The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of many
factors, including those set forth under "Special Note Regarding Forward-Looking
Statements," "Item 1A. Risk Factors" and elsewhere in this Annual Report on
Form 10-K.
Overview
We are a blank check company incorporated in the British Virgin Islands on
August 21, 2020 formed for the purpose of effecting a merger, amalgamation,
share exchange, asset acquisition, share purchase, reorganization or other
similar initial business combination with one or more businesses. We intend to
effectuate our initial business combination using cash derived from the proceeds
of our initial public offering and the sale of the private units, our shares,
debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete an initial
business combination will be successful.
Results of Operations
We have neither engaged in any operations (other than searching for an initial
business combination after our initial public offering) nor generated any
operating revenues to date. Our only activities from inception through December
31, 2022 were organizational activities, those necessary to prepare for our
initial public offering, described below, and, subsequent to our initial public
offering, identifying a target company for an initial business combination. We
do not expect to generate any operating revenues until after the completion of
our initial business combination. We expect to generate non-operating income in
the form of interest income on marketable securities held after our initial
public offering and changes in fair value of our warrants and promissory note.
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, an initial business combination.
For the year ended December 31, 2022, we had net income of $2,419,605, which
consisted of change in fair value of warrant liabilities of $1,877,109 and
interest earned on marketable securities held in Trust Account of $701,134 and
change in fair value of convertible promissory note - related party of $539,940,
partially offset by formation and operational costs of $698,578.
For the year ended December 31, 2021, we had a net income of $3,824,229, which
consisted of change in fair value of warrant liabilities of $4,530,016, interest
earned on marketable securities held in Trust Account of $35,761 and unrealized
gain on marketable securities held in Trust Account of $1,523, offset by
formation and operational costs of $743,071.
Liquidity and Capital Resources
Until the consummation of our initial public offering, our only source of
liquidity was an initial purchase of ordinary shares by our sponsor and loans
from our sponsor.
On October 27, 2020, we consummated our initial public offering of 10,000,000
units at a price of $10.00 per unit, generating gross proceeds of $100,000,000.
Simultaneously with the closing of our initial public offering, we consummated
the sale of 350,000 private units to our sponsor at a price of $10.00 per
private unit generating gross proceeds of $3,500,000.
On November 24, 2020, the Company sold an additional 479,626 units for total
gross proceeds of $4,796,260 in connection with the underwriters' partial
exercise of their over-allotment option. Simultaneously with the partial closing
of the over-allotment option, we also consummated the sale of an additional
9,592 private units at $10.00 per private unit, generating total proceeds of
$95,925.
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Following our initial public offering, the partial exercise of the
over-allotment option, and the sale of the private units, a total of
$104,796,260 was placed in the Trust Account. We incurred $6,168,976 in
transaction costs, including $2,095,925 of underwriting fees, $3,667,869 of
deferred underwriting fees and $405,182 of other costs.
For the year ended December 31, 2022, net cash used in operating activities was
$630,291. Net income of $2,419,605 was impacted by interest earned on marketable
securities held in Trust Account of $701,134, change in fair value of warrant
liabilities of $1,877,109 and change in fair value of convertible promissory
note - related party of $539,940. Changes in operating assets and liabilities
provided $68,287 of cash from operating activities.
For the year ended December 31, 2021, net cash used in operating activities was
$502,108. Net income of $3,824,229 was impacted by interest earned on marketable
securities held in Trust Account of $35,761, change in fair value of warrant
liabilities of $4,530,016 and unrealized gain on marketable securities held in
Trust Account of $1,523. Changes in operating assets and liabilities provided
$240,963 of cash from operating activities.
At December 31, 2022, we held $12,353,160 of cash in the Trust Account of. We
intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account, which
interest shall be net of taxes payable and excluding deferred underwriting
commissions, to complete our initial 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
an initial 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 held $18,865 of cash 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,
structure, negotiate and complete an initial 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. If we complete an initial business
combination, we may repay such loaned amounts out of the proceeds of the Trust
Account released to us. In the event that an initial business combination does
not close, we may use a portion of the working capital held outside the Trust
Account to repay such loaned amounts, but no proceeds from our Trust Account
would be used for such repayment. Up to $1,500,000 of such loans may be
convertible into additional private units, at a price of $10.00 per unit, at the
option of the lender.
On January 20, 2022, we issued an unsecured promissory note (the "2022
Promissory Note") to our sponsor. The 2022 Promissory Note provided that we may
borrow up to an aggregate maximum amount of $600,000 from our sponsor. On
January 24, 2022, we made an initial draw on the 2022 Promissory Note of
$250,000 and a subsequent draw on November 7, 2022 of $350,000. On February 15,
2023 we issued another unsecured promissory note (the "2023 Promissory Note") to
our sponsor. The 2023 Promissory Note provides that we may borrow up to an
aggregate maximum amount of $500,000 from our sponsor. Also on February 15, 2023
we made an initial draw on the 2023 Promissory Note of $96,000, followed by a
draw of $150,000 on March 31, 2023.
Amounts up to the aggregate maximum amount may and are expected to be drawn down
from time to time by us pursuant to the 2023 Promissory Note to fund our working
capital requirements and for general corporate purposes. The 2022 Promissory
Note and the 2023 Promissory Note do not bear any interest. If we complete an
initial business combination, we would repay outstanding loaned amounts under
the 2022 Promissory Note and the 2023 Promissory Note. In the event that we are
unable to complete an initial business combination, we may use a portion of the
working capital held outside its trust account to repay such loaned amounts but
no proceeds from its trust account would be used for such repayment. The loans
are convertible into units of the Company, at a price of $10.00 per unit, at the
option of our sponsor. The units would be identical to those units that were
issued to our sponsor in a private placement concurrent with our initial public
offering.
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Going Concern
We have until April 27, 2023, to consummate an initial business combination. It
is uncertain that we will be able to consummate an initial business combination
by this time. If an initial business combination is not consummated by this
date, there will be a mandatory liquidation and subsequent dissolution. We have
$67,058 of working capital as of December 31, 2022 and may require additional
capital to complete an initial business combination, which is available to us
through our 2023 Promissory Note. Management has determined that the liquidity
condition and mandatory liquidation, should an initial business combination not
occur, and potential subsequent dissolution raises substantial doubt about our
ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets or liabilities should we be required to liquidate
after April 27, 2023.
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 described below.
The underwriter is entitled to a deferred fee of $0.35 per unit, or $3,667,869
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 an
initial 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 policies:
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC
815-40 under which the Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the Warrants as
liabilities at their fair value and adjust the Warrants to fair value at each
reporting period. This liability is subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in our
statements of operations. The Private Placement Warrants and the Public Warrants
for periods where no observable traded price was available are valued using a
binomial lattice model. For periods subsequent to the detachment of the Public
Warrants from the units, the Public Warrant quoted market price was used as the
fair value as of each relevant date, except for December 31, 2020 when the
Public Warrants price was derived as the difference between the price of the
units and the price of the ordinary shares due to a lack of quoted prices for
the public warrants.
Ordinary Shares Subject to Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption is classified as a liability
instrument and is measured at fair value. Conditionally redeemable ordinary
shares (including ordinary shares that features redemption rights that is 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 a component of
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 is presented as temporary equity, outside of the shareholders'
deficit section of our balance sheets.
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Net Income Per Ordinary Share
Net income per ordinary share is computed by dividing net income by the weighted
average number of ordinary shares outstanding during the period. Accretion
associated with the redeemable shares of ordinary shares is excluded from
earnings per share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 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): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity" ("ASU 2020-06"), which simplifies
accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope
exception, and it also simplifies the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years, with
early adoption permitted. The Company is currently assessing the impact, if any,
that ASU 2020-06 would have on its financial position, results of operations or
cash flows.
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.
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