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.
Overview
We are a blank check company incorporated in the British Virgin Islands on July
15, 2020 with limited liability (meaning our public shareholders have no
liability, as shareholders of the Company, for the liabilities of the Company
over and above the amount paid for their shares) to serve as a vehicle to effect
a merger, share exchange, asset acquisition, share purchase, recapitalization,
reorganization or similar business combination with one or more target
businesses. Our efforts to identify a prospective target business will not be
limited to a particular industry or geographic location. We intend to utilize
cash derived from the proceeds of the Initial Public Offering, our securities,
debt or a combination of cash, securities and debt, in effecting a business
combination.
A resolution was passed on September 20, 2021 at the Company's Annual General
Meeting to amend the Company's investment management trust agreement by and
between the Company and the Trustee, to extend the date on which to commence
liquidating the Trust Account established in connection with the Company's IPO
twelve (12) times for an additional one (1) month each time from September 23,
2022 to September 23, 2023 by depositing into the trust account $0.0155 for each
Public Share that has not been redeemed (or an aggregate of $88,867 if there are
no redemptions) (the "Extension Payment") for each one-month extension in the
event the Company has not consummated a business combination by the Extended
Termination Date. The Company has extended the amount of available time to
complete a business combination until April 23, 2023.
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Results of Operations
Our entire activity from inception up to September 23, 2021 was in preparation
for the initial public offering. Since the initial public offering, 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 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. We expect our
expenses to increase substantially after this period.
For the years ended December 31, 2022, we had a net loss of $46,734, which was
comprised of interest income from our cash in bank and dividend income earned in
investments held in Trust Account of $507,209 and general and administrative
expenses of $553,943.
For the years ended December 31, 2021, we had a net loss of $140,520, which was
comprised of interest income from our cash in bank and dividend income earned in
investments held in Trust Account of $1,039, sundry income of $168 and general
and administrative expenses of $141,727.
Liquidity and Capital Resources
As of December 31, 2022, we had cash of $328,869. Until the consummation of the
initial public offering, the Company's only source of liquidity was an initial
purchase of ordinary shares by the initial shareholders, monies loaned by the
related party under an unsecured promissory note .
On September 19, 2022, the shareholders of the Company approved an amended and
restated memorandum and articles of association (the "Charter Amendment"),
giving the Company the right to extend the date by which it has to complete a
business combination up to twelve (12) times for an additional one (1) month
each time, from September 23, 2022 up to September 23, 2023. We do not believe
we will need to raise additional funds in order to meet the expenditures
required for operating our business. This belief is based on the fact that while
we may begin preliminary due diligence of a target business in connection with
an indication of interest, we intend to undertake in-depth due diligence,
depending on the circumstances of the relevant prospective acquisition, only
after we have negotiated and signed a letter of intent or other preliminary
agreement that addresses the terms of our initial business combination. However,
if our estimate of the costs of undertaking in-depth due diligence and
negotiating our initial business combination is less than the actual amount
necessary to do so, or the amount of interest available to use from the trust
account is minimal as a result of the current interest rate environment, we may
be required to raise additional capital, the amount, availability and cost of
which is currently unascertainable. In this event, we could seek such additional
capital through loans or additional investments from members of our management
team, but such members of our management team are not under any obligation to
advance funds to, or invest in, us. In the event that the 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. Such loans would be evidenced by
promissory notes. The notes would either be paid upon consummation of our
business combination, without interest, or, at the lender's discretion, up to
$500,000 of the notes may be converted upon consummation of our business
combination into additional Private Units at a price of $10.00 per unit. The
terms of such loans by our initial shareholders, officers and directors, if any,
have not been determined and no written agreements exist with respect to such
loans.
Additionally, the Charter Amendment also allowed the holders of the Public
Shares to redeem the shares when the Directors of the Company propose any
amendment to the Company's amended and restated memorandum and article of
association that would affect the substance or timing of the redemption of the
Public Shares. Accordingly, on September 19, 2022, 2,393,594 Public Shares were
redeemed for the pro-rata share of the deposits then in the Trust Account.
On September 23, 2021, we consummated the initial public offering of 5,000,000
Public Units at a price of $10.00 per unit, generating gross proceeds of
$50,000,000. Simultaneously, the underwriters exercised the over-allotment
option in full and purchased additional 750,000 units at a price of $10.00 per
unit, generating gross proceeds of $7,500,000. Simultaneously with the closing
of the initial public offering, we consummated the sale of 237,000 Private
Units, at a price of $10.00 per unit, generating gross proceeds of $2,370,000.
Following the initial public offering and the exercise of the over-allotment
option, a total of $58,075,000 was placed in the trust account. We incurred
$1,031,411 in initial public offering related costs, including $805,000 of
underwriting fees and $226,411 of initial public offering costs.
We intend to use substantially all of the net proceeds of the initial public
offering, including the funds held in the trust account, to acquire a target
business or businesses 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
our business combination, the remaining proceeds held in the trust account, as
well as any other net proceeds not expended, 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.
15
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.
Along with the Company's amendment to the amended and restated memorandum and
article of association, the Company entered into an amendment (the "Trust
Amendment") to the investment management trust agreement, dated as of September
19, 2021, with American Stock Transfer & Trust Company. Pursuant to the Trust
Amendment, the Company has the right to extend the time to complete a business
combination twelve (12) times for an additional one (1) month each time from
September 23, 2022, up to September 23, 2023, by depositing $0.033 for each
issued and outstanding Public Shares for each one-month extension, excluding
Public Shares hold by the Anchor Shareholders. On each of September 21, 2022,
October 31, 2022, November 28, 2022, December 21, 2022, January 20, 2023,
February 21, 2023 and March 21, 2023, the Company had been deposited $9,080 into
the Trust Account in order to extend the amount of available time to complete a
business combination until April 23, 2023.
For the year ended December 31, 2022, the Company incurred net loss of $46,734
and had negative cash provided by operating activities of $534,228. As of
December 31, 2022, the Company had cash of $328,869 with working capital deficit
of $148,587. We may need to raise additional capital through loans or additional
investments from its Sponsor or third parties.
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. These conditions raise substantial doubt about the
Company's ability to continue as a going concern through one year from the date
of these financial statements if a Business Combination is not consummated.
These consolidated financial statements do not include any adjustments relating
to the recovery of the recorded assets or the classification of the liabilities
that might be necessary should the Company be unable to continue as a going
concern.
In connection with the Company's assessment of going concern in accordance with
the authoritative guidance in ASU 2014-15, "Disclosures of Uncertainties about
an Entity's Ability to Continue as a Going Concern," management has concluded
that the Company has incurred significant operating losses and determined that
the mandatory liquidation and subsequent dissolution, should the Company be
unable to raise additional funds to meet its obligations and complete a Business
Combination, raises substantial doubt about the Company's ability to continue as
a going concern. The Company has until April 23, 2023 to consummate a Business
Combination. It is uncertain that the Company will be able to consummate a
Business Combination by this time. If a Business Combination is not consummated
by this date without an extension to the acquisition period, there will be a
mandatory liquidation and subsequent dissolution. No adjustments have been made
to the carrying amounts of assets or liabilities should the Company be required
to liquidate after April 23, 2023. Pursuant to the Trust Amendment, the Company
has the right to extend the time to complete a business combination twelve (12)
times for an additional one (1) month each time from September 23, 2022, to
September 23, 2023, by depositing $0.0155 for each issued and outstanding
Company ordinary share issued in the IPO for each one-month extension.
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 and 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.
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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 $10,000 for general and administrative services, including
office space, utilities and administrative services to the Company. We began
incurring these fees on October 1, 2021 and will continue to incur these fees
monthly until the earlier of the completion of the business combination and the
Company's liquidation. Also, we are committed to the below:
Registration Rights
The holders of the insider shares, the Private Units (and their underlying
securities) and the warrants that may be issued upon conversion of any working
capital loans (and their underlying securities) are entitled to registration
rights pursuant to a registration rights agreement signed on September 20, 2021.
The holders of a majority of these securities will be entitled to make up to two
demands that the Company register such securities. The holders of the majority
of the insider shares can elect to exercise these registration rights at any
time commencing three months prior to the date on which these ordinary shares
are to be released from escrow. The holders of a majority of the Private Units
and warrants issued in payment of any working capital loans made to the Company
(or underlying securities) can elect to exercise these registration rights at
any time after the Company consummates a business combination. In addition, the
holders will have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the completion of a business
combination. The Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting fee of 3.2% of the gross
proceeds from offering to the maximum of $1,615,000. A total of $805,000 was
paid upon the closing of the Initial Public Offering. At the closing of any
Business Combination, the Underwriters will receive a cash payment equal to the
greater of: (i)$575,000 or (ii) a fee equal to 4.5% (or 0.5% with respect to
investors in the Offering introduced to the Underwriters by the Company's
sponsor, or Company's management, subject to a total maximum underwriting fee of
$1,615,000.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("U.S. 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 periods reported. Actual results could materially differ from those
estimates. The Company has identified the following critical accounting
policies:
Warrants
The Company accounts 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 Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("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, 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 the Company's own ordinary shares and whether the
warrant holders could potentially require "net cash settlement" in a
circumstance outside of the Company's 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.
As the warrants issued upon the IPO and private placements meet the criteria for
equity classification under ASC 480, therefore, the warrants are classified as
equity.
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Ordinary Shares Subject To Possible Redemption
The Company accounts for its 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 (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 issued upon
the consummation of the IPO and the exercise of the over-allotment option
feature certain redemption rights that are considered to be outside of the
Company's control and subject to occurrence of uncertain future events.
Accordingly, at December 31, 2022 and 2021, ordinary shares subject to possible
redemption are presented as temporary equity, outside of the shareholders'
(deficit) equity section of the Company's balance sheets.
The Company has 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 if additional paid in capital equals to zero over an
expected 12-month period leading up to a business combination. On December 31,
2022 and 2021, the Company had recorded $9,425,784 and $2,947,334 accretion of
carrying value to redemption value, respectively.
Net income (loss) per share
The Company complies with accounting and disclosure requirements of FASB ASC
260, Earnings 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 common stock and non-redeemable common stock and the undistributed
income (loss) is calculated using the total net income (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 ordinary share. Any remeasurement of the accretion to redemption
value of the ordinary share subject to possible redemption was considered to be
dividends paid to the public shareholders. As of December 31, 2022 and 2021, the
Company has not considered the effect of the warrants sold in the Initial Public
Offering in the calculation of diluted net income (loss) per share, since the
exercise of the warrants is contingent upon the occurrence of future events and
the inclusion of such warrants would be anti-dilutive and the Company did not
have any other dilutive securities and other contracts that could, potentially,
be exercised or converted into common stock and then share in the earnings of
the Company. As a result, diluted income (loss) per share is the same as basic
(income) loss per share for the period presented.
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 U.S. GAAP. The ASU also removes certain settlement
conditions that are required for equity-linked contracts to qualify for the
derivative scope exception, and it simplifies the diluted earnings per share
calculation in certain areas. The Company adopted ASU 2020-06 on January 1,
2021. Adoption of the ASU did not impact the Company's financial position,
results of operations or cash flows. There are no other ASUs being adopted.
Other than the above, there are no other recently issued accounting standards
which are applicable to the Company.
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