The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form
10-K.
Overview
We are a blank check company incorporated in the British Virgin Islands as a
business company and incorporated for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses ("Business Combination"). We have not
yet selected any specific Business Combination target. We intend to effectuate
our initial Business Combination using cash from the proceeds of the IPO and the
private placement of the private placement warrants ("Private Placement"), the
proceeds of the sale of our securities in connection with our initial Business
Combination, our shares, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from June 28, 2021 (inception) through May 2, 2022
were organizational activities and those necessary to prepare for the IPO,
described below. Following our IPO, our only activities have been seeking a
target business with which to complete a business combination. We do not expect
to generate any operating revenues until after the completion of our initial
Business Combination. We expect to generate non-operating income in the form of
interest income on marketable securities held after the IPO. We expect that we
will 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 in connection with searching for, and completing, a Business
Combination.
For the year ended December 31, 2022, we had a net income of $2,442,549, which
consisted of general and administrative expenses of $424,790, offset by interest
earned on investment held in Trust Account of $2,867,339.
For the period from June 28, 2021 (inception) through December 31, 2021, we had
a net loss of $2,760, which consisted of formation and operating expenses.
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Liquidity and Capital Resources
As previously disclosed on a Current Report on Form 8-K dated May 2, 2022, on
May 5, 2022, the Company consummated the IPO of 20,000,000 Units, which includes
the partial exercise of the over-allotment option granted to the underwriters.
Each Unit consists of one Ordinary Share, one-half of one redeemable Warrant
entitling its holder to purchase one Ordinary Share at a price of $11.50 per
full share and one Right to receive one-tenth of one Class A ordinary share upon
the consummation of an initial Business Combination. The Units were sold at an
offering price of $10.00 per Unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the IPO, the Company consummated the Private
Placement with A SPAC II (Holdings) Corp., the Company's sponsor, of 8,966,000
Private Warrants at a price of $1.00 per Private Warrant, generating total
proceeds of $8,966,000. The Private Warrants are identical to the public
Warrants sold in the IPO, as set forth in the Underwriting Agreement, except as
described in the Warrant Agreement.
On May 5, 2022, a total of $203,500,000 of the net proceeds from the IPO and the
Private Placement were deposited in a Trust Account established for the benefit
of the Company's public shareholders. We intend to use substantially all of the
funds held in the Trust Account, to acquire a target business and to pay our
expenses relating thereto. To the extent that our capital stock is used in whole
or in part as consideration to effect a Business Combination, the remaining
funds held in the Trust Account will be used as working capital to finance the
operations of the target business. Such working capital funds could be used in a
variety of ways including continuing or expanding the target business'
operations, for strategic acquisitions and for marketing, research and
development of existing or new products. Such funds could also be used to repay
any operating expenses or finders' fees which we had incurred prior to the
completion of our Business Combination if the funds available to us outside of
the Trust Account were insufficient to cover such expenses.
For the year ended December 31, 2022 and for the period from June 28, 2021
(inception) to December 31, 2021, cash used in operating activities was $438,591
and $0, respectively.
As of December 31, 2022, we had marketable securities held in the Trust Account
of $206,356,227 consisting of securities held in a treasury trust fund that
invests in United States government treasury bills, bonds or notes with a
maturity of 185 days or less. Interest income on the balance in the Trust
Account may be used by us to pay taxes. Through December 31, 2022, we did not
withdraw any interest earned on the Trust Account to pay our taxes. We intend to
use substantially all of the funds held in the Trust Account, to acquire a
target business and to pay our expenses relating thereto. To the extent that our
capital stock is used in whole or in part as consideration to effect a business
combination, the remaining funds held in the Trust Account will be used as
working capital to finance the operations of the target business. Such working
capital funds could be used in a variety of ways including continuing or
expanding the target business' operations, for strategic acquisitions and for
marketing, research and development of existing or new products. Such funds
could also be used to repay any operating expenses or finders' fees which we had
incurred prior to the completion of our business combination if the funds
available to us outside of the Trust Account were insufficient to cover such
expenses.
As of December 31, 2022, we had cash of $1,063,837 outside the Trust Account.
Until consummation of the business combination, we intend to use the funds held
outside the Trust Account for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the business combination.
If our estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a business combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our business combination. In this event, our
officers, directors or their affiliates may, but are not obligated to, loan us
funds as may be required. If we consummate an initial business combination, we
would repay such loaned amounts out of the proceeds of the Trust Account
released to us upon consummation of the Business Combination. Up to $1,150,000
of such loans may be convertible into warrants at a price of $1.00 per warrant
at the option of the lender. In the event that a Business Combination does not
close, we may use a portion of the working capital held outside the Trust
Account to repay such loaned amounts, but no proceeds from our Trust Account
would be used for such repayment. The terms of such loans by our initial
shareholders, officers and directors, if any, have not been determined and no
written agreements exist with respect to such loans.
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Moreover, we may need to obtain additional financing either to complete our
Business Combination or because we become obligated to redeem a significant
number of our public shares upon consummation of our Business Combination, in
which case we may issue additional securities or incur debt in connection with
such Business Combination. Subject to compliance with applicable securities
laws, we would only complete such financing simultaneously with the completion
of our Business Combination. If we are unable to complete our Business
Combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the Trust Account. In addition,
following our Business Combination, if cash on hand is insufficient, we may need
to obtain additional financing in order to meet our obligations.
As of December 31, 2022, we had cash of $1,063,837 and a working capital of
$1,126,933. The Company has 15 months from the closing of the IPO (or up to 21
months if extended to the full extent) to consummate a Business Combination. It
is uncertain that the Company will be able to consummate a Business Combination
by this time. If a Business Combination is not consummated within the time
period, there will be a mandatory liquidation and subsequent dissolution.
The Company has incurred and expects to continue to incur significant
professional costs to remain as a publicly traded company and to incur
significant transaction costs in pursuit of the consummation of a Business
Combination. 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 these conditions raise substantial doubt about the Company's ability to
continue as a going concern. The management's plan in addressing this
uncertainty is through the Working Capital Loans. In addition, if the Company is
unable to complete a business combination within the Combination Period (by
August 5, 2023), the Company's board of directors would proceed to commence a
voluntary liquidation and thereby a formal dissolution of the Company. There is
no assurance that the Company's plans to consummate a business combination will
be successful within the Combination Period. As a result, management has
determined that such additional condition also raises substantial doubt about
the Company's ability to continue as a going concern. The financial statement
does not include any adjustments that might result from the outcome of this
uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of 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.
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
At December 31, 2022 we did not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities other than the
commitments to the below:
Registration Rights
The holders of founder shares, private placement warrants, shares being issued
to the underwriters and units that may be issued on conversion of working
capital loans (and in each case holders of their component securities, as
applicable) will be entitled to registration rights pursuant to a registration
rights agreement that required the Company to register such securities for
resale (in the case of the founder shares, only after conversion to our Class A
ordinary shares). The holders of these securities are entitled to make up to
three demands, excluding short form demands, that the Company register such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to the
completion of a Business Combination. The Company will bear the expenses
incurred in connection with the filing of any such registration statements.
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Underwriting Agreement
The Company granted the underwriters, the representative of the underwriters a
45-day option to purchase up to 2,775,000 additional Units to cover
over-allotments, if any, at IPO price less the underwriting discounts and
commissions. On May 5, 2022, simultaneously with the closing of the IPO, the
underwriter partially exercised its over-allotment option to purchase 1,500,000
Units, generating gross proceeds to the Company of $15,000,000.
The underwriters were paid a cash underwriting discount of $0.169 per unit, or $
3,380,000 (including the partial exercise of over-allotment option) upon the
closing of the IPO. In addition, the underwriters will be entitled to a deferred
commission of $0.35 per unit, or $6,475,000, which will be paid upon the closing
of a Business Combination from the amounts held in the Trust Account, subject to
the terms of the underwriting agreement.
Representative's Ordinary Shares
The Company issued to the underwriters and/or its designees, 300,000 Class A
ordinary shares including 22,500 ordinary shares as a result of partial exercise
of the underwriters' over-allotment option at the closing of the IPO.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Deferred Offering Costs
Deferred offering costs consist of direct costs incurred through the balance
sheet date that are directly related to the IPO and that will be charged to
shareholders' equity upon the completion of the IPO. Should the IPO prove to be
unsuccessful, these deferred costs, as well as additional expenses to be
incurred, will be charged to operations.
Warrant Instruments
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the instruments'
specific terms and applicable authoritative guidance in ASC 480 and ASC 815,
"Derivatives and Hedging" ("ASC 815"). The assessment considers whether the
instruments are freestanding financial instruments pursuant to ASC 480, meet the
definition of a liability pursuant to ASC 480, and whether the instruments meet
all of the requirements for equity classification under ASC 815, including
whether the instruments are indexed to the Company's own ordinary shares and
whether the instrument holders could potentially require "net cash settlement"
in a circumstance outside of the Company's control, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the instruments are outstanding. The Company
determined that upon further review of the Warrant Agreement, management
concluded that the Public Warrants and Private Placement Warrants issued
pursuant to the Warrant Agreement qualify for equity accounting treatment.
Class A Ordinary Shares Subject To Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible
redemption in accordance with the guidance in Accounting Standards Codification
("ASC") Topic 480 "Distinguishing Liabilities from Equity." Ordinary shares
subject to mandatory redemption (if any) is classified as a liability instrument
and is measured at fair value. Conditionally redeemable ordinary shares
(including ordinary shares that features redemption rights that are either
within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company's control) is classified as
temporary equity. At all other times, ordinary shares are classified as
shareholders' equity. The Company's Class A ordinary shares feature certain
redemption rights that are considered to be outside of the Company's control and
subject to the occurrence of uncertain future events. Accordingly, as of
December 31, 2022, ordinary shares subject to possible redemption are presented
at redemption value of $10.318 per share as temporary equity, outside of the
shareholders' equity section of the Company's balance sheet. The Company
recognizes changes in redemption value immediately as they occur and adjusts the
carrying value of redeemable ordinary shares to equal the redemption value at
the end of each reporting period. Increases or decreases in the carrying amount
of shares of redeemable ordinary shares are affected by charges against
additional paid in capital or accumulated deficit if additional paid in capital
equals to zero.
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Net Loss Per Share
The Company complies with accounting and disclosure requirements of FASB ASC
260, Earnings Per Share. The condensed statements of operations include a
presentation of income (loss) per redeemable share and income (loss) per
non-redeemable share following the two-class method of income per share. In
order to determine the net income (loss) attributable to both the redeemable
shares and non-redeemable shares, the Company first considered the undistributed
income (loss) allocable to both the redeemable shares and non-redeemable shares
and the undistributed income (loss) is calculated using the total net loss less
any dividends paid. The Company then allocated the undistributed income (loss)
ratably based on the weighted average number of shares outstanding between the
redeemable and non-redeemable shares. Any remeasurement of the accretion to
redemption value of the common shares subject to possible redemption was
considered to be dividends paid to the public shareholders. As of December 31,
2022, the Company did not have any dilutive securities and other contracts that
could, potentially, be exercised or converted into ordinary shares and then
share in the earnings of the Company. As a result, diluted loss per share is the
same as basic loss per share for the period presented.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2024 for the Company and should be applied
on a full or modified retrospective basis, with early adoption permitted
beginning on January 1, 2021. The Company is currently assessing the impact, if
any, that ASU 2020-06 would have on its financial position, results of
operations or cash flows.
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, the consolidated financial
statements may not be comparable to companies that comply with new or revised
accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404,(ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the consolidated financial statements (auditor discussion and
analysis) and (iv) disclose certain executive compensation related items such as
the correlation between executive compensation and performance and comparisons
of the CEO's compensation to median employee compensation. These exemptions will
apply for a period of five years following the completion of our Initial Public
Offering or until we are no longer an "emerging growth company," whichever is
earlier.
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