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. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of many factors, including those set forth under "Special Note Regarding
Forward-Looking Statements," "Item 1A. Risk Factors" and elsewhere in this
Annual Report on Form 10-K.
We are a blank check company incorporated as a Delaware corporation on
February 25, 2021 formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (a "Business Combination"). We intend to
effectuate our Business Combination using cash derived from the proceeds of our
IPO and the sale of Class A common stock (the "Private Placement Shares") in a
private placement (the "Private Placement") to the Company's sponsors, potential
additional shares, debt or a combination of cash, shares 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.
On May 17, 2022, the Company consummated the IPO of 6,450,000 units, each
consisting of one share of Class A common stock, $0.0001 par value per share,
one-half of one redeemable warrant, and one right. Simultaneously with the
closing of the IPO, we consummated the Private Placement of 398,892 shares of
Private Placement Shares. Following the closings of the IPO and the Private
Placement on May 17, 2022, a total of $65,790,000 (or $10.20 per share) was
placed in a trust account, established for the benefit of the Company's public
stockholders and the underwriters of the IPO with Wilmington Trust, National
Association acting as trustee (the "Trust Account").
Recent Developments
On December 29, 2022, we, Prime Number Merger Sub Inc. ("Merger Sub"), a
Delaware corporation established for the purpose to become a wholly-owned
subsidiary of a newly incorporated exempted Cayman Islands company ("PubCo")
prior to the noco-noco Business Combination (as defined below), NOCO-NOCO PTE.
LTD. ("noco-noco") and certain shareholders of noco-noco collectively holding a
controlling interest (together with other shareholders of noco-noco subsequently
joining the transactions, the "Sellers") entered into a Business Combination
Agreement (the "Business Combination Agreement"). Capitalized terms used and not
otherwise defined herein have the definitions assigned to such terms in the
Business Combination Agreement. Prime Number Holding Limited, formed on December
28, 2022 as PubCo, and Prime Number New Sub Pte. Ltd., formed on January 25,
2023 as New SubCo, joined as parties to such Business Combination Agreement.
Pursuant to the Business Combination Agreement, among other things, in
accordance with the General Corporation Law of the State of Delaware, as amended
(the "DGCL"), Merger Sub will merge with and into PNAC (the "Merger"), with PNAC
surviving the Merger as a wholly owned subsidiary of PubCo. The Merger will
become effective at such time on the date of the closing of the Merger (the
"Merger Closing") as the certificate of merger is duly filed with the Secretary
of State of the State of Delaware or at such other time specified in the
certificates of merger (the "Merger Effective Time"). In addition, a wholly
owned subsidiary of PubCo to be incorporated in Singapore ("New SubCo") shall
acquire the issued and outstanding shares of noco-noco from the Sellers; in
exchange, PubCo shall issue to the shareholders of noco-noco the shares of PubCo
(the "Share Exchange", and together with the Merger and the other transactions
contemplated by the Business Combination Agreement, the "noco-noco Business
Combination"), with noco-noco becoming a subsidiary of New SubCo. Upon the
consummation of the noco-noco Business Combination, PNAC will become a
wholly-owned subsidiary of PubCo and noco-noco will be a subsidiary of PubCo
with PubCo indirectly holding all or controlling equity interest in noco-noco,
and the stockholders of PNAC and the Sellers would receive shares, par value
$0.0001 per share, of PubCo ("PubCo Ordinary
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Shares") as consideration and become the shareholders of PubCo. Following the
Merger Effective Time, PubCo will change its name to "noco-noco Inc." PubCo and
New SubCo were incorporated shortly after the execution of the Buiness
Combination Agreement and have joined as parties to such Business Combination
Agreement.
We currently have until May 17, 2023 to consummate our initial business
combination. However, if we anticipate that we may not be able to consummate our
initial business combination by May 17, 2023, we may, but are not obligated to,
extend the period of time to consummate a Business Combination for up to two
times by an additional three-month period each time and may have until up to
November 17, 2023 to consummate our initial business combination.
Results of Operations
Our entire activity from inception up to date was related to the Company's
formation, the IPO and general and administrative activities. Since the IPO, our
activity has been limited to the evaluation of Business Combination candidates,
and we will not be generating any operating revenues until the closing and
completion of our initial business combination. We generate non-operating income
in the form of interest income on investments. We are incurring 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 income of $141,931, which
consisted of general and administrative expenses of $588,973, franchise tax of
$47,980, income tax of $112,446 and deferred income taxes provision of $37,190,
offset by unrealized gain on investments held in Trust Account of $215,965, and
interest earned on the investments held in the Trust Account of $712,555.
For the period from February 25, 2021 (inception) through December 31, 2021, we
had a net loss of $1,357, all of which consisted of formation and operating
costs.
Liquidity and Going Concern
On May 17, 2022, we consummated the IPO of 6,450,000 Public Units at a price of
$10.00 per unit, generating gross proceeds of $64,500,000. Simultaneously with
the closing of the IPO, we consummated the Private Placement of 398,892 shares
(including 349,032 shares to sponsor A, and 49,860 shares to sponsor B) at a
price of $10.00 per share generating gross proceeds of $3,988,920. Following the
closings of the IPO and the Private Placement on May 17, 2022, a total of
$65,790,000 (or $10.20 per share) was placed in the Trust Account.
As of December 31, 2022, we had marketable securities held in the Trust Account
of $66,718,520 consisting of securities held in money market funds 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 December 31, 2022, we did not withdraw any
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 December 31, 2022, the Company had cash of $278,295 and a working capital
of $313,675 (excluding investments held in Trust Account, deferred underwriting
fee payable and taxes payable). The Company's liquidity needs up to the closing
of the IPO on May 17, 2022 had been satisfied through proceeds from notes
payable and advances from related party and from the issuance of common stock.
We have 12 months from the closing of the IPO to consummate a Business
Combination. It is uncertain that we will be able to consummate a Business
Combination by this time. If a Business Combination is not consummated by this
date, there will be a mandatory liquidation and subsequent dissolution.
In order to finance transaction costs in connection with a Business Combination,
the Company's Sponsor or an affiliate of the Sponsor or certain of the Company's
officers and directors may, but are not obligated to, provide the Company with
working capital.
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The Company's management plans to continue its efforts to complete a Business
Combination within the Combination Period after the closing of the IPO.
If the estimated costs of identifying a target business, undertaking in-depth
due diligence and negotiating a Business Combination are less than the actual
amount necessary to do so, the Company may have insufficient funds available to
operate its business prior to its Business Combination. Moreover, the Company
may need to obtain additional financing either to complete its Business
Combination or because it becomes obligated to redeem a significant number of
public shares upon consummation of its Business Combination, in which case the
Company may issue additional securities or incur debt in connection with such
Business Combination. Subject to compliance with applicable securities laws, the
Company would only complete such financing simultaneously with the completion of
our Business Combination.
In connection with the Company's assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Presentation of Financial Statements -
Going Concern," management has determined that mandatory liquidation, should a
Business Combination not occur, and potential subsequent dissolution raises
substantial doubt about the Company's ability to continue as a going concern for
a reasonable period of time, which is considered to be one year from the
issuance of the financial statements.
Off-Balance Sheet Financing Arraignments
We have no obligations, assets or liabilities that 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.
Contractual Obligations
As of December 31, 2022, we do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities.
On October 25, 2022, we engaged PNCPS and WestPark, the representatives of the
underwriters for our IPO, to act as the financial advisors to us in connection
with its initial business combination. Pursuant to their engagement letter,
PNCPS and WestPark have agreed, if requested by and in consultation with us,
among others, to assist us in the transaction structing and negotiation of a
definitive purchase agreement with respect to a business combination, hold
meetings with us stockholders to discussion business combination and the
target's attributes, introduce us to potential investors in connection with a
business combination, assist us with relevant financial analysis, presentations,
press releases. PNCPS and Westpark will not receive any additional compensation
for services rendered under this engagement except the deferred underwriting fee
in the amount of $2,257,500 as provided in a certain underwriting agreement
dated May 12, 2022 among us, PNCPS and Westpark. We also agree to reimburse
PNCPS and WestPark up to $20,000 for its reasonable out-of-pocket expenses in
connection with the performance of their services thereunder.
On October 25, 2022, we and PNCPS entered into a separate engagement whereby
PNCPS would, among others, use its reasonable efforts in identifying and
introducing potential targets, valuate potential business combination and assess
the proposed structure for business combination and assist in managing the
process and other related services. In exchange of its services, we have agreed
to pay or cause the surviving entity to pay a service fee equal to 0.5% of the
total value of all cash, securities, or other property paid or transferred at
the closing by or to us, the target and/or their shareholders with respect to a
business combination. On January 31, 2023, we and PNCPS amended the original
engagement to set forth PNCPS's compensation thereunder in connection with the
Business Combination, which includes $500,000 in cash and 609,756 newly issued
PubCo Ordinary Shares, payable at the Closing. In addition, we also agree to
reimburse PNCPS up to $5,000 for its reasonable out-of-pocket expenses in
rendering their services.
Pursuant to these arrangements, we are obligated to pay the Representatives the
deferred underwriting compensation equal to 3.5% of the IPO Proceeds. The
deferred underwriting compensation will become payable to the Representatives
from the amounts held in the Trust Account solely in the event that we complete
a Business Combination. In addition, in connection with and upon the closing of
the Business Combination, we will pay or cause the surviving entity of the
Business Combination to pay PNCPS $500,000 in cash and issue 609,756 in new
PubCo Ordinary Shares.
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Critical Accounting Policies
Offering Costs
The Company complies with the requirements of FASB ASC Topic 340-10-S99-1,
"Other Assets and Deferred Costs - SEC Materials" ("ASC 340-10-S99") and SEC
Staff Accounting Bulletin Topic 5A, "Expenses of Offering". Offering costs
consisting principally of underwriting, legal, accounting and other expenses
that are directly related to the IPO and charged to shareholders' equity upon
the completion of the IPO.
Warrants
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in ASC 480 "Distinguishing Liabilities from
Equity" ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The
assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, whether they meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity
classification under ASC 815, including whether the warrants are indexed to our
own Class A Common Stock 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 warrant issuance 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, the warrants are required to be recorded as a component of
equity at the time of issuance. For issued or modified warrants that do not meet
all the criteria for equity classification, the warrants are required to be
recorded as liabilities at their initial fair value on the date of issuance, and
each balance sheet date thereafter. Changes in the estimated fair value of the
warrants are recognized as a non-cash gain or loss on the statements of
operations. We determined that upon further review of the proposed form of
warrant agreement, management concluded that the warrants included in the units
issued in the IPO pursuant to the warrant agreement qualify for equity
accounting treatment.
Common Stock Subject to Possible Redemption
We account for our Class A Common Stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Class A Common Stock subject to mandatory redemption (if any) are
classified as a liability instrument and are measured at fair value.
Conditionally redeemable Class A Common Stock (including Class A Common Stock
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 our control) are classified as temporary equity. At all other times,
Class A Common Stock are classified as stockholders' equity. Our Public Shares
feature certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. Accordingly, as of
December 31, 2022, shares of Class A Common Stock subject to possible redemption
are presented at redemption value of $10.34 per share as temporary equity,
outside of the stockholders' equity section of our balance sheet. We recognize
changes in redemption value immediately as they occur and adjusts the carrying
value of redeemable Class A Common Stock to equal the redemption value at the
end of each reporting period. Increases or decreases in the carrying amount of
shares of redeemable Class A Common Stock are affected by charges against
additional paid in capital or accumulated deficit if additional paid in capital
equals to zero.
Net Income (Loss) per Share
We comply with accounting and disclosure requirements of ASC 260, Earnings 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 Class A Common
Stock and non-redeemable Class A Common Sock 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 Class A
Common Stock. Any remeasurement of the accretion to redemption value of the
Class A Common Stock subject to possible redemption was considered to be
dividends paid to the public stockholders.
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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. ASU 2020 06 is effective January 1, 2024 for the
Company 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 our
financial statements.
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