UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2022
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the transition period from __________ to __________
Commission
File Number: 001-41243
KEYARCH
ACQUISITION CORPORATION
(Exact
name of registrant as specified in its charter)
Cayman
Islands |
|
98-1600074 |
(State
or other jurisdiction of
incorporation or organization) |
|
(I.R.S.
Employer
Identification Number) |
275
Madison Avenue, 39th Floor
New York, New York |
|
10016 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code: (914)
434-2030
Securities
registered pursuant to Section 12(b) of the
Act:
Title
of Each Class: |
|
Trading
Symbol(s) |
|
Name
of Each Exchange on Which
Registered: |
Units,
each consisting of one Class A
ordinary share, one-half of one
redeemable warrant and one right |
|
KYCHU |
|
The
Nasdaq Stock Market LLC |
Class
A ordinary shares, par value
$0.0001 per share |
|
KYCH |
|
The
Nasdaq Stock Market LLC |
Warrants,
each whole warrant
exercisable for one Class A ordinary
share at an exercise price of $11.50 per share |
|
KYCHW |
|
The
Nasdaq Stock Market LLC |
Rights
to receive one-tenth of one Class A Ordinary Share included as part
of the units |
|
KYCHR |
|
The
Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See definition of “large
accelerated filer,” “accelerated filer, “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
Emerging
growth company |
☒ |
|
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes ☒ No ☐
As of
November 8, 2022, there were 12,245,000 Class A ordinary
shares, par value $0.0001 per share, and
2,875,000 Class B ordinary shares, par value $0.0001 per
share, of the registrant issued and outstanding.
KEYARCH
ACQUISITION CORPORATION
FORM 10-Q
FOR
THE QUARTER ENDED JUNE 30, 2022
TABLE
OF CONTENTS
|
|
Page |
PART
1 – FINANCIAL INFORMATION |
1 |
|
|
|
Item
1. |
Condensed
Financial Statements |
1 |
|
|
|
|
Condensed Balance Sheets as of September 30, 2022 (unaudited) and
December 31, 2021 |
1 |
|
|
|
|
Unaudited Condensed Statement of Operations for the three and nine
months ended September 30, 2022 and for the period from April 23,
2021 (inception) through September 30, 2021 |
2 |
|
|
|
|
Unaudited
Condensed Statement of Changes in Shareholders’ Equity for the
three and nine months ended September 30, 2022 and for the period
from April 23, 2021 (inception) through September 30,
2021 |
3 |
|
|
|
|
Unaudited Condensed Statement of Cash Flows for the nine months
ended September 30, 2022 and for the period from April 23, 2021
(inception) through September 30, 2021 |
4 |
|
|
|
|
Notes to Unaudited Condensed Financial Statements |
5 |
|
|
|
Item
2. |
Management’s Discussion and Analysis of Financial Condition and
Results of Operations |
18 |
|
|
|
Item
3. |
Quantitative
and Qualitative Disclosures About Market Risk |
23 |
|
|
|
Item
4. |
Controls
and Procedures |
23 |
|
|
|
PART
II – OTHER INFORMATION |
24 |
|
|
|
Item
1. |
Legal
Proceedings |
24 |
|
|
|
Item
1A. |
Risk
Factors |
24 |
|
|
|
Item
2. |
Unregistered
Sales of Equity Securities and Use of Proceeds |
24 |
|
|
|
Item
3. |
Defaults
Upon Senior Securities |
24 |
|
|
|
Item
4. |
Mine
Safety Disclosures |
24 |
|
|
|
Item
5. |
Other
Information |
24 |
|
|
|
Item
6. |
Exhibits |
25 |
|
|
|
SIGNATURES |
26 |
PART I –
FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS.
KEYARCH
ACQUISITION CORPORATION
CONDENSED
BALANCE SHEETS
|
|
September 30, |
|
|
December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
(Audited) |
|
Assets: |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash |
|
$ |
255,200 |
|
|
|
9,168 |
|
Prepaid
expenses |
|
|
267,592 |
|
|
|
- |
|
Total
current assets |
|
|
522,792 |
|
|
|
9,168 |
|
|
|
|
|
|
|
|
|
|
Investments
held in Trust Account |
|
|
116,849,084 |
|
|
|
- |
|
Deferred
offering costs |
|
|
- |
|
|
|
933,978 |
|
Total
Assets |
|
$ |
117,371,876 |
|
|
|
943,146 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity: |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
214,109 |
|
|
|
394,126 |
|
Due
to affiliates |
|
|
10,000 |
|
|
|
383,852 |
|
Note
payable—related party |
|
|
— |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
Total
current liabilities |
|
|
224,109 |
|
|
|
927,978 |
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies |
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption, 11,500,000
and no shares at redemption value of $10.10 per share as of
September 30, 2022 and December 31, 2021,
respectively |
|
|
116,849,084 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Shareholders’
Equity: |
|
|
|
|
|
|
|
|
Preferred shares, $0.0001 par value; 1,000,000 shares authorized;
none issued and outstanding |
|
|
— |
|
|
|
— |
|
Class
A ordinary shares, $0.0001 par value; 180,000,000 shares
authorized; 745,000 and 200,000 shares issued and outstanding
(excluding 11,500,000 and no shares subject to possible redemption)
as of September 30, 2022 and December 31, 2021,
respectively |
|
|
75 |
|
|
|
20 |
|
Class
B ordinary shares, $0.0001 par value; 20,000,000 shares authorized;
2,875,000 shares issued and outstanding as of
September 30, 2022 and
December 31, 2021 |
|
|
287 |
|
|
|
287 |
|
Additional
paid-in capital |
|
|
986,124 |
|
|
|
26,493 |
|
Accumulated
deficit |
|
|
(687,803 |
) |
|
|
(11,632 |
) |
Total
Shareholders’ Equity |
|
|
298,683 |
|
|
|
15,168 |
|
Total
Liabilities and Shareholders’ Equity |
|
$ |
117,371,876 |
|
|
|
943,146 |
|
The
accompanying notes are an integral part of these unaudited
condensed financial statements
KEYARCH
ACQUISITION CORPORATION
UNAUDITED
CONDENSED STATEMENT OF OPERATIONS
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND FOR THE
PERIOD FROM APRIL 23, 2021 (INCEPTION) THROUGH SEPTEMBER 30,
2021
|
|
Three Months |
|
|
Three Months |
|
|
|
|
|
From
April 23, 2021 |
|
|
|
Ended
September 30,
2022 |
|
|
Ended
September 30,
2021 |
|
|
Nine
Months
Ended
September 30,2022 |
|
|
(inception)
throughSeptember 30,
2021 |
|
General
and administrative expenses |
|
$ |
184,293 |
|
|
$ |
10,431 |
|
|
$ |
677,176 |
|
|
$ |
11,632 |
|
Total
Expenses |
|
|
184,293 |
|
|
|
10,431 |
|
|
|
677,176 |
|
|
|
11,632 |
|
Loss
from Operations |
|
|
(184,293 |
) |
|
|
(10,431 |
) |
|
|
(677,176 |
) |
|
|
(11,632 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank
interest income |
|
|
807 |
|
|
|
— |
|
|
|
1,005 |
|
|
|
— |
|
Income
earned on investment held in Trust Account |
|
|
525,192 |
|
|
|
— |
|
|
|
699,084 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Profit/(Loss) |
|
$ |
341,706 |
|
|
$ |
(10,431 |
) |
|
$ |
22,913 |
|
|
$ |
(11,632 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding of redeemable ordinary
shares |
|
|
11,500,000 |
|
|
|
— |
|
|
|
10,338,828 |
|
|
|
— |
|
Basic and diluted net income per share, redeemable ordinary
shares |
|
$ |
0.03 |
|
|
$ |
— |
|
|
$ |
0.42 |
|
|
$ |
— |
|
Weighted
average shares outstanding of non-redeemable ordinary
shares |
|
|
3,620,000 |
|
|
|
2,608,696 |
|
|
|
3,566,117 |
|
|
|
2,562,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share, non-redeemable ordinary
shares |
|
$ |
(0.01 |
) |
|
$ |
(0.00 |
) |
|
$ |
(1.22 |
) |
|
$ |
(0.00 |
) |
The
accompanying notes are an integral part of these unaudited
condensed financial statements
KEYARCH
ACQUISITION CORPORATION
UNAUDITED
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’
EQUITY
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND FOR THE
PERIOD FROM APRIL 23, 2021 (INCEPTION) THROUGH SEPTEMBER 30,
2021
|
|
Ordinary Shares |
|
|
Additional |
|
|
|
|
|
|
|
|
|
Class A |
|
|
Class B |
|
|
Paid-In |
|
|
Accumulated |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Total |
|
Balance
as of April 23, 2021 (inception) |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Issuance
of Class B ordinary shares to Sponsor |
|
|
— |
|
|
|
— |
|
|
|
2,875,000 |
|
|
|
287 |
|
|
|
24,713 |
|
|
|
— |
|
|
|
25,000 |
|
Issuance
of Class A ordinary shares to underwriter |
|
|
200,000 |
|
|
|
20 |
|
|
|
— |
|
|
|
— |
|
|
|
1,780 |
|
|
|
— |
|
|
|
1,800 |
|
Net
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,632 |
) |
|
|
(11,632 |
) |
Balance
as of September 30, 2021 |
|
|
200,000 |
|
|
|
20 |
|
|
|
2,875,000 |
|
|
|
287 |
|
|
|
26,493 |
|
|
|
(11,632 |
) |
|
|
15,168 |
|
Balance
as of December 31, 2021 |
|
|
200,000 |
|
|
$ |
20 |
|
|
|
2,875,000 |
|
|
$ |
287 |
|
|
$ |
26,493 |
|
|
$ |
(11,632 |
) |
|
$ |
15,168 |
|
Proceeds
from sale of public units |
|
|
11,500,000 |
|
|
|
1,150 |
|
|
|
— |
|
|
|
— |
|
|
|
114,998,850 |
|
|
|
— |
|
|
|
115,000,000 |
|
Proceeds
from sale of private placement units |
|
|
545,000 |
|
|
|
55 |
|
|
|
— |
|
|
|
— |
|
|
|
5,449,945 |
|
|
|
— |
|
|
|
5,450,000 |
|
Underwriters’
commission on sale of public units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,300,000 |
) |
|
|
— |
|
|
|
(2,300,000 |
) |
Other
offering costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,171,734 |
) |
|
|
— |
|
|
|
(1,171,734 |
) |
Allocation
of offering costs to ordinary shares subject to
redemption |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,105,119 |
|
|
|
— |
|
|
|
3,105,119 |
|
Initial
measurement of Ordinary Shares Subject to Redemption under ASC
480-10-S99 against additional paid-in capital |
|
|
(11,500,000 |
) |
|
|
(1,150 |
) |
|
|
— |
|
|
|
— |
|
|
|
(102,854,850 |
) |
|
|
— |
|
|
|
(102,856,000 |
) |
Deduction
for increases of carrying value of redeemable shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16,399,119 |
) |
|
|
— |
|
|
|
(16,399,119 |
) |
Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(360,157 |
) |
|
|
(360,157 |
) |
Balance
as of March 31, 2022 |
|
|
745,000 |
|
|
$ |
75 |
|
|
|
2,875,000 |
|
|
$ |
287 |
|
|
$ |
854,704 |
|
|
$ |
(371,789 |
) |
|
$ |
483,277 |
|
Reversal
of offering costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
131,420 |
|
|
|
— |
|
|
|
131,420 |
|
Allocation
of reversal of offering costs to ordinary shares subject to
redemption |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(117,542 |
) |
|
|
— |
|
|
|
(117,542 |
) |
Addition
for decrease in carrying value of redeemable shares due to reversal
of offering costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
117,542 |
|
|
|
— |
|
|
|
117,542 |
|
Subsequent
measurement of Class A ordinary shares subject to possible
redemption (income earned on investment held in trust
account) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(173,892 |
) |
|
|
(173,892 |
) |
Net
profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
41,364 |
|
|
|
41,364 |
|
Balance
as of June 30, 2022 |
|
|
745,000 |
|
|
$ |
75 |
|
|
|
2,875,000 |
|
|
$ |
287 |
|
|
$ |
986,124 |
|
|
$ |
(504,317 |
) |
|
$ |
482,169 |
|
Subsequent
measurement of Class A ordinary shares subject to possible
redemption (income earned on investment held in trust
account) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(525,192 |
) |
|
|
(525,192 |
) |
Net
profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
341,706 |
|
|
|
341,706 |
|
Balance
as of September 30, 2022 |
|
|
745,000 |
|
|
$ |
75 |
|
|
|
2,875,000 |
|
|
$ |
287 |
|
|
$ |
986,124 |
|
|
$ |
(687,803 |
) |
|
$ |
298,683 |
|
The
accompanying notes are an integral part of these unaudited
condensed financial statements
KEYARCH
ACQUISITION CORPORATION
UNAUDITED
CONDENSED STATEMENT OF CASH FLOWS
FOR
NINE MONTHS ENDED SEPTEMBER 30, 2022 AND FOR THE PERIOD FROM APRIL
23, 2021
(INCEPTION)
THROUGH SEPTEMBER 30, 2021
|
|
Nine
months
ended
September 30,
2022 |
|
|
From
April 23,
2021
(inception)
through
September 30,
2021 |
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities: |
|
|
|
|
|
|
Net
profit/(loss) |
|
$ |
22,913 |
|
|
$ |
(11,632 |
) |
Adjustments
to reconcile net profit/(loss) to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
Income
earned on investment held in Trust Account |
|
|
(699,084 |
) |
|
|
— |
|
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
370,109 |
|
|
|
11,052 |
|
Prepaid expenses |
|
|
(267,592 |
) |
|
|
— |
|
Due
to affiliates |
|
|
10,000 |
|
|
|
580 |
|
Net
cash used in operating activities |
|
|
(563,654 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Purchase
of investment held in Trust Account |
|
|
(116,150,000 |
) |
|
|
— |
|
Net
cash used in investing activities |
|
$ |
(116,150,000 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds
from sale of public units through public offering |
|
|
115,000,000 |
|
|
|
— |
|
Proceeds
from sale of private placement units |
|
|
5,450,000 |
|
|
|
— |
|
Proceeds
from issuance of Class A ordinary shares to underwriter |
|
|
— |
|
|
|
1,800 |
|
Proceeds
from issuance of Class B ordinary shares to sponsor |
|
|
— |
|
|
|
25,000 |
|
Payment
of underwriters’ commissions |
|
|
(2,300,000 |
) |
|
|
— |
|
Payment
of offering costs |
|
|
(1,040,314 |
) |
|
|
— |
|
Repayment
on promissory note to related party |
|
|
(150,000 |
) |
|
|
— |
|
Net
cash provided by financing activities |
|
$ |
116,959,686 |
|
|
$ |
26,800 |
|
|
|
|
|
|
|
|
|
|
Net
change in cash |
|
$ |
246,032 |
|
|
$ |
26,800 |
|
Cash—beginning
of the period |
|
|
9,168 |
|
|
|
— |
|
Cash—end
of the period |
|
$ |
255,200 |
|
|
$ |
26,800 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
Allocation
of offering costs to ordinary shares subject to
redemption |
|
$ |
2,987,577 |
|
|
$ |
— |
|
Reclassification
of ordinary shares subject to redemption |
|
$ |
102,856,000 |
|
|
$ |
— |
|
Remeasurement
adjustment on redeemable ordinary shares |
|
$ |
16,281,577 |
|
|
$ |
— |
|
Subsequent
measurement of Class A ordinary shares subject to possible
redemption (income earned on investment held in trust
account) |
|
$ |
699,084 |
|
|
$ |
— |
|
Reversal
of offering cost adjusted from additional paid in
capital |
|
$ |
131,420 |
|
|
$ |
— |
|
Deferred
offering costs included in due to affiliate |
|
$ |
— |
|
|
$ |
232,344 |
|
Deferred
offering costs included in accrued offering costs |
|
$ |
— |
|
|
$ |
47,581 |
|
Deferred
offering costs included in promissory note |
|
$ |
— |
|
|
$ |
256,279 |
|
The
accompanying notes are an integral part of these unaudited
condensed financial statements
KEYARCH ACQUISITION CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1 – Organization and Business Operation
Keyarch Acquisition Corporation (the “Company”) was incorporated in
Cayman Islands on April 23, 2021. The Company was 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 (the “Business
Combination”). Although the Company is not limited to a particular
industry or sector for purposes of consummating a Business
Combination, the Company intends to focus its search on global
disruptive technology and innovative services companies. However,
the Company’s Amended and Restated Memorandum and Articles of
Incorporation provides that it shall not undertake its initial
Business Combination with any entity that is based in, located in
or with its principal business operations in China (including Hong
Kong and Macau). The Company is an emerging growth company and, as
such, the Company is subject to all of the risks associated with
emerging growth companies.
As of September 30, 2022, the Company had not commenced any
operations. All activity for the period from April 23, 2021
(inception) through September 30, 2022, relates to the
Company’s formation and the initial public offering (“IPO”)
described below, and following the IPO, the search for a target to
consummate a Business Combination. The Company will not generate
any operating revenues until after the completion of its initial
Business Combination, at the earliest. The Company will generate
non-operating income in the form of interest income on cash and
cash equivalents from the proceeds derived from the IPO. The
Company has selected December 31 as its fiscal year
end.
The Company’s sponsor is Keyarch Global Sponsor Limited, a Cayman
Islands limited liability company (the “Sponsor”).
Financing
The registration statement for the Company’s IPO was declared
effective on January 24, 2022 (the “Effective Date”). On
January 27, 2022, the Company consummated the IPO of
10,000,000 units (the “Units” and, with respect to the Class A
ordinary shares included in the Units being offered, the “Public
Shares”), at $10.00 per Unit, generating gross proceeds of
$100,000,000, which is discussed in Note 3.
Simultaneously with the closing of the IPO, the Company consummated
the sale of 500,000 private placement units (“Private Placement
Units”) (450,000 Private Placement Units purchased by the Sponsor
and 50,000 Private Placement Units purchased by
EarlyBirdCapital, Inc., the representative of the underwriters
of the IPO (“EarlyBirdCapital”)) at a price of $10.00 per Private
Placement Unit, for an aggregate purchase price of $5,000,000, in a
private placement.
On February 8, 2022, the underwriters purchased an additional
1,500,000 Units by exercising its over-allotment option in full at
a purchase price of $10.00 per Unit, generating gross proceeds of
$15,000,000. Simultaneously with the closing of the full exercise
of the over-allotment option, the Company completed the private
sale of an aggregate of 45,000 Private Placement Units (40,500
Private Placement Units purchased by the Sponsor and 4,500 Private
Placement Units purchased by EarlyBirdCapital) at a price of $10.00
per Private Placement Unit, generating gross proceeds of
$450,000.
Offering
costs amounted to $3,471,734 consisting of $2,300,000 of
underwriting discount and $1,171,734 of other offering
costs. During the nine month period ended September 30,
2022, the Company received discount amounting to $131,420 on
outstanding offering costs included within accounts payable and
accrued expenses. This has been treated as a reversal of offering
costs.
As of September 30, 2022, cash of $255,200 was held outside of
the Trust Account (as defined below) and is available for the
payment of offering costs and for working capital purposes.
Trust Account
Following the closing of the IPO and the sale of over-allotment
units, an aggregate of $116,150,000 ($10.10 per Unit) from the net
proceeds and the sale of the Private Placement Units was held in a
Trust Account (“Trust Account”), and will invest only in U.S.
government securities, within the meaning set forth in
Section 2(a)(16) of the Investment Company Act, having a
maturity of 185 days or less or in money market funds meeting
certain conditions under Rule 2a-7 promulgated under the
Investment Company Act which invest only in direct U.S. government
treasury obligations. Except with respect to income earned on the
funds held in the Trust Account that may be released to the Company
to pay income tax obligations, the proceeds from the IPO will not
be released from the Trust Account until the earlier of the
completion of a Business Combination or the Company’s
liquidation.
The Company’s management has broad discretion with respect to the
specific application of the net proceeds of the IPO and the sale of
Private Placement Units, although substantially all of the net
proceeds are intended to be applied generally toward consummating a
Business Combination. There is no assurance that the Company will
be able to complete a Business Combination successfully.
Business Combination
The Company must complete one or more initial Business Combinations
having an aggregate fair market value of at least 80% of the assets
held in the Trust Account (excluding taxes payable on income earned
on the Trust Account) at the time of the definitive agreement for
the initial Business Combination. However, the Company will only
complete a Business Combination if the post-transaction company
owns or acquires 50% or more of the outstanding voting securities
of the target or otherwise acquires a controlling interest in the
target sufficient for it not to be required to register as an
investment company under the Investment Company Act of 1940, as
amended (the “Investment Company Act”).
The Company will provide the holders of its outstanding
Class A ordinary shares, par value $0.0001 (“Class A
ordinary shares”), sold in the IPO (the “public shareholders”) with
the opportunity to redeem all or a portion of their Public Shares
upon the completion of a Business Combination either (i) in
connection with a shareholder meeting called to approve the
Business Combination or (ii) by means of a tender offer. The
decision as to whether the Company will seek shareholder approval
of a Business Combination or conduct a tender offer will be made by
the Company, solely in its discretion, subject to applicable law.
The public shareholders will be entitled to redeem their Public
Shares for a pro rata portion of the amount then in the Trust
Account (initially anticipated to be $10.10 per Public Share). The
per-share amount to be distributed to public shareholders who
redeem their Public Shares will not be reduced by the cash fee
payable to EarlyBirdCapital for services performed in connection
with the initial Business Combination (as discussed in
Note 6). In such case, the Company will proceed with a
Business Combination if the Company has net tangible assets of at
least $5,000,001 upon such consummation of a Business Combination
and a majority of the shares voted are voted in favor of the
Business Combination. If a shareholder vote is not required by law
and the Company does not decide to hold a shareholder vote for
business or other legal reasons, the Company will, pursuant to its
Amended and Restated Memorandum and Articles of Incorporation (the
“Amended and Restated Memorandum and Articles of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of
the U.S. Securities and Exchange Commission (“SEC”) and file tender
offer documents with the SEC prior to completing a Business
Combination. If, however, shareholder approval of the transactions
is required by law, or the Company decides to obtain shareholder
approval for business or legal reasons, the Company will offer to
redeem shares in conjunction with a proxy solicitation pursuant to
the proxy rules and not pursuant to the tender offer rules.
Additionally, each public shareholder may elect to redeem their
Public Shares irrespective of whether they vote for or against the
proposed transaction. If the Company seeks shareholder approval in
connection with a Business Combination, the initial shareholders
(as defined below) have agreed to vote its Founder Shares (as
defined below in Note 4) and any Public Shares purchased
during or after the IPO in favor of a Business Combination.
Subsequent to the consummation of the IPO, the Company adopted an
insider trading policy which requires insiders to: (i) refrain
from purchasing shares during certain blackout periods and when
they are in possession of any material non-public information and
(ii) to clear all trades with the Company’s legal counsel
prior to execution. In addition, the initial shareholders have
agreed to waive their redemption rights with respect to their
Founder Shares and Public Shares in connection with the completion
of a Business Combination.
Notwithstanding the foregoing, the Amended and Restated Memorandum
and Articles of Incorporation provides that a public shareholder,
together with any affiliate of such shareholder or any other person
with whom such shareholder is acting in concert or as a “group” (as
defined under Section 13 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)), will be restricted from
redeeming its shares with respect to more than an aggregate of 15%
or more of the Class A ordinary shares sold in the IPO,
without the prior consent of the Company.
The Company’s Sponsor, officers and directors (the “initial
shareholders”) have agreed not to propose an amendment to the
Amended and Restated Memorandum and Articles of Incorporation that
would affect the substance or timing of the Company’s obligation to
redeem 100% of its Public Shares if the Company does not complete a
Business Combination, unless the Company provides the public
shareholders with the opportunity to redeem their Class A
ordinary shares in conjunction with any such amendment.
Liquidation
If the Company is unable to complete a Business Combination by
July 27, 2023 (the “Combination Period”), the Company will
(i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten
business days thereafter, redeem the Public Shares, at a
per-share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account including income earned on the
funds held in the Trust Account and not previously released to us
to pay the Company’s franchise and income taxes, divided by the
number of then outstanding Public Shares, which redemption will
completely extinguish public shareholders’ rights as shareholders
(including the right to receive further liquidating distributions,
if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the
approval of the Company’s remaining shareholders and the Company’s
board of directors, dissolve and liquidate, subject in each case to
the Company’s obligations under Cayman Islands law to provide for
claims of creditors and the requirements of other applicable
law.
The initial shareholders have agreed to waive their liquidation
rights with respect to the Founder Shares if the Company fails to
complete a Business Combination within the Combination Period.
However, if the initial shareholders should acquire Public Shares
in or after the IPO, they will be entitled to liquidating
distributions from the Trust Account with respect to such Public
Shares if the Company fails to complete a Business Combination
within the Combination Period. EarlyBirdCapital has agreed to waive
its rights to the cash fee payable to EarlyBirdCapital for services
performed in connection with the initial Business Combination (see
Note 6) held in the Trust Account in the event the Company
does not complete a Business Combination within in the Combination
Period and, in such event, such amounts will be included with the
other funds held in the Trust Account that will be available to
fund the redemption of the Public Shares. In the event of such
distribution, it is possible that the per share value of the
residual assets remaining available for distribution (including
Trust Account assets) could be less than $10.10 per share initially
held in the Trust Account. In order to protect the amounts held in
the Trust Account, the Sponsor has agreed to be liable to the
Company if and to the extent any claims by a vendor for services
rendered or products sold to the Company, or a prospective target
business with which the Company has discussed entering into a
transaction agreement, reduce the amount of funds in the Trust
Account. This liability will not apply with respect to any claims
by a third party who executed a waiver of any right, title,
interest or claim of any kind in or to any monies held in the Trust
Account or to any claims under the Company’s indemnity of the
underwriters of the IPO against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the
“Securities Act”). Moreover, in the event that an executed waiver
is deemed to be unenforceable against a third party, the Sponsor
will not be responsible to the extent of any liability for such
third-party claims. The Company will seek to reduce the possibility
that the Sponsor will have to indemnify the Trust Account due to
claims of creditors by endeavoring to have all vendors, service
providers, prospective target businesses or other entities with
which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in
or to monies held in the Trust Account.
Going Concern and Management Liquidity Plans
As of September 30, 2022 and December 31, 2021, the Company had
cash of $255,200 and $9,168, respectively and working
capital/(deficit) of $298,683 and ($918,810), respectively. The
Company’s liquidity needs prior to the consummation of the IPO had
been satisfied through proceeds from notes payable and advances
from related party and from the issuance of ordinary shares.
Subsequent to the consummation of the IPO, the Company expects that
it will need additional capital to satisfy its liquidity needs
beyond the net proceeds from the consummation of the IPO and the
proceeds 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 Initial Business Combination.
Although certain of the Company’s initial shareholders, officers
and directors or their affiliates have committed to loan the
Company funds from time to time or at any time, in whatever amount
they deem reasonable in their sole discretion, there is no
guarantee that the Company will receive such funds.
Accordingly, the accompanying unaudited condensed financial
statements has been prepared in conformity with U.S. GAAP, which
contemplates continuation of the Company as a going concern and the
realization of assets and the satisfaction of liabilities in the
normal course of business. The financial statement does not include
any adjustments that might result from the outcome of this
uncertainty. Further, we have incurred and expect to continue to
incur significant costs in pursuit of our financing and acquisition
plans. Management plans to address this uncertainty during period
leading up to the Initial Business Combination. The Company cannot
provide any assurance that its plans to raise capital or to
consummate an Initial Business Combination will be successful.
Based on the foregoing, management believes that the Company will
not have sufficient working capital and borrowing capacity to meet
its needs through the earlier of the consummation of the Initial
Business Combination or one year from this filing. These
factors, among others, raise substantial doubt about our ability to
continue as a going concern.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19
pandemic on the industry and has concluded that while it is
reasonably possible that the virus could have a negative effect on
the Company’s financial position, results of its operations and/or
search for a target company, the specific impact is not readily
determinable as of the date of these financial statements. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
In the beginning of February 2022, the Russian Federation and
Belarus commenced a military action against the country of Ukraine.
As a result of this action, various nations, including the United
States, have instituted economic sanctions against the Russian
Federation and Belarus. The impact of this action and related
sanctions on the world economy are not determinable as of the date
of these financial statements.
Note 2 – Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are
presented in conformity with accounting principles generally
accepted in the United States of America (“US GAAP”) and pursuant
to the rules and regulations of the SEC.
The accompanying unaudited condensed financial statements as of
September 30, 2022 have been prepared in accordance with U.S.
GAAP for interim financial information and Article 8 of
Regulation S-X. In the opinion of management, all adjustments
(consisting of normal accruals) considered for a fair presentation
have been included. Operating results for the three and
nine months ended September 30, 2022 are not necessarily
indicative of the results that may be expected for the period
ending December 31, 2022, or any future period.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in
Section 2(a) of the Securities Act of 1933, as amended,
(the “Securities Act”), as modified by the Jumpstart the Business
Startups Act of 2012 (the “JOBS Act”), and it may take advantage of
certain exemptions from various reporting requirements that are
applicable to other public companies that are not emerging growth
companies including, but not limited to, not being required to
comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in its periodic
reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and
shareholder approval of any golden parachute payments not
previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or
revised financial accounting standards until private companies
(that is, those that have not had a Securities Act registration
statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the
new or revised financial accounting standards. The JOBS Act
provides that a company can elect to opt out of the extended
transition period and comply with the requirements that apply to
non-emerging growth companies but any such election to opt out is
irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is
issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company,
can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the
Company’s financial statements with another public company which is
neither an emerging growth company nor an emerging growth company
which has opted out of using the extended transition period
difficult or impossible because of the potential differences in
accounting standards used.
Use of Estimates
The preparation of unaudited condensed financial statements in
conformity with US GAAP requires 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 period.
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.
Cash and Cash Equivalents
The Company considers all short-term investments with an original
maturity of three months or less when purchased to be cash
equivalents. The Company did not have any cash equivalents as of
September 30, 2022 and December 31, 2021.
Investments Held in Trust Account
The Company’s portfolio of investments held in the Trust Account is
comprised of investments in money market funds that invest in U.S.
government securities and generally have a readily determinable
fair value, or a combination thereof. Gains and losses resulting
from the change in fair value of these securities is included in
income earned on investment held in Trust Account in the
accompanying statement of operations. The estimated fair values of
investments held in the Trust Account are determined using
available market information.
Offering Costs
Offering
costs were $3,471,734 consisting principally of underwriting,
legal, accounting and other expenses incurred through the balance
sheet date that are related to the IPO and are charged to
shareholders’ equity upon the completion of the IPO. The Company
complies with the requirements of the ASC 340-10-S99-1 and SEC
Staff Accounting Bulletin (“SAB”) Topic 5A – “Expenses of
Offering”. The Company allocates offering costs between the Public
Shares, Public Warrants (as defined below in Note 3) and
Public Rights (as defined below in Note 3) based on the
relative fair values of the Public Shares, Public Warrants and
Public Rights. Accordingly, $3,105,119 was allocated to the Public
Shares and charged to temporary equity, and $366,615 was allocated
to Public Warrants and Public Rights and charged to shareholders’
equity. During the nine month period ended September 30,
2022, the Company received discount amounting to $131,420 on
outstanding offering cost included within accounts payable and
accrued expenses. This has been treated as reversal of offering
cost adjusted through additional paid-in capital considering the
related offering cost charged against additional paid-in capital at
the time of IPO.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which
qualify as financial instruments under the FASB ASC 825, “Financial
Instruments,” approximates the carrying amounts represented in the
balance sheet, primarily due to its short-term nature.
Warrants
The Company accounts 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 (“FASB”) ASC 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, whether they 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 the Company’s 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.
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 equity 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 as
liabilities 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.
Ordinary Shares Subject to Possible Redemption
The Company accounts for its 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 (if any)
is classified as a liability instrument and is measured at fair
value. Conditionally redeemable ordinary shares (including 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 the Company’s control) is
classified as temporary equity. At all other times, ordinary shares
are classified as shareholders’ equity. The Company’s ordinary
shares features certain redemption rights that are considered to be
outside of the Company’s control and subject to occurrence of
uncertain future events. Accordingly, as of September 30,
2022, 11,500,000 ordinary shares subject to possible
redemption are presented at redemption value of $10.10 per
share (plus any income earned on investment held in Trust Account)
as temporary equity, outside of the shareholders’ equity section of
the Company’s balance sheet. The Company recognizes changes in
redemption value immediately as they occur and adjusts the carrying
value of redeemable ordinary shares to equal the redemption value
at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable ordinary shares are affected by
charges against additional paid in capital and accumulated deficit.
The Company allocates gross proceeds between the Public Shares,
Public Warrants and Public Rights based on the relative fair values
of the Public Shares, Public Warrants and Public Rights.
At September 30, 2022, the ordinary shares reflected in the
condensed balance sheet are reconciled in the following table:
Gross proceeds |
|
$ |
115,000,000 |
|
Less: |
|
|
|
|
Proceeds allocated to Public Rights |
|
|
(9,257,500 |
) |
Proceeds allocated to Public Warrants |
|
|
(2,886,500 |
) |
Allocation of offering costs related to redeemable shares (net of
allocation of offering cost amounting to $117,542 related to
redeemable shares reversed*) |
|
|
(2,987,577 |
) |
Plus: |
|
|
|
|
Accretion of carrying value to redemption value (net of decrease of
$117,542 in carrying value of redeemable shares due to reversal of
offering costs*) |
|
|
16,281,577 |
|
Subsequent measurement of Class A ordinary shares subject to
possible redemption (income earned on investment held in trust
account) |
|
|
699,084 |
|
Ordinary shares subject to possible redemption |
|
$ |
116,849,084 |
|
|
* |
During
the nine month period ended September 30, 2022, the Company
received discount amounting to $131,420 on outstanding offering
cost included within accounts payable and accrued expenses. This
has been treated as reversal of offering cost adjusted through
additional paid-in capital considering the related offering cost
charged against additional paid-in capital at the time of
IPO. This reversal of offering cost has been
proportionately allocated to redeemable shares based on the fair
value of Public Shares leading to a corresponding decrease in
carrying value by $117,542 to arrive at the redemption value of
Ordinary Shares subject to possible redemption. |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist of a cash account in a
financial institution which, at times may exceed the Federal
depository insurance coverage of $250,000. At September 30,
2022, the Company had not experienced losses on this account and
management believes the Company is not exposed to significant risks
on such account.
Net Income/(Loss) Per Share
The
Company complies 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, the Company 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. The
Company then allocated the undistributed income (loss) rateably
based on the weighted average number of shares outstanding between
the redeemable and non-redeemable shares. Any remeasurement of the
accretion to redemption value of the ordinary shares subject to
possible redemption was considered to be dividends paid to the
public shareholders. As of September 30, 2022, the Company did not
have any dilutive securities and other contracts that could,
potentially, be exercised or converted into ordinary shares and
then share in the earnings of the Company. As a result, diluted
loss per share is the same as basic loss per share for the period
presented.
The net income (loss) per share presented in the condensed
statement of operations is based on the following:
|
|
Three
months ended |
|
|
Nine
months ended |
|
|
|
September 30,
2022 |
|
|
September 30,
2022 |
|
Net Profit |
|
$ |
341,706 |
|
|
$ |
22,913 |
|
Income
earned on investment held in Trust Account |
|
|
(525,192 |
) |
|
|
(699,084 |
) |
Accretion of
carrying value to redemption value |
|
|
—
|
|
|
|
(16,399,119 |
) |
Decrease in carrying value of redeemable shares due to reversal of
offering costs |
|
|
—
|
|
|
|
117,542 |
|
Net loss including accretion of equity into redemption value |
|
$ |
(183,486 |
) |
|
$ |
(16,957,748 |
) |
|
|
Three months
ended
September 30,
2022 |
|
|
Three months
ended
September 30,
2021 |
|
|
Nine months
ended
September 30,
2022 |
|
|
For the period
from April 23,
2021(inception)
through September 30,
2021 |
|
|
|
Redeemable |
|
|
Non-
Redeemable |
|
|
Non-
Redeemable |
|
|
Redeemable |
|
|
Non-
Redeemable |
|
|
Non-
Redeemable |
|
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
Basic and diluted net income/(loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerators: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net loss including accretion of temporary equity |
|
$ |
(139,556 |
) |
|
$ |
(43,930 |
) |
|
$ |
(10,431 |
) |
|
$ |
(12,608,697 |
) |
|
$ |
(4,349,051 |
) |
|
$ |
(11,632 |
) |
Income earned on investment held in Trust Account |
|
|
525,192 |
|
|
|
—
|
|
|
|
—
|
|
|
|
699,084 |
|
|
|
—
|
|
|
|
—
|
|
Accretion
of carrying value to redemption value |
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,399,119 |
|
|
|
—
|
|
|
|
—
|
|
Decrease in carrying value of redeemable shares due to reversal of
offering costs |
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(117,542 |
) |
|
|
—
|
|
|
|
—
|
|
Allocation of net income/(loss) |
|
|
385,636 |
|
|
|
(43,930 |
) |
|
|
(10,431 |
) |
|
|
4,371,964 |
|
|
|
(4,349,051 |
) |
|
|
(11,632 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominators: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding |
|
|
11,500,000 |
|
|
|
3,620,000 |
|
|
|
2,608,696 |
|
|
|
10,338,828 |
|
|
|
3,566,117 |
|
|
|
2,562,112 |
|
Basic and diluted net income/(loss) per share
|
|
$ |
0.03 |
|
|
$ |
(0.01 |
) |
|
$ |
(0.00 |
) |
|
$ |
0.42 |
|
|
$ |
(1.22 |
) |
|
$ |
(0.00 |
) |
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes
(“ASC 740”). ASC 740 requires the recognition of deferred tax
assets and liabilities for both the expected impact of differences
between the financial statement and tax basis of assets and
liabilities and for the expected future tax benefit to be derived
from tax loss and tax credit carry forwards. Valuation allowances
are established, when necessary, to reduce deferred tax assets to
the amount expected to be realized.
FASB ASC 740, “Income Taxes”, prescribes a recognition threshold
and a measurement attribute for the financial statement recognition
and measurement of tax positions taken or expected to be taken in a
tax return. For those benefits to be recognized, a tax position
must be more likely than not to be sustained upon examination by
taxing authorities. There were no unrecognized tax benefits as of
September 30, 2022 and December 31, 2021. The Company’s management
determined that the Cayman Islands is the Company’s only major tax
jurisdiction. The Company is not currently aware of any issues
under review that could result in significant payments, accruals,
or material deviation from its position. The Company is subject to
tax examinations by major taxing authorities since inception. There
is currently no taxation imposed by the Government of the Cayman
Islands. In accordance with Cayman income tax regulations, income
taxes are not levied on the Company. Consequently, income taxes are
not reflected in the Company’s financial statements. The Company’s
management does not expect that the total amount of unrecognized
tax benefits will materially change over the next
twelve months.
There is currently no taxation imposed by the Government of the
Cayman Islands. The Company has no connection to any other taxable
jurisdiction and is presently not subject to income taxes or income
tax filing requirements in the Cayman Islands or the United States.
Consequently, income taxes are not reflected in the Company’s
financial statements.
Recent Accounting Pronouncements
Management
does not believe that any recently issued, but not effective,
accounting standards, if currently adopted, would have a material
effect on the Company’s unaudited condensed financial
statements.
Note 3 – Initial Public Offering
On January 27, 2022, the Company sold 10,000,000 Units, at a
purchase price of $10.00 per Unit. Each Unit consists of one
Class A ordinary share, one-half of one redeemable warrant
(“Public Warrant”) and one right (“Public Right”). Each whole
Public Warrant entitles the holder to purchase one Class A
ordinary share at a price of $11.50 per share, subject to
adjustment. Ten Public Rights will entitle the holder to one
Class A ordinary share at the closing of the Business
Combination.
On February 8, 2022, the underwriters purchased an additional
1,500,000 Units to exercise its over-allotment option in full at a
purchase price of $10.00 per Unit, generating gross proceeds of
$15,000,000.
The warrants will become exercisable 30 days after the
completion of the initial Business Combination and will expire
five years after the
completion of the initial Business Combination or earlier upon
redemption or liquidation (see Note 7).
Note 4 - Private Placement
Simultaneously with the closing of the IPO, the Sponsor and
EarlyBirdCapital purchased an aggregate of 500,000 Private
Placement Units at a price of $10.00 per Private Placement Unit
(450,000 Private Placement Units purchased by the Sponsor and
50,000 Private Placement Units purchased by EarlyBirdCapital), for
an aggregate purchase price of $5,000,000, in a private placement.
Each whole Private Placement Unit consisted of one Class A
ordinary share, one-half of one warrant (the “Private Warrant”) and
one right (the “Private Rights”). On February 8, 2022, the
underwriters fully exercised the over-allotment option and the
Company completed the private sale of an aggregate of 45,000
Private Placement Units (40,500 Private Placement Units purchased
by the Sponsor and 4,500 Private Placement Units purchased by
EarlyBirdCapital) at a price of $10.00 per Private Placement Unit,
generating gross proceeds of $450,000. Certain of the proceeds from
the Private Placement Units were added to the proceeds from the IPO
held in the Trust Account.
If the Company does not complete a Business Combination within the
Combination Period, the proceeds from the sale of the Private
Placement Units held in the Trust Account will be used to fund the
redemption of the Public Shares (subject to the requirements of
applicable law) and the Private Placement Units will expire
worthless.
Note 5 - Related Party Transactions
Founder Shares
On June 27, 2021, the Sponsor paid $25,000, to cover certain
offering costs in consideration for 2,875,000 of the Company’s
Class B ordinary shares, par value $0.0001 (the “Founder
Shares”). Up to 375,000 Founder Shares are subject to forfeiture by
the Sponsor depending on the extent to which the underwriters’
over-allotment option is exercised. On February 8, 2022, the
underwriter exercised its over-allotment option in full, hence, the
375,000 Founder Shares are no longer subject to forfeiture since
then.
The initial shareholders have agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Founder
Shares until the earliest to occur of: (A) 180 days after
the completion of the initial Business Combination or (B) the
date on which the Company completes a liquidation, merger, capital
stock exchange or other similar transaction that results in all of
the Company’s shareholders having the right to exchange their
ordinary shares for cash, securities or other property.
EBC Founder Shares
On August 12, 2021, the Company issued to EarlyBirdCapital
and/or its designees 200,000 Class A ordinary shares (the “EBC
Founder Shares”) at a price of $0.0001 per share. The Company
estimated the fair value of the EBC Founder Shares to be $1,800
based upon the price of the founder shares issued to the Sponsor.
The holders of the EBC Founder Shares have agreed not to transfer,
assign or sell any such shares until the completion of a Business
Combination. In addition, the holders have agreed (i) to waive
their conversion rights (or right to participate in any tender
offer) with respect to such shares in connection with the
completion of a Business Combination and (ii) to waive their
rights to liquidating distributions from the Trust Account with
respect to such shares if the Company fails to complete a Business
Combination within the Combination Period.
The EBC Founder Shares have been deemed compensation by FINRA and
are therefore subject to a lock-up for a period of 180 days
immediately following the effective date of the registration
statement related to the IPO pursuant to FINRA
Rule 5110(e)(1). Pursuant to FINRA Rule 5110(e)(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 statements related to the IPO, nor may they be sold,
transferred, assigned, pledged or hypothecated for a period of
180 days immediately following the effective date of the
registration statements related to the IPO except to any
underwriter and selected dealer participating in the IPO and their
officers or partners, associated persons or affiliates.
Related Party Loans and Due to Affiliate
On June 16, 2021, the Sponsor agreed to loan the Company an
aggregate of up to $150,000 to cover expenses related to the IPO
pursuant to a promissory note (the “Note”). This loan is
non-interest bearing and payable on the earlier of March 31, 2022,
or the completion of the IPO. During the month of
September 2021, the Sponsor transferred the outstanding
sponsor line of credit of $15,625 to Keywise Capital Management
(HK) Limited (the “Affiliate”). Prior to July 6, 2021, the
Sponsor had an arrangement with the Affiliate regarding payment to
be made by the Affiliate for certain costs of the Company on behalf
of the Sponsor which will be adjusted with the Note. However, once
the bank account of the Sponsor and the Company was open, the
Affiliate agreed with the Sponsor and the Company that such amount
will be paid directly to them.
On October 4, 2021, the Sponsor funded $150,000 to the Company
pursuant to the promissory note executed by the Company on
June 16, 2021. The note was paid in full on January 27,
2022.
Further, during the period up to December 31, 2021, the
Affiliate paid for the offering costs and other general and
administration expenses of $368,227. The Company settled the amount
due to affiliates with the IPO proceeds. As of September 30,
2022, the Company had $10,000 outstanding as due to Affiliate for
monthly administrative and support services as per agreement
defined below.
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 units of the
post Business Combination entity at a price of $10.00 per unit. The
units would be identical to the Private Placement Units. As of
September 30, 2022, no Working Capital Loans were outstanding.
Administrative Services
The Company intends to pay the Sponsor a fee of approximately
$10,000 per month following the consummation of the IPO until
the earlier of the consummation of the Business Combination or
liquidation for office and administrative support services. For the
three and nine months ended September 30, 2022, the Company
incurred $30,000 and $80,000 respectively for administrative and
support services.
Note 6 - Commitments and Contingencies
Risk and
Uncertainties
Management is currently evaluating the impact of the COVID-19
pandemic on the industry and has concluded that while it is
reasonably possible that the virus could have a negative effect on
the Company’s future financial position, results of its operations
and/or search for a target company, there has not been a
significant impact as of the date of these unaudited condensed
financial statements. The unaudited condensed financial statements
do not include any adjustments that might result from the future
outcome of this uncertainty
Registration
Rights
The holders of Founder Shares, Private Placement Units and Units
that may be issued upon conversion of Working Capital Loans, if
any, are entitled to registration rights (in the case of the
Founder Shares, only after conversion of such shares to
Class A ordinary shares) pursuant to a registration rights
agreement signed on January 24, 2022. These holders will be
entitled to certain demand and “piggyback” registration rights.
However, the registration rights agreement provides that the
Company will not permit any registration statement filed under the
Securities Act to become effective until the termination of the
applicable lock-up period for the securities to be registered. The
Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Underwriters
Agreement
The underwriters had a 45-day option beginning January 24,
2022, to purchase up to an additional 1,500,000 units to cover
over-allotments, if any, at the IPO price less the underwriting
discounts and commissions. On February 8, 2022, the
underwriters exercised their over-allotment option in full and
purchased an additional 1,500,000 units at $10.00 per unit.
On January 27, 2022, the Company paid a fixed underwriting
discount of $2,000,000 and on February 8, 2022, it paid an
additional $300,000 of underwriting fees arising from the sale of
the over-allotment units.
Business Combination Marketing
Agreement
The Company has engaged EarlyBirdCapital as an advisor in
connection with a Business Combination to assist the Company in
holding meetings with its shareholders 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 in obtaining shareholder approval
for the Business Combination and assist the Company with its press
releases and public filings in connection with the Business
Combination. The Company will pay EarlyBirdCapital 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 IPO (exclusive of any
applicable finders’ fees which might become payable). In addition,
the Company may engage EarlyBirdCapital as an advisor in connection
with introducing a target business to us. If we engage
EarlyBirdCapital and it introduces us to the target business with
whom we complete our initial Business Combination, EarlyBirdCapital
will receive a cash fee equal to 1% of the total consideration
payable in the initial Business Combination.
Note 7 - Shareholder’s Equity
Preferred shares -The Company is authorized to
issue 1,000,000 preferred shares with such designations, voting and
other rights and preferences as may be determined from time to time
by the Company’s board of directors. As of September 30, 2022 and
December 31, 2021, there were no preferred shares
issued or outstanding.
Ordinary Shares
Class A Ordinary Shares - The Company is
authorized to issue 180,000,000 Class A ordinary shares with a
par value of $0.0001 per share. As of September 30, 2022 and
December 31, 2021, there were 745,000 and 200,000 Class A
ordinary shares issued or outstanding, excluding 11,500,000 and no
shares subject to possible redemption, respectively.
Class B Ordinary Shares -The Company is
authorized to issue 20,000,000 Class B ordinary shares with a
par value of $0.0001 per share. As of September 30, 2022 and
December 31, 2021, there were 2,875,000 Class B ordinary
shares issued and outstanding. Of the 2,875,000 Class B
ordinary shares, an aggregate of up to 375,000 shares are subject
to forfeiture to the Company for no consideration to the extent
that the underwriters’ over-allotment option is not exercised in
full or in part, so that the initial shareholders will collectively
own 20% of the Company’s issued and outstanding ordinary shares
after the IPO. On February 8, 2022, the underwriter exercised
its over-allotment option in full, hence, the 375,000 Founder
Shares are no longer subject to forfeiture since then.
Holders of Class A ordinary shares and Class B ordinary
shares will vote together as a single class on all other matters
submitted to a vote of shareholders except as required by law.
The Class B ordinary shares will automatically convert into
Class A ordinary shares at the time of the initial Business
Combination on a one-for-one basis, subject to adjustment for stock
splits, stock dividends, reorganizations, recapitalizations, and
the like, and subject to further adjustment as provided herein.
Warrants
Each whole warrant entitles the holder to purchase one ordinary
share at a price of $11.50 per share commencing 30 days after
the completion of its initial Business Combination and expiring
five years from after the completion of an initial Business
Combination. No fractional warrant will be issued and only whole
warrants will trade.
In addition, if (x) we issue additional ordinary shares or
equity-linked securities for capital raising purposes in connection
with the closing of our initial Business Combination at an issue
price or effective issue price of less than $9.20 per Class A
ordinary share (with such issue price or effective issue price to
be determined in good faith by our board of directors, and in the
case of any such issuance to our Sponsor, initial shareholders or
their affiliates, without taking into account any Founder Shares
held by them prior to such issuance) (the “Newly Issued Price”),
(y) the aggregate gross proceeds from such issuances represent
more than 60% of the total equity proceeds, and interest thereon,
available for the funding of our initial Business Combination on
the date of the consummation of our initial Business Combination
(net of redemptions), and (z) the volume weighted average
trading price of our Class A ordinary shares during the 20
trading day period starting on the trading day prior to the day on
which we consummate our initial Business Combination (such price,
the “Market Value”) is below $9.20 per share, then the exercise
price of the warrants will be adjusted (to the nearest cent) to be
equal to 115% of the greater of (i) the Market Value or
(ii) the Newly Issued Price and the $18.00 per share
redemption trigger price described below under “Redemption” will be
adjusted (to the nearest cent) to be equal to 180% of the greater
of (i) the Market Value or (ii) the Newly Issued
Price.
The Company may redeem the warrants at a price of $0.01 per warrant
upon 30 days’ notice, only in the event that the last sale
price of the ordinary shares is at least $18.00 per share for any
20 trading days within a 30-trading day period ending on the
third day prior to the date on which notice of redemption is given,
provided there is an effective registration statement and current
prospectus in effect with respect to the ordinary shares underlying
such warrants during the 30 day redemption period. If a
registration statement is not effective within 60 days
following the consummation of a Business Combination, warrant
holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed
to maintain an effective registration statement, exercise warrants
on a cashless basis in accordance with Section 3(a)(9) of
the Securities Act or another exemption, but we will use our
commercially reasonable efforts to register or qualify the shares
under applicable blue sky laws to the extent an exemption is not
available.
Note 8 – Fair Value Measurements
The fair value of the Company’s financial assets and liabilities
reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in
connection with the transfer of the liabilities in an orderly
transaction between market participants at the measurement date. In
connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable
inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about
how market participants would price assets and liabilities). The
following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs
used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or
liabilities. An active market for an asset or liability is a market
in which transactions for the asset or liability occur with
sufficient frequency and volume to provide pricing information on
an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of
Level 2 inputs include quoted prices in active markets for similar
assets or liabilities and quoted prices for identical assets or
liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment of the
assumptions that market participants would use in pricing the asset
or liability.
The following table presents information about the Company’s assets
that are measured at fair value on a recurring basis at September
30, 2022 and indicates the fair value hierarchy of the valuation
inputs the Company utilized to determine such fair value.
|
|
|
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
Prices in |
|
|
Other |
|
|
Other |
|
|
|
As of |
|
|
Active |
|
|
Observable |
|
|
Unobservable |
|
|
|
September 30, |
|
|
Markets |
|
|
Inputs |
|
|
Inputs |
|
|
|
2022 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment held in Trust
Account |
|
$ |
116,849,084 |
|
|
$ |
116,849,084 |
|
|
$ |
—
|
|
|
$ |
—
|
|
As of December 31, 2021, there was no investment held in Trust
Account.
Note 9 - Subsequent Events
The Company has evaluated subsequent events through November
8, 2022, which was the date these financial statements were
available for issuance and determined that there were no
significant unrecognized events through that date.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking
Statements
All statements other than
statements of historical fact included in this Report including,
without limitation, statements under this “Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” regarding our financial position, business strategy and
the plans and objectives of management for future operations, are
forward- looking statements. When used in this Report, words such
as “anticipate,” “believe,” “estimate,” “expect,” “intend” and
similar expressions, as they relate to us or our management,
identify forward-looking statements. Such forward-looking
statements are based on the beliefs of management, as well as
assumptions made by, and information currently available to, the
Company’s management. Actual results could differ materially from
those contemplated by the forward-looking statements as a result of
certain factors detailed in our filings with the SEC. All
subsequent written or oral forward-looking statements attributable
to us or persons acting on our behalf are qualified in their
entirety by this paragraph.
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with the
unaudited condensed financial statements and the notes thereto
contained elsewhere in this 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 as a Cayman Islands
exempted company and formed for the purpose of effecting a merger,
amalgamation, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more
businesses. Our efforts to identify a prospective target business
will not be limited to a particular industry or geographic
location. However, our Amended and Restated Memorandum and Articles
of Incorporation provides that we shall not undertake our initial
Business Combination with any entity that is based in, located in
or with its principal business operations in China (including Hong
Kong and Macau). We intend to effectuate our initial Business
Combination using cash from the proceeds of our IPO and the sale of
the private units, our shares, debt or a combination of cash,
shares and debt.
Our sponsor is Keyarch Global Sponsor Limited, a Cayman Islands
limited liability company. We are an emerging growth company and,
as such, we are subject to all of the risks associated with
emerging growth companies.
If we are unable to complete a Business Combination within the
Combination Period, we will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably
possible but not more than ten business days thereafter,
redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account
including income earned on the funds held in the Trust Account and
not previously released to us to pay our franchise and income
taxes, divided by the number of then outstanding Public Shares,
which redemption will completely extinguish Public Shareholders’
rights as shareholders (including the right to receive further
liquidating distributions, if any), subject to applicable law, and
(iii) as promptly as reasonably possible following such
redemption, subject to the approval of the remaining shareholders
and the board of directors, dissolve and liquidate, subject in each
case to our obligations under Cayman Islands law to provide for
claims of creditors and the requirements of other applicable
law.
Results of Operations
We have neither engaged in any operations nor generated any
revenues to date. Our only activities from April 23, 2021
(date of inception) to September 30, 2022 were organizational
activities and those necessary to consummate the IPO, described
below. Following our IPO, we do not expect to generate any
operating revenues until after the completion of our Business
Combination. We expect to generate non-operating income in the form
of interest income on cash and marketable securities held after the
IPO. 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 three months ended
September 30, 2022, we had a net profit of $341,706, which consists
of loss of $184,293 derived from general and administrative
expenses offset by income earned on investment held in Trust
Account of $525,192 and bank interest income of $807.
For
the three months ended September 30, 2021, we had a net loss
of $10,431, which consists of loss of $10,431 derived from general
and administrative expenses.
For the nine months ended
September 30, 2022, we had a net profit of $22,913, which consists
of loss of $677,176 derived from general and administrative
expenses offset by income earned on investment held in Trust
Account of $699,084 and bank interest income of $1,005.
For the period from April 23, 2021 (inception) through September
30, 2021, we had a net loss of $11,632, which consists of loss of
$11,632 derived from general and administrative expenses.
Liquidity and Capital Resources
On January 27, 2022, we consummated our IPO of 10,000,000 units, at
$10.00 per Unit, generating gross proceeds of $100,000,000.
Simultaneously with the closing of our IPO, we consummated the sale
of 500,000 Private Placement Units at a price of $10.00 per Private
Placement Unit in a Private Placement to the Sponsor and
EarlyBirdCapital, generating total gross proceeds of
$5,000,000.
On February 8, 2022, the underwriters in our IPO purchased an
additional 1,500,000 Units to exercise its over-allotment option in
full at a purchase price of $10.00 per Unit, generating gross
proceeds of $15,000,000. Simultaneously with the closing of the
fully exercise of the over-allotment option, we completed the
private sale of an aggregate of 45,000 Private Placement Units to
the Sponsor and EarlyBirdCapital, at a purchase price of $10.00 per
Private Placement Unit, generating gross proceeds of $450,000.
Offering costs amounted to $3,471,734 consisting of $2,300,000 of
underwriting discount and $1,171,734 of other offering costs.
During the nine month period ended September 30, 2022, the Company
received discount amounting to $131,420 on outstanding offering
costs included within accounts payable and accrued expenses. This
has been treated as a reversal of offering costs adjusted through
additional paid-in capital considering the related offering costs
charged against additional paid-in capital at the time of IPO.
Following the closing of our IPO and the sale of over-allotment
units, an aggregate of $116,150,000 ($10.00 per Unit) from the net
proceeds and the sale of the Private Placement Units was held in a
Trust Account.
In order to fund working capital deficiencies or finance
transaction costs in connection with an intended initial Business
Combination, our Sponsor or an affiliate of our Sponsor or certain
of our officers and directors may, but are not obligated to, loan
us funds as may be required. Any such loans would be on an
interest-free basis and would be repaid only from funds held
outside the trust account or from funds released to us upon
completion of our initial Business Combination. Up to $1,500,000 of
such loans may be convertible into units at a price of $10.00 per
unit, at the option of the lender. These units would be identical
to the private units issued to our Sponsor. 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.
As of September 30, 2022, we had marketable securities held in the
Trust Account of $116,849,084 consisting of securities held in a
treasury trust fund that invests in United States government
treasury bills, bonds or notes with a maturity of 180 days or
less. Income earned on the balance in the Trust Account may be used
by us to pay taxes. Through September 30, 2022, we did not withdraw
any income earned on the Trust Account to pay our taxes. We intend
to use substantially all of the funds held in the Trust Account, to
acquire a target business and to pay our expenses relating thereto.
To the extent that our capital stock is used in whole or in part as
consideration to effect a Business Combination, the remaining funds
held in the Trust Account will be used as working capital to
finance the operations of the target business. Such working capital
funds could be used in a variety of ways including continuing or
expanding the target business’ operations, for strategic
acquisitions and for marketing, research and development of
existing or new products. Such funds could also be used to repay
any operating expenses or finders’ fees which we had incurred prior
to the completion of our Business Combination if the funds
available to us outside of the Trust Account were insufficient to
cover such expenses.
As of September 30, 2022 and December 31, 2021, the Company had
cash of $255,200 and $9,168, respectively and working
capital/(deficit) of $298,683 and ($918,810), respectively. The
Company’s liquidity needs prior to the consummation of the IPO had
been satisfied through proceeds from notes payable and advances
from related party and from the issuance of ordinary shares.
Subsequent to the consummation of the IPO, the Company expects that
it will need additional capital to satisfy its liquidity needs
beyond the net proceeds from the consummation of the IPO and the
proceeds 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 Initial Business Combination.
Although certain of the Company’s initial shareholders, officers
and directors or their affiliates have committed to loan the
Company funds from time to time or at any time, in whatever amount
they deem reasonable in their sole discretion, there is no
guarantee that the Company will receive such funds.
Accordingly, the accompanying unaudited condensed financial
statement has been prepared in conformity with U.S. GAAP, which
contemplates continuation of the Company as a going concern and the
realization of assets and the satisfaction of liabilities in the
normal course of business. The financial statement does not include
any adjustments that might result from the outcome of this
uncertainty. Further, we have incurred and expect to continue to
incur significant costs in pursuit of our financing and acquisition
plans. Management plans to address this uncertainty during period
leading up to the Initial Business Combination. The Company cannot
provide any assurance that its plans to raise capital or to
consummate an Initial Business Combination will be successful.
Based on the foregoing, management believes that the Company will
not have sufficient working capital and borrowing capacity to meet
its needs through the earlier of the consummation of the Initial
Business Combination or one year from this filing. These
factors, among others, raise substantial doubt about our ability to
continue as a going concern.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be
considered off-balance sheet arrangements as of September 30, 2022.
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.
Quantitative and Qualitative Disclosures About Market
Risk
We are a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and are not required to provide the information
otherwise required under this item.
Related Party Transactions
Private Placement Units
On January 27, 2022, our Sponsor and EarlyBirdCapital
purchased an aggregate of 500,000 private units (including 450,000
private units purchased by our sponsor and 50,000 private units
purchased by EarlyBirdCapital) at a price of $10.00 per unit, for a
purchase price of $5,000,000 in the aggregate.
On
February 8, 2022, our Sponsor and EarlyBirdCapital purchased
an aggregate of 45,000 private units (including 40,500 private
units purchased by our Sponsor and 4,500 private units purchased by
EarlyBirdCapital) at a price of $10.00 per unit, for a purchase
price of $450,000 in the aggregate. Each unit consists of
one Class A ordinary share, one-half of one redeemable
warrant and one right. Each whole private warrant entitles the
holder to purchase one Class A ordinary share at a price of
$11.50 per share. Ten rights will entitle the holder to one
Class A ordinary share at the closing of the Business
Combination.
Administrative Services Agreement
We entered
into an agreement that provides, commencing on the effective date
of the registration statement for the IPO and through the earlier
of consummation of the initial Business Combination or our
liquidation, we agree to pay the Sponsor a total of $10,000 per
month for administrative and support services. For the three and
nine months ended September 30, 2022, the Company incurred $30,000
and $80,000, respectively for administrative and support
services.
Other Contractual Obligations
Registration Rights
The holders of the Founder Shares and any underlying ordinary
shares, EBC Founder Shares, private units (and their component
parts and securities underlying those component parts) and any
units that may be issued on conversion of working capital loans
(and their component parts and securities underlying those
component parts) are entitled to registration rights pursuant to a
registration rights agreement signed upon the consummation of our
IPO requiring us to register such securities for resale. The
holders of these securities will be entitled to make up to three
demands, excluding short form registration demands, that we
register such securities. Notwithstanding anything to the contrary,
EarlyBirdCapital may only make a demand on one occasion and only
during the 5-year period beginning on the effective date of the
registration statement of which this prospectus forms a part. In
addition, the holders have certain “piggy-back” registration rights
with respect to registration statements filed subsequent to our
completion of our initial Business Combination and rights to
require us to register for resale such securities pursuant to
Rule 415 under the Securities Act; provided, however, that
EarlyBirdCapital may participate in a “piggy-back” registration
only during the 7-year period beginning on the effective date of
the registration statement of which this prospectus forms a part.
We will bear the expenses incurred in connection with the filing of
any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of IPO to
purchase up to 1,500,000 additional Units to cover over-allotments,
if any, at the IPO price less the underwriting discounts and
commissions. The underwriters exercised the over-allotment option
in full on February 8, 2022.
EarlyBirdCapital were entitled to an underwriting discount of $0.20
per Unit, or $2 million in the aggregate, paid upon the closing of
the IPO. Additionally, we have engaged EarlyBirdCapital as an
advisor in connection with our Business Combination to assist us in
holding meetings with our shareholders to discuss the potential
Business Combination and the target business’ attributes, introduce
us to potential investors that are interested in purchasing our
securities in connection with our initial Business Combination and
assist us with our press releases and public filings in connection
with the Business Combination. We will pay EarlyBirdCapital a cash
fee for such services upon the consummation of our initial Business
Combination in an amount equal to 3.5% of the gross proceeds of our
IPO. In addition, we may engage EarlyBirdCapital as an advisor in
connection with introducing a target business to us. If we engage
EarlyBirdCapital and it introduces us to the target business with
whom we complete our initial Business Combination, EarlyBirdCapital
will receive a cash fee equal to 1% of the total consideration
payable in the initial Business Combination.
Deferred Legal Fee
On April 1, 2022, Company entered
into letter agreement with Ellenoff Grossman & Schole LLP
(“EGS”) as legal counsel in connection with the Company’s efforts
to identify, evaluate, negotiate, finance and consummate an initial
business combination with an operating company or business to be
determined by the Company. According to the engagement, the Company
will be billed on a monthly basis, with fifty percent (50%) of all
fees being due on a rolling basis, up to a total of $350,000 (the
“Front Fee”), and the balance of all fees (the “Deferred Fee”)
being due upon consummation of a Business Combination. As of
September 30, 2022 and December 31, 2021, the Company had $4,668
and $0, respectively as deferred legal fee.
Critical Accounting Policies
The preparation of unaudited condensed 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 period reported.
Actual results could materially differ from those estimates. We
have identified the following critical accounting policies:
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 feature redemption rights that is either within the control of
the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company’s control) is
classified as temporary equity. At all other times, ordinary shares
are classified as shareholders’ equity. The Company’s ordinary
shares features certain redemption rights that are considered to be
outside of the Company’s control and subject to occurrence of
uncertain future events. Accordingly, ordinary shares subject to
possible redemption is presented at redemption of $10.10 per share
(plus any income earned on investment held in Trust Account) as
temporary equity, outside of the shareholders’ equity section of
the Company’s balance sheet. The Company recognizes changes in
redemption value immediately as they occur and adjusts the carrying
value of redeemable ordinary shares to equal the redemption value
at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable ordinary shares are affected by
charges against additional paid in capital or accumulated deficit
if additional paid in capital equals to zero.
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of
FASB ASC 260, Earnings Per Share. The unaudited condensed
statements of operations include a presentation of income (loss)
per redeemable share and income (loss) per non-redeemable share
following the two-class method of income (loss) per share. In order
to determine the net income (loss) attributable to both the
redeemable shares and non-redeemable shares, the Company 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. The Company then allocated the undistributed income
(loss) ratably based on the weighted average number of shares
outstanding between the redeemable and non-redeemable shares. Any
remeasurement of the accretion to redemption value of the ordinary
shares subject to possible redemption was considered to be
dividends paid to the public shareholders.
Offering Costs
Offering costs consist of underwriting, legal, accounting,
registration and other expenses incurred through the balance sheet
date that are directly related to the IPO. The Company complies
with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting
Bulletin Topic 5A – “Expenses of Offering”. Offering costs are
allocated between the Public Shares, Public Warrants and Public
Rights based on the estimated fair values of Public Shares, Public
Warrants and Public Rights at the date of issuance.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a
material effect on our financial statements.
Factors That May Adversely Affect our Results of
Operations
Our results of operations and our ability to complete an initial
Business Combination may be adversely affected by various factors
that could cause economic uncertainty and volatility in the
financial markets, many of which are beyond our control. Our
business could be impacted by, among other things, downturns in the
financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain
disruptions, declines in consumer confidence and spending, the
ongoing effects of the COVID-19 pandemic, including resurgences and
the emergence of new variants, and geopolitical instability, such
as the military conflict in the Ukraine. We cannot at this time
fully predict the likelihood of one or more of the above events,
their duration or magnitude or the extent to which they may
negatively impact our business and our ability to complete an
initial Business Combination.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
We are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information
otherwise required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other
procedures designed to ensure that information required to be
disclosed in our reports filed or submitted under the Exchange Act
is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated
and communicated to management, including our Chief Executive
Officer and Chief Financial Officer (together, the “Certifying
Officers”), or persons performing similar functions, as
appropriate, to allow timely decisions regarding required
disclosure.
Under the supervision and with the participation of our management,
including our Certifying Officers, we carried out an evaluation of
the effectiveness of the design and operation of our disclosure
controls and procedures as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act. Based on the foregoing, our Certifying
Officers concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this report.
We do not expect that our disclosure controls and procedures will
prevent all errors and all instances of fraud. Disclosure controls
and procedures, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met.
Further, the design of disclosure controls and procedures must
reflect the fact that there are resource constraints, and the
benefits must be considered relative to their costs. Because of the
inherent limitations in all disclosure controls and procedures, no
evaluation of disclosure controls and procedures can provide
absolute assurance that we have detected all our control
deficiencies and instances of fraud, if any. The design of
disclosure controls and procedures also is based partly on certain
assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.
Changes in Internal Control Over Financial Reporting
There have been no changes to our internal control over financial
reporting during the quarter ended September 30, 2022 that
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
To the knowledge of our management team, there is no litigation
currently pending or contemplated against us, any of our officers
or directors in their capacity as such or against any of our
property.
ITEM 1A. RISK FACTORS
As of the date of this report, there have been no material changes
with respect to those risk factors previously disclosed in our (i)
final prospectus filed with the SEC on January 26, 2022 (“Final
Prospectus”), (ii) Annual Report on Form 10-K for the fiscal year
ended December 31, 2021, as filed with the SEC on March 30, 2022
(“Annual Report”), and (iii) Quarterly Report on Form 10-Q for the
period ended June 30, 2022, as filed with the SEC on August 11,
2022. Any of these factors could result in a significant or
material adverse effect on our results of operations or financial
condition. Additional risks could arise that may also affect our
business or ability to consummate an initial Business Combination.
We may disclose changes to such risk factors or disclose additional
risk factors from time to time in our future filings with the
SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None. For a description of the use of proceeds generated in our IPO
and private placement, see Part II, Item 5 of the Company’s Annual
Report. There has been no material change in the planned use of
proceeds from the Company’s IPO and private placement as described
in the Final Prospectus.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by
reference into, this Quarterly Report on Form 10-Q.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
|
KEYARCH
ACQUISITION CORPORATION |
|
|
|
Date:
November 8, 2022 |
|
/s/
Kai Xiong |
|
Name: |
Kai
Xiong |
|
Title: |
Chief
Executive Officer and Director |
|
|
(Principal
Executive Officer) |
|
|
|
Date:
November 8, 2022 |
|
/s/
Jing Lu |
|
Name: |
Jing
Lu |
|
Title: |
Chief
Financial Officer |
|
|
(Principal
Financial and Accounting Officer) |
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