Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form
10-K including, without limitation, statements under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. When used in
this Form 10-K, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of certain factors detailed in our filings with the SEC.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
Overview
We are a blank check company formed under the laws of the State of Delaware on
April 15, 2021 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of the IPO and the sale of the Private
Warrants, our capital stock, debt or a combination of cash, stock and debt.
All activity through December 31, 2022 relates to our formation, IPO, and search
for a prospective initial business combination target.
We are incurring 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 revenues to date.
Our only activities from April 15, 2021 (inception) through December 31, 2022
were organizational activities, those necessary to prepare for the IPO,
described below, and identifying a target company for a Business Combination. We
do not expect to generate any operating revenues until after the completion of
our Business Combination. We generate non-operating income in the form of
interest income on marketable securities held after the IPO. We incur expenses
as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses.
For the year ended December 31, 2022, we had net loss of $623,874 , which
consisted of realized gain on marketable securities held in our Trust Account of
$1,189,699 offset by formation and operational costs of $1,405,790, franchise
tax of $200,050 and provision for income tax of $207,733.
Liquidity and Capital Resources
On January 3, 2022, the Company consummated its Initial Public Offering of
11,500,000 units (the "Units" and, with respect to the shares of Class A common
stock included in the Units being offered, the "Public Shares"), at $10.00 per
Unit, generating gross proceeds of $115,000,000 (the "Initial Public Offering"),
and incurring offering costs of $6,755,007, of which $4,025,000 was for deferred
underwriting commissions. The Company granted the underwriter a 45-day option to
purchase up to an additional 1,500,000 Units at the Initial Public Offering
price to cover over-allotments, if any. On January 3, 2022, the over-allotment
option was exercised in full. Simultaneously with the consummation of the
closing of the Offering, the Company consummated the private placement of an
aggregate of 528,500 units (the "Placement Units") to the Sponsor at a price of
$10.00 per Placement Unit, generating total gross proceeds of $5,285,000 (the
"Private Placement"). A total of $116,725,000 of the net proceeds from the
Offering and the Private Placement was deposited in a trust account established
for the benefit of the Company's public stockholders. The proceeds held in the
trust account were invested only in U.S. government treasury obligations 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 which invest only in direct
U.S. government treasury obligations. A total of $1,451,900 was deposited into
the operating account of the Company.
In order to fund working capital deficiencies or finance transaction costs in
connection with an intended initial business combination, our sponsor or an
affiliate of our sponsor or certain of our officers and directors may, but are
not obligated to, loan us funds on a non-interest bearing basis as may be
required. If we complete our initial business combination, we would repay such
loaned amounts. In the event that our initial business combination does not
close, we may use a portion of the working capital held outside the trust
account, if any, to repay such loaned amounts but no proceeds from our trust
account would be used for such repayment. Up to $1,500,000 of such loans may be
convertible into units, at a price of $10.00 per unit at the option of the
lender, upon consummation of our initial business combination. The units would
be identical to the placement units. Other than as described above, the terms of
such loans by our officers and directors, if any, have not been determined and
no written agreements exist with respect to such loans. We do not expect to seek
loans from parties other than our sponsor or an affiliate of our sponsor as we
do not believe third parties will be willing to loan such funds and provide a
waiver against any and all rights to seek access to funds in our trust account.
As December 31, 2022, the Company has borrowed $91,124 under such loans.
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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 intend to target
businesses larger than we could acquire with the net proceeds of this offering
and the sale of the placement units, and may as a result be required to seek
additional financing to complete such proposed initial business combination.
Subject to compliance with applicable securities laws, we would only complete
such financing simultaneously with the completion of our 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. In addition, following our
initial business combination, if cash on hand is insufficient, we may need to
obtain additional financing in order to meet our obligations.
As indicated in the accompanying financial statements, at December 31, 2022, the
Company had $334 of cash in its operating bank account and a working capital of
$112,922,795. Further, we have incurred and expect to continue to incur
significant costs in pursuit of our financing and acquisition plans. We cannot
assure you that our plans to raise capital or to consummate an initial business
combination will be successful.
Going Concern Consideration
The Company expects to incur significant costs in pursuit of its financing and
acquisition plans. In connection with the Company's assessment of going concern
considerations in accordance with Accounting Standards Update ("ASU") 2014-15,
"Disclosures of Uncertainties about an Entity's Ability to Continue as a Going
Concern," management has determined that if the Company is unsuccessful in
consummating an initial business combination within the prescribed period of
time from the closing of the IPO, the requirement that the Company cease all
operations, redeem the public shares and thereafter liquidate and dissolve
raises substantial doubt about the ability to continue as a going concern. The
balance sheet does not include any adjustments that might result from the
outcome of this uncertainty. Management has determined that the Company has
funds that are sufficient to fund the working capital needs of the Company until
the consummation of an initial business combination or the winding up of the
Company as stipulated in the Company's amended and restated memorandum of
association. The accompanying financial statement has been prepared in
conformity with generally accepted accounting principles in the United States of
America ("GAAP"), which contemplate continuation of the Company as a going
concern.
Related Party Transactions
The Sponsor loaned the Company an aggregate of $122,352 of up to $300,000 to
cover expenses related to the IPO. The note is non-interest bearing and payable
on the earlier of the consummation of the Initial Public Offering or the date on
which the Company determines not to proceed with the Initial Public Offering.
Following the IPO of the Company on January 3, 2022, a total of $122,352 under
the promissory note was repaid on January 6, 2022.
On May 11, 2021, the Sponsor purchased 2,875,000 founder shares for an aggregate
purchase price of $25,000, or approximately $0.009 per share. In June 2021, the
Sponsor transferred 20,000 shares each to the Company's Chief Executive Officer
and David Kopp, 15,000 shares to the Company's Chief Financial Officer and
10,000 shares to each of the Company's independent director nominees. In July
2021, the Sponsor also transferred 431,250 shares to ARC Group Limited. In
November 2021, ARC Group Limited transferred 140,400 shares to Max Mark Capital
Limited, 140,400 shares to Jonathan Chan, and 10,000 shares to Mei Eng Goy. ARC
Group Limited purchased its net 140,450 shares in consideration of services
provided by such party as financial advisor to the Company in connection with
the Initial Public Offering. Each of the transfers above were completed at the
same per share purchase price as the Sponsor paid for the founder shares, or
$0.009. The number of founder shares issued was determined based on the
expectation that such founder shares would represent 20% of the outstanding
shares upon completion of this offering (excluding the placement units and
underlying securities). The per share purchase price of the founder shares was
determined by dividing the amount of cash contributed to the company by the
aggregate number of founder shares issued. As of December 31, 2022, the Sponsor
owned 2,358,750 shares of Class B common stock. As the underwriters'
over-allotment option has been exercised in full, none of the Sponsor shares
were forfeited.
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In order to finance transaction costs in connection with a Business Combination,
the Sponsor or an affiliate of the Sponsor, or the Company's officers and
directors may, but are not obligated to, loan the Company funds as may be
required ("Working Capital Loans"). Such Working Capital Loans would be
evidenced by promissory notes. The notes would either be repaid upon
consummation of a Business Combination, without interest, or, at the lender's
discretion, up to $1,500,000 of notes may be converted upon consummation of a
Business Combination into additional Placement Units at a price of $10.00 per
Unit. In the event that a Business Combination does not close, the Company may
use a portion of proceeds held outside the Trust Account to repay the Working
Capital Loans, but no proceeds held in the Trust Account would be used to repay
the Working Capital Loans. As December 31, 2022, the Company has borrowed
$91,124 under such loans.
Our sponsor purchased an aggregate of 528,500 placement units at a price of
$10.00 per unit for an aggregate purchase price of $5,285,000. Each placement
unit consists of one share of Class A common stock and one warrant. Each warrant
is exercisable to purchase one share of Class A common stock at $11.50 per
share. There will be no redemption rights or liquidating distributions from the
trust account with respect to the founder shares, the placement shares, or the
placement warrants, which will expire worthless if we do not consummate a
business combination within 15 months from the closing of this offering. The
placement units are identical to the units sold in the IPO except that the
placement units and their component securities (a) will not be transferable,
assignable or saleable until 30 days after the consummation of our initial
business combination except to permitted transferees and (b) so long as they are
held by our sponsor or its permitted transferees, will be entitled to
registration rights.
Our initial stockholders have agreed to waive their redemption rights with
respect to their founder shares and placement shares (i) in connection with the
consummation of a business combination, (ii) in connection with a stockholder
vote to amend our Amended and Restated Certificate of Incorporation (A) to
modify the substance or timing of our obligation to allow redemption in
connection with our initial business combination or certain amendments to our
Amended and Restated Certificate of Incorporation prior thereto or to redeem
100% of our public shares if we do not complete our initial business combination
within 15 months from the completion of this offering or (B) with respect to any
other provision relating to stockholders' rights or pre-initial business
combination activities and (iii) if we fail to consummate a business combination
within 15 months from the completion of this offering or if we liquidate prior
to the expiration of the 15-month period. However, our initial stockholders will
be entitled to redemption rights with respect to any public shares held by them
if we fail to consummate a business combination or liquidate within the 15-month
period.
Pursuant to a registration rights agreement we have entered into with our
initial stockholders, we may be required to register certain securities for sale
under the Securities Act. These holders, and holders of units issued upon
conversion of working capital loans, if any, are entitled under the registration
rights agreement to make up to three demands that we register certain of our
securities held by them for sale under the Securities Act and to have the
securities covered thereby registered for resale pursuant to Rule 415 under the
Securities Act. In addition, these holders have the right to include their
securities in other registration statements filed by us. We will bear the costs
and expenses of filing any such registration statements. See the section of this
Annual Report entitled "Certain Relationships and Related Party Transactions."
On March 23, 2023, we held a Special Meeting of our stockholders seeking
approval to amend our Amended and Restated Certificate of Incorporation, to
extend the date by which we must consummate a business combination up to twelve
(12) times (the "Charter Amendment"), each such extension for an additional one
(1) month period from April 3, 2023 to April 3, 2024. We also sought approval to
amend the investment management trust agreement, dated as of December 29, 2021,
by and between us and Continental Stock Transfer & Trust Company, allowing us to
extend the date by which the Company must consummate a business combination up
to twelve (12) times, each such extension for an additional one (1) month
period, until April 3, 2024, by depositing into the trust account established
for the benefit of the Company's public stockholders the lesser of (A) $0.055
per non-redeeming publicly held share of common stock and (B) $150,000 (the
"Extension Payment") for each one-month extension. Both proposals were approved.
Off-balance sheet financing arrangements
We did not have any off-balance sheet arrangements as of December 31, 2022.
Critical Accounting Policies
The preparation of 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. As of December 31, 2022, there were no critical accounting policies.
Recent accounting standards
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
our financial statements.
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