Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 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.
25
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 transaction (“Business Combination”)
with one or more businesses or entities. While we may pursue an acquisition opportunity in any business, industry, sector, or geographical
location, we have focused, and 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 combined 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, 2023, 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, 2023, 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 incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing
compliance), as well as expenses for due diligence efforts. Our operating expenses consist of general and administrative expenses necessary
to operate and maintain the Company as we pursue one or more Business Combinations.
For
the year ended December 31, 2023, we had a net income of $4,464,079, which consisted of operating expenses of $1,340,168 and interest expense on debt discount of $8,966, offset by
interest income of $5,813,213.
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.
Liquidity
and Capital Resources
Until
the consummation of the IPO, our only source of liquidity was an initial purchase of Founder Shares by the Original Sponsor and loans
from the Original 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 Original 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 Original Sponsor, generating gross proceeds of $937,500.
For
the year ended December 31, 2023, net cash used in operating activities was $653,107, net cash provided by investing activities was $284,916,127
and net cash used in financing activities was $284,760,279.
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.
26
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, 2023, the Company had $0 in its operating bank account, $19,901,169 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 deficit of $322,105.
As of December 31, 2023, $5,813,213 of the amount in the Trust Account is represented as interest earned on investments held in the Trust
Account.
The
Company has until May 23, 2024 to consummate an initial Business Combination. However, if the Company anticipates that it may not be
able to consummate an initial Business Combination prior to May 23, 2024, its shareholders may vote by special resolution to amend the
Company’s amended and restated memorandum and articles of association to extend the period of time that the Company has 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 New Sponsor, shareholders, officers, directors, or third parties. The
Company’s officers, directors and New 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 an additional extension, the remaining life
of the Company as of December 31, 2023 is under 12 months.
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 consolidated financial statements. 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.
Related
Party Transactions
Founder
Shares
On
February 16, 2021, the Original 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 Original Sponsor surrendered
2,156,250 Class B ordinary shares, so that the Original Sponsor owned 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 its Class B ordinary shares, so that the Original Sponsor owned
an aggregate of 7,187,500 Founder 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 are subject to certain transfer restrictions, as described below.
27
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,
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.
On
August 18, 2023, the New Sponsor purchased from the Original Sponsor (x) 4,317,500 Class A Ordinary Shares and (y) 6,834,333 private
placement warrants for an aggregate purchase price of $1.00, payable at the time of the initial Business Combination.
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 Private 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 are non-redeemable and exercisable
on a cashless basis.
Related
Party Loans
On
February 16, 2021, the Original 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. The Note was paid off in January 2022 after the IPO.
On
December 21, 2023 the Company entered into a Loan and Transfer Agreement between the Company, the Sponsor, and SSVK Associates, LLC (the
“Lender”), pursuant to which the Lender loaned an aggregate of $250,000 to the Sponsor, and, in turn, the Sponsor loaned
$250,000 to the Company. As of December 31, 2023 and December 31, 2022, there was $155,848 and $0 in borrowings under the agreement,
respectively. The debt discount is being amortized to interest expense as a non-cash
charge over the term of the loan and transfer liability, in which is generally the Company’s expected Business Combination date
at the time of each draw. During the year ended December 31, 2023, the Company recorded $8,966 of interest expense related to the amortization
of the debt discount. The remaining balance of the debt discount as of December 31, 2023 amounted to $143,464.
In
addition, in order to finance transaction costs in connection with a Business Combination, the New Sponsor or an affiliate of the New
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, 2023 and 2022, 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 Original Sponsor a monthly fee of $10,000 for office space, secretarial and administrative services. For the
year ended December 31, 2023 and 2022, the Company has incurred $120,000 and $100,000, respectively, of expenses under this arrangement.
28
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 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 were 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 was $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 was to 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.
On
June 28, 2023, the underwriters agreed to waive their entitlements to the deferred underwriting commissions of $10,812,500 pursuant to
the underwriting agreement for the IPO (the “Underwriting Agreement”). As a result, $10,812,500 was recorded to additional
paid-in capital in relation to the waiver of the deferred underwriting discount in the accompanying consolidated financial statements
(see Note 6 to the consolidated financial statements contained elsewhere in this Quarterly Report).
Due
to affiliate
As
of December 31, 2023 and 2022, $238,939 and $122,689, respectively, 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 due to New Sponsor and will be repaid as soon as practical from the Company’s operating account.
Off-Balance
Sheet Financing Arrangements
We
have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2023. 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 consolidated 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 consolidated 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.
29
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 per share of the Class A shares, basic and diluted is calculated
by dividing the interest income earned on the Trust Account by the weighted average number of shares of Class A ordinary shares outstanding
since original issuance. Net income per share of ordinary shares, basic and diluted, for Class B ordinary shares is calculated by dividing
the net income, less income attributable to shares of Class A ordinary shares, by the weighted average number of shares of Class B 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 consolidated financial statements.
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 Original 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 or the Company’s liquidation.
Critical
Accounting Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting periods.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates.
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 qualify as an “emerging growth company” and are 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 consolidated financial statements may
not be comparable to companies that comply with public company effective dates.
Subject
to certain conditions set forth in the JOBS Act, 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 consolidated 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 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.
30
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
As
a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide disclosure under this Item
7A.
Item
8. Financial Statements and Supplementary Data.
Reference
is made to pages F-1 through F-18 following Item 16, which comprise a portion of this Report.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.