References to the "Company," "our," "us" or "we" refer to BYTE Acquisition Corp.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the unaudited condensed
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 incorporated on January 8, 2021 as a Cayman Islands
exempted company for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses or entities (the "Business Combination"), that we have
not yet identified. While we may pursue an initial business combination target
in any business or industry, we intent to focus our search for targets in the
Israeli technology industry, including those engaged in cybersecurity,
automotive technology, fintech, enterprise software, cloud computing,
semiconductors, medical technology, AI and robotics and that offer a
differentiated technology platform and products. Our sponsor is Byte Holdings
LP, a Cayman Islands exempted limited partnership (our "Sponsor").
Our registration statement for our initial public offering was declared
effective on March 17, 2021. On March 23, 2021, we consummated its Initial
Public Offering of 30,000,000 units (the "Units" and, with respect to the Class
A ordinary shares included in the Units being offered, the "Public Shares"), at
$10.00 per Unit, generating gross proceeds of $300.0 million, and incurring
offering costs of approximately $17.2 million, inclusive of approximately $10.5
million in deferred underwriting commissions. On April 7, 2021, the underwriter
exercised the over-allotment option in part and purchased an additional
2,369,251 Units (the "Over-Allotment Units"), generating additional gross
proceeds of $23,692,510 (such offering, including the exercise of the
over-allotment, the "Initial Public Offering").
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 1,030,000 Units (the "Private
Placement Units") at a price of $10.00 per Private Placement Unit, generating
total gross proceeds of $10.3 million.
Upon the closing of the Initial Public Offering, sale of the Over-Allotment
Units, and the Private Placement, $323.7 million ($10.00 per Unit) of the net
proceeds of the sale of the Units in the Initial Public Offering and certain of
proceeds of the Private Placement were placed in a trust account ("Trust
Account") with Continental Stock Transfer & Trust Company acting as trustee and
invested in United States "government securities" within the meaning of Section
2(a)(16) of the Investment Company Act having a maturity of 185 days or less or
in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government
treasury obligations, as determined by us, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution of the Trust
Account to the shareholders.
If we are unable to complete a Business Combination by the Extended Date, we
will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but no more than 10 business days thereafter,
redeem 100% of the outstanding 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 (less taxes payable 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 shareholders' rights
as shareholders (including the right to receive further liquidation
distributions, if any), and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining shareholders and our
board of directors, dissolve and liquidate, subject in each case to its
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law.
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Extension
The Company had until March 23, 2023 to consummate an initial business
combination. On March 16, 2023, the Company held an extraordinary general
meeting of shareholders (the "EGM"). In this meeting the shareholders approved
amendments to the Company's amended and restated memorandum and articles of
association to extend the date by which the Company must complete an initial
business combination from March 23, 2023 to September 25, 2023 (the "Extension"
and such date, the "Extended Date"). In connection with the EGM, shareholders
holding an aggregate of 30,006,034 shares of the Company's Class A Ordinary
Shares exercised their right to redeem their shares for $10.20 per share of the
funds held in the Company's trust account, leaving approximately $24.1 million
in the trust account after such redemption.
Non-Redemption Agreements
On March 8, 2023, the Company entered into non-redemption agreements
(collectively, the "Non-Redemption Agreements") with certain of its existing
shareholders (the "Non-Redeeming Shareholders") holding Class A Ordinary Shares
of the Company. Pursuant to the Non-Redemption Agreements, each of the
Non-Redeeming Shareholders agreed to (a) not redeem 1,000,000 Class A Ordinary
Shares held by them on the date of the Non-Redemption Agreements (the "Shares")
in connection with the vote to amend the Company's amended and restated
memorandum and articles of association to extend the date by which the Company
has to consummate an initial business combination from March 23, 2023 to
September 25, 2023 and (b) vote their Shares in favor of the Extension presented
by the Company for approval by its shareholders. In connection with the
foregoing, the Company agreed to pay to each Non-Redeeming Shareholder $0.033
per Share in cash per month through the Extended Date.
Letter of Intent
On March 10, 2023, the Company issued a press release announcing that it has
entered into a non-binding letter of intent ("LOI") for a business combination
with Airship AI Holdings, Inc. ("Airship AI"). Airship AI, a robust AI-driven
edge video, sensor and data management platform for government agencies and
enterprises that gathers unstructured data from surveillance cameras and
sensors, applies artificial intelligence ("AI") analytics, and provides
visualization tools to improve decision making in mission critical environments.
Under the terms of the LOI, the Company and Airship AI would become a combined
entity, with Airship AI's existing equity holders rolling 100% of their equity
into the combined public company. The proposed transaction values Airship AI at
an enterprise value of $290 million. The Company expects to announce additional
details regarding the proposed business combination when a definitive merger
agreement is executed.
Class B Conversion
Effective as of March 27, 2023, pursuant to the terms of the amended and
restated memorandum and articles of association after the EGM, the Sponsor
elected to convert each outstanding Class B ordinary share held by it on a
one-for-one basis into Class A ordinary shares of the Company, with immediate
effect.
Results of Operations
Our entire activity since inception through March 31, 2023 related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We will generate non-operating
income in the form of interest income on cash and cash equivalents. We expect to
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.
For the three months ended March 31, 2023, we had net income of $1,163,141,
which primarily consisted of interest earned from investments held in the Trust
Account of $2,998,349 and interest income from bank account of $9,275, offset by
$675,589 of losses from operations and a noncash loss of $1,168,894 resulting
from changes in fair value of derivative warrant liabilities.
For the three months ended March 31, 2022, we had net income of $5,255,353,
which primarily consisted of interest earned from investments held in the Trust
Account of $30,627 and a noncash gain of $5,573,010 resulting from changes in
fair value of derivative warrant liabilities, offset by $348,284 of losses from
operations.
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Liquidity, Capital Resources and Going Concern Consideration
As of March 31, 2023, we had cash of $568,236. Until the consummation of the
Public Offering, our only source of liquidity was an initial purchase of
ordinary shares and private placement units by the Sponsor and loans from our
Sponsor.
Our liquidity needs prior to the consummation of the Initial Public Offering had
been satisfied through a payment of $25,000 from the Sponsor to cover certain
expenses on our behalf in exchange for the issuance of the Founder Shares (as
defined below), a loan under a note agreement from our Sponsor of approximately
$149,000 (the "Note"), and the net proceeds from the consummation of the Private
Placement not held in the Trust Account. We fully repaid the Note on March 25,
2021. In addition, in order to 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, provide us working
capital loans. To date, there were no amounts outstanding under any working
capital loans.
In connection with the Company's assessment of going concern considerations in
accordance with the Financial Accounting Standards Board's ("FASB") Accounting
Standards Codification ("ASC") Topic 205-40, "Presentation of Financial
Statements - Going Concern," management has determined that the mandatory
liquidation and subsequent dissolution raises substantial doubt about the
Company's ability to continue as a going concern. Management continues to seek
to complete a Business Combination within the Combination Period. No adjustments
have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after the Extended Date. The financial
statements do not include any adjustment that might be necessary if the Company
is unable to continue as a going concern.
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 office space, utilities and secretarial,
and administrative and support services. We began incurring these fees on March
23, 2021 and will continue to incur these fees monthly until the earlier of the
completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$11,329,238 in the aggregate. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, 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 policy:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants and forward purchase agreements, to determine if
such instruments are derivatives or contain features that qualify as embedded
derivatives, pursuant to FASB ASC Topic 480 "Distinguishing Liabilities from
Equity" ("ASC 480") and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC
815"). The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at
the end of each reporting period.
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The warrants issued in connection with the Initial Public Offering and the
Private Placement Warrants are recognized as derivative liabilities in
accordance with ASC 815. Accordingly, we recognize the warrant instruments as
liabilities at fair value and adjusts the instruments to fair value at each
reporting period. The liabilities are subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in the
Company's statements of operations. The initial estimated fair value of the
warrants was measured using a Monte Carlo simulation. The subsequent estimated
fair value of the Public Warrants is based on the listed price in an active
market for such warrants while the fair value of the Private Placement Warrants
continues to be measured using a Monte Carlo simulation.
Class A ordinary shares subject to possible redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC 480. Class A ordinary shares subject to
mandatory redemption (if any) is classified as liability instruments and are
measured at fair value. Conditionally redeemable Class A ordinary shares
(including Class 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) are classified as
temporary equity. At all other times, Class A ordinary shares are classified as
shareholders' equity. The Company's Public 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 March 31, 2023 and
December 31, 2022, 2,363,217 and 32,369,251 Class A ordinary shares subject to
possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' equity section of our balance sheet.
Effective with the closing of the Public Offering (including sale of the
Over-Allotment Units), we recognized the accretion from initial book value to
redemption amount, which resulted in charges against additional paid-in capital
(to the extent available) and accumulated deficit.
Net Income per ordinary share
We have two classes of shares, which are referred to as Class A ordinary shares
subject to possible redemption and non-redeemable Class A ordinary shares and
Class B ordinary shares. Income and losses are shared pro rata between the two
classes of shares. Net income per ordinary share is calculated by dividing the
net income by the weighted average of ordinary shares outstanding for the
respective period.
The calculation of diluted net income per ordinary shares does not consider the
effect of the warrants issued in connection with the Public Offering (including
sale of the Over-Allotment Units) and the Private Placement to purchase an
aggregate of 16,699,626 ordinary shares in the calculation of diluted income per
share, because their exercise is contingent upon future events and their
inclusion would be anti-dilutive under the treasury stock method. As a result,
diluted net income per share is the same as basic net income per share for the
period ended March 31, 2023 and December 31, 2022. Accretion associated with the
redeemable Class A ordinary shares is excluded from net income per share as the
redemption value approximates fair value.
Recent Accounting Standards
In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13 -
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments ("ASU 2016-13"). This update requires financial assets
measured at amortized cost basis to be presented at the net amount expected to
be collected. The measurement of expected credit losses is based on relevant
information about past events, including historical experience, current
conditions, and reasonable and supportable forecasts that affect the
collectability of the reported amount. Since June 2016, the FASB issued
clarifying updates to the new standard including changing the effective date for
smaller reporting companies. The guidance is effective for fiscal years
beginning after December 15, 2022, and interim periods within those fiscal
years, with early adoption permitted. The Company adopted ASU 2016-13 on January
1, 2023. The adoption of ASU 2016-13 did not an impact on its financial
statements.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
Off-Balance Sheet Arrangements and Contractual Obligations
As of March 31, 2023, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
JOBS Act
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, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
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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 of the
Sarbanes-Oxley Act, (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 PCAOB regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the 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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