The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited financial
statements and the notes thereto which are included in "Item 8. Financial
Statements and Supplementary Data" of this Report. Certain information contained
in the discussion and analysis set forth below includes forward-looking
statements. Our actual
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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 Report.
Overview
We are a blank check company incorporated on February 9, 2021 as a Cayman
Islands corporation and formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar Business
Combination with one or more businesses or entities that have not yet selected.
While we may pursue an acquisition opportunity in any business, industry,
sector, or geographical location, we intend to focus on industries that
complement our management's background and to capitalize on the ability of our
management team to identify and acquire a business. We may pursue a transaction
in which our shareholders immediately, prior to completion of our initial
Business Combination, would collectively own a minority interest in the
post-Business Combination company. We intend to effectuate our initial Business
Combination using cash from the proceeds of our initial public offering (the
"IPO") 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.
Results of Operations
As of December 31, 2022, the Company had not commenced any operations. From
February 9, 2021 (inception) until the Company's initial public offering on
February 23, 2022, the Company's entire activity was in preparation for an
initial public offering, and following the Company's IPO through December 31,
2022, the Company's entire activity has been limited to the search for a
prospective initial business combination. We will not generate any operating
revenues until after completion of our initial Business Combination at the
earliest. 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.
For the year ended December 31, 2022, we had a net income of $3,340,238, which
consisted of interest income of $4,316,583, offset by operating expenses of
$976,345.
For the period from February 9, 2021 (inception) through December 31, 2021, we
had a net loss of $25,475, which consisted of formation expenses.
Liquidity and Capital Resources
Until the consummation of the IPO, our only source of liquidity was an initial
purchase of Founder Shares by our Sponsor and loans from our Sponsor.
On February 23, 2022, the Company consummated the IPO of 25,000,000 units
("Units") with respect to the ordinary shares included in the Units being
offered (the "Public Shares") at $10.00 per Unit generating gross proceeds of
$250,000,000. Simultaneously with the closing of the IPO, the Company
consummated the sale of 9,138,333 private placement warrants ("Private Placement
Warrants") at a price of $1.50 per Private Placement Warrant in a private
placement to the Company's sponsor, PowerUp Sponsor LLC (the "Sponsor")
generating gross proceeds of $13,707,500. Simultaneously with the closing of the
IPO, the Company consummated the closing of the sale of 3,750,000 additional
Units upon receiving notice of the underwriter's election to fully exercise its
overallotment option (the "Overallotment Units"), generating additional gross
proceeds of $37,500,000. Simultaneously with the exercise of the overallotment,
the Company consummated the private placement of an additional 625,000 Private
Placement Warrants to the Sponsor, generating gross proceeds of $937,500.
For the year ended December 31, 2022, net cash used in operating activities was
$1,408,786, net cash used in investing activities was $294,687,500 and net cash
provided by financing activities was $296,593,545 mainly reflecting the proceeds
of the IPO and subsequent deposit into the Trust Account.
For the period from February 9, 2021 (inception) through December 31, 2021, net
cash used in operating activities was $238,596 and net cash provided by
financing activities was $238,596 mainly reflecting proceeds from the notes
payable- related party.
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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 and deferred underwriting commissions), to complete our initial
Business Combination. We may withdraw interest income (if any) to pay taxes, if
any. Our annual tax obligations will depend on the amount of interest and other
income earned on the amounts held in the Trust Account. We expect the interest
income earned on the amount in the Trust Account (if any) will be sufficient to
pay our taxes. To the extent that our equity or debt is used, in whole or in
part, as consideration to complete our initial 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 December 31, 2022, the Company had $497,259 in its operating bank
accounts, $299,004,083 in securities held in the Trust Account to be used for a
Business Combination or to repurchase or redeem its Ordinary Shares in
connection therewith and working capital surplus of $797,229. As of December 31,
2022, $4,316,583 of the amount in the Trust Account is represented as Interest
earned on investments held in Trust Account.
The Company has until May 23, 2023 to consummate an initial business
combination. However, if the Company anticipates that they may not be able to
consummate their initial business combination within 15 months from the closing
of the IPO, their shareholders may vote by special resolution to amend their
amended and restated memorandum and articles of association to extend the period
of time that the Company have to consummate the initial business combination
(any such extended period of time, an "Extension Period").
Until the consummation of a Business Combination, the Company will be using the
funds not held in the Trust Account for identifying and evaluating prospective
acquisition candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
acquire, and structuring, negotiating and consummating the Business Combination.
The Company may need to raise additional capital through loans or additional
investments from its Sponsor, shareholders, officers, directors, or third
parties. The Company's officers, directors and Sponsor may, but are not
obligated to, loan the Company funds, from time to time or at any time, in
whatever amount they deem reasonable in their sole discretion, to meet the
Company's working capital needs. Accordingly, the Company may not be able to
obtain additional financing. Unless the shareholders vote for the extension, the
remaining life of the Company as of December 31, 2022 is under 12 months.
Management is currently assessing the need for the extension vote in the future.
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 for a reasonable period of
time, which is considered to be one year from the issuance date of the financial
statements. These 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.
Related Party Transactions
Founder Shares
On February 16, 2021, the Sponsor purchased 8,625,000 shares of the Company's
Class B ordinary shares, par value $0.0001 ("Class B ordinary shares") for an
aggregate price of $25,000, and on December 18, 2021, the Sponsor surrendered
2,156,250 Class B ordinary shares, so that the Sponsor owns an aggregate of
6,468,750 Class B ordinary shares. On February 11, 2022, the Company effected a
1.11111111-for-1.0 share dividend of our Class B ordinary shares, so that the
Sponsor owns an aggregate of 7,187,500 founder shares) (the "Founder Shares").
As of February 11, 2022 Class B ordinary shares were effected with 1.11111111
for 1.0 share dividend which comes to an aggregate of 7,187,500 shares. The
share dividend was retroactively restated. Since the underwriters' exercised
their overallotment option in full upon IPO, none of the Founder Shares were
forfeited.
The Founder Shares will automatically convert into Class A ordinary shares at
the time of the Company's initial Business Combination and are subject to
certain transfer restrictions, as described below. Holders of Founder Shares may
also elect to convert their Class B ordinary shares into an equal number of
Class A ordinary shares, subject to adjustment, at any time.
The Initial Shareholders have agreed, subject to limited exceptions, not to
transfer, assign or sell any of their Founder Shares until the earlier to occur
of: (A) one year after the completion of the initial Business Combination or
(B) subsequent to the initial Business Combination, (x) if the last sale price
of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted
for share splits,
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share dividends, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing at least 150 days after
the initial Business Combination, or (y) the date on which the Company completes
a liquidation, merger, capital share exchange or other similar transaction that
results in all of the Company's shareholders having the right to exchange their
Class A ordinary shares for cash, securities or other property
Private Placement
On February 23, 2022, simultaneously with the consummation of the IPO and the
underwriters' exercise of their over-allotment option in full, the Company
consummated the issuance and sale of 9,763,333 Private Placement Warrants in a
private placement transaction at a price of $1.50 per Placement Warrant,
generating gross proceeds of $14,645,000. Each whole Private Placement Warrant
is exercisable for one whole Class A ordinary share at a price of $11.50 per
share. A portion of the proceeds from the Private Placement Warrants was added
to the proceeds from the IPO to be held in the Trust Account. If the Company
does not complete a Business Combination within the Combination Period, the
Private Placement Warrants will expire worthless. The Private Placement Warrants
will be non-redeemable and exercisable on a cashless basis
Related Party Loans
On February 16, 2021, the Sponsor agreed to loan the Company an aggregate of up
to $300,000 to cover expenses related to the IPO pursuant to a promissory note
(the "Note"). This loan was non-interest bearing and payable on the earlier of
September 30, 2022 or the completion of the IPO. As of December 31, 2021 the
amount outstanding was $238,596. The Note was subsequently paid off in
January 2022 after the IPO.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Sponsor or an affiliate of the Sponsor, or certain of the
Company's officers and directors may, but are not obligated to, loan the Company
funds as may be required ("Working Capital Loans"). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of
the proceeds of the Trust Account released to the Company. Otherwise, the
Working Capital Loans would be repaid only out of funds held outside the Trust
Account. In the event that a Business Combination does not close, the Company
may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans but no proceeds held in the Trust Account would be used to
repay the Working Capital Loans. Except for the foregoing, the terms of such
Working Capital Loans, if any, have not been determined and no written
agreements exist with respect to such loans. The Working Capital Loans would
either be repaid upon consummation of a Business Combination, without interest,
or, at the lender's discretion, up to $1.5 million of such Working Capital Loans
may be convertible into warrants of the post Business Combination entity at a
price of $1.50 per warrant. The warrants would be identical to the Private
Placement Warrants. As of December 31, 2022 and 2021, no Working Capital Loans
were outstanding.
Administrative Services Fee
We agreed, commencing on the effective date of the IPO through the earlier of
our consummation of a Business Combination or our liquidation, to pay an
affiliate of the Sponsor a monthly fee of $10,000 for office space, secretarial
and administrative services. As of December 31, 2022, and 2021, we incurred
$100,000 and $0, respectively, in fees for these services.
Deferred Underwriting Fees
The underwriters were paid a cash underwriting discount of $0.20 per unit, or
$5,000,000 in the aggregate at the closing of the IPO. The underwriters have
agreed to defer the cash underwriting discount of $0.20 per share related to the
over-allotment to be paid at Business Combination ($750,000 in the aggregate).
In addition, the underwriters are entitled to a deferred underwriting
commissions of $0.35 per unit, or $10,062,500 from the closing of the IPO. The
total deferred fee is $10,812,500 consisting of the $10,062,500 deferred portion
and the $750,000 cash discount agreed to be deferred until Business Combination.
The deferred fee will become payable to the underwriters from the amounts held
in the Trust Account solely if the Company completes a Business Combination,
subject to the terms of the underwriting agreement.
Due to affiliate
As of December 31, 2022, the amount of $122,689 has been accrued and shown as
`Due to affiliate' in the accompanying balance sheet for the administrative
services fees described above and a residual balance due from IPO proceeds. The
amount is non-interest bearing and due on demand and will be repaid as soon as
practical from the Company's operating account.
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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. We do not participate in
transactions that create relationships with 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.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
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 identified the following critical accounting policies:
Warrant Instruments
The Company accounts for warrants as either equity-classified or
liability-classified instruments based on an assessment of the instruments'
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 instruments are
freestanding financial instruments pursuant to ASC 480, meet the definition of a
liability pursuant to ASC 480, and whether the instruments meet all of the
requirements for equity classification under ASC 815, including whether the
instruments are indexed to the Company's own ordinary shares and whether the
instrument 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 instruments are outstanding. The Company
determined, upon further review of the warrant agreement, that the Public
Warrants and Private Placement Warrants issued pursuant to the warrant agreement
qualify for equity accounting treatment.
Ordinary shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." 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 ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, ordinary shares
subject to possible redemption is presented as temporary equity, outside of the
shareholders' deficit section of our balance sheets.
Net Income (loss) Per Share of Ordinary shares
We apply the two-class method in calculating earnings per share. Net income
(loss) per share of the redeemable shares, basic and diluted is calculated by
dividing the interest income earned on the Trust Account by the weighted average
number of shares of redeemable ordinary shares outstanding since original
issuance. Net income (loss) per share of ordinary shares, basic and diluted, for
non-redeemable ordinary shares is calculated by dividing the net income (loss),
less income attributable to shares of redeemable ordinary shares, by the
weighted average number of shares of non-redeemable ordinary shares outstanding
for the periods presented.
Recently Adopted Accounting Standards
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company's financial statements.
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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 an
affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities
and secretarial, and administrative support services provided to the Company. We
began incurring these fees on February 23, 2022 and will continue to incur these
fees monthly until the earlier of the completion of a Business Combination and
the Company's liquidation.
The underwriters are entitled to a deferred fee of $10,812,500. 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.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. 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" and
under the JOBS Act 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 may not 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 such, our financial statements may not be
comparable to companies that comply with 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 may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404 of the
Sarbanes-Oxley Act, (ii) 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, (iii) 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
(iv) disclose certain executive compensation related items such as the
correlation between executive compensation and performance and comparisons of
executive 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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