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 our financial condition and results of operations should be read in conjunction with our audited
financial statements and the notes related thereto which are included in Item 8. Financial Statements and Supplementary Data of this
Annual Report on Form 10-K. 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 Annual
Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
Special
Note Regarding Forward-Looking Statements
This
Annual Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended
(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected
and projected. All statements, other than statements of historical fact included in this Quarterly Report, including, without limitation,
statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding
the search for an initial business combination, the Company’s financial position, business strategy and the plans and objectives
of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,”
“intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify
such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s
current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the forward-looking statements. The Company’s filings with the
SEC can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
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Overview
We are a blank check company incorporated on July 12, 2021, as a Cayman
Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar
combination with one or more businesses or assets, which we refer to throughout this Annual Report on Form 10-K as our initial business
combination. To date, our efforts have been limited to organizational activities and activities related to the search for a target business
for our initial business combination. We have generated no revenues to date, and we do not expect that we will generate operating revenues
at the earliest until we consummate our initial business combination. Since our IPO, we have completed a detailed assessment of SparkLabs
Group ecosystem companies, and have finalized initial targets to prioritize. We are currently having substantive discussions with multiple
prioritized targets and are working to having non-binding letters of intent signed with all prioritized targets, with the goal of executing
a binding business combination agreement with a final target as efficiently as practicable.
We
intend to utilize cash derived from the proceeds of our initial public offering (the “IPO”) and the private placement of
Private Units, our securities, debt or a combination of cash, securities and debt, in effecting our initial business combination.
We
expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete
an initial business combination will be successful.
Results
of Operations
We
have neither engaged in any operations nor generated any operating revenues to date. Our only activities through December 31, 2023 were
organizational activities and those necessary to prepare for our IPO, which is described below, and subsequent to the IPO, identifying
a target company for an initial business combination. 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 investments held in the trust account after the IPO. 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, our initial business combination.
For
the year ended December 31, 2023, we had a net loss of $730,903, which consists of formation and operating costs of $657,494 and administration
fees – related party of $1,250,920 partially offset by the interest earned on investments held in the Trust Account of $1,177,510
and operating account interest income of $1.
59
Liquidity,
Capital Resources and Going Concern
On
October 11, 2023, we consummated our IPO of 10,000,000 Units. Each Unit consists of one Class A ordinary share, par value $0.0001 and
one-half of one redeemable Public Warrant, with each Public Warrant entitling the holder thereof
to purchase one Class A ordinary share for $11.50 per share, subject to adjustment, beginning 30 days after the completion of the
Company’s initial business combination . We granted Cantor Fitzgerald & Co., as
representative of the underwriters (“Cantor”) , a 45-day option to purchase up to 1,500,000 additional Units to cover
over-allotments. Subsequently, On October 10, 2023, Cantor informed the Company that it will not
be exercising the over-allotment option. As a result, the Sponsor forfeited an aggregate of 448,052 Class B ordinary shares. Such forfeited
shares were cancelled by the Company prior to the consummation of the IPO.
Simultaneously
with the closing of the IPO, we consummated the Private Placement with our Sponsor, who purchased 8,490,535 Private Warrants, generating
total proceeds of $8,490,535. The terms of the Private Warrants are identical to the Public Warrants ,
except that, for so long as the Private Warrants are held by the Sponsor or their permitted transferees, the Private Warrants (i) may
not (including the Class A ordinary shares issuable upon exercise of the Private Warrants), subject to certain limited exceptions, be
transferred, assigned or sold until 30 days after the completion of the Company’s initial business combination, and (ii) are entitled
to registration rights. The Private Warrants will be worthless if the Company does not complete an initial business combination.
A
total of $100,500,000 ($10.05 per Unit, which amount includes $3,500,000 of the underwriters’ deferred discount) of the net proceeds
from the sale of Units in the IPO and the Private Placements on October 11, 2023 was placed in a trust account maintained for the benefit
of the public shareholders at Continental Stock Transfer & Trust Company, as a trustee and was invested only in U.S. government treasury
bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company
Act of 1940, as amended, and that invest only in direct U.S. government treasury obligations. Except with respect to interest earned
on the funds held in the trust account that may be released to the Company to pay its taxes and up to $100,000 of interest to pay dissolution
expenses, the funds held in the trust account will not be released from the trust account until the earliest of (i) the completion of
the Company’s initial business combination, (ii) the redemption of the Class A ordinary shares included in the Units sold in the
IPO if we are unable to complete our initial business combination by July 11, 2025, subject to applicable law or (iii) the redemption
of any of the public shares properly submitted in connection with a shareholder vote to amend the Company’s amended and restated
memorandum and articles of association (A) to modify the substance or timing of our obligation to allow redemption in connection with
its initial business combination or to redeem 100% of its public shares if it has not consummated an initial business combination by
July 11, 2025 or (B) with respect to any other material provisions relating to shareholders’ rights or pre-initial business combination
activity.
As
of December 31, 2023, we had $1,404,174 of cash held outside its trust account and working capital of $1,152,039.
Subsequent
to the consummation of the IPO, our liquidity has been satisfied through the net proceeds from the consummation of the IPO and the Private
Placement held outside of our trust account. 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 our officers and directors may, but are not obligated to, provide us working
capital loans.
In connection
with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board’s (“FASB”)
Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements—Going Concern, the Company
may not have sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these financial
statements. Management has determined that the liquidity condition raises substantial doubt about the Company’s ability to continue
as a going concern for the next twelve months from the issuance of these financial statements. No adjustments have been made to the carrying
amounts of assets or liabilities. The Company’s Sponsor, officers and directors 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.
Off-Balance
Sheet Arrangements
As
of December 31, 2023, we had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements. 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.
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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 aggregate of $77,500 per month to our management team for their services. We began incurring these fees on May 1,
2021, and will continue to incur these fees monthly until the earlier of the completion of our initial business combination and
our liquidation.
The
underwriters are entitled to a deferred underwriting commission of 3.5% per unit or $3,500,000 in the aggregate of the gross proceeds
of the Initial Public Offering held in the Trust Account upon the completion of our initial business combination subject to the terms
of the underwriting commission.
Critical
Accounting Estimates
The
preparation of financial statements and related disclosures in conformity with U.S. 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 period reported. Actual results could materially differ from those estimates. As of December
31, 2023, we did not have any critical accounting estimates to be made.
Critical
Accounting Policies
Class A
Ordinary Shares Subject to Possible Redemption
We
account for our Class A ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification
(“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption
is classified as a liability instrument and measured at fair value. Conditionally redeemable Class A ordinary shares (including Class
A ordinary shares that features redemption rights that are 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, Class A ordinary
shares is classified as shareholders’ equity. Our Class A ordinary shares features 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 at redemption value as temporary equity, outside of the shareholders’ equity section of our balance sheets.
We made a policy election in accordance with ASC 480-10-S99-3A and recognizes changes in redemption value in accumulated deficit over
an expected 9-month period leading up to our initial business combination.
Warrants
We
account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific
terms and applicable authoritative guidance in Financial Accounting Standards Board Topic 480, Distinguishing Liabilities from Equity
(“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are
freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants
meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own ordinary
shares and whether the warrant 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 warrants are outstanding. Consequently,
we account for warrants as equity-classified instruments.
For
issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component
of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification,
the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.
Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.
61
Net
Income (Loss) Per Share
We
comply with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. In order to determine the net income (loss) attributable
to both the redeemable shares and non-redeemable shares, we first considered the undistributed income (loss) allocable to both the redeemable
shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less any dividends paid.
We then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable
and non-redeemable shares. Any re-measurement of the accretion to redemption value of the common shares subject to possible redemption
was considered to be dividends paid to the public shareholders.
Offering
Costs
Offering
costs were consisting principally of underwriting, legal, accounting and other expenses incurred through the balance sheet date that
are related to the IPO and were charged to shareholders’ equity upon the completion of the IPO. The Company allocates offering
costs between public shares, public warrants and public rights based on the relative fair values of public shares, public warrants and
public rights.
Recent
Accounting Pronouncements
In
August 2020, FASB issued Accounting Standards Update (“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
January 1, 2024 for the Company and should be applied on a full or modified retrospective basis, with early adoption permitted beginning
on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results
of operations or cash flows.
In December 2023, the FASB issued ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s
effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness
of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently assessing
what impact, if any, that ASU 2023-09 would have on its financial position, results of operations or cash flows.
Management
does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company’s financial statement.
Recently Adopted Accounting Standards
On January 1, 2023, the Company adopted ASU 2016-13, “Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This guidance was issued
to provide financial statement users with more useful information about the expected credit losses on financial instruments and other
commitments to extend credit held by a reporting entity at each reporting date. Specifically, this guidance requires entities to utilize
a new “expected loss” model as it relates to financial instruments and receivables. The adoption of ASU 2016-13 did not have
any impact to the Company’s financial position, results of operations or cash flows.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk
As
a smaller reporting company, we are not required to make disclosures under this Item.
Item
8. Financial Statements and Supplementary Data
This
information appears following Item 15 of this report and is included herein by reference.
Item
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
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