References to the "Company," "PAFO," "our," "us" or "we" refer to Pacifico
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 interim condensed consolidated 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
U.S. Securities and Exchange Commission ("SEC") filings.
The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its majority owned subsidiaries where the
Company has the ability to exercise control. All significant intercompany
balances and transactions have been eliminated in consolidation. Activities in
relation to the noncontrolling interest are not considered to be significant and
are, therefore, not presented in the accompanying unaudited condensed
consolidated financial statements.
Overview
We are a blank check company formed under the laws of the State of Delaware on
March 2, 2021. We were formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, recapitalization, reorganization or
other similar business combination.
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 operating revenues
to date. Our only activities from inception through September 30, 2022 were
organizational activities and those necessary to prepare for our initial public
offering ("IPO"), and, after our IPO, searching for a target business to
acquire. 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 the IPO. 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, a business combination.
For the quarter ended September 30, 2022, we had a net loss of $12,480, which
comprised of income of $40,132 derived primarily from general and administrative
expenses of approximately $177,360, offset by interest earned on marketable
securities of approximately $225,292. For the nine months ended September 30,
2022, we had a net loss of $384,745, which consisted of loss of approximately
$332,133 derived primarily from general and administrative expenses of $616,516,
offset by $307,783 interest income earned on marketable securities from our
trust account. Income tax expense was $52,612 for each of the three months and
nine months period.
17
Liquidity and Capital Resources
On September 16, 2021, we consummated the IPO of 5,000,000 units (the "Public
Units"). Each Unit consists of one share of Common Stock ("Common Stock") and
one right ("Right") to receive one-tenth (1/10) of a share of Common Stock upon
the consummation of an initial business combination. The Public Units were sold
at an offering price of $10.00 per Public Unit, generating gross proceeds of
$50,000,000. Simultaneously with the closing of the IPO on September 16, 2021,
the Company consummated the private placement ("Private Placement") with
Pacifico Capital LLC, its sponsor, purchasing 231,250 units, and Chardan
purchasing 50,000 units, in the aggregate a total of 281,250 units (the "Private
Units") at a price of $10.00 per Private Unit, generating total proceeds of
$2,812,500.
On September 20, 2021, the underwriter fully exercised its over-allotment option
and the closing of the issuance and sale of the additional Public Units occurred
on September 22, 2021. The total aggregate issuance by the Company of 750,000
units at a price of $10.00 per unit resulted in total gross proceeds of
$7,500,000. On September 22, 2021, simultaneously with the sale of the
over-allotment Units, the company consummated the private sale of an additional
26,250 Private Units, generating gross proceeds of $262,500.
A total of $58,075,000 of the net proceeds from the sale of Public Units in the
Initial Public Offering (including the over-allotment option units) and the
Private Placements on September 16, 2021 and September 22, 2021, were placed in
a trust account established for the benefit of the Company's public
shareholders.
Following the IPO, the full exercise of the over-allotment option, and the sale
of the private placement units, we had $72,436 of cash held outside of the Trust
Account, after payment of costs related to the IPO, and available for working
capital purposes as of September 30, 2022. We incurred a total of $4,759,144 in
transaction costs, including $1,437,500 of underwriting fees, $2,469,769 of
deferred underwriting fees and $851,875 of other offering costs (including
$320,994 of the estimated cost of Unit Purchase Option issued to the
underwriter).
As of September 30, 2022, we had marketable securities held in the Trust Account
of $58,945,268 consisting of securities held in a treasury trust fund that
invests in United States government treasury bills, bonds or notes with a
maturity of 185 days or less. Interest income on the balance in the Trust
Account may be used by us to pay taxes. Through September 30, 2022, we withdrew
$13,819 interest 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 September 30, 2022, we had cash of $11,892 outside the Trust Account. For
the three and nine months period ending September 30, 2022, cash used in
operating activities was $186,739 and $519,745, respectively. We intend to use
the funds held outside the Trust Account for identifying and evaluating
prospective acquisition candidates, performing business due diligence on
prospective target businesses, traveling to and from the offices, plants or
similar locations of prospective target businesses, reviewing corporate
documents and material agreements of prospective target businesses, selecting
the target business to acquire and structuring, negotiating and consummating the
business combination.
18
In order to fund working capital deficiencies or finance transaction costs in
connection with a business combination, our insiders, officers and directors or
their affiliates may, but are not obligated to, loan us funds, from time to time
or at any time, in whatever amount they deem reasonable in their sole
discretion. 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 $600,000
of such loans may be convertible into Private Units, at a price of $10.00 per
Unit, at the option of the lender. The Private Units would be identical to the
Private Placement Units.
On August 8, 2022 and September 15, 2022, the Sponsor loaned an additional
$100,000 and $50,000, respectively, pursuant to two promissory notes which are
unsecured, interest-free and due after the date on which the Company consummates
an initial business combination. The Sponsor has the right to convert each
promissory note into private units at $10.00 per unit.
On September 13, 2022, pursuant to the amended Merger Agreement, Caravelle
loaned the Company $575,000 pursuant to a promissory note and deposited into the
Company's Trust Account an additional $575,000 (representing $0.10 per each
share of redeemable common stock) to extend the time for Pacifico to complete
the Business Combination by three months until December 16, 2022. It is
uncertain that the Company will be able to consummate a Business Combination by
this date. If a Business Combination is not consummated by the required date,
there will be a mandatory liquidation and subsequent dissolution. In connection
with the Company's assessment of going concern considerations in accordance with
FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern",
management has determined that mandatory liquidation, and subsequent
dissolution, should the Company be unable to complete a business combination,
raises substantial doubt about the Company's ability to continue as a going
concern. If a business combination is not consummated by this date, there will
be a mandatory liquidation and subsequent dissolution. No adjustments have been
made to the carrying amounts of assets and liabilities should the Company be
required to liquidate after December 16, 2022.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 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.
Upon closing of a business combination, the underwriters will be entitled to a
deferred fee of $0.375 per public share, or $2,156,250 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 a business combination,
subject to the terms of the underwriting agreement. The underwriters will also
be entitled to 43,125 common shares, to be issued if the Company closes a
business combination.
The Company has engaged a merger and acquisition advisor and capital market
advisor in connection with business combination to provide services such as
introducing the Company to potential investors that are interested in purchasing
the Company's securities in connection with the initial business combination,
assisting the Company in negotiating the terms and conditions with the target
company. The Company will pay the advisor a cash fee or in shares in a total
amount of approximately $4.625 million. In addition, the Company has committed
to pay additional $50,000 professional fees upon the closing of a business
combination.
19
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 period reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Common stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable common stock (including common stock 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,
common stock is classified as stockholders' equity. The Company's common stock
features certain redemption rights that are considered to be outside of the
Company's control and subject to occurrence of uncertain future events.
Accordingly, common stock subject to possible redemption is presented at
redemption value as temporary equity, outside of the stockholders' equity
section of the Company's balance sheet.
We have made a policy election in accordance with ASC 480-10-S99-3A and
recognizes changes in redemption value in additional paid-in capital (or
accumulated deficit in the absence of additional paid-in capital) over an
expected 12-month period leading up to a business combination.
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC
260, Earnings Per Share. The unaudited condensed statements of operations
include a presentation of income (loss) per redeemable share and income (loss)
per non-redeemable share following the two-class method of income per share. In
order to determine the net income (loss) attributable to both the redeemable
shares and non-redeemable shares, the Company 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. The Company 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 common 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 340-10-S99-1 and
SEC Staff Accounting Bulletin Topic 5A - "Expenses of Offering". Offering costs
are allocated between public shares and public rights based on the estimated
fair values of public shares and public rights at the date of issuance.
20
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.
© Edgar Online, source Glimpses
PACO ACQU 