References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to Innovative International Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Innovative International Sponsor I LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that
are not historical facts and involve risks and uncertainties that could cause
actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (the "SEC"). The Company's securities filings
can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated as a Cayman Island exempted company on
March 22, 2021. We were formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or other similar
business transaction with one or more businesses that the Company has not yet
identified (a "Business Combination").
As of March 31, 2022, we had not commenced any operations. All activity for the
period from March 22, 2021 (inception) through March 31, 2022, relates our
formation, the initial public offering, and subsequent to the Initial Public
Offering, identifying a target company for a Business Combination. We will not
generate any operating revenues until after the completion of our Business
Combination, at the earliest. We will generate non-operating income in the form
of interest income on cash and cash equivalents from the proceeds derived from
the IPO. We expect to continue 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.
Our sponsor is Innovative International Sponsor I LLC, a Delaware limited
liability company (the "Sponsor").
Our registration statement for the IPO was declared effective on October 26,
2021 (the "Effective Date"). On October 29, 2021, we consummated our IPO of
23,000,000 units (the "Units" and, with respect to the ordinary shares included
in the Units being offered, the "Public Shares") at $10.00 per Unit (which
included the full exercise of the underwriters' over-allotment option) and the
sale of 1,060,000 shares (the "Private Placement Shares") at a price of $10.00
per Private Placement Share in a private placement to our Sponsor, Cohen &
Company Capital Markets, a division of J.V.B. Financial Group, LLC ("CCM"), and
Cantor Fitzgerald & Co. ("Cantor"), the representative of the underwriters that
closed simultaneously with the Public Offering.
Transaction costs amounted to $16,664,843 consisting of $3,173,059 of
underwriting commissions, $12,100,000 of deferred underwriting commissions and
$1,391,784 of other cash offering costs and were charged to equity.
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Our initial Business Combination must occur with one or more operating
businesses or assets with an aggregate fair market value equal to at least 80%
of the assets held in the Trust Account (excluding the deferred underwriting
commissions and taxes payable on the income earned on the Trust Account) at the
time of our signing a definitive agreement in connection with the initial
Business Combination. However, we will only complete such Business Combination
if the post-transaction company owns or acquires 50% or more of the issued and
outstanding voting securities of the target or otherwise acquires a controlling
interest in the target business sufficient for it not to be required to register
as an investment company under the Investment Company Act of 1940, (the
"Investment Company Act"). There is no assurance that the Company will be able
to complete a Business Combination successfully.
Upon the closing of the Public Offering, management deposited $234,600,000 or
$10.20 per Unit sold in the Public Offering, including a portion of the proceeds
of the Private Placement Shares, into a Trust Account ("Trust Account") that
will be invested only in U.S. government treasury obligations with a maturity of
185 days or less or in money market funds meeting certain conditions under Rule
2a-7 under the Investment Company Act that invest only in direct U.S. government
treasury obligations. Except with respect to interest earned on the funds held
in the Trust Account that may be released to the Company to pay its taxes, if
any (less up to $100,000 interest to pay dissolution expenses), the proceeds
from the Public Offering and the sale of the Private Placement Shares deposited
into the Trust Account will not be released from the Trust Account until the
earliest of (i) the completion of our initial Business Combination, the
redemption of our public shares properly tendered in connection with a
shareholder vote to amend our amended and restated memorandum and articles of
association (A) to modify the substance or timing of our obligation to allow
redemption in connection with the initial Business Combination or to redeem 100%
of the public shares if we do not complete our initial Business Combination
within 15 months from the closing of the Public Offering or (B) with respect to
any other provision relating to shareholders' rights or pre-Business Combination
activity and (iii) the redemption of all of the public shares if the Company is
unable to complete its initial Business Combination within 15 months from the
closing of the Public Offering, subject to applicable law.
We will have until January 29, 2023 to complete the Business Combination (the
"Combination Period"). If we are unable to consummate our Business Combination
within the Combination Period, we will: (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably possible but not more than
10 business days thereafter, redeem the public shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest (which interest shall be net of taxes payable, and
less up to $100,000 of interest to pay dissolution expenses) divided by the
number of then issued and outstanding public shares, which redemption will
completely extinguish public shareholders' rights as shareholders (including the
right to receive further liquidation distributions, if any), subject to
applicable law, and (ii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining shareholders and our board
of directors, liquidate and dissolve, subject in each case to the Company's
obligations under Cayman Islands law to provide for claims of creditors and the
requirements of other applicable law. There will be no redemption rights or
liquidating distributions with respect to the warrants, which will expire
worthless if we fail to complete our initial Business Combination within the
Combination Period.
Risks and Uncertainties
In February 2022, Russia commenced a military action with the country of
Ukraine. As a result of this action, various nations, including the United
States, have instituted economic sanctions against Russia. The invasion of
Ukraine may result in market volatility that could adversely affect our stock
price and our search for a target company. Further, the impact of this action
and related sanctions on the world economy are not determinable as of the date
of these financial statements and the specific impact on the Company's financial
condition, results of operations, and cash flows is also not determinable as of
the date of these financial statements.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on our financial position, results of our
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Results of Operations and Known Trends or Future Events
Through March 31, 2022, we have 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 this offering. We
will not generate any operating revenues until after completion of our initial
business combination. We expect to generate non-operating income in the form of
interest income on cash and cash equivalents after this offering. There has been
no significant change in our financial or trading position and no
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material adverse change has occurred since the date of our audited financial
statements. 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. We expect our expenses to increase
substantially after the closing of this offering.
For the three months ended March 31, 2022, we had a net loss of $2,763,995,
which consists of formation and operating costs of $2,787,640, offset by
interest income from bank of $21 and interest earned on marketable securities
held in the Trust Account of $23,624.
For the period from March 22, 2021 (inception) through March 31, 2021, we had a
net loss of $15,859, which totally consisted of formation and operating costs.
Liquidity and Capital Resources
As of March 31, 2022, the Company had cash of $791,520 and a working capital
deficit of $1,693,722. Following the consummation of the IPO on October 29,
2021, the Company had $2,800,472 of cash available to it, temporarily being held
in the Sponsor's bank account, and working capital of $1,210,696. The Company
opened its operating bank account and the $2,800,472 was transferred to it from
the Sponsor's account on November 1, 2021.
Our liquidity needs were satisfied prior to completion of IPO through advances
on behalf of the company of $25,000 from the sale of the founder shares to our
sponsor and up to $300,000 in loans from our sponsor under an unsecured
promissory note. As of October 29, 2021, we had borrowed $122,292 under the
unsecured promissory note. The balance was repaid on November 5, 2021. We
received net proceeds from (i) the sale of the units in the IPO, after deducting
offering expenses of approximately $550,000 and underwriting commissions of
$4,000,000 (excluding deferred underwriting commissions of $12,100,000 since the
underwriters' over-allotment option was exercised in full), and (ii) the sale of
the private placement shares for a purchase price of $10,600,000 in the
aggregate amount of $236,050,000 since the underwriters' over-allotment option
was exercised in full. Of this amount, $234,600,000, including $12,100,000 in
deferred underwriting commissions, was deposited into a non-interest-bearing
trust account. The funds in the trust account was invested only in specified
U.S. government treasury bills or in specified money market funds. The remaining
$1,450,000 is not held in the trust account.
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 to pay taxes, if any. Our annual income tax obligations will depend on
the amount of interest and other income earned on the amounts held in the trust
account. To the extent that our ordinary shares or debt is used, in whole or in
part, as consideration to complete our 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.
After completion of our IPO, we had available to us $1,450,000 of proceeds held
outside the trust account. We will use these funds 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 a business combination, and to pay taxes to
the extent the interest earned on the trust account is not sufficient to pay our
taxes.
In addition, we could use a portion of the funds not being placed in trust to
pay commitment fees for financing, fees to consultants to assist us with our
search for a target business or as a down payment or to fund a "no-shop"
provision (a provision designed to keep target businesses from "shopping" around
for transactions with other companies or investors on terms more favorable to
such target businesses) with respect to a particular proposed business
combination, although we do not have any current intention to do so. If we
entered into an agreement where we paid for the right to receive exclusivity
from a target business, the amount that would be used as a down payment or to
fund a "no-shop" provision would be determined based on the terms of the
specific business combination and the amount of our available funds at the time.
Our forfeiture of such funds (whether as a result of our breach or otherwise)
could result in our not having sufficient funds to continue searching for, or
conducting due diligence with respect to, prospective target businesses.
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Going Concern
We can raise additional capital through Working Capital Loans from the initial
shareholders, our officers, directors, or their respective affiliates, or
through loans from third parties. None of the Sponsors, officers or directors
are under any obligation, except as described above, to advance funds to, or to
invest in, us. If we are unable to raise additional capital, we 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 our
business plan, and reducing overhead expenses. We cannot provide any assurance
that new financing will be available to us on commercially acceptable terms, if
at all. These conditions raise substantial doubt about our ability to continue
as a going concern for a reasonable period of time, which is considered to be
one year from the issuance date of the financial statements.
We have until January 29, 2023 to consummate a Business Combination. It is
uncertain that we will be able consummate a Business Combination within the
Combination Period. If a Business Combination is not consummated within the
Combination Period, there will be a mandatory liquidation and subsequent
dissolution. In connection with our assessment of going concern considerations
in accordance with the authoritative guidance FASB Accounting Standards Update
("ASU") Topic 2014-15, "Disclosure of Uncertainties About an Entity's Ability to
Continue as a Going Concern", management has determined that the liquidity
condition, mandatory liquidation, and subsequent dissolution, should we be
unable to complete a Business Combination, raises substantial doubt about our
ability to continue as a going concern. No adjustments have been made to the
carrying amounts of assets and liabilities should we be required to liquidate
after January 29, 2023.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 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 as described below.
On April 17, 2021, our Sponsor agreed to loan us up to $300,000 to be used for a
portion of the expenses of the IPO. These loans are non-interest bearing,
unsecured and are due at the earlier of December 31, 2021, or the closing of the
IPO. A portion of the loan was be repaid upon the closing of the IPO out of the
offering proceeds not held in the Trust Account. As of March 31, 2022, we had no
borrowings under the promissory note.
Certain Relationships and Related Party Transactions
On April 17, 2021, our sponsor paid $25,000 to cover certain of our offering
costs in exchange for 7,187,500 founder shares. On September 20, 2021, we
effected a dividend of 1.12 shares for each outstanding Class B ordinary share,
resulting in an aggregate of 8,050,000 founder shares being held by our sponsor
(up to 1,060,000 shares of which are subject to forfeiture by our sponsor
depending on the extent to which the underwriters' over-allotment option is
exercised), resulting in a purchase price of approximately $0.003 per share. The
purchase price of the founder shares was determined by dividing the amount of
cash contributed to the company by the number of founder shares issued. As such,
our initial shareholders collectively own approximately 25% of our issued and
outstanding shares (excluding any shares underlying any units our initial
shareholders may purchase in the IPO and the private placement shares our
sponsor intends to purchase in the private placement) after the IPO. None of our
sponsor, officers, and directors intends to purchase any units after the IPO.
We are reimbursing our sponsor for office space, secretarial and administrative
services provided to members of our management team, in the amount of $10,000
per month. Upon completion of our initial business combination or our
liquidation, we will cease paying these monthly fees.
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Our sponsor, officers and directors, advisers, and any of their respective
affiliates, will be reimbursed for any bona-fide, documented out-of-pocket
expenses incurred in connection with activities on our behalf such as
identifying potential target businesses and performing due diligence on suitable
business combinations. Our audit committee will review on a quarterly basis all
payments that were made by us to our sponsor, officers, directors, advisers, or
any of their respective affiliates and will determine which expenses and the
amount of expenses that will be reimbursed. There is no cap or ceiling on the
reimbursement of out-of-pocket expenses incurred by such persons in connection
with activities on our behalf.
Prior to the closing of the IPO, our sponsor has agreed to loan us up to
$300,000 to be used for a portion of the expenses of the IPO. As of March 31,
2022, the Company had no borrowings under the promissory note with our sponsor.
In addition, in order to finance transaction costs in connection with an
intended initial 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 our initial business
combination, we would repay such loaned amounts. In the event that our 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 Class A ordinary shares at a price of $10.00 per
share, at the option of the lender. Such shares would be identical to the
Private Placement shares. The terms of such loans by our officers and directors,
if any, have not been determined and no written agreements exist with respect to
such loans. We do not expect to seek loans from parties other than our sponsor
or an affiliate of our sponsor as we do not believe third parties will be
willing to loan such funds and provide a waiver against any and all rights to
seek access to funds in our trust account.
Our sponsor, Cantor and Cohen & Company Capital Markets ("CCM") have committed
to purchase an aggregate of 1,000,000 Class A ordinary shares (or up to
1,060,000 depending on the extent to which the underwriters' over-allotment
option is exercised) at a price of $10.00 per share ($10,000,000 in the
aggregate, or up to $10,600,000 depending on the extent to which the
underwriters' over-allotment option is exercised) in a private placement that
will close simultaneously with the closing of this offering. Of those 1,000,000
Private Placement shares, our sponsor has agreed to purchase 900,000 Private
Placement shares (or up to 960,000 depending on the extent to which the
underwriters' over-allotment option is exercised), CCM has agreed to purchase
30,000 private placement shares, and Cantor has agreed to purchase 70,000
Private Placement shares. Our sponsor, Cantor and CCM will be permitted to
transfer the Private Placement shares they hold to certain permitted
transferees, including their respective directors, officers, and other persons
or entities affiliated with or related to them, but the transferees receiving
such securities will be subject to the same agreements with respect to such
securities. In addition, the Private Placement shares will not, subject to
certain limited exceptions, be transferable or salable until 30 days after the
completion of our initial business combination. The Private Placement shares
will not be redeemable by us so long as they are held by the initial purchasers
or their respective permitted transferees. If the private placement shares are
held by holders other than the initial purchasers or their respective permitted
transferees, the Private Placement shares will be redeemable by us and
exercisable by the holders on the same basis as the shares and warrants included
in the units being sold in this offering. Otherwise and, except as described
under "Description of Securities -Ordinary Shares - Private Placement Shares",
the Private Placement shares have terms and provisions that are identical to
those of the Public Shares.
Pursuant to a registration rights agreement that we will enter into with our
sponsor, our directors, our officers Cantor and CCM on or prior to the closing
of the IPO, we may be required to register the offer and sale of certain
securities under the Securities Act. These holders, and holders of shares issued
upon conversion of working capital loans, if any, are entitled under the
registration rights agreement to make up to three demands that we register the
offer and sale of certain of our securities held by them under the Securities
Act and to have the resale of the securities covered thereby registered pursuant
to Rule 415 under the Securities Act. In addition, these holders have the right
to include the offer and sale of their securities in other registration
statements filed by us. However, the registration rights agreement provides that
we will not permit any registration statement filed under the Securities Act to
become effective until the offer and sale of the securities covered thereby are
released from their lock-up restrictions, as described herein. Notwithstanding
the foregoing, Cantor may not exercise their demand and "piggyback" registration
rights after five and seven years after the effective date of the registration
statement of which this prospectus forms a part and may not exercise their
demand rights on more than one occasion. We will bear the costs and expenses of
filing any such registration statements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
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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 such, our financial statements may not be
comparable to companies that comply with 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 auditor's attestation report on our system of
internal control 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 executive
compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of our IPO or until we are no
longer an "emerging growth company," whichever is earlier.
Critical Accounting Policies
The preparation of unaudited condensed 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:
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("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 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, 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 is presented as temporary equity, outside of the
shareholders' equity section of our condensed 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.
Net Loss Per Ordinary Share
The Company applies the two-class method in calculating earnings per share. Net
loss per ordinary share is computed by dividing the pro rata net loss between
the redeemable ordinary shares and the non-redeemable ordinary shares of by the
weighted average number of ordinary shares outstanding for each of the periods.
The calculation of diluted loss per share does not consider the effect of the
warrants issued in connection with the IPO since the exercise of the warrants
are contingent upon the occurrence of future events and the inclusion of such
warrants would be anti-dilutive.
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
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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 effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statement.
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