Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding our financial position, business strategy and the plans and objectives
of management for future operations, are forward- looking statements. When used
in this Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or our management,
identify forward-looking statements. Such forward-looking statements are based
on the beliefs of our management, as well as assumptions made by, and
information currently available our 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. All subsequent written
or oral forward-looking statements attributable to us or persons acting on our
behalf are qualified in their entirety by this paragraph.
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 on August 20, 2020 as a Cayman Islands
corporation and formed for the purpose of effecting a merger, capital share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses (a "Business Combination"). We
consummated our Public Offering (as defined below) on November 12, 2020 and are
currently in the process of locating suitable targets for our business
combination. We intend to use the cash proceeds from our Public Offering and the
sale of our private placement units described below as well as additional
issuances, if any, of our capital shares, debt or a combination of cash, shares
and debt to complete the Business Combination.
We expect to incur significant costs in the pursuit of our initial Business
Combination. We cannot assure you that our plans to raise capital or to complete
our initial Business Combination will be successful.
We completed the sale of 9,000,000 units (the "Units" and, with respect to the
shares of ordinary shares included in the Units being offered, the "Public
Shares") at $10.00 per Unit on November 12, 2020. Simultaneous with the closing
of the Public Offering, we completed the sale of 479,000 private placement units
(the "Private Units") at a price of $10.00 per unit in a private placement. Of
the 479,000 private placement units, 65,000 units, or the "representative units"
were purchased by I-Banker (and/or its designees).
In addition, the Company's sponsor agreed, pursuant to a letter agreement to
purchase up to 3,750,000 of the Company's rights in the open market at a market
price not to exceed $0.20 per right. I-Bankers also agreed to purchase up to
1,250,000 of the Company's rights in the open market at a market price not to
exceed $0.20 per right.
On November 9, 2021, our board of directors approved the first extension of the
date by which we have to consummate a Business Combination from November 12,
2021, to February 12, 2022. In connection with the extension, the Sponsor
deposited into the Trust Account $0.10 for each of the 9,000,000 shares issued
in the Public Offering, for a total of $900,000. We issued the Sponsor an
interest bearing unsecured promissory note in the principal amount of $900,000
which is payable by us upon the earlier of the consummation of the Business
Combination or our liquidation on or before February 12, 2023 (unless such date
is extended by our board of directors). Simple interest will accrue on the
unpaid principal balance of the Note at the rate of 4% per annum based on 365
days a year. The Note may be repaid in cash or convertible into units consisting
of one ordinary share, one right exchangeable into one-tenth of one ordinary
share, and one warrant exercisable for one-half of one ordinary share at $11.50
per share equal to (x) the portion of the principal amount of and accrued
interest under the Note being converted divided by (y) $10.00 rounded up to the
nearest whole number of units.
On February 9, 2022, we held an extraordinary general meeting pursuant to which
our shareholders approved extending the date by which the Company had to
complete a Business Combination from February 12, 2022 to August 12, 2022. In
connection with the approval of the extension, shareholders elected to redeem an
aggregate of 6,326,758 Ordinary Shares. As a result, an aggregate of $64,996,858
(or approximately ($10.27 per share) was released from the Trust Account to pay
such shareholders. On February 13, 2022, the Company issued a
non-interest-bearing convertible promissory note (the "February 2022 Note") in
the principal amount of up to $750,000 to the Sponsor and is due and payable
upon the earlier to occur of (i) the date on which the Company consummates its
initial Business Combination and (ii) the date that the winding up of the
Company is effective. Up to $600,000 of the unpaid principal amount of the
February 2022 Note may be converted into units of the Company, each unit
consisting of one ordinary share, one right exchangeable into one-tenth of one
ordinary share, and one warrant exercisable for one-half of one ordinary share.
27
On August 12, 2022, the Company held an extraordinary general meeting pursuant
to which the Company's shareholders approved extending the date by which the
Company has to complete a Business Combination from August 12, 2022 to February
12, 2023. In connection with the approval of the extension, shareholders elected
to redeem an aggregate of 646,617 Ordinary Shares. As a result, an aggregate of
$6,660,150 (or approximately $10.30 per share) was released from the Trust
Account to pay such shareholders. In connection with the extension, the Sponsor
deposited into the Trust Account approximately $0.10 for each of the 2,026,625
shares issued in the Public Offering, for a total of $202,460, and intends to
deposit approximately $0.15 for each such share for a total of $303,944 (plus
any applicable interest) during the week of January 23, 2023. On August 25,
2022, the Company issued a non-interest-bearing promissory note (the "August
2022 Note") in the aggregate principal amount of up to $202,460 to the Sponsor.
The principal amount of the August 2022 Note may be drawn down in three equal
amounts and the balance of the August 2022 Note is payable by the Company on the
earlier of the consummation of the Business Combination or the date of the
liquidation of the Company.
On October 6, 2022, the Company issued a non-interest-bearing promissory note
(the "October 2022 Note") in the principal amount of up to $500,000 to the
Sponsor. The principal balance of the October 2022 Note is payable by the
Company on the earlier of the consummation of the Business Combination or the
date of the liquidation of the Company. As of December 31, 2022, $500,000 was
outstanding under the October 2022 Note.
On November 16, 2022, the Company issued a non-interest-bearing promissory note
(the "November 2022 Note") in the principal amount of up to $303,994 (the
"Extension Funds") to our Sponsor, pursuant to which the Extension Funds will be
deposited into the trust account for each Public Share that was not redeemed in
connection with the Company's termination date from August 12, 2022 to February
12, 2023. The principal amount of the November 2022 Note may be drawn down in
three equal amounts and the balance of the November 2022 Note is payable by the
Company on the earlier of the consummation of the Business Combination or the
date of the liquidation of the Company. In connection with the third extension
of the Company and the November 2022 Note, the Company intends to deposit
$303,944 (plus any applicable interest) into the trust account during the week
of January 23, 2023. As of December 31, 2022, there was no balance outstanding
under the November 2022 Note.
As of December 31, 2022, we had marketable securities held in the Trust account
for the benefit of the Company's public shareholders of $21,319,155 (including
$303,257 of interest earned since the IPO, net of $46,066 of interest paid for
share redemptions, and $1,102,460 from the Trust extension payments). The trust
fund account is invested in interest-bearing U.S. government securities and the
income earned on those investments is also for the benefit of our public
shareholders.
Our management has broad discretion with respect to the specific application of
the net proceeds of IPO and the Private Placement, although substantially all of
the net proceeds are intended to be applied generally towards consummating a
business combination.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities, those
necessary to prepare for our Initial Public Offering and identifying a target
company for our initial Business Combination. We do not expect to generate any
operating revenues until after completion of our initial Business Combination.
We generate non-operating income in the form of interest income on cash and cash
equivalents held in the Trust Account. We incur expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as expenses as we conduct due diligence on prospective
Business Combination candidates.
For the year ended December 31, 2022, we had a net loss of $7,686,390 consisting
of formation and operating costs of $2,544,984 affected by interest expense of
$36,102 and transaction cost of shares transferred to backstop investors of
$5,739,976 and offset by interest earned on marketable securities held in Trust
of $314,155 and change in fair value in warrant liabilities of $180,581 and
change in fair value of convertible promissory note of $139,936.
For the year ended December 31, 2021, we had a net loss of $899,880 consisting
of formation and operating costs of $1,798,098 affected by interest expense of
$5,027 and change in fair value of convertible promissory note of $70,297 and
offset by interest earned on marketable securities held in Trust of $20,868 and
change in fair value in warrant liabilities of $952,674.
Recent Developments
As previously reported by the Company in its Quarterly Report on Form 10-Q for
the quarter ended March 31, 2022, on February 2, 2022, the Company entered into
an Agreement and Plan of Merger (the "Merger Agreement") with Edoc Merger Sub
Inc, and Calidi Biotherapeutics, Inc. ("Calidi"). On August 11, 2022, the
Company received written notice from Calidi that it had terminated the Merger
Agreement pursuant to the terms thereof and the parties have no further
obligations thereunder. As a result of the termination of the Merger Agreement,
the Merger Agreement is of no further force and effect, and certain agreements
entered into in connection with the Merger Agreement, including but not limited
to, the Voting Agreement and Lock-Up Agreement, are also no further force and
effect.
For additional information, refer to our Current Report on Form 8-K, filed with
the SEC on August 12, 2022.
On December 5, 2022, the Company entered into the AOI Merger Agreement with AOI,
Pubco, AOI Merger Sub, Purchaser Representative, Seller Representative and
Sellers, pursuant to which, subject to the terms and conditions set forth
therein and upon Closing, (a) the Company will merge with and into AOI Merger
Sub, with the Company continuing as the surviving entity, and with holders of
the Company's securities receiving substantially identical securities of Pubco,
and (b) immediately prior to the Merger, Pubco will acquire all of the issued
and outstanding ordinary shares of AOI from the Sellers in exchange for ordinary
shares of Pubco, with AOI becoming a wholly-owned subsidiary of Pubco. For more
information on the AOI Merger and the AOI Merger Agreement, see "Item 1.
Business".
28
On February 2, 2022, the Company entered into share purchase agreements
(collectively, the "Forward Share Purchase Agreements") with certain backstop
arrangements with Sea Otter Securities, Stichting Juridisch Eigendom Mint Tower
Arbitrage Fund, Feis Equities LLC, Yakira Capital Management, Inc., Yakira
Enhanced Offshore Fund and Yakira Partners LP, MAP 136 Segregated Portfolio and
Meteora Capital Partners, LP (collectively, the "Backstop Investors"), pursuant
to which the Backstop Investors agreed not to redeem certain Edoc shares (the
"Backstop Shares") in connection with the Company's shareholder meeting to
approve an extension of the date by which the Company has to consummate a
Business Combination from February 12, 2022 to August 12, 2022 (the " February
2022 Extension") and the Business Combination. Pursuant to the Forward Share
Purchase Agreements, the Backstop Investors agreed to hold such shares until the
three-month anniversary of the consummation of the Business Combination, at
which time they will each have the right to sell them to the combined entity,
after giving effect to the Business Combination (the "Combined Company") for a
price of $10.42 per share, or will sell them during such time period at a market
price of at least $10.27 per share (with a premium of $0.05 per share to be paid
by the Combined Company for each Backstop Share sold by a Backstop Investor
during the one-month period following the Closing of the Business Combination).
The Forward Share Purchase Agreements provide that, following the Closing of the
Business Combination, the Company will deposit into escrow accounts the
aggregate cash amount necessary to purchase the shares held by the Backstop
Investors, up to $22,924,000. As a result, these amounts deposited into the
escrow accounts will not be available to the Combined Company unless and until
any of the Backstop Investors sell such shares in the market. If the Backstop
Investors sell such shares during the one-month period following the Closing of
the Business Combination at a sales price that is greater than $10.27 per share,
then Combined Company shall pay to each selling investor a premium of $0.05 per
share sold. If the Backstop Investors sell shares to the Combined Company on the
three-month anniversary of the Closing of the Business Combination, the
repurchase price payable by the Combined Company for such shares from the escrow
accounts established for this purpose shall be $10.42 per share.
In consideration of the Backstop Investors' agreements with regard to Public
Shares pursuant to the Forward Share Purchase Agreements, the Sponsor (or its
designees) agreed to transfer an aggregate of 338,907 shares of Edoc Class B
ordinary shares (the "Backstop Transferred Founder Shares") to the Backstop
Investors. Additionally, if the Business Combination has not consummated by May
12, 2022, then for each monthly period from May 12, 2022 until August 12, 2022
that the Business Combination has not closed, Edoc shall cause to be paid to the
Backstop Investors, at Edoc's discretion, either (i) a cash amount of $0.05 per
share not redeemed by the Backstop Investors, for an aggregate of up to $0.15
per share, or (ii) or 0.034 Backstop Transferred Founder Shares per share not
redeemed by the Backstop Investors in connection with the extraordinary general
meeting of Edoc shareholders in connection with the February 2022 Extension, to
be transferred by the Sponsor (or its designees), for an aggregate of up to
0.1027 Backstop Transferred Founder Shares per share. As of July 22, 2022, an
aggregate of 225,940 additional Backstop Transferred Founder Shares were
transferred by the Sponsor to the Backstop investors The Company recognized
$5,739,976 and $0 of finance costs for the year ended December 31, 2022 and
2021, for the transfer of shares associated with the agreement in the statements
of operations of the condensed financial statements.
The Backstop Agreements expired on August 12, 2022, in accordance with their
terms.
On December 5, 2022, EDOC Acquisition Corp., a Cayman Islands exempted
corporation (together with its successors, "Edoc"), entered into a Business
Combination Agreement (the "Business Combination Agreement") with Australian
Oilseeds Investments Pty Ltd., an Australian proprietary company (the "AOI"),
Australian Oilseeds Holdings Limited, upon execution of a joinder agreement to
become party to the Business Combination Agreement (a "Joinder"), a to-be-formed
Cayman Islands exempted company ("Pubco"), AOI Merger Sub, upon execution of a
Joinder, a to-be-formed Cayman Islands exempted company and a wholly-owned
subsidiary of Pubco ("Merger Sub"), American Physicians LLC, a Delaware limited
liability company ("Purchaser Representative"), in the capacity as the Purchaser
Representative thereunder, Gary Seaton, in his capacity as the representative
for the Sellers (as defined below) in accordance with the terms and conditions
of the Business Combination Agreement (the "Seller Representative") and each of
the holders of AOI's outstanding capital shares named on Annex I thereto (the
"Primary Sellers"), as amended from time to time to include subsequent parties
that execute and deliver to Edoc, Pubco and AOI a Joinder (the "Joining
Sellers"), and the holders of AOI's outstanding capital shares who are bound by
the provisions of the Business Combination Agreement pursuant the drag-along
rights set forth in AOI's memorandum and articles of association (the
"Drag-Along Sellers", and collectively with the Joining Sellers, the "Sellers").
29
Pursuant to the Business Combination Agreement, subject to the terms and
conditions set forth therein, at the closing of the transactions contemplated by
the Business Combination Agreement (the "Closing"), (a) Edoc will merge with and
into Merger Sub, with Edoc continuing as the surviving entity (the "Merger"),
and with holders of Edoc securities receiving substantially identical securities
of Pubco, and (b) immediately prior to the Merger, Pubco will acquire all of the
issued and outstanding ordinary shares of AOI (the "Purchased Shares") from the
Sellers in exchange for ordinary shares of Pubco, with AOI becoming a
wholly-owned subsidiary of Pubco (the "Share Exchange", and together with the
Merger and the other transactions contemplated by the Business Combination
Agreement, the "Transactions").
The total consideration to be paid by Pubco to the Sellers for the Purchased
Shares shall be an aggregate number of Pubco ordinary shares (the "Exchange
Shares") with an aggregate value (the "Exchange Consideration") equal to,
without duplication, (i) $190,000,000, plus (or minus if negative) (ii) AOI's
net working capital less a target net working capital of $4,000,000, minus (iii)
the aggregate amount of any outstanding indebtedness, net of cash and cash
equivalents, of AOI and its subsidiaries, and minus (iv) the amount of any
unpaid transaction expenses of AOI, with each Pubco ordinary share to be issued
to the Sellers valued at $10.00.
Liquidity and Capital Resources
As of December 31, 2022, the Company had cash outside the Trust Account of
$13,726 available for working capital needs. All remaining cash held in the
Trust Account are generally unavailable for the Company's use, prior to an
initial business combination, and is restricted for use either in a Business
Combination or to redeem ordinary shares. As of December 31, 2022 and December
31, 2021, none of the amount in the Trust Account was available to be withdrawn
as described above.
For the year ended December 31, 2022, cash used in operating activities was
$1,459,672. Net loss of $7,686,390 was affected by accrued interest on
promissory note of $36,102, transaction cost of shares transferred to backstop
investors of $5,739,976, change in fair value in warrant liabilities of
$180,581, change in fair value in convertible promissory note of $139,936 and
interest earned on marketable securities held in Trust Account of $314,155.
Changes in operating assets and liabilities provided $1,085,312 of cash for
operating activities.
For the year ended December 31, 2021, cash used in operating activities was
$777,332. Net loss of $899,880 was affected by accrued interest on promissory
note of $5,027, change in fair value of convertible promissory note of $70,297,
interest earned on marketable securities held in Trust of $20,868 and change in
fair value in warrant liabilities of $952,674. Changes in operating assets and
liabilities provided $1,020,766 of cash for operating activities.
Through December 31, 2022, the Company's liquidity needs were satisfied through
receipt of $25,000 from the sale of the founder shares, the remaining net
proceeds from the IPO and the sale of private units, and the promissory notes
drawn from the Sponsor.
Until the consummation of a Business Combination, the Company will be using the
funds not held in the Trust Account for identifying and evaluating prospective
acquisition candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
acquire, and structuring, negotiating and consummating the Business Combination.
The Company will need to raise additional capital through loans or additional
investments from its Sponsor, shareholders, officers, directors, or third
parties. The Company's Sponsor, officers and directors 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.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern until the earlier of the consummation of the Business
Combination or the date the Company is required to liquidate. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
30
On November 10, 2021, the Company issued an interest-bearing convertible
promissory note (the "November 2021 Note") to the Sponsor in the amount of
$900,000, which is payable by the Company upon the earlier of the consummation
of the Business Combination or the liquidation of the Company on or before
February 12, 2022 (unless such date is extended by the Company's board of
directors). The November 2021 Note may be repaid in cash or convertible into
units consisting of one ordinary share, one right exchangeable into one-tenth of
one ordinary share, and one warrant exercisable for one-half of one ordinary
share at $11.50 per share equal to (x) the portion of the principal amount of
and accrued interest under the note being converted divided by (y) $10.00
rounded up to the nearest whole number of units. As of December 31, 2022,
$900,000 was outstanding on the November 2021 Note and the fair value of the
note, including accrued interest, was $842,069.
On February 13, 2022, the Company issued a non-interest-bearing convertible
promissory note (the "February 2022 Note") in the principal amount of up to
$750,000 to the Sponsor and is due and payable upon the earlier to occur of (i)
the date on which the Company consummates its initial Business Combination and
(ii) the date that the winding up of the Company is effective. Up to $600,000 of
the unpaid principal amount of the February 2022 Note may be converted into
units of the Company, each unit consisting of one ordinary share, one right
exchangeable into one-tenth of one ordinary share, and one warrant exercisable
for one-half of one ordinary share. As of December 31, 2022, $750,000 was
outstanding on the February 2022 Note and the fair value of the note was
$670,343.
On August 25, 2022, the Company issued a non-interest-bearing promissory note
(the "August 2022 Note") in the aggregate principal amount of up to $202,460 to
the Sponsor. The principal amount of the August 2022 Note may be drawn down in
three equal amounts and the balance of the August 2022 Note is payable by the
Company on the earlier of the consummation of the Business Combination or the
date of the liquidation of the Company. As of December 31, 2022, $202,460 was
outstanding under the August 2022 Note.
On October 6, 2022, the Company issued a non-interest-bearing promissory note
(the "October 2022 Note") in the principal amount of up to $500,000 to the
Sponsor. The principal balance of the October 2022 Note is payable by the
Company on the earlier of the consummation of the Business Combination or the
date of the liquidation of the Company. As of December 31, 2022, $500,000 was
outstanding under the October 2022 Note.
On November 16, 2022, the Company issued a non-interest-bearing promissory note
(the "November 2022 Note") in the principal amount of up to $303,994 (the
"Extension Funds") to our Sponsor, pursuant to which the Extension Funds will be
deposited into the trust account for each Public Share that was not redeemed in
connection with the Company's termination date from August 12, 2022 to February
12, 2023. The principal amount of the November 2022 Note may be drawn down in
three equal amounts and the balance of the November 2022 Note is payable by the
Company on the earlier of the consummation of the Business Combination or the
date of the liquidation of the Company. In connection with the November 2022
Note, the Company intends to deposit $303,944 (plus any applicable interest)
into the trust account during the week of January 23, 2023. As of December 31,
2022, there was no balance outstanding under the November 2022 Note.
Off-Balance Sheet Financing Arrangements
As of December 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K. 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
As of December 31, 2022, we did not have any long-term debt, capital or
operating lease obligations.
We entered into an administrative support agreement ("Administrative Support
Agreement") pursuant to which agreed to pay our sponsor for office space and
secretarial and administrative services provided to members of our management
team, in an amount not to exceed $10,000 per month. Effective March 31, 2021, we
entered into a termination agreement with our sponsor (the "Termination
Agreement") to terminate the Administrative Support Agreement (and any accrued
obligations pursuant thereto). Since our initial public offering, we have not
made any payments under the Administrative Support Agreement and have paid for
services rendered and expenses advanced by our sponsor on an as-needed basis.
31
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States 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 as our critical accounting policies:
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, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815-15.
We account for the Public Warrants, Private Warrants, Rights and Representative
Warrants (as defined in Note 5, 6 and 8) collectively ("Warrants"), as either
equity or liability-classified instruments based on an assessment of the
specific terms of the Warrants and the applicable authoritative guidance in
Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") 815, Derivatives and Hedging ("ASC 815"). The assessment considers
whether the Warrants meet all of the requirements for equity classification
under ASC 815, including whether the Warrants are indexed to our own ordinary
shares and whether the warrant holders could potentially require "net cash
settlement" in a circumstance outside of our control, among other conditions for
equity classification. This assessment, which requires the use of professional
judgment, is conducted at the time of issuance of the Warrants and as of each
subsequent quarterly period end date while the Warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, such warrants are required to be recorded as a component of
additional paid-in capital at the time of issuance. For issued or modified
warrants that do not meet all the criteria for equity classification, such
warrants are required to be recorded at their initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of liability-classified warrants are recognized as a non-cash gain or loss
on the statements of operations.
We account for the Private Warrants, Rights and Representative's Warrants in
accordance with ASC 815-40 under which the Warrants and FPAs do not meet the
criteria for equity classification and must be recorded as liabilities. The fair
value of the Private Warrants, Rights and Representative's Warrants has been
estimated using the Monte Carlo simulation model.
We evaluated the Public Warrants in accordance with ASC 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity," and concluded that they met the
criteria for equity classification and are required to be recorded as part a
component of additional paid-in capital at the time of issuance.
Convertible Promissory Note
The Company accounts for its convertible promissory note under ASC 815,
Derivatives and Hedging ("ASC 815"). Under 815-15-25, the election can be at the
inception of a financial instrument to account for the instrument under the fair
value option under ASC 825. The Company has made such election for its
convertible promissory note. Using fair value option, the convertible promissory
note is required to be recorded at its initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the note are recognized as non-cash change in the fair value of the
convertible promissory note in the statements of operations. The fair value of
the conversion feature of the note was valued utilizing the Monte Carlo model.
32
Class A Ordinary Shares Subject to Possible Redemption
We account for the Class A ordinary shares subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A ordinary shares subject to mandatory redemption (if any) 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' deficit. Our ordinary shares feature certain
redemption rights that are considered to be outside of our control and subject
to the occurrence of uncertain future events. On February 9, 2022, we held an
extraordinary general meeting pursuant to which our shareholders approved
extending the date by which we had to complete a Business Combination from
February 12, 2022 to August 12, 2022. In connection with the approval of the
extension, shareholders elected to redeem an aggregate of 6,326,758 Ordinary
Shares. As a result, an aggregate of $64,996,858 (or approximately ($10.27 per
share) was released from the Trust Account to pay such shareholders. On August
12, 2022, the Company held an extraordinary general meeting pursuant to which
the Company's shareholders approved extending the date by which the Company has
to complete a Business Combination from August 12, 2022 to February 12, 2023. In
connection with the approval of the extension, shareholders elected to redeem an
aggregate of 646,617 Ordinary Shares. As a result, an aggregate of $6,660,150
(or approximately $10.30 per share) was released from the Trust Account to pay
such shareholders. Accordingly, as of December 31, 2022 and December 31, 2021,
2,026,625 and 9,000,000 shares of Class A ordinary shares subject to possible
redemption, respectively, are presented at redemption value as temporary equity,
outside of the shareholders' deficit section of our balance sheets.
Net Loss Per Ordinary Share
The Company applies the two-class method in calculating earnings per share. The
contractual formula utilized to calculate the redemption amount approximates
fair value. The Class feature to redeem at fair value means that there is
effectively only one class of stock. Changes in fair value are not considered a
dividend of the purposes of the numerator in the earnings per share calculation.
Net loss per ordinary share is computed by dividing the pro rata net loss
between the Class A ordinary shares and the Non-redeemable Class A and Class B
ordinary shares by the weighted average number of ordinary shares outstanding
for each of the periods. The calculation of diluted loss per ordinary share does
not consider the effect of the warrants and rights issued in connection with the
IPO since the exercise of the warrants and rights are contingent upon the
occurrence of future events and the inclusion of such warrants would be
anti-dilutive. The warrants and rights are exercisable for 6,137,400 shares of
Class A ordinary shares in the aggregate.
Recent Accounting Standards
In August 2020, the 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. As a smaller reporting company, ASU 2020-06 is
effective January 1, 2024 for fiscal years beginning after December 15, 2023 and
should be applied on a full or modified retrospective basis, with early adoption
permitted beginning on January 1, 2021. We adopted ASU 2020-06 on January 1,
2021. Adoption of the ASU did not impact the Company's financial position,
results of operations or cash flows.
The Company's management does not believe that any other recently issued, but
not yet effective, accounting standards if currently adopted would have a
material effect on the accompanying financial statements.
33
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" under the JOBS Act and 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.
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 independent registered public accounting firm'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 PCAOB regarding mandatory audit firm
rotation or a supplement to the independent registered public accounting firm'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 this offering or until we are no longer an "emerging
growth company," whichever is earlier.
Factors That May Adversely Affect our Results of Operations
Our results of operations and our ability to complete an initial Business
Combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in Ukraine. We cannot at
this time fully predict the likelihood of one or more of the above events, their
duration or magnitude or the extent to which they may negatively impact our
business and our ability to complete an initial Business Combination.
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