References to "we", "us", "our" or the "Company" are to PepperLime Health
Acquisition Corporation, except where the context requires otherwise. The
following discussion should be read in conjunction with our unaudited condensed
financial statements and related notes thereto included 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. 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 were incorporated as a Cayman Islands exempted company on June 29, 2021. We
were incorporated for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses (the "Business Combination"). We have not selected any
specific Business Combination target.
On October 19, 2021, we consummated the initial public offering ("IPO") of
15,000,000 units of the Company (the "Units"), at a price of $10.00 per Unit,
generating gross proceeds of $150,000,000 and incurring offering costs of
approximately $16,900,000, of which $5,300,000 was for deferred underwriting
commissions), and approximately $7,987,000 was the excess of fair value over
price paid for Founder Shares sold to certain qualified institutional buyers or
institutional accredited investors (the "Anchor Investors"). Simultaneously with
the closing of the IPO, we consummated the sale of 7,500,000 private placement
warrants (the "Private Placement Warrants"), at a price of $1.00 per Private
Placement Warrant, in a private placement (the "Private Placement") to PepperOne
LLC (the "Sponsor"), generating gross proceeds of $7,500,000.
On October 29, 2021, the underwriter purchased an additional 2,000,000 Units
generating net proceeds to the Company of approximately $20,000,000 in the
aggregate, and incurring an additional offering costs of $1,100,000 in
connection with the over-allotment (of which $700,000 was for deferred
underwriting fees) and substantially concurrently with the closing of the full
exercise of the over-allotment option relating to the IPO, the Company completed
the private sale of an aggregate of 600,000 additional Private Placement
Warrants to our Sponsor at a purchase price of $1.00 per Private Placement
Warrant, generating gross proceeds to the Company of $600,000.
Upon the closing of the IPO, the over-allotment and the Private
Placement, approximately $171.7 million ($10.10 per unit) of the net proceeds of
the sale of the Units and the Private Placement Warrants were placed in a trust
account ("Trust Account") with Continental Stock Transfer & Trust Company acting
as trustee and will be invested in United States government treasury bills with
a maturity of 185 days or less or in money market funds investing solely in U.S.
Treasuries and meeting certain conditions under Rule 2a-7 under the Investment
Company Act of 1940, as amended, or the Investment Company Act, as determined by
the Company, until the earlier of: (i) the completion of a Business Combination
and (ii) the distribution of the Trust Account.
We cannot assure you that our plans to complete our Business Combination will be
successful.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
The only activities through September 30, 2021 were organizational activities
and those necessary to prepare for the IPO. We do not expect to generate any
operating revenues until after the completion of our Business Combination. We
will generate non-operating income in the form of interest income on marketable
securities held in the Trust Account and unrealized gains or losses related to
the change in fair value of our warrant liabilities. We will incur 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 period from June 29, 2021 (inception) to September 30, 2021, we had a
net loss of $41,230, solely consisting of general and administrative expenses.
Liquidity and Capital Resources
As of September 30, 2021, the Company held unrestricted operating cash of
approximately $4.2 million, substantially all of which was prefunded amounts
from the Sponsor for the purchase of Private Placement warrants, presented as
due to related party on the condensed balance sheet.
The Company's liquidity needs prior to the consummation of the IPO were
satisfied through the payment of $25,000 from the Sponsor to cover for certain
expenses on behalf of the Company in exchange for issuance of Founder Shares,
and loan proceeds from the Sponsor of approximately $187,000 as of September 30,
2021, under the unsecured promissory note (the "Note"). The Note balance was
settled in connection with the Sponsor's purchase of Private Placement Warrants.
Subsequent to the consummation of the IPO, the Company's liquidity has been
satisfied through the net proceeds from the consummation of the Private
Placement held outside of the Trust Account.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity to meet its needs through the
earlier of the consummation of a Business Combination or one year from this
filing. Over this time period, the Company will be using the funds held outside
of the Trust Account for paying existing accounts payable, identifying and
evaluating prospective Business Combination candidates, performing due diligence
on prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination.
Subsequent to the period covered by this Quarterly Report, we consummated our
IPO, and consummated the exercise of our over-allotment option as set forth in
our unaudited condensed financial statements and completed the sale of our
private placements warrants. Of the net proceeds from the IPO, exercise of the
over-allotment option, and associated private placements, $171.7 million of cash
was placed in the Trust Account and approximately $2.8 million of cash was held
outside of the Trust Account and is to be used for the Company's payment of
offering costs and working capital purposes.
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
ordinary 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 target
business or businesses, make other acquisitions and pursue our growth
strategies.
We do not believe we will need to raise additional funds following the IPO in
order to meet the expenditures required for operating our business. However, if
our estimates 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 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.
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In order to fund working capital deficiencies or finance transaction costs in
connection with an intended Business Combination, our Sponsor or an affiliate of
our Sponsor or certain of our directors and officers may, but are not obligated
to, loan us funds as may be required. If we complete our Business Combination,
we may repay such loaned amounts out of the proceeds of the Trust Account
released to us. Otherwise, such loans may be repaid only out of funds held
outside the Trust Account. In the event that our 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 to repay such loaned amounts. 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
issued to our Sponsor. The terms of such loans, if any, have not been determined
and no written agreements exist with respect to such loans. We do not expect to
seek loans from parties other than our Sponsor or an affiliate of our Sponsor as
we do not believe third parties will be willing to loan such funds and provide a
waiver against any and all rights to seek access to funds in our Trust Account.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. 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. There have been no significant changes in our
critical accounting policies as discussed in the Form 8-K and the final
prospectus filed by us with the SEC on October 25, 2021 and October 18, 2021,
respectively.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-06,
Debt - debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging - Contracts in Entity' Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity' 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 the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. We adopted ASU 2020-06 on June 29, 2021
(inception) using a modified retrospective method for transition. Adoption of
the ASU did not impact the Company's 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 condensed financial statements.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of September 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations. No unaudited quarterly operating data is included in
this prospectus as we have conducted no operations to date.
Registration Rights Agreement
Pursuant to a registration rights agreement entered into on October 14, 2021,
the holders of the Founder Shares and the Private Placement Warrants and its
underlying securities are entitled to certain registration rights. The Company
will bear the expenses incurred in connection with the filing of any
registration statements pursuant to such registration rights.
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Underwriting Agreement
Pursuant to the underwriting agreement, the underwriters received cash
underwriting discounts totaling $3.4 million following the consummation of the
IPO and the exercise of the over-allotment option.
Additionally, the underwriters will be entitled to a deferred underwriting
discount of 3.5% of the gross proceeds of the IPO and exercise of the
over-allotment option, or $5,950,000, upon the completion of the Company's
Business Combination subject to the terms of the underwriting agreement.
JOBS Act
The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We will qualify as an
"emerging growth company" under the JOBS Act and, as such, we will be allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We are electing to delay the
adoption of new or revised accounting standards, and as a result, we will not be
required to comply with new or revised accounting standards on the relevant
dates on which adoption of such standards is required for non-emerging growth
companies. As a result, our financial statements may not be comparable to
companies that comply with new or revised accounting pronouncements as of public
company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we will not be required to, among
other things: (1) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act; (2) provide all of the compensation disclosure that may be
required of non-emerging growth public companies under the Dodd-Frank Wall
Street Reform and Consumer Protection Act; (3) comply with any requirement that
may be adopted by the PCAOB regarding mandatory audit firm rotation or a
supplement to the auditor's report providing additional information about the
audit and the financial statements (auditor discussion and analysis); and (4)
disclose certain executive compensation-related items such as the correlation
between executive compensation and performance and comparisons of the CEO's
compensation to median employee compensation. These exemptions will apply for a
period of five years following the completion of the IPO or until we are no
longer an "emerging growth company," whichever is earlier.
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