References to the "Company," "us," "our" or "we" refer to Malacca Straits
Acquisition Company Limited. The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with
our audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Report
including, without limitation, statements under this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" regarding the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward- looking statements. When used in
this Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to us or the Company's
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and
information currently available to, the Company's management. Actual results
could differ materially from those contemplated by the forward- looking
statements as a result of certain factors detailed in our filings with the SEC.
All subsequent written or oral forward-looking statements attributable to us or
persons acting on the Company's behalf are qualified in their entirety by this
paragraph.
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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 on July 17, 2019 as a Cayman Islands
exempted company for the purpose of effecting an initial business combination.
We intend to effectuate our initial business combination using cash from the
proceeds of the initial public offering and the sale of the private placement
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.
AVN Business Combination
On March 21, 2021, we entered into the AVN Business Combination Agreement with
AVN, an indirect 99.99% owned subsidiary of PT MNC Vision Networks TBK, an
Indonesian public limited liability company, and new holding company for
Vision+, Indonesia's fastest growing OTT business and MNC Play, the 3rd largest
broadband and IPTV operator in Indonesia. Pursuant to the AVN Business
Combination Agreement, subject to the terms and conditions set forth therein, a
newly-formed Cayman Islands subsidiary of AVN would merge with and into our
Company, with our Company surviving the merger as a wholly-owned subsidiary of
AVN, and with AVN becoming the successor US-listed company to our Company.
On September 3, 2021, AVN and the Company entered into the Termination Agreement
to mutually terminate the AVN Business Combination Agreement, pursuant to
Section 9.1(a) thereof.
Extension Amendment and Redemption
On December 27, 2021, we held our 2021 annual general meeting of shareholders
and approved, among other things, the Extension Amendment, which extended the
date by which we must consummate a business combination from January 17, 2022
(which was 18 months from the closing of the initial public offering) to October
17, 2022 (or such earlier date as determined by the board). Our sponsor has the
sole discretion whether to continue extending for additional calendar months
until October 17, 2022. In connection with the Extension Amendment, shareholders
holding 9,669,449 public shares exercised their right to redeem such public
shares for a pro rata portion of the trust account.
Recent Developments
In January 2022, in connection with the Extension Amendment, we paid cash in the
aggregate amount of $96,761,060, or approximately $10.00 per share to redeeming
shareholders in the Extension Redemption. For each one month extension our
sponsor will deposit a Contribution of $0.03 per public share not redeemed in
connection with the Extension Amendment. The first Contribution was due on
January 17, 2022 in the amount of $141,167 and subsequent Contributions are
payable monthly through the Company's extension date in October 2022 (if we
fully extend the term we have to complete our initial business
combination).Immediately after the Extension Redemption, the amount in the trust
account was approximately $47,087,905.
On March 29, 2022, we issued the Working Capital Note, an unsecured promissory
note in the amount of up to $1,000,000, to our sponsor. The proceeds of the
Working Capital Note will be used for costs in connection with our initial
business combination or as general working capital. We also issued the Extension
Note, an unsecured promissory note, dated March 29, 2022, in the amount of up to
$1,297,500, to our sponsor. The proceeds of the Extension Note will be used
solely for extensions of the time period the Company has to complete an initial
business combination pursuant to our amended and restated memorandum and
articles of association. For more information on the Working Capital Note and
the Extension Note see "Item 9. Other Information".
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Results of Operations
We have neither engaged in any operations nor generated any operating 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 initial 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 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 year ended December 31, 2021, we had net income of $6,050,466, which
consists of a gain due to changes in fair value of warrant liabilities of
$7,457,876, operating expenses of $1,440,989, offset by interest earned from
bank of $3 and interest earned on marketable securities held in the trust
account of $35,576.
For the year ended December 31, 2020, we had a net loss of $7,625,541, which
consists of a loss due to changes in fair value of warrant liabilities of
$7,193,729, transaction costs of $186,456 and operating expenses of $311,104,
offset by interest earned from bank of $4 and interest earned on marketable
securities held in the trust account of $65,744.
Liquidity and Capital Resources
On July 17, 2020, we consummated the initial public offering of 12,500,000
units, and on July 21, 2020, we consummated the sale of an additional 1,875,000
units, which included the full exercise by the underwriters of their
over-allotment option, at $10.00 per unit, generating aggregate gross proceeds
of $143,750,000. Each unit consists of one Class A ordinary share of the
Company, par value $0.0001 per share, and one-half of one redeemable warrant of
the Company, with each whole warrant entitling the holder thereof to purchase
one share of Class A ordinary share for $11.50 per share. Simultaneously with
the closing of the initial public offering and the full exercise of the
over-allotment option, we consummated the sale of an aggregate of 4,375,000
private placement warrants to our sponsor at a price of $1.00 per warrant,
generating aggregate gross proceeds of $4,375,000.
Following the initial public offering, the exercise of the over-allotment option
and the sale of the private placement warrants, a total of $143,750,000 was
placed in the trust account. We incurred $8,394,954 in transaction costs,
including $2,875,000 of underwriting fees, $5,031,250 of deferred underwriting
fees and $488,704 of other offering costs in connection with the initial public
offering and the sale of the private placement warrants. Of these amounts,
transactions costs of $186,456 attributable to the issuance of the warrants were
expensed during 2020.
For the year ended December 31, 2021, net cash used in operating activities was
$1,218,150. Net income of $6,050,466 primarily related to the income from change
in fair market value of derivative warrant liabilities of $7,457,876, interest
earned on marketable securities of $33,576 and changes in operating assets and
liabilities, which provided $222,836 of cash from operating activities.
At December 31, 2021 and 2020, we had cash and marketable securities held in the
trust account of $143,849,320 and $143,815,744, respectively. Subsequent to
December 31, 2021, $96,761,060 was distributed to shareholders who elected to
redeem their shares. We intend to use substantially all of the funds held in the
trust account, including any amounts representing interest earned on the trust
account (less taxes payable (if applicable) and deferred underwriting
commissions) to complete our business combination. To the extent that our shares
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 post-business combination
entity, make other acquisitions and pursue our growth strategies.
At December 31, 2021 and 2020, we had cash of $112,687 and $730,837,
respectively, held 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, structure, negotiate and complete a
business combination.
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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 warrants, at a
price of $1.00 per warrant, at the option of the lender. The warrants would be
identical to the private placement warrants.
Other than as disclosed in this Report, we do not presently believe we will need
to raise additional funds in order to meet the expenditures required for
operating our business. However, if our estimate of the 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, we may have
insufficient funds available to operate our business prior to our initial
business combination. Moreover, we may need to obtain additional financing
either to complete our business combination or because we become obligated to
redeem a significant number of our public shares upon completion of our business
combination, in which case we may issue additional securities or incur debt in
connection with such business combination.
We issued the Promissory Notes to the sponsor, which consist of two unsecured
promissory notes in the amount of up to $300,000, each, which were issued on
August 2, 2021 and October 20, 2021, respectively. The Promissory Notes are
non-interest bearing and payable at the earlier of (i) the date on which the
initial business combination is completed and (ii) the date of liquidation of
the Company. The Promissory Notes are not convertible into equity or warrants.
As of December 31, 2021 and 2020, we had $600,000 and nil, respectively,
outstanding borrowings under the Promissory Notes.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") Topic 2014-15, "Disclosures of Uncertainties about an Entity's
Ability to Continue as a Going Concern," we have determined that we do not
currently have adequate liquidity to sustain operations, which consist solely of
pursuing an initial business combination. While we expect to have sufficient
access to additional sources of capital if necessary, there is no current
commitment on the part of any financing source to provide additional capital and
no assurances can be provided that such additional capital will ultimately be
available. Additionally, we have determined that if the Company is unable to
complete a business combination by October 17, 2022 (if we fully extend the term
we have to complete our initial business combination), then the Company will
cease all operations except for the purpose of liquidating. The date for
mandatory liquidation and subsequent redemption of shares raises substantial
doubt about the Company's ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after October 17, 2022 (if we fully extend the
term we have to complete our initial business combination). We intend to
complete a business combination before the mandatory liquidation date.
Off-Balance Sheet Financing 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.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
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The underwriters are entitled to a deferred fee of $0.35 per unit, or $5,031,250
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. A
portion of such amount, not to exceed 25% of the total amount of the deferred
fee held in the trust account, may be re-allocated or paid to unaffiliated
thirds parties that assist us in consummating a business combination. The
election to re-allocate or make any such payments to unaffiliated third parties
will be solely at the discretion our management team, and such unaffiliated
third parties will be selected by the management team in their sole and absolute
discretion.
Pursuant to a registration rights agreement entered into on July 14, 2020, the
holders of the founder shares, private placement warrants and any warrants that
may be issued upon conversion of working capital loans (the "Working Capital
Loans") (and any Class A ordinary shares issuable upon the exercise of the
private placement warrants or warrants issued upon conversion of the Working
Capital Loans and upon conversion of the founder shares) are entitled to
registration rights requiring us to register such securities for resale (in the
case of the Founder Shares, only after conversion to the Class A ordinary
shares). The holders of these securities are entitled to make up to three
demands, excluding short form demands, that we register such securities. In
addition, the holders have certain "piggy-back" registration rights with respect
to registration statements filed subsequent to the completion of a business
combination and rights to require us to register for resale such securities
pursuant to Rule 415 under the Securities Act. The registration rights agreement
does not contain liquidated damages or other cash settlement provisions
resulting from delays in registering the Company's securities. We will bear the
expenses incurred in connection with the filing of any such registration
statements.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with 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. We have not identified any critical accounting policies.
Derivative Warrant Liabilities
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 (i) ASC
Topic 480 "Distinguishing Liabilities from Equity" ("ASC 480") and (ii) ASC
Topic 815-15, "Derivatives and Hedging". The classification of derivative
instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
We issued 7,187,500 public warrants to investors in our initial public offering
and issued 4,375,000 private placement warrants. All of our outstanding warrants
are recognized as derivative liabilities in accordance with ASC Topic 815-40
"Contracts in Entity's Own Equity". Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjust the instruments to fair
value at each reporting period. The liabilities are subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The fair value of the public warrants
was initially measured using a Monte Carlo simulation approach with subsequent
measurements based off the quarterly trading price, whereas the fair value of
the Private Warrants was estimated initially and subsequently using a Modified
Black Scholes Model.
Class A Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480. Class A Ordinary shares subject to mandatory
redemption is classified as a liability instrument and is measured at fair
value. Conditionally redeemable ordinary shares (including ordinary shares that
features redemption rights that is either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) is classified as temporary equity. At all other times, ordinary
shares are classified as shareholders' equity. Our Class A ordinary shares
feature certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. Accordingly, Class
A ordinary shares subject to possible redemption is presented as temporary
equity, outside of the shareholders' equity section of our balance sheet.
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Class A ordinary shares subject to possible redemption is presented at
redemption value as temporary equity, outside of the shareholders' equity
section of the Company's balance sheet. Under ASC Topic 480-10-S99,
"Distinguishing Liabilities from Equity", the Company has elected to recognize
changes in the redemption value immediately as they occur and adjust the
carrying value of the security to equal the redemption value at the end of each
reporting period. This method would view the end of the reporting period as if
it were also the redemption date for the security.
Net Income (Loss) per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net income (loss)
by the weighted average number of shares of ordinary shares outstanding for the
period. The Company applies the two-class method in calculating income (loss)
per ordinary share. Accretion associated with the redeemable shares of Class A
ordinary shares is excluded from income (loss) per ordinary share as the
redemption value approximates fair value.
Recent Accounting Pronouncements
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.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial business
combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial business
combination.
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MALACCA STRAITS ACQUISITION COMPANY LIMITED 
