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 Cayman Islands on March 11,
2021 formed for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar Business Combination with
one or more businesses. We intend to effectuate our Business Combination using
cash derived from the proceeds of the Initial Public Offering and the sale of
the Private Units, our shares, debt or a combination of cash, shares and debt.
We expect 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 inception through December 31, 2022 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, and identifying a target company for a Business
Combination after the Initial Public Offering. 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 Initial Public Offering. 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 $1,107,130 which
consisted of formation and operational costs of $587,614, interest income on
marketable securities held in the trust account of $1,312,585, other income of
$5 and unrealized gain on marketable securities held in trust account of
$382,154. The formation and operational costs mainly consisted with
administrative expenses to the sponsor, insurance expenses and professional
expense. The other income and unrealized gain on marketable securities are
consist with mainly tax-exempt interest income.
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Liquidity and Capital Resources
On December 15, 2021, we consummated the Initial Public Offering of 11,500,000
Units, generating gross proceeds of $115,000,000. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 330,000
Private Units to the Sponsor at a price of $10.00 per Private Unit generating
gross proceeds of $3,300,000.
Following the Initial Public Offering and the sale of the Private Units, a total
of $115,000,000 was placed in the Trust Account. We incurred $5,669,696 in
transaction costs, including $2,300,000 of underwriting fees, $2,875,000 of
deferred underwriting fees and $494,696 of other offering costs.
For the year ended December 31, 2022, net cash used in operating activities was
$276,867. Net income of $1,107,130 was impacted by formation and operational
costs of $587,614, interest earned on investments of $1,312,585 and unrealized
gain on marketable securities held in trust account of $382,154.
At December 31, 2022, we had investments held in the Trust Account of
$118,228,816. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust
Account, excluding deferred underwriting commissions, to complete our Business
Combination. We may withdraw interest from the Trust Account to pay taxes, if
any. To the extent that our share capital or debt is used, in whole or in part,
as consideration to complete a Business Combination, the remaining proceeds held
in the Trust Account will be used as working capital to finance the operations
of the target business or businesses, make other acquisitions and pursue our
growth strategies.
At December 31, 2022, we had cash of $110,991 held outside of the Trust Account.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a 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 as may be required. Such Working Capital Loans would be evidenced
by promissory notes. If we complete a Business Combination, we may repay such
notes out of the proceeds of the Trust Account released to us. 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 notes, but no proceeds from
our Trust Account would be used for such repayment. Up to $1,500,000 of notes
may be convertible into units, at a price of $10.00 per unit, at the option of
the lender. The units would be identical to the Private Units.
In order to complete a Business Combination, the Company will need to raise
additional capital through loans or additional investments from its Sponsor,
stockholders, officers, directors, or third parties. The Company's officers,
directors and Sponsor may, but are not obligated to, loan the Company funds,
from time to time or at any time, in whatever amount they deem reasonable in
their sole discretion, to meet the Company's working capital needs. Accordingly,
the Company may not be able to obtain additional financing. If the Company is
unable to raise additional capital, it may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be
limited to, curtailing operations, suspending the pursuit of a potential
transaction, and reducing overhead expenses. The Company cannot provide any
assurance that new financing will be available to it on commercially acceptable
terms, if at all. These conditions raise substantial doubt about the Company's
ability to continue as a going concern if a Business Combination is not
consummated.
On September 13, 2022, the Company issued a promissory note (the "Note") in the
principal amount of up to $1,000,000 to the Sponsor, pursuant to which the
Sponsor shall loan to the Company up to $1,000,000 to pay the extension fee and
transaction cost. The Notes bear no interest and are repayable in full upon the
earlier of (a) September 15, 2023 or (b) the date of the consummation of the
Company's initial business combination. On December 13, 2022, the Company issued
a second promissory note (the "Second Note") in the principal amount of up to
$1,300,000 to the Sponsor, pursuant to which the Sponsor shall loan to the
Company up to $1,300,000 to pay the extension fee and transaction cost. Notes
bear no interest and are repayable in full upon the earlier of (a) December 31,
2023 or (b) the date of the consummation of the Company's initial business
combination. The Notes have no conversion feature and no collateral. On March
13, 2023, the Company issued a third promissory note (the "Third Note") in the
principal amount of up to $2,500,000 to the Sponsor, pursuant to which the
Sponsor shall loan to the Company up to $2,500,000 to pay the extension fee and
transaction cost. Notes bear no interest and are repayable in full upon the
earlier of (a) December 31, 2023 or (b) the date of the consummation of the
Company's initial business combination. The Notes have no conversion feature and
no collateral. The issuance of the Notes were made pursuant to the exemption
from registration contained in Section 4(a)(2) of the Securities Act of 1933, as
amended. Sponsor promissory notes balances were $1,533,332 and nil as of
December 31, 2022 and December 31, 2021 respectively.
We believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. 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 initial Business Combination. 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 completion of
our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination.
43
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
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay the Sponsor
a monthly fee of $10,000 for certain general and administrative services,
including office space, utilities and administrative services, provided to the
Company. We began incurring these fees on December 15, 2021 and will continue to
incur these fees monthly until the earlier of the completion of a Business
Combination or the Company's liquidation.
The underwriters are entitled to a deferred fee of two and one-half percent
(2.5%) of the gross proceeds of the Initial Public Offering, or $2,875,000. The
deferred fee will be paid in cash upon the closing of a Business Combination
from the amounts held in the Trust Account, subject to the terms of the
underwriting agreement.
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. We have identified the following critical accounting policies:
Warrants
The Company evaluates the Public and Private Warrants as either
equity-classified or liability-classified instruments based on an assessment of
the warrants' specific terms and applicable authoritative guidance in Financial
Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives
and Hedging ("ASC 815"). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the warrants meet all of the
requirements for equity classification under ASC 815, including whether the
warrants are indexed to the Company's own ordinary shares, among other
conditions for equity classification. Pursuant to such evaluation, both Public
and Private Warrants are classified in stockholders' equity as of December 31,
2022 and 2021.
Ordinary Shares Subject to Redemption
We account for our ordinary shares subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Ordinary shares subject to mandatory
redemption are classified as a liability instrument and are measured at fair
value. Conditionally redeemable ordinary shares (including ordinary shares that
feature redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) are classified as temporary equity. At all other times, ordinary
shares are classified as shareholders' equity. Our ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, ordinary shares
subject to possible redemption are presented at redemption value as commitments
and contingencies, outside of the shareholders' equity section of our balance
sheets.
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 redeemable ordinary shares are affected by charges against
additional paid-in capital and accumulated deficit if additional paid in capital
equals to zero.
44
Basic and diluted net income (loss) per share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings 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 income (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 ordinary shares subject to possible redemption was considered to be
dividends paid to the public shareholders.
The calculation of diluted net income (loss) per ordinary shares and related
weighted average of the ordinary shares does not consider the effect of the
warrants and rights issued in connection with the (i) Initial Public Offering,
and (ii) the private placement since the exercise of the warrants and rights are
contingent upon the occurrence of future events. The warrants are exercisable to
purchase 5,915,000 shares of ordinary shares in the aggregate, and the rights
are exercisable to convert 1,690,000 shares of ordinary shares in the aggregate.
As of December 31, 2022, the Company did not have any dilutive securities or
other contracts that could, potentially, be exercised or converted into ordinary
shares and then share in the earnings of the Company other than above. As a
result, diluted net income (loss) per ordinary shares is the same as basic net
income (loss) per ordinary shares for the periods presented.
Recent accounting standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
interim condensed financial statements.
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