References to the "Company," "our," "us" or "we" refer to Gobi 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a blank check company incorporated in the Cayman Islands on March 16,
2021. The Company was formed for the purpose of entering into a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses. The Company is not limited to a
particular industry or geographic region for purposes of consummating a business
combination. The Company is an early stage and emerging growth company and, as
such, the Company is subject to all of the risks associated with early stage and
emerging growth companies.
Results of Operations
Our entire activity since inception up to March 31, 2022 was in preparation for
our Initial Public Offering and business combination. We will not generate any
operating revenues until the closing and completion of our initial Business
Combination, at the earliest.
For the three months ended March 31, 2022, we had a net loss of $326,097, which
consisted formatting and operating costs of $346,943 offset by interest income
of $20,846.
For the period from March 16, 2021 through March 31, 2021, we had a net loss of
$7,125, which consisted formatting and operating costs of $7,125.
Liquidity and Capital Resources
As of March 31, 2022, we had cash of $20,663 held outside of the trust account
and a working capital deficit of $55,862. As of March 31, 2022, we had neither
engaged in any operations nor generated any revenues to date. Our only
activities since inception have been organizational activities and those
necessary to prepare for the initial public offering and searching for a
business combination target.
In order to finance transaction costs in connection with a business combination,
our Sponsor, officers, directors and their affiliates intend to loan us funds as
may be required. On July 23, 2021, we received $1,000,000 from our sponsor under
an unsecured promissory note signed on July 19, 2021. On November 20, 2021, our
sponsor signed an agreement to provide $300,000 of loan to us as required. On
April 21, 2022, we received $500,000 from our sponsor under an unsecured
promissory note signed on April 14, 2022.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet our needs through the earlier of the
consummation of a business combination or one year from this filing. Over this
time period, we will be using these funds for paying existing accounts payable,
identifying and evaluating prospective initial business combination candidates,
performing due diligence on prospective target businesses, paying for travel
expenditures, selecting the target business to merge with or acquire, and
structuring, negotiating and consummating the business combination.
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Off-Balance Sheet Arrangements
As of March 31, 2022, we did not have any off-balance sheet arrangements.
Contractual Obligations
Registration and Shareholder Rights
Pursuant to a registration and shareholder rights agreement entered into on June
28, 2021, the holders of the founder shares, private placement shares and any
shares that may be issued upon conversion of working capital loans are entitled
to registration rights. The holders of these securities are entitled to make up
to three demands, excluding short form demands, that we register such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to our
completion of our initial business combination. However, the registration and
shareholder rights agreement provides that we will not permit any registration
statement filed under the Securities Act to become effective until termination
of the applicable lockup period, which occurs (i) in the case of the founder
shares, as described in the following paragraph, and (ii) in the case of the
private placement shares, 30 days after the completion of our initial business
combination. We will bear the expenses incurred in connection with the filing of
any such registration statements.
In addition, pursuant to the registration and shareholder rights agreement, our
Sponsor, upon and following consummation of an initial business combination,
will be entitled to nominate three individuals for election to our board of
directors, as long as the Sponsor holds any securities covered by the
registration and shareholder rights agreement.
Promissory Notes
On March 19, 2021, we issued an unsecured promissory note to the Sponsor (the
"Promissory Note"), pursuant to which we could borrow up to $300,000 to cover
expenses related to our initial public offering. The Promissory Note was
non-interest bearing and has been fully repaid.
Related Party Loans
In addition, in order to finance transaction costs in connection with an
intended initial business combination, the Sponsor, its affiliates or certain of
our officers and directors may, but are not obligated to, loan we fund as may be
required ("Working Capital Loans"). If we complete the initial business
combination, we may repay the Working Capital Loans out of the proceeds of the
Trust Account released to us. Otherwise, the Working Capital Loans may be repaid
only out of funds held outside the Trust Account. In the event that the initial
business combination does not close, we may use a portion of the working capital
held outside the Trust Account to repay the Working Capital Loans but no
proceeds from the Trust Account would be used to repay the Working Capital
Loans. Up to $2,000,000 of such Working Capital Loans may be convertible into
shares of the post business combination entity at a price of $10.00 per share at
the option of the lender. Such shares would be identical to the Private
Placement Share. Except as set forth above, the terms of the Working Capital
Loans, if any, have not been determined and no written agreements exist with
respect to such loans.
On July 19,2021, we entered into a promissory note with our sponsor, under which
our sponsor agreed to loan $1,000,000 to us. These loans are non-interest
bearing, unsecured and are due at the closing of the initial business
combination. Upon consummation of a business combination, our sponsor shall have
the option, but not the obligation, to convert the principal balance of this
note, in whole or in part at the option of the Sponsor, into our Class A
ordinary shares at a price of $10.00 per share, each share being identical to
the Private Placement Shares. On November 22, 2021, our sponsor signed a letter
of financial support to provide $300,000 of loan to us as required. As of March
31, 2022 and December 31, 2021, we had $1,000,000 borrowings under the Working
Capital Loans. As of March 31, 2022 and December 31, 2021, $1,000,000 was
outstanding under the Working Capital Loans.
Underwriting Agreement
On June 28, 2021, we entered into an Underwriting Agreement with Citigroup
Global Markets Inc., Goldman Sachs (Asia) L.L.C. and UBS Securities LLC, which
contains customary representations and warranties and indemnification of the
underwriter by the Company.
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Upon the closing of our initial public offering, the underwriters were paid a
cash underwriting discount of 2% of the gross proceeds of the initial public
offering (not including the proceeds from the Fund), or $1,108,507 in the
aggregate. In addition, the underwriters are entitled to a deferred fee of 3.5%
of the gross proceeds of the initial public offering (not including the proceeds
from the Fund), or $1,939,888 in the aggregate. Subject to the terms of the
underwriting agreement, (i) the deferred fee is placed in the trust account and
will be released to the underwriters only upon the completion of our initial
business combination and (ii) the deferred fee will be waived by the
underwriters in the event that we do not complete our initial business
combination.
Administrative Services Agreement
The Company entered into an agreement, commencing on June 28, 2021, to pay our
Sponsor a total of $10,000 per month for office space, utilities, administrative
services and remote support services. The Sponsor has committed not to request
the payment until the completion of a business combination, and the
administrative services expenses shall be waived if the business combination is
not completed. Upon the completion of a business combination or liquidation, the
Company will cease paying these monthly fees. A total of $91,333 and $61,333 has
been accrued as of March 31, 2022 and December 31, 2021 respectively.
Critical Accounting Policies
Offering Costs Associated with IPO
We comply with the requirements of ASC 34-10-S99-1 and SEC Staff Accounting
Bulletin ("SAB") Topic 5A - "Expenses of Offering". Deferred offering costs
consist of underwriting, legal, accounting and other expenses incurred through
the balance sheet date that were directly related to the IPO. Offering costs are
charged to shareholders' equity or the statements of operations. Accordingly, on
July 14, 2021 (upon the underwriters exercising their over-allotment option),
offering costs totaling $3,657,597 (consisting of $1,108,507 of underwriting
fee, $1,939,888 of deferred underwriting fee and $609,205 of other offering
costs) were recognized.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset
or paid to transfer of a liability, in an orderly transaction between market
participants at the measurement date. GAAP establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements).
Net Loss Per Ordinary Share
We have two classes of shares, which are referred to as Class A ordinary shares
and Class B ordinary shares. Earnings and losses are shared pro rata between the
two classes of shares.
Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in FASB ASC Topic 480 "Distinguishing Liabilities
from Equity." Class A ordinary shares subject to mandatory redemption (if any)
is classified as a liability instrument and is measured at fair value.
Conditionally redeemable Class A ordinary shares (including Class A 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 our control) is classified as temporary equity. At all other
times, Class A ordinary shares are classified as shareholders' equity. Our Class
A ordinary shares feature certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, 25,542,537 Class A ordinary shares subject to possible redemption
is presented at redemption value as temporary equity, outside of the
shareholders' equity section of our balance sheets.
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Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board ("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.
ASU 2020-06 is effective January 1, 2024 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. 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 pronouncements, if currently adopted, would have a
material effect on the Company's financial statements.
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