large market opportunity for growth over the next five years driven by a differentiated strategy and a defensible
competitive advantage.
3. Experienced Management Team
Our team has an accomplished track record and deep
understanding of the financial software industry. We believe our management team’s multifaceted expertise in assessing a target’s
technology and potential will be an advantage in this industry. We intend to seek a business whose performance we believe we can improve
by leveraging our transactional, financial, managerial and investment experience, as well as our extensive networks and insights. We believe
our management team has the right skills and capabilities to enhance a target’s results and consolidate its competitive positions
in its sectors.
4. Favorable Competitive Environment in an Attractive Growing
Market
We will seek companies operating in growing industries
with favorable dynamics and potential for consolidation. While we will target businesses with large markets with the potential to grow
substantially through organic means, we will prioritize those targets that have platform opportunities to expand their addressable markets.
By targeting strategic, product, customer segment and technology acquisitions, we expect our potential target business will be positioned
to use its public currency and cash position to ideally generate accretive transactions that benefit shareholders.
5. Attractive Terms
We intend to focus on a target business that
gives our investors access to market-leading technologies, exceptional management and a large market opportunity at an attractive
price. We believe an initial business combination with us would offer private companies seeking access to the public markets and
liquidity for their investors and shareholders an attractive alternative to a traditional initial public offering. By focusing on a
partnership with the potential to achieve attractive risk-adjusted returns, we believe we have the potential to be a preferred
partner for leading financial software companies.
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These guidelines and characteristics are important,
but not exhaustive. The merits of any particular initial business combination will be based on these guidelines and characteristics, as
well as other considerations that our management team may deem relevant. Ultimately, we believe our management team is well suited to
identify and execute on acquisition opportunities that have the potential to generate attractive risk-adjusted returns for our stockholders.
In the event that we decide to enter into our initial
business combination with a target business that does not meet the above guidelines and characteristics, we will disclose the same in
our stockholder communications related to our initial business combination, which, as discussed in this report, would be in the form of
proxy solicitation materials or tender offer documents that we will file with the Securities and Exchange Commission (the “SEC”).
In addition to any potential business candidates
we may identify on our own, we anticipate that other target business candidates will be brought to our attention from various unaffiliated
sources, including investment market participants, private equity funds, and large business enterprises seeking to divest non-core assets
or divisions.
Acquisition Process
In evaluating a prospective target business, we
expect to conduct an extensive due diligence review which will encompass, as applicable and among other things, commercial and industry
due diligence, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of
facilities, and a review of financial and other information about the target and its industry. To help facilitate this evaluation, we
will rely on input from our management team, sponsor and directors, including third party diligence providers if and as necessary.
So long as we maintain a listing for our securities
on the New York Stock Exchange (the “NYSE”), our initial business combination must occur with one or more businesses or assets
with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the amount of any deferred underwriting
discount held in the Trust Account). We refer to this as the “80% of net assets test.” If our securities are no longer listed
on the NYSE, we will not be obligated to satisfy the 80% of net assets test. Our board of directors will make the determination as to
the fair market value of our initial business combination. The fair market value of the target businesses or assets will be determined
by our board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential
sales, earnings, cash flow and/or book value). Even though our board of directors will rely on generally accepted standards, our board
of directors will have discretion to select the standards employed. In addition, the application of the standards generally involves a
substantial degree of judgment. Accordingly, investors will be relying on the business judgment of our board of directors in evaluating
the fair market value of the target businesses or assets. The proxy solicitation materials or tender offer documents used by us in connection
with any proposed initial business combination will provide public stockholders with our analysis of our satisfaction of the 80% of net
assets test, as well as the basis for our determinations. If our board of directors is not able to independently determine the fair market
value of the target businesses or assets, we will obtain an opinion from an independent investment banking firm which is a member of FINRA
or a valuation or appraisal firm with respect to the satisfaction of such criteria. While we consider it unlikely that our board will
not be able to make an independent determination of the fair market value of any applicable target business or asset, it may be unable
to do so if the board is less familiar or experienced with such target business or asset, there is a significant amount of uncertainty
as to the value of the target assets or the prospects of the target business, including if such business is at an early stage of development,
operations or growth, or if the anticipated transaction involves a complex financial analysis or other specialized skills and our board
determines that outside expertise would be helpful or necessary in conducting such analysis. Since any opinion, if obtained, would merely
state that the fair market value of the target businesses or assets meets the 80% threshold, unless such opinion includes material information
regarding the valuation of a target business or asset or the consideration to be provided, it is not anticipated that copies of such opinion
would be distributed to our stockholders. However, if required under applicable law, any proxy statement that we deliver to stockholders
and file with the SEC in connection with a proposed initial business combination will include such opinion.
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We anticipate structuring our initial
business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of
the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination
such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business or
businesses for the post-transaction company to meet certain objectives of the target management team or stockholders or for other
reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the
outstanding voting securities of the target or otherwise acquires an interest in the target or assets sufficient for it not to be
required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or
acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own
a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business
combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A common stock
in exchange for all of the outstanding capital stock of a target or issue a substantial number of new shares of Class A common stock
to third parties in connection with financing our initial business combination. In this case, we would acquire a 100% controlling
interest in the target. However, as a result of the issuance of a substantial number of new shares of Class A common stock, our
stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares of Class
A common stock subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target
business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is
owned or acquired is what will be valued for purposes of the 80% of net assets test. If the initial business combination involves
more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and
we will treat the target businesses together as the initial business combination for the purposes of a tender offer or for seeking
stockholder approval, as applicable.
If our initial business combination is paid for
using equity, equity-linked or debt securities or loans or not all of the funds released from the Trust Account are used for the aforementioned
purposes or redemption of our public shares, we may apply the balance of the cash released to us from the Trust Account for general corporate
purposes, including for maintenance or expansion of operations of post-transaction businesses, for payment of principal of or interest
on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We may seek to raise additional funds in connection
with the completion of our initial business combination through an offering of equity, equity-linked or debt securities or loans, and
we may effectuate our initial business combination using the proceeds of such offerings or loans rather than using the amounts held in
the Trust Account. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously
with the completion of our business combination. In the case of our initial business combination funded with assets other than the Trust
Account assets, our tender offer documents or proxy materials disclosing the business combination would disclose the terms of the financing
and, only if required by law or we decide to do so for business or other reasons, we would seek stockholder approval of such financing.
There are no prohibitions on our ability to raise funds through an offering of equity, equity-linked or debt securities or loans in connection
with our initial business combination. At this time, we are not a party to any arrangement or understanding with any third party with
respect to raising any additional funds through the sale of securities or otherwise.
Redemption Rights for Public Stockholders upon Completion of Our
Initial Business Combination
We will provide our public stockholders with the
opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation
of our initial business combination, including interest earned on the funds held in the Trust Account (net of permitted withdrawals for
tax), divided by the number of then outstanding public shares, subject to the limitations described herein. At completion of our initial
business combination, we will be required to purchase any public shares properly delivered for redemption and not withdrawn. The amount
in the Trust Account is initially anticipated to be $10.20 per public share. The per share amount we will distribute to investors who
properly redeem their public shares will not be reduced by the deferred underwriting fees we will pay to the underwriter. However, the
per-share redemption amount received by public stockholders could be less than the $10.20 per public share initially held in the Trust
Account due to claims of creditors (see “Risk Factors—If third parties bring claims against us, the proceeds held in the Trust
Account could be reduced and the per-share redemption amount received by our public stockholders may be less than $10.20 per share”
and other risk factors herein). The redemption right will include the requirement that any beneficial owner on whose behalf a redemption
right is being exercised must identify itself in order to validly redeem its shares. There will be no redemption rights upon completion
of our initial business combination with respect to our warrants. Our sponsor, directors and officers have entered into a letter agreement
with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares
held by them in connection with the completion of our initial business combination.
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Manner of Conducting Redemptions
We will provide our public stockholders with the
opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either: (1) in connection
with a stockholder meeting called to approve the business combination; or (2) by means of a tender offer. The decision as to whether we
will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion,
and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require
us to seek stockholder approval under applicable law or stock exchange listing requirement. Asset acquisitions and stock purchases would
not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we
issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would typically
require stockholder approval. If we structure a business combination transaction with a target business in a manner that requires stockholder
approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed business combination. We may conduct
redemptions of our public shares without a stockholder vote unless stockholder approval is required by applicable law or stock exchange
listing requirement, or we decide to seek stockholder approval for business or other reasons. If a stockholder vote is not required and
we do not decide to hold a stockholder vote for business or other reasons, we will, pursuant to our amended and restated certificate of
incorporation:
If, however, stockholder approval of the transaction
is required by applicable law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other
reasons, we will, pursuant to our amended and restated certificate of incorporation:
· file proxy materials with the SEC.
Submission of Our Initial Business Combination to a Stockholder
Vote
In the event that we seek stockholder approval
of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders
with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete
our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business
combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock
of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote
at such meeting. Our sponsor, directors and officers will count towards this quorum and have agreed to vote any founder shares and any
public shares held by them in favor of our initial business combination. These quorum and voting thresholds and agreements may make it
more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares without
voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction. In addition, our sponsor, directors
and officers have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect
to any founder shares and any public shares held by them in connection with the completion of a business combination.
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Limitation on Redemption upon Completion of our Initial Business
Combination if We Seek Stockholder Approval
Notwithstanding the foregoing, if we seek
stockholder approval of our initial business combination and we do not conduct redemptions of our public shares in connection with
our initial business combination pursuant to the tender offer rules, our amended and restated 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 Exchange Act), will be restricted from seeking redemption
rights with respect to more than an aggregate of 15% of the public shares, without our prior consent, which we refer to as the
“Excess Shares.” We believe this restriction will discourage stockholders from accumulating large blocks of shares, and
subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed business combination
as a means to force us or our affiliates to purchase their shares at a significant premium to the then-current market price or on
other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the public shares
could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our affiliates at a
premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no
more than 15% of the public shares, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to
block our ability to complete our initial business combination, particularly in connection with a business combination with a target
that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be
restricting our stockholders’ ability to vote all of their public shares (including Excess Shares) for or against our initial
business combination.
Redemption of Public Shares and Liquidation if No Initial Business
Combination
Our amended and restated certificate of incorporation
provides that we will have only until June 14, 2023, unless an Extension Period applies, to complete our initial business combination.
If we are unable to complete our initial business combination within such period, we will: (1) cease all operations, except for the purpose
of winding up; (2) as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds
therefor, redeem the public shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest earned on the funds held in the Trust Account (net of permitted withdrawals for tax and up to $100,000 of
interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject
to applicable law; and (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders
and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to
our warrants, and our warrants will expire worthless if we fail to complete our initial business combination by June 14, 2023 or during
any Extension Period.
Corporate Information
Our offices are located at 1745 Grand Avenue, Del
Mar, California 92014, and our telephone number is (917) 503-9722.
We maintain a corporate website at https://www.southportone.com. The information that is or may be contained on or accessible through
our corporate website or any other website that we may maintain is not part of this report and is not incorporated herein by reference.
We are required to file Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to disclose certain material events in Current
Reports on Form 8-K. These reports are available on our website.
Status as a Public Company
We believe our structure makes us an attractive
business combination partner to target businesses. As an existing public company, we offer target businesses an alternative to the traditional
initial public offering through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business
combination. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares
of our Class A common stock or for a combination of shares of our Class A common stock and cash, allowing us to tailor the consideration
to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company, we believe
target businesses will find this method a more certain and cost effective method to becoming a public company than the typical initial
public offering. In a typical initial public offering, there are additional expenses incurred in marketing, road show and public reporting
efforts that may not be present to the same extent in connection with a business combination with us.
Furthermore, once a proposed business
combination is completed, the target business will have effectively become public, whereas an initial public offering is always
subject to the underwriter’s ability to complete the offering, as well as general market conditions, which could delay or
prevent the offering from occurring. Once public, we believe the target business would then have greater access to capital and an
additional means of providing management incentives consistent with stockholders’ interests. It can offer further benefits by
augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
7
We are an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and
proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved. These exemptions will be available to us for a period of five years
following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier. Accordingly,
the reports we file with the SEC may not be comparable to those of other public companies and our stockholders may not have access to
certain information they may deem important. If some investors find our securities less attractive as a result, there may be a less active
trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides
that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the
Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage
of the benefits of this extended transition period. As a result, our financial statements may not be comparable to companies that comply
with new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until
the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we
have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means
the market value of our common stock that is held by non-affiliates equals or exceeds $700 million as of the end of such fiscal year’s
second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior
three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting
company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure
obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting
company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates equals or exceeds
$250 million as of the end of that year’s second fiscal quarter and (2) our annual revenues equaled or exceeded $100 million during
such completed fiscal year or the market value of our common stock held by non-affiliates equals or exceeds $700 million as of the end
of that year’s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison
of our financial statements with other public companies difficult or impossible.
Competition
In identifying, evaluating and selecting a target
business for our initial business combination, we may encounter intense competition from other entities having a business objective similar
to ours, including other blank check companies, private equity groups and leveraged buyout funds, public companies and operating businesses
seeking strategic acquisitions. Many of these entities are well-established and have extensive experience identifying and effecting business
combinations directly or through affiliates. Additionally, the number of blank check companies looking for business combination targets
has increased significantly in recent years and many of these blank check companies are sponsored by entities or persons that have significant
experience with completing business combinations. Moreover, many of these competitors possess greater financial, technical, human and
other resources than us. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent
limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection
with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination
and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses.
Any of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
8
Facilities
We currently maintain our executive offices at
1745 Grand Avenue, Del Mar, California 92014. We consider our current office space adequate for our current operations.
Employees
We currently have one officer and do not intend
to have any full-time employees prior to the completion of our initial business combination. Members of our management team are not obligated
to devote any specific number of hours to our matters. The amount of time that any such person will devote in any time period to our company
will vary based on whether a target business has been selected for our initial business combination and the current stage of the business
combination process.
Item 1A. Risk Factors.
You should carefully consider the following
risk factors and all the other information contained in this report, including the financial statements. If any of the following risks
occur, our business, financial condition, liquidity or results of operations may be materially adversely affected. In that event, the
trading price of our securities could decline, and you could lose all or part of your investment. The risk factors described below are
not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business.
We are a recently incorporated company with
no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a recently incorporated company with no
operating results, and we did not commence operations until after the closing of our IPO in December 2021. Because we lack an operating
history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination
with one or more target businesses. We do not yet have any plans, arrangements or understandings with any prospective target business
concerning a business combination and may be unable to complete our initial business combination. If we fail to complete our initial business
combination, we will never generate any operating revenues.
Past performance by our management team may
not be indicative of future performance of an investment in us or of the future performance of any business we may acquire.
Information or other references herein regarding
performance by, or businesses associated with, members of our management team is presented for informational purposes only. Any past experience
and performance, including related to acquisitions, of our management team or its affiliates or of businesses associated with our management
team is not a guarantee: (1) that we will be able to successfully identify a suitable candidate for our initial business combination;
(2) of any results with respect to any initial business combination we may consummate; or (3) that we will be able to adequately assess
the risks of a potential transaction. You should not rely on the historical record and performance of our management team or its affiliates
or of businesses associated our management team as indicative of the future performance of an investment in us or the returns we will,
or are likely to, generate going forward. Further, our management team has been involved with a number of public and private companies,
which have achieved different levels of performance. An investment in us is not an investment in our sponsor or in any other entity in
which our sponsor or our management team is affiliated and does not in any way create an advisory relationship between our sponsor, our
management team or any such entity, on the one hand, and any of our stockholders, on the other hand.
Our independent registered public accounting
firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going
concern.”
As of December 31, 2021, we had $1,950,543
in cash held outside the Trust Account and a working capital of $1,010,298, respectively. Further, we expect to incur significant costs
in pursuit of our acquisition plans. Our plans to raise capital and to consummate our initial business combination may not be successful.
In addition, management is currently evaluating the impact of the COVID-19 pandemic on the industry and its effect on the company’s
financial condition, liquidity, results of operations and/or search for a target company. These factors, among others, raise substantial
doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this report do not include any
adjustments that might result from our inability to continue as a going concern.
9
Our public stockholders may not be afforded
an opportunity to vote on our initial business combination, and even if we hold a vote, holders of our founder shares will participate
in such vote, which means we may complete our initial business combination even though a majority of our public stockholders do not support
such initial business combination.
We may not hold a stockholder vote to approve our
initial business combination unless the business combination would require stockholder approval under applicable law or stock exchange
listing requirements or if we decide to hold a stockholder vote for business or other reasons. For instance, the rules of the NYSE currently
allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we
were seeking to issue more than 20% of our outstanding common stock to a target business as consideration in any business combination.
Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding common stock, we would
seek stockholder approval of such business combination. However, except as required by applicable law or stock exchange rules, the decision
as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their public shares
to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of
the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Even if we seek stockholder
approval, the holders of our founder shares will participate in the vote on such approval. Accordingly, we may consummate our initial
business combination even if holders of a majority of our outstanding public shares do not approve of the business combination we consummate.
If we seek stockholder approval of our initial
business combination, our sponsor, officers and directors have agreed to vote in favor of such initial business combination, regardless
of how our public stockholders vote, and depending on the number of stockholders who vote, our sponsor, officers and directors may have
almost enough votes to approve our initial business combination based on the shares held by them.
Our sponsor, directors and officers have agreed
(and their permitted transferees will agree) to vote any founder shares and any public shares held by them in favor of our initial business
combination. As a result, in addition to our sponsor’s founder shares, we would need only 8,625,001, or 37.5% (assuming all outstanding
shares are voted) or 1,437,501, or 6.25% (assuming only the minimum number of shares representing a quorum are voted) of the 23,000,000
shares sold in our IPO to be voted in favor of a transaction in order to have our initial business combination approved. We expect that
our sponsor and its permitted transferees will own at least 20% of our outstanding shares of common stock at the time of any such stockholder
vote. Accordingly, if we seek stockholder approval of our initial business combination, it is more likely that the necessary stockholder
approval will be received than would be the case if our sponsor and its permitted transferees agreed to vote their founder shares in accordance
with the majority of the votes cast by our public stockholders. Although none of our sponsor, directors or officers have any current intention
to purchase our public shares, they are not restricted from doing so and there is no limit to the number of our public shares they may
purchase. If they purchase any of our public shares and retain such shares until any stockholders vote on our initial business combination,
the approval of our initial business combination by our stockholders will be even more likely.
Your only opportunity to affect the investment
decision regarding our initial business combination will be limited to the exercise of your right to redeem your public shares from us
for cash, unless we seek stockholder approval of such initial business combination.
Since our board of directors may complete our initial
business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the initial
business combination. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding
a potential business combination may be limited to exercising your redemption rights applicable to the outstanding public shares within
the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders
in which we describe our initial business combination.
The ability of our public stockholders to
redeem their public shares for cash may make our financial condition and liquidity unattractive to potential business combination targets,
which may make it difficult for us to enter into a business combination with a target.
We may seek to enter into a business
combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or
a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such
closing condition and, as a result, would not be able to proceed with the business combination. The amount of the deferred
underwriting fees payable to the underwriter will not be adjusted for any public shares that are redeemed in connection with our
initial business combination and such amount of deferred underwriting fees is not available for us to use as consideration in an
initial business combination. Furthermore, in no event will we redeem our public shares in an amount that would cause our net
tangible assets, after payment of the deferred underwriting fees, to be less than $5,000,001 (so that we do not then become subject
to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in
the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests
would cause our net tangible assets to be less than $5,000,001 or such greater amount necessary to satisfy a closing condition as
described above, we would not proceed with such redemption and the related business combination and may instead search for an
alternate business combination (including, potentially, with the same target). Prospective targets will be aware of these risks and,
thus, may be reluctant to enter into a business combination transaction with us. If we are able to consummate an initial business
combination, the per-share value of shares held by non-redeeming stockholders will give effect to the payment of the deferred
underwriting fees.
10
The ability of our public stockholders to
exercise redemption rights with respect to a large number of our public shares may not allow us to complete the most desirable business
combination or optimize our capital structure.
At the time we enter into an agreement for our
initial business combination, we will not know how many public stockholders may exercise their redemption rights and, therefore, we will
need to structure the transaction based on our expectations as to the number of public shares that will be submitted for redemption. If
our initial business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price or
requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the Trust Account to meet such
requirements or arrange for third-party financing. In addition, if a larger number of public shares is submitted for redemption than we
initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account or arrange
for third-party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness
at higher than desirable levels. Furthermore, this dilution would increase to the extent that the anti-dilution provision of the Class B
common stock results 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 at the time of our initial business combination. In addition, the amount of deferred underwriting fees payable
to the underwriter is not required to be adjusted for any public shares that are redeemed in connection with an initial business combination.
The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital
structure.
The ability of our public stockholders to
exercise redemption rights with respect to a large number of our public shares could increase the probability that our initial business
combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your public shares
If our initial business combination agreement requires
us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing,
the probability that our initial business combination would be unsuccessful increases. If our initial business combination is unsuccessful,
you would not be entitled to receive your pro rata portion of the Trust Account until we liquidate the Trust Account. If you are
in need of immediate liquidity, you could attempt to sell your public shares in the open market; however, at such time our Class A
common stock may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a
material loss on your investment or lose the benefit of funds expected to be expended in connection with the redemption of our public
shares until we liquidate or you are able to sell your public shares in the open market.
The requirement that we complete our initial
business combination by June 14, 2023, unless an Extension Period applies, may give potential target businesses leverage over us in negotiating
a business combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in
particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on
terms that would produce value for our stockholders.
Any potential target business with which we enter
into negotiations concerning a business combination will be aware that we must complete our initial business combination by June 14, 2023,
unless an Extension Period applies. Consequently, such target business may obtain leverage over us in negotiating a business combination,
knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete
our initial business combination with any target business. This risk will increase as we get closer to the timeframe described above.
In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would
have rejected upon a more comprehensive investigation.
11
We may not be able to complete our initial
business combination by June 14, 2023 or during any Extension Period, in which case we would cease all operations, except for the purpose
of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may receive only $10.20 per share,
or less than such amount in certain circumstances, and our warrants will expire worthless.
Our sponsor, officers and directors have agreed
that we must complete our initial business combination by June 14, 2023, unless an Extension Period applies. We may not be able to find
a suitable target business and complete our initial business combination within the prescribed time period. Our ability to complete our
initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the
other risks described herein. For example, while the extent of the impact of the novel coronavirus (“COVID-19”) pandemic on