References in this report to "we," "us" or the "Company" refer to Oxus
Acquisition Corp. References to our "management" or our "management team" refer
to our officers and directors, and references to the "Sponsor" refer to Oxus
Capital Pte. Ltd. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the annual 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.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the annual 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.
36
Overview
We are a blank check company incorporated in the Cayman Islands on February 3,
2021 for the purpose of entering into a merger, share exchange, asset
acquisition, share purchase, reorganization or similar Business Combination with
one or more businesses (a "Business Combination"). We intend to effectuate our
initial Business Combination using cash from the proceeds of our Initial Public
Offering and the sale of the Private Warrants, our shares, debt or a combination
of cash, equity 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 a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from inception through December 31, 2021, were
organizational activities and those necessary to prepare for the Initial Public
Offering, described below. 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 marketable securities
held after the Initial Public Offering. We incur 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 period from February 3, 2021 (inception) through December 31, 2021, we
had a net loss of $0.41 million, which consists of dividend income of $3,964 and
change in fair value of over-allotment liability of $16,788, offset by operating
expenses of $0.43 million.
Liquidity
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of ordinary shares by the Sponsor and loans
from the Sponsor.
On September 8, 2021, the Company consummated the Initial Public Offering of
15,000,000 units, at a price of $10.00 per unit, generating gross proceeds of
$150.00 million. Simultaneously with the closing of the Initial Public Offering,
we consummated the sale of 8,400,000 Private Warrants at a price of $1.00 per
warrant in a private placement to Sponsor and the underwriters, generating gross
proceeds of $8.40 million. On September 13, 2021, the underwriters exercised the
over-allotment option in full and purchased an additional 2,250,000 units,
generating gross proceeds of $22.50 million. In connection with the
underwriters' full exercise of the over-allotment option, the Company issued an
additional 900,000 private warrants at a price of $1.00 per warrant in a private
placement to Sponsor and the underwriters, generating gross proceeds of $0.90
million.
Following the Initial Public Offering and the private placement, a total of
$175.95 million was placed in the Trust Account (at $10.20 per Unit). We
incurred $4.15 million in transaction costs, including $3.45 million of
underwriting fees and $0.70 million of other offering costs.
37
For the period from February 3, 2021 (inception) through December 31, 2021, cash
used in operating activities was $0.60 million. Net loss of $0.41 million was
offset by the dividend received of $3,964 and change in fair value of
over-allotment liability of $16,788. Changes in operating assets and liabilities
provided $0.17 million of total cash for operating activities.
As of December 31, 2021, we had cash and marketable securities held in Trust
Account of $175.95 million. We intend to use substantially all of the funds held
in the Trust Account, including any amounts representing interest earned on the
Trust Account to complete our Business Combination. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to complete
our 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.
As of December 31, 2021, we had cash of $1.12 million 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, and structure, negotiate and complete a 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 a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. In the event that a 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 Private
Warrants, at a price of $1.00 per warrant, at the option of the lender. The
warrants would be identical to the Private Warrants.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with ASC Topic 205-40 Presentation of Financial Statements - Going
Concern, the Company has until March 8, 2023 to consummate a Business
Combination. If a Business Combination is not consummated by this date and an
extension not requested by the Sponsor, there will be a mandatory liquidation
and subsequent dissolution of the Company. Although the Company intends to
consummate a Business Combination on or before March 8, 2023, it is uncertain
that the Company will be able to consummate a Business Combination by this time.
Management has determined that the liquidity condition, coupled with the
mandatory liquidation, should a Business Combination not occur and an extension
is not requested by the Sponsor, and potential subsequent dissolution raises
substantial doubt about the Company's ability to continue as a going concern.
The Company's plan is to complete a business combination or obtain an extension
on or prior to March 8, 2023, however it is uncertain that the Company will be
able to consummate a Business Combination or obtain an extension by this time.
No adjustments have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after March 8, 2023.
As of December 31, 2021, the Company had $1.12 million in its operating bank
account, $175.95 million of cash held in the Trust Account to be used for a
Business Combination or to repurchase or redeem its common stock in connection
therewith and a working capital of $1.20 million.
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, stockholders, officers, directors, or third
parties. The Company's officers, directors and Sponsor 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. The Company cannot provide any assurance that new financing will be
available to it on commercially acceptable terms, if at all.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2021. 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.
38
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than described below.
We have engaged EarlyBirdCapital, Inc. And Sova Capital Limited as advisors 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,
assist us in obtaining shareholder approval for the Business Combination and
assist us with our press releases and public filings in connection with the
Business Combination. We will pay EarlyBirdCapital, Inc. And Sova Capital
Limited a cash fee of up to an aggregate of $5.23 million for such services upon
the consummation of our initial Business Combination (exclusive of any
applicable finders' fees which might become payable); provided that up to 25% of
the fee may be allocated at our sole discretion to other FINRA members that
assist us in identifying or consummating an initial Business Combination.
Critical Accounting Policies
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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. The
Company has identified the following as its critical accounting policies:
Warrants
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 and Private Warrants 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 evaluated the Public Warrants and Private 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.
39
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its 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 the Company's control) are classified as temporary equity. At all other
times, ordinary shares are classified as shareholders' equity. The Company's
ordinary shares feature certain redemption rights that are considered to be
outside of the Company's control and subject to the occurrence of uncertain
future events. Accordingly, as of December 31 2021, 17,250,000 shares of Class A
ordinary shares subject to possible redemption are presented at redemption value
as temporary equity, outside of the shareholders' equity section of the
Company's balance sheet.
Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements of Financial Accounting
Standards Board Accounting Standard Codification, or FASB ASC, Topic 260,
"Earnings Per Share." Net loss per ordinary share is computed by dividing net
loss by the weighted average number of ordinary shares outstanding during the
period. The Company applies the two-class method in calculating earnings per
share. Accretion associated with the redeemable shares of Class A ordinary share
is excluded from EPS as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, 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.
The provisions of ASU 2020-06 are applicable for fiscal years beginning after
December 15, 2023, with early adoption permitted no earlier than fiscal years
beginning after December 15, 2020. The Company is currently evaluating the
impact of ASU 2020-06 on its financial statements.
Management does not believe that any other recently issues, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our financial statements.
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