References in this report (the "Annual Report") to "we," "us" or the "Company"
refer to RF Acquisition Corp. References to our "management" or our "Management
Team" refer to our officers and directors, and references to the "Sponsor" refer
to RF Dynamic LLC. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the audited financial statements and the notes thereto contained elsewhere in
this Annual 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 January 11, 2021 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses. We intend to effectuate our Business
Combination using cash from the proceeds of our Initial Public Offering and the
private placement warrants, the proceeds of the sale of equity or equity-linked
securities or through loans, advances or other indebtedness in connection with
our Business Combination, shares issued to the owners of the target, debt issued
to banks or other lenders or the owners of the target, or a combination of the
foregoing.
We expect to continue to incur significant costs in the pursuit of a Business
Combination. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
Our only activities from January 11, 2021 (inception) through December 31, 2022,
were those related to our formation, the preparation for our Initial Public
Offering and, since the closing of the Initial Public Offering, the search for a
prospective Business Combination. We have neither engaged in any operations nor
generated any operating revenues to date. We will not generate any operating
revenues until after completion of our Business Combination, at the earliest. We
incurred expenses as a result of being a public company (including for legal,
financial reporting, accounting and auditing compliance), as well as for
expenses in connection with searching for a prospective Business Combination.
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For the twelve months ended December 31, 2022, we had a net income of $284,725,
which is comprised of $858,479 of formation and operating expenses, $1,646,459
interest income, $303,890 in income tax expenses and $199,365 in franchise tax
expenses. For the period from January 11, 2021 (inception) through December 31,
2021, we had a net loss of $31,782, which is comprised of formation and
operating expenses of $659 and franchise tax expenses of $31,123.
Liquidity and Going Concern
On March 28, 2022, the Company consummated the Initial Public Offering of
10,000,000 units, generating gross proceeds of $100,000,000. Simultaneously with
the closing of the IPO, pursuant to the Private Placement Warrants Purchase
Agreements, the Company completed the private sale of 4,050,000 Private
Placement Warrants to the Sponsor at a purchase price of $1.00 per Private
Placement Warrant, and 500,000 warrants to EBC, generating gross proceeds to the
Company of $4,550,000.
On March 30, 2022, the Underwriters fully exercised the over-allotment option
and purchased an additional 1,500,000 Units, generating an aggregate of gross
proceeds of $15,000,000. Simultaneously with the closing of the exercise of the
over-allotment option, the Company completed the private sale of an aggregate of
(i) 400,500 Private Placement Warrants to the Company's Sponsor, at a purchase
price of $1.00 per Private Placement Warrant, generating gross proceeds of
$400,500, and (ii) 49,500 Private Placement Warrants to EBC, at a purchase price
of $1.00 per Private Placement Warrant, generating gross proceeds of $49,500.
Following the closing of the Initial Public Offering on March 28, 2022 and the
exercise of the over-allotment option on March 30, 2022, an amount of
$116,150,000 from the net proceeds was placed in the Trust Account. Transaction
costs amounted to $3,803,330 consisting of $2,300,000 of underwriting fees, and
$1,503,330 of other costs.
As of December 31, 2022 and December 31, 2021, we had $117,724,476 and $0
investments held in the Trust Account, respectively. We intend to use
substantially all of the funds held in the Trust Account 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.
As of December 31, 2022 and December 31, 2021, we had cash of $19,759 and $0
held outside of the Trust Account, respectively and had a working capital
deficit of $791,577. We intend to use the funds held outside of the Trust
Account primarily to identify and evaluate target businesses, perform business
due diligence on prospective target businesses, travel to and from the offices,
properties, or similar locations of prospective target businesses or their
representative or owners, review corporate documents and material agreements of
prospective target businesses, and structure, negotiate and complete a Business
Combination. On March 22, 2023, the stockholders of record were provided the
opportunity to exercise their redemption rights in connection with a Special
Meeting. A total of 7,391,973 shares of Class A common stock were redeemed and
$76,054,240 in redemption payments made in connection with the Special Meeting,
leaving a total of 4,108,027 shares of Class A common stock outstanding and
$42,266,506 in the Trust Account after redemptions.
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 Working Capital
Loans. If the Company completes a Business Combination, the Company would repay
such loaned amounts. If a Business Combination does not close, the Company may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from its Trust Account would be used for
such repayment.
In connection with the Company's assessment of going concern considerations in
accordance with the authoritative guidance in Financial Accounting Standard
Board ("FASB") Accounting Standards Update ("ASU") 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern." The
Company has until December 28, 2023, to consummate a Business Combination. It is
uncertain that the Company will be able to consummate a Business Combination by
the specified period. If a Business Combination is not consummated by the
Revised Extension Deadline, and the Company decides not to further extend the
period of time to consummate a Business Combination, there will be a mandatory
liquidation and subsequent dissolution. The liquidity condition and date for
mandatory liquidation and subsequent dissolution raise substantial doubt about
the Company's ability to continue as a going concern one year from the date that
these financial statements are issued. 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.
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Related Party Transactions
Founder Shares
On January 21, 2021, the Company issued an aggregate of 2,875,000 Founder Shares
to the Sponsor in exchange for cash of $25,000. The Founder Shares include an
aggregate of up to 375,000 shares subject to forfeiture by the Sponsor to the
extent that the Underwriter's overallotment is not exercised in full or in part,
so that the Sponsor will own, on an as-converted basis, 20% of the Company's
issued and outstanding shares after the Initial Public Offering.
As a result of the Underwriter's election to exercise their over-allotment
option on March 30, 2022, 375,000 Founder Shares are no longer subject to
forfeiture.
The Sponsor has agreed not to, except to permitted transferees, transfer, assign
or sell any of its Founder Shares until the earlier to occur of: (A) one year
after the completion of a Business Combination or (B) the date on which the
Company completes a liquidation, merger, capital stock exchange or similar
transaction that results in all of the Company's stockholders having the right
to exchange their shares of common stock for cash, securities or other property.
Notwithstanding the foregoing, if the last sale price of the Company's Class A
Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits,
stock dividends, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing at least 120 days after
the Business Combination, the Founder Shares will be released from the lock-up.
Related Party Loans
The Sponsor agreed to loan the Company an aggregate of up to $300,000 in the
aggregate, to cover expenses related to the Initial Public Offering pursuant to
a promissory note (the "Note"). The Note is non-interest bearing and is payable
on the earlier of (i) September 30, 2022 or (ii) the closing of the Initial
Public Offering. As of December 31, 2022, the Company has not drawn down on the
promissory note.
On March 13, 2023, Melvin Xeng Thou Ong agreed to loan the Sponsor an aggregate
of up to $600,000 to be used for (i) extension payments in connection with the
business combination, and (ii) working capital requirements (the "Director
Promissory Note"). The Director Promissory Note bears no interest and matures on
the earlier of: (i) December 28, 2023, or (ii) the date that the Company
consummates an initial business combination. As of the date of this Annual
Report, the Company has drawn down $220,000 on the Director Promissory Note.
On March 24, 2023, the Company and Sponsor entered into a promissory pursuant to
which the Sponsor agreed to loan the Company the principal sum of $900,000 to
cover the extension payments in connection with the Revised Extension Deadline
(the "Extension Promissory Note"). The promissory note was non-interest bearing
and is payable on the earlier of (1) December 28, 2023, or (ii) the consummation
of the Business Combination. As of the date of this Annual Report, the Company
had drawn down on $300,000 of the promissory note.
In addition, in order to finance transaction costs in connection with a Business
Combination, the Company's Sponsor or an affiliate of the Sponsor or certain of
the Company's officers and directors may, but are not obligated to, provide the
Company Working Capital Loans. As of December 31, 2022, the total amount due to
Sponsor was $476,179, which was issued to cover working capital expenses.
Subsequent to year end the Sponsor provided an additional $360,760 under the
Working Capital Loan to cover working capital expenses.
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 Working Capital
Loans. If the Company completes a Business Combination, the Company would repay
such loaned amounts. If a Business Combination does not close, the Company may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from its Trust Account would be used for
such repayment.
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Contractual Obligations
Administrative Services Agreement
Commencing on the date of the Initial Public Offering and until completion of
the Company's Business Combination or liquidation, the Company will make a
payment of a monthly fee of $10,000 to the Sponsor for office space, utilities
and secretarial and administrative support provided to the Company. Upon
completion of the Business Combination or the Company's liquidation, the Company
will cease paying these monthly fees. Given the timing of the Company's Initial
Public Offering, $90,000 has been recognized in connection with such services
for the nine months ended December 31, 2022.
Registration and Stockholder Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of the Working Capital Loans (and in each
case holders of their component securities, as applicable) will be entitled to
registration rights pursuant to a registration rights agreement to be signed
prior to or on the effective date of the Initial Public Offering, requiring the
Company to register such securities for resale (in the case of the Founder
Shares, only after conversion to our Class A Common Stock). The holders of the
majority of these securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities. In addition, the
holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the consummation of a Business
Combination and rights to require the Company to register for resale such
securities pursuant to Rule 415 under the Securities Act. The Company will bear
the expenses incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
The Underwriters were paid a cash underwriting discount of 2.00% of the gross
proceeds of the Initial Public Offering, or $2,300,000. On March 30, 2022, the
Underwriters fully exercised the over-allotment option and purchased an
additional 1,500,000 Over-Allotment Units, generating an aggregate of gross
proceeds of $15,000,000.
Business Combination Marketing Agreement
On March 23, 2022, the Company engaged EBC as an advisor in connection with a
Business Combination to assist the Company in holding meetings with its
stockholders to discuss the potential Business Combination and the target
business' attributes, introduce the Company to potential investors that are
interested in purchasing the Company's securities in connection with a Business
Combination, assist the Company with its press releases and public filings in
connection with the Business Combination. The Company will pay EBC a cash fee
for such services upon the consummation of a Business Combination in an amount
equal to 3.5% of the gross proceeds of Initial Public Offering.
Additionally, the Company will pay EBC a cash fee equal to 1.0% of the total
consideration payable in the proposed Business Combination if it introduces the
Company to the target business with which the Company completes a Business
Combination; provided that the foregoing fee will not be paid prior to the date
that is 90 days from the effective date of the Initial Public Offering, unless
the FINRA determines that such payment would not be deemed Underwriters'
compensation in connection with the Initial Public Offering pursuant to FINRA
Rule 5110.
EBC Founder Shares
On April 12, 2021 the Company issued to EBC and or designees an aggregate of
200,000 shares of Class A Common Stock at a price of $0.0001 per share for a
total consideration of $20. The Company accounts for the fair value of the EBC
Founder shares over consideration paid as offering cost of the Initial Public
Offering, with a corresponding credit to stockholder's equity.
The Company estimated the fair value of the EBC Founder Shares to be $519,415
and is recorded as an offering cost with a corresponding increase in
stockholder's equity. The Company established the initial fair value of the EBC
Founder Shares on April 12, 2021, using a probability weighted model for the EBC
Founder Shares. The EBC Founder Shares are classified as Level 3 at the
measurement date due to the use of unobservable inputs including the probability
of a Business Combination, the probability of the Initial Public Offering, and
other risk factors.
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EBC (and/or its designees) has agreed not to transfer, assign or sell any such
shares without the Company's prior written consent until the completion of the
Business Combination. In addition, EBC (and/or its designees) has agreed (i) to
waive its redemption rights with respect to such shares in connection with the
completion of the Business Combination and (ii) to waive its rights to
liquidating distributions from the Trust Account with respect to such shares if
the Company fails to complete the Business Combination within the Combination
Period.
The shares have been deemed compensation by FINRA and are therefore subject to a
lock-up for a period of 180 days immediately following the date of the
effectiveness of the Registration Statement pursuant to FINRA Rule 5110(g)(1).
Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of
any hedging, short sale, derivative, put or call transaction that would result
in the economic disposition of the securities by any person for a period of 180
days immediately following the effective date of the Registration Statement, nor
may they be sold, transferred, assigned, pledged or hypothecated for a period of
180 days immediately following the effective date of the Registration Statement
except to any Underwriter and selected dealer that participated in our Initial
Public Offering and their bona fide officers or partners.
Critical Accounting Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of our 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.
Recently Issued Accounting Standards
In August 2020, 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) ("ASU 2020-06") to simplify accounting for certain
financial instruments. ASU 2020-06 eliminates the current models that require
separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years, with early adoption
permitted. The Company is currently evaluating the impact this guidance will
have on its financial statements.
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.
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