References to the "Company," "our," "us" or "we" refer to Provident 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 condensed 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 Securities Exchange Act of 1934, as amended (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. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission ("SEC") filings.

Overview

We are a blank check company incorporated in the Cayman Islands on October 21, 2020 formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering, the private placement of the private placement warrants, and the units sold under the forward purchase agreements, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of our initial public offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.

The issuance of additional shares in connection with a business combination, including the issuance of forward purchase and PIPE securities, to the owners of the target or other investors:

may significantly dilute the equity interest of investors in our initial public

? offering, which dilution would increase if the anti-dilution provisions in the

Class B ordinary shares resulted in the issuance of Class A ordinary shares on

a greater than one-to-one basis upon conversion of the Class B ordinary shares;

may subordinate the rights of holders of Class A ordinary shares if preferred

? shares are issued with rights senior to those afforded our Class A ordinary

shares;

could cause a change in control if a substantial number of our Class A ordinary

? shares are issued, which may affect, among other things, our ability to use our

net operating loss carry forwards, if any, and could result in the resignation

or removal of our present officers and directors;

may have the effect of delaying or preventing a change of control of us by

? diluting the share ownership or voting rights of a person seeking to obtain

control of us;

may adversely affect prevailing market prices for our Class A ordinary shares

? and/or warrants. Similarly, if we issue debt securities or otherwise incur

significant debt to bank or other lenders or the owners of a target, it could

result in;

? default and foreclosure on our assets if our operating revenues after an

initial business combination are insufficient to repay our debt obligations;




                                       21

  Table of Contents

acceleration of our obligations to repay the indebtedness even if we make all

? principal and interest payments when due if we breach certain covenants that

require the maintenance of certain financial ratios or reserves without a

waiver or renegotiation of that covenant;

? our immediate payment of all principal and accrued interest, if any, if the

debt security is payable on demand;

our inability to obtain necessary additional financing if the debt security

? contains covenants restricting our ability to obtain such financing while the

debt security is outstanding;

? our inability to pay dividends on our Class A ordinary shares;

using a substantial portion of our cash flow to pay principal and interest on

? our debt, which will reduce the funds available for dividends on our Class A

ordinary shares if declared, expenses, capital expenditures, acquisitions and

other general corporate purposes;

? limitations on our flexibility in planning for and reacting to changes in our

business and in the industry in which we operate;

? increased vulnerability to adverse changes in general economic, industry and

competitive conditions and adverse changes in government regulation; and

limitations on our ability to borrow additional amounts for expenses, capital

? expenditures, acquisitions, debt service requirements, execution of our

strategy and other purposes and other disadvantages compared to our competitors

who have less debt.

We expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.

Recent Developments

On March 3, 2022, we entered into the Business Combination Agreement with Perfect, Merger Sub 1 and Merger Sub 2, pursuant to which, among other transactions, on the terms and subject to the conditions set forth therein, (i) Merger Sub 1 will merge with and into Provident, with Provident surviving the First Merger as a wholly-owned subsidiary of Perfect, and (ii) immediately after the consummation of the First Merger, Provident (as the surviving company of the First Merger) will merge with and into Merger Sub 2, with Merger Sub 2 surviving the Second Merger as a wholly-owned subsidiary of Perfect.

Pursuant to the Business Combination Agreement and subject to the approval of the Provident shareholders, among other things, (i) immediately prior to the First Merger Effective Time, each Provident Class B Ordinary Share, outstanding immediately prior to the First Merger Effective Time will be automatically converted into a number of Provident Class A Ordinary Share in accordance with the articles of association of Provident then effective, and, after giving effect to such automatic conversion, at the First Merger Effective Time and as a result of the First Merger, (a) each issued and outstanding Provident Class A Ordinary Share (other than the Provident Dissenting Shares will be cancelled in exchange for the right to receive one Perfect Class A Ordinary Share after giving effect to the Recapitalization (as defined below), and (b) each issued and outstanding Provident Dissenting Share will be cancelled and carry no right other than the right to receive the payment of the fair value of such Provident Dissenting Share determined in accordance with Section 238 of the Companies Act (As Revised) of the Cayman Islands, and (ii) each issued and outstanding Provident Warrants will be converted into a corresponding Perfect Warrant.



                                       22

Table of Contents

Immediately prior to the First Merger Effective Time, (i) the Listing A&R AoA will be adopted and become effective, and (ii) Perfect will effect a share combination such that each Pre-Recapitalization Perfect Shares (whether issued and outstanding or authorized but unissued) immediately prior to the First Merger Effective Time, will be consolidated into a number of shares equal to the Combination Factor, and upon such share combination, (a) each resulting share held by any person other than the Founder Parties will be repurchased and cancelled by Perfect in exchange for the issuance of one Perfect Class A Ordinary Share, and (b) each resulting share that is held by the Founder Parties will be repurchased and cancelled by Perfect in exchange for the issuance of one Perfect Class B Ordinary Share. Pursuant to the Listing A&R AoA, each Perfect Class A Ordinary Share will have one vote and each Perfect Class B Ordinary Share will have ten votes.

The "Combination Factor" is a number resulting from dividing the Per Share Perfect Equity Value by $10.00. The "Per Share Perfect Equity Value" is obtained by dividing (i) the equity value of Perfect (being $1,010,000,000) by (ii) the aggregate number of Pre-Recapitalization Perfect Shares that are issued and outstanding immediately prior to the Recapitalization. Upon the Recapitalization, each Perfect Ordinary Share will have a value of $10.00.

The Business Combination has been approved by the boards of directors of both Provident and Perfect.

The Business Combination Agreement contains customary representations, warranties and covenants by the parties thereto and the Closing is subject to certain conditions as further described in the Business Combination Agreement.

On March 28, 2022, Perfect filed Form F-4 with the US SEC relating to the proposed Business Combination. On May 26, 2022 and July 8, 2022, Perfect filed two amendments of Form F-4 with the US SEC relating to the proposed Business Combination.

Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through June 30, 2022 were organizational activities, those necessary to prepare for our initial public offering, described below, and after our initial public offering, identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We will generate non-operating income in the form of interest income on marketable securities after our initial public offering. 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 in connection with completing a Business Combination.

For the three months ended June 30, 2022, we had net income of $4,183,892, which consists of interest income on marketable securities held in the Trust Account of $313,921 and unrealized gain on change on fair value of warrants and FPA Units of $5,233,542 offset by operating costs of $1,363,571.

For the three months ended June 30, 2021, we had net income of $515,777, which consists of interest income on marketable securities held in the Trust Account of $3,435 and an unrealized gain on change on fair value of warrants and FPA Units of $743,824, offset by operating and formation costs of $231,482.

For the six months ended June 30, 2022, we had net income of $5,258,668, which consists of interest income on marketable securities held in the Trust Account of $316,409 and unrealized gain on change on fair value of warrants and FPA Units of $6,969,114 offset by operating costs of $2,026,855.

For the six months ended June 30, 2021, we had net income of $6,862,712, which consists of interest income on marketable securities held in the Trust Account of $6,342, and an unrealized gain on change on fair value of warrants and FPA Units of $11,362,962 less operating and formation costs of $1,676,612, expense incurred for issuance of FPA Units of $1,776,766 and expenses incurred by the fair value of warrants exceeding the purchase price of $1,053,214.

Liquidity and Capital Resources

On January 12, 2021, we consummated our Initial Public Offering of 23,000,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $230,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 6,600,000 Private Placement Warrants to our sponsor at a price of $1.00 per warrant, generating gross proceeds of $6,600,000.



                                       23

Table of Contents

Following our Initial Public Offering and the sale of the Private Placement Warrants, a total of $230,000,000 was placed in the Trust Account. We incurred $13,204,580 in transaction costs, including $4,600,000 of underwriting fees, $8,050,000 of deferred underwriting fees and $554,580 of other offering costs.

For the six months ended June 30, 2022, cash used in operating activities was $344,456. Net income of $5,258,668 was impacted by interest earned on marketable securities held in the Trust Account of $316,409, an unrealized gain on change on fair value of warrants and FPA Units of $6,969,114 and changes in operating assets and liabilities generated $1,682,399 of cash provided from operating activities.

For the six months ended June 30, 2021, cash used in operating activities was $939,129. Net income of $6,862,712 was impacted by interest earned on marketable securities held in the Trust Account of $6,342, an unrealized gain on change on fair value of warrants and FPA Units of $11,362,962, expenses incurred in relation Class B ordinary shares issued of $2,330,688, warrant issuance costs of $778,385, expenses incurred by the fair value of warrants exceeding the purchase price of $1,053,214 and changes in operating assets and liabilities used $594,824 of cash for operating activities.

As of June 30, 2022, we had marketable securities held in the Trust Account of $230,330,846. 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 Business Combination. To the extent that our share capital is used, in whole or in part, as consideration to complete a 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 June 30, 2022, we had cash of $479,064 held outside the Trust Account.

In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor commits to provide us with Working Capital Loans (see Note 5 to Financial Statements) if necessary to ensure that we will have sufficient working capital one year from this filing.

In connection with our assessment of going concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern," we have until January 11, 2023 to consummate the proposed Business Combination. It is uncertain that we will be able to consummate the proposed Business Combination by this time. On March 3, 2022, we entered into a Business Combination Agreement with Perfect Corp. as discussed above. We intend to complete the proposed Business Combination before the mandatory liquidation date. However, there can be no assurance that we will be able to consummate any business combination by January 11, 2023. Management has determined that the mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after January 11, 2023.

Off-balance sheet financing arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 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 an agreement to pay our sponsor a monthly fee of up to $10,000 per month for office space, and administrative and support services, provided to us. We began incurring these fees on January 7, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and our liquidation.

The underwriters are entitled to a deferred underwriting discount of 3.5% of the gross proceeds of our Initial Public Offering upon the completion of our initial Business Combination.



                                       24

  Table of Contents

On June 29, 2022, we issued an unsecured promissory note to the Sponsor, pursuant to which we may borrow up to $400,000 to be used for working capital need. These loans are non-interest bearing, unsecured and are due on the earlier of (i) the date on which the Company consummates an initial Business Combination contemplated under the Business Combination Agreement dated as of March 3, 2022 and (ii) the date on which our winding up is effective. As of June 30, 2022 and December 31, 2021, the total amount borrowed under the promissory note were $400,000 and $0, respectively.

Critical Accounting Policies

Management's discussion and analysis of our results of operations and liquidity and capital resources are based on our unaudited condensed financial information. We describe our significant accounting policies in Note 2-Significant Accounting Policies, of the notes to unaudited condensed financial statements included in this report. The preparation of these unaudited condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We evaluated the Warrants in accordance with ASC 815-40, "Derivatives and Hedging - Contracts in Entity's Own Equity", and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers as well as provisions that provided for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant, precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815 and are not eligible for an exception from derivative accounting, the Warrants are recorded as derivative liabilities on the Balance Sheets and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, "Fair Value Measurement", with changes in fair value recognized in the Statement of Operations in the period of change.

Treatment of Temporary Equity

As a result of recent guidance to Special Purpose Acquisition Companies by the SEC regarding redeemable equity instruments, we revisited its application of ASC 480-10-S99 on our financial statements. Management has noted that all of the Class A ordinary shares are classified as temporary equity. Thus, no further adjustments were made by us.

Recent Accounting Pronouncements

In August 2020, the FASB issued 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): 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. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies the diluted earnings per share calculation in certain areas. 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. We are currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

© Edgar Online, source Glimpses