Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "section 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 management, as well as assumptions made by, and information currently
available to, 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 our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Report.
Overview
We are a blank check company incorporated as a Cayman Islands exempted company
and formed for the purpose of effecting a business combination with one or more
businesses. Our efforts to identify a prospective target business are not be
limited to a particular industry or geographic location. However, our amended
and restated memorandum and articles of incorporation provides that we shall not
undertake our initial business combination with any entity that is based in,
located in or with its principal business operations in China (including Hong
Kong and Macau). We intend to effectuate our initial business combination using
cash 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.
Our sponsor is Keyarch Global Sponsor Limited, a Cayman Islands limited
liability company. We are an emerging growth company and, as such, we are
subject to all of the risks associated with emerging growth companies.
If we are unable to complete a 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 ten 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
income earned on the funds held in the Trust Account and not previously released
to us to pay our franchise and income taxes, divided by the number of then
outstanding public shares, which redemption will completely extinguish public
shareholders' rights as shareholders (including the right to receive further
liquidating distributions, if any), subject to applicable law, and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of the remaining shareholders and the board of directors, dissolve and
liquidate, subject in each case to our obligations under Cayman Islands law to
provide for claims of creditors and the requirements of other applicable law.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from April 23, 2021 (date of inception) to December 31, 2022
were organizational activities and those necessary to consummate the Initial
Public Offering, described below. Following our Initial Public Offering , we do
not expect to generate any operating revenues until after the completion of our
business combination. We expect to generate non-operating income in the form of
interest income on cash and marketable securities held after the Initial Public
Offering. We expect to incur increased expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses.
For the year ended December 31, 2022, we had a net profit of $843,672, which
consists of loss of $860,419 derived from general and administrative expenses
offset by income earned on investment held in Trust Account of $1,701,869 and
bank interest income of $2,222.
For the period from April 23, 2021 (inception) through December 31, 2021, we had
a net loss of $11,632, which consists of loss of $11,632 derived from general
and administrative expenses.
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Liquidity and Capital Resources
On January 27, 2022, we consummated our Initial Public Offering of 10,000,000
units, at $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 500,000 private placement units at a price of $10.00 per private
placement unit in the private placement to the sponsor and EarlyBirdCapital,
generating total gross proceeds of $5,000,000.
On February 8, 2022, the underwriters in our Initial Public Offering purchased
an additional 1,500,000 units to exercise its over-allotment option in full at a
purchase price of $10.00 per unit, generating gross proceeds of $15,000,000.
Simultaneously with the closing of the Over-Allotment Option, we completed the
private sale of an aggregate of 45,000 private placement units to the sponsor
and EarlyBirdCapital, at a purchase price of $10.00 per private placement unit,
generating gross proceeds of $450,000. Offering costs amounted to $3,471,734
consisting of $2,300,000 of underwriting discount and $1,171,734 of other
offering costs. During the year ended December 31, 2022, we received discounts
amounting to $131,420 on outstanding offering costs included within accounts
payable and accrued expenses. This has been treated as a reversal of offering
costs adjusted through additional paid-in capital considering the related
offering costs charged against additional paid-in capital at the time of Initial
Public Offering.
Following the closing of our Initial Public Offering and the sale of
over-allotment units, an aggregate of $116,150,000 ($10.00 per unit) from the
net proceeds and the private placement was held in the Trust Account.
In order to fund working capital deficiencies or 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 Working Capital Loans as may be required. Any such
Working Capital Loans would be on an interest-free basis and would be repaid
only from funds held outside the Trust Account or from funds released to us upon
completion of our initial business combination. Up to $1,500,000 of such Working
Capital Loans may be convertible into units at a price of $10.00 per unit, at
the option of the lender. These units would be identical to the private units
issued to our sponsor. 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.
As of December 31, 2022, we had marketable securities held in the Trust Account
of $117,851,869 consisting of securities held in a treasury trust fund that
invests in United States government treasury bills, bonds or notes with a
maturity of 180 days or less. Income earned on the balance in the Trust Account
may be used by us to pay taxes. Through December 31, 2022, we did not withdraw
any income earned on the Trust Account to pay our taxes. We intend to use
substantially all of the funds held in the Trust Account, to acquire a target
business and to pay our expenses relating thereto. To the extent that our
capital stock is used in whole or in part as consideration to effect a business
combination, the remaining funds held in the Trust Account will be used as
working capital to finance the operations of the target business. Such working
capital funds could be used in a variety of ways including continuing or
expanding the target business' operations, for strategic acquisitions and for
marketing, research and development of existing or new products. Such funds
could also be used to repay any operating expenses or finders' fees which we had
incurred prior to the completion of our business combination if the funds
available to us outside of the Trust Account were insufficient to cover such
expenses.
As of December 31, 2022 and December 31, 2021, the Company had cash of $115,171
and $9,168, respectively and working capital/(deficit) of $116,657 and
($918,810), respectively. The Company's liquidity needs prior to the
consummation of the Initial Public Offering had been satisfied through proceeds
from notes payable and advances from related party and from the issuance of our
ordinary shares. Subsequent to the consummation of the Initial Public Offering,
we expect that we will need additional capital to satisfy our liquidity needs
beyond the net proceeds from the consummation of the Initial Public Offering and
the proceeds held outside of the Trust Account for paying existing accounts
payable, identifying and evaluating prospective 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 initial business combination.
Although certain of the our initial shareholders, officers and directors or
their affiliates have committed to loan the us funds from time to time or at any
time, in whatever amount they deem reasonable in their sole discretion, there is
no guarantee that we will receive such funds.
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Accordingly, the financial statements and the notes thereto contained elsewhere
in this Report have been prepared in conformity with GAAP, which contemplates
continuation of the Company as a going concern and the realization of assets and
the satisfaction of liabilities in the normal course of business. The financial
statements and the notes thereto contained elsewhere in this Report do not
include any adjustments that might result from the outcome of this uncertainty.
Further, we have incurred and expect to continue to incur significant costs in
pursuit of our financing and acquisition plans. Management plans to address this
uncertainty during period leading up to the initial business combination. We
cannot provide any assurance that its plans to raise capital or to consummate an
initial business combination will be successful. Based on the foregoing,
management believes that we will not have sufficient working capital and
borrowing capacity to meet its needs through the earlier of the consummation of
the initial business combination or one year from this filing. These factors,
among others, raise substantial doubt about our ability to continue as a going
concern.
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.
Related Party Transactions
Founder Shares
On June 27, 2021, our sponsor paid $25,000, to cover certain offering costs in
consideration for 2,875,000 of the Company's Class B ordinary shares, par value
$0.0001. Up to 375,000 Founder Shares were subject to forfeiture by the sponsor
depending on the extent to which the underwriters' over-allotment option was
exercised. On February 8, 2022, the underwriter exercised its over-allotment
option in full, hence, the 375,000 Founder Shares are no longer subject to
forfeiture since then. On March 18, 2022, the sponsor transferred 25,000 Founder
Shares to each of our three independent directors.
Private Placement Units
On January 27, 2022, our sponsor and EarlyBirdCapital purchased an aggregate of
500,000 private units (including 450,000 private units purchased by our sponsor
and 50,000 private units purchased by EarlyBirdCapital) at a price of $10.00 per
unit, for a purchase price of $5,000,000 in the aggregate.
On February 8, 2022, our sponsor and EarlyBirdCapital purchased an aggregate of
45,000 private units (including 40,500 private units purchased by our sponsor
and 4,500 private units purchased by EarlyBirdCapital) at a price of $10.00 per
unit, for a purchase price of $450,000 in the aggregate. Each unit consists of
one Class A ordinary share, one-half of one redeemable warrant and one right.
Each whole private warrant entitles the holder to purchase one Class A ordinary
share at a price of $11.50 per share. Ten rights will entitle the holder to one
Class A ordinary share at the closing of the business combination.
Administrative Services Agreement
We entered into an agreement that provides, commencing on the effective date of
the registration statement for the Initial Public Offering and through the
earlier of consummation of the initial business combination or our liquidation,
we agree to pay the sponsor a total of $10,000 per month for administrative and
support services. For the year ended December 31, 2022, we incurred $110,000 for
administrative and support services.
Other Contractual Obligations
Registration Rights
The holders of the Founder Shares and any underlying Class A ordinary shares,
EBC Founder Shares, private placement units (and their component parts and
securities underlying those component parts) and any units that may be issued on
conversion of Working Capital Loans (and their component parts and securities
underlying those component parts) are entitled to registration rights pursuant
to a registration rights agreement signed upon the consummation of our Initial
Public Offering requiring us to register such securities for resale. The holders
of these securities will be entitled to make up to three demands, excluding
short form registration demands, that we register such securities.
Notwithstanding anything to the contrary, EarlyBirdCapital may only make a
demand on one occasion and only during the 5-year period beginning on the
effective date of the registration statement of which this prospectus forms a
part. 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 and rights to require us to register for resale
such securities pursuant to Rule 415 under the Securities Act; provided,
however, that EarlyBirdCapital may participate in a "piggy-back" registration
only during the 7-year period beginning on the effective date of the
Registration Statement. We will bear the expenses incurred in connection with
the filing of any such registration statements.
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Underwriting Agreement
We granted the underwriters a 45-day option from the date of Initial Public
Offering to purchase up to 1,500,000 additional units to cover over-allotments,
if any, at the Initial Public Offering price less the underwriting discounts and
commissions. The underwriters exercised the over-allotment option in full on
February 8, 2022.
EarlyBirdCapital were entitled to an underwriting discount of $0.20 per unit, or
$2 million in the aggregate, paid upon the closing of the Initial Public
Offering. Additionally, we have engaged EarlyBirdCapital as an advisor in
connection with our business combination to assist us in holding meetings with
our shareholders to discuss the potential business combination and the target
business' attributes, introduce us to potential investors that are interested in
purchasing our securities in connection with our initial business combination
and assist us with our press releases and public filings in connection with the
business combination. We will pay EarlyBirdCapital the Business Combination
Marketing Fee, a cash fee for such services upon the consummation of our initial
business combination in an amount equal to 3.5% of the gross proceeds of our
Initial Public Offering. In addition, we may engage EarlyBirdCapital as an
advisor in connection with introducing a target business to us. If we engage
EarlyBirdCapital and it introduces us to the target business with whom we
complete our initial business combination, EarlyBirdCapital will receive a cash
fee equal to 1% of the total consideration payable in the initial business
combination.
Deferred Legal Fee
On April 1, 2022, we entered into letter agreement with Ellenoff Grossman &
Schole LLP ("EGS") as legal counsel in connection with our efforts to identify,
evaluate, negotiate, finance and consummate an initial business combination with
an operating company or business to be determined by the Company. According to
the engagement, we are billed on a monthly basis, with fifty percent (50%) of
all fees being due on a rolling basis, up to a total of $350,000, and the
balance of all fees being due upon consummation of a business combination. As of
December 31, 2022 and December 31, 2021, we had $10,092 and $0, respectively as
deferred legal fee.
Critical Accounting Policies
The preparation of the financial statements contained elsewhere in this Report
related disclosures in conformity with GAAP 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 period 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 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 feature redemption rights that is either
within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company's control) is classified as
temporary equity. At all other times, ordinary shares are classified as
shareholders' equity. Our ordinary shares features 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 at redemption of $10.25 per share (plus any income
earned on investment held in Trust Account) as temporary equity, outside of the
shareholders' equity section of our balance sheet. We recognize 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 or
accumulated deficit if additional paid in capital equals to zero.
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Net Income (Loss) per Share
We comply with accounting and disclosure requirements of ASC Topic 260,
"Earnings Per Share." The statements of operations in the financial statements
contained elsewhere in this Report include a presentation of income (loss) per
redeemable share and income (loss) per non-redeemable share following the
two-class method of income (loss) per share. In order to determine the net
income (loss) attributable to both the redeemable shares and non-redeemable
shares, we first considered the undistributed income (loss) allocable to both
the redeemable shares and non-redeemable shares and the undistributed income
(loss) is calculated using the total net loss less any dividends paid. We then
allocated the undistributed income (loss) ratably based on the weighted average
number of shares outstanding between the redeemable and non-redeemable shares.
Any remeasurement of the accretion to redemption value of the ordinary shares
subject to possible redemption was considered to be dividends paid to the public
shareholders.
Offering Costs
Offering costs consist of underwriting, legal, accounting, registration and
other expenses incurred through the balance sheet date that are directly related
to the IPO. The Company complies with the requirements of ASC Topic 340-10-S99-1
and SEC Staff Accounting Bulletin Topic 5A, "Expenses of Offering." Offering
costs are allocated between the public shares, public warrants and public rights
based on the estimated fair values of public shares, public warrants and public
rights at the date of issuance.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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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