UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2021
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period
from to
Commission File No. 001-39226
|
YUNHONG
INTERNATIONAL |
|
(Exact
name of registrant as specified in its charter) |
|
Cayman
Islands |
|
N/A |
(State
or other jurisdiction of
incorporation or organization) |
|
(I.R.S.
Employer
Identification No.) |
4
– 19/F, 126 Zhong Bei,
Wuchang District, Wuhan, China
People’s Republic of China 430061 |
|
(Address
of Principal Executive Offices, including zip code) |
|
+86
131 4555 5555 |
|
(Registrant’s
telephone number, including area code) |
|
N/A |
|
(Former
name, former address and former fiscal year, if changed since last
report) |
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 Warrant and
one Right |
|
ZGYHU |
|
The
NASDAQ Stock Market LLC |
Class
A Ordinary Shares, par value $0.001
per share |
|
ZGYH |
|
The
NASDAQ Stock Market LLC |
Warrants,
each exercisable for one Class A
Ordinary Share for $11.50 per share |
|
ZGYHW |
|
The
NASDAQ Stock Market LLC |
Rights,
each exchangeable into one-tenth of
one Class A Ordinary Share |
|
ZGYHR |
|
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 x 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
x 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 the
definitions 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 |
| x Non-accelerated
filer |
x Smaller
reporting company |
| |
x 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 x No ¨
As of July 30, 2021, there were 7,219,500 Class A ordinary shares,
$0.001 par value per share, and 1,725,000 Class B ordinary shares,
$0.001 par value per share, issued and outstanding.
YUNHONG INTERNATIONAL
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL
STATEMENTS
YUNHONG INTERNATIONAL
CONDENSED BALANCE SHEETS
| |
|
March 31, |
|
|
June 30, |
|
| |
|
2021 |
|
|
2020 |
|
| |
|
(Unaudited) |
|
|
(Audited) |
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
101,152 |
|
|
$ |
819,755 |
|
|
Prepaid expenses and other current assets |
|
|
100 |
|
|
|
23,750 |
|
|
Total Current Assets |
|
|
101,252 |
|
|
|
843,505 |
|
| |
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account |
|
|
69,739,183 |
|
|
|
69,057,508 |
|
|
Total Assets |
|
$ |
69,840,435 |
|
|
$ |
69,901,013 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
$ |
244,494 |
|
|
$ |
80,000 |
|
|
Advances from related party |
|
|
182,796 |
|
|
|
232,796 |
|
|
Promissory note- related party |
|
|
— |
|
|
|
210,659 |
|
|
Promissory note – other |
|
|
690,000 |
|
|
|
— |
|
|
Total Current Liabilities |
|
|
1,117,290 |
|
|
|
523,455 |
|
| |
|
|
|
|
|
|
|
|
|
Warrant liability |
|
|
1,824,630 |
|
|
|
895,065 |
|
|
Deferred underwriting fees payable |
|
|
2,415,000 |
|
|
|
2,415,000 |
|
|
Total Liabilities |
|
|
5,356,920 |
|
|
|
3,833,520 |
|
| |
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Class A ordinary shares
subject to possible redemption, 5,948,351and 6,106,749 shares at
March 31, 2021 and
June 30,
2020, respectively
|
|
|
59,483,510 |
|
|
|
61,067,490 |
|
| |
|
|
|
|
|
|
|
|
|
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
Preference shares, $0.001 par value; 1,000,000 shares authorized;
none issued and outstanding |
|
|
— |
|
|
|
— |
|
|
Class A ordinary shares,
$0.001 par value; 47,000,000 shares authorized; 1,271,149 and
1,112,751 shares
issued
and outstanding (excluding 5,948,351and 6,106,749 shares subject to
possible redemption) at
March
31, 2021 and June 30, 2020, respectively
|
|
|
1,271 |
|
|
|
1,113 |
|
|
Class B ordinary shares,
$0.001 par value; 2,000,000 shares authorized; 1,725,000 shares
issued and
outstanding at March 31, 2021 and June 30,
2020
|
|
|
1,725 |
|
|
|
1,725 |
|
|
Additional paid-in capital |
|
|
6,685,929 |
|
|
|
5,102,107 |
|
|
Accumulated deficit |
|
|
(1,688,920 |
) |
|
|
(104,942 |
) |
|
Total Shareholders’ Equity |
|
|
5,000,005 |
|
|
|
5,000,003 |
|
|
Total Liabilities and Shareholders’ Equity |
|
$ |
69,840,435 |
|
|
$ |
69,901,013 |
|
The accompanying notes are an integral part of the unaudited
condensed financial statements.
YUNHONG INTERNATIONAL
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| |
|
Three Months Ended
March 31,
|
|
|
Nine Months Ended
March 31,
|
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| General and administrative expenses |
|
$ |
177,304 |
|
|
$ |
51,441 |
|
|
$ |
673,148 |
|
|
$ |
51,572 |
|
| Loss from operations |
|
|
(177,304 |
) |
|
|
(51,441 |
) |
|
|
(673,148 |
) |
|
|
(51,572 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in fair value of warrant
liability |
|
|
823,560 |
|
|
|
(71,505 |
) |
|
|
(929,565 |
) |
|
|
(71,505 |
) |
| Transaction costs associated with Initial Public
Offering |
|
|
— |
|
|
|
(89,670 |
) |
|
|
— |
|
|
|
(89,670 |
) |
| Interest income earned on marketable securities
held in the Trust Account |
|
|
5,025 |
|
|
|
75,369 |
|
|
|
18,735 |
|
|
|
75,369 |
|
| Unrealized loss on marketable
securities |
|
|
— |
|
|
|
(1,151,591 |
) |
|
|
— |
|
|
|
(1,151,591 |
) |
| Total other income (loss), net |
|
|
828,585 |
|
|
|
(1,237,397 |
) |
|
|
(910,830 |
) |
|
|
(1,237,397 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
651,281 |
|
|
$ |
(1,288,838 |
) |
|
$ |
(1,583,978 |
) |
|
$ |
(1,288,969 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
of Class A redeemable ordinary shares |
|
|
6,900,000 |
|
|
|
6,771,429 |
|
|
|
6,900,000 |
|
|
|
6,771,429 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income
(loss) per share, Class A redeemable ordinary
shares |
|
$ |
0.00 |
|
|
$ |
(0.19 |
) |
|
$ |
0.00 |
|
|
$ |
(0.19 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
of Class A and Class B non-redeemable ordinary shares |
|
|
2,044,500 |
|
|
|
1,870,681 |
|
|
|
2,044,500 |
|
|
|
1,773,207 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income
(loss) per share, Class A and Class B non-redeemable ordinary
shares |
|
$ |
0.32 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.78 |
) |
|
$ |
(0.03 |
) |
The accompanying notes are an integral part of the unaudited
condensed financial statements.
YUNHONG INTERNATIONAL
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
THREE AND NINE MONTHS ENDED MARCH 31, 2021
| |
|
Class A
Ordinary Shares
|
|
|
Class B
Ordinary Shares
|
|
|
Additional
Paid-in
|
|
|
(Accumulated
Deficit)
Retained
|
|
|
Total
Shareholders’
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Equity |
|
| Balance –
July 1, 2020 |
|
|
1,112,751 |
|
|
$ |
1,113 |
|
|
|
1,725,000 |
|
|
$ |
1,725 |
|
|
$ |
5,102,107 |
|
|
$ |
(104,942 |
) |
|
$ |
5,000,003 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of Class A ordinary shares subject to possible
redemption |
|
|
(11,686 |
) |
|
|
(12 |
) |
|
|
— |
|
|
|
— |
|
|
|
(116,848 |
) |
|
|
— |
|
|
|
(116,860 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
116,863 |
|
|
|
116,863 |
|
| Balance –
September 30, 2020 |
|
|
1,101,065 |
|
|
$ |
1,101 |
|
|
|
1,725,000 |
|
|
$ |
1,725 |
|
|
$ |
4,985,259 |
|
|
$ |
11,921 |
|
|
$ |
5,000,006 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of Class A ordinary shares subject to possible
redemption |
|
|
235,212 |
|
|
|
235 |
|
|
|
— |
|
|
|
— |
|
|
|
2,351,885 |
|
|
|
— |
|
|
|
2,352,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,352,122 |
) |
|
|
(2,352,122 |
) |
| Balance –
December 31, 2020 |
|
|
1,336,277 |
|
|
$ |
1,336 |
|
|
|
1,725,000 |
|
|
$ |
1,725 |
|
|
$ |
7,337,144 |
|
|
$ |
(2,340,201 |
) |
|
$ |
5,000,004 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of Class A ordinary shares subject to possible
redemption |
|
|
(65,128 |
) |
|
|
(65 |
) |
|
|
— |
|
|
|
— |
|
|
|
(651,215 |
) |
|
|
— |
|
|
|
(651,280 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
651,281 |
|
|
|
651,281 |
|
|
Balance – March 31, 2021 |
|
|
1,271,149 |
|
|
$ |
1,271 |
|
|
|
1,725,000 |
|
|
$ |
1,725 |
|
|
$ |
6,685,929 |
|
|
$ |
(1,688,920 |
) |
|
$ |
5,000,005 |
|
THREE AND NINE MONTHS ENDED MARCH 31, 2020
| |
|
Class A
Ordinary Shares
|
|
|
Class B
Ordinary Shares
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Total
Shareholders’
|
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
| Balance –
July 1, 2019 |
|
|
— |
|
|
$ |
— |
|
|
|
1,725,000 |
|
|
$ |
1,725 |
|
|
$ |
23,275 |
|
|
$ |
(5,081 |
) |
|
$ |
19,919 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(131 |
) |
|
|
(131 |
) |
| Balance –
September 30, 2019 |
|
|
— |
|
|
$ |
— |
|
|
|
1,725,000 |
|
|
$ |
1,725 |
|
|
$ |
23,275 |
|
|
$ |
(5,212 |
) |
|
$ |
19,788 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Balance –
December 31, 2019 |
|
|
— |
|
|
$ |
— |
|
|
|
1,725,000 |
|
|
$ |
1,725 |
|
|
$ |
23,275 |
|
|
$ |
(5,212 |
) |
|
$ |
19,788 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 6,900,000 Units, net of underwriting fees and discounts,
fair value allocated to warrant liability and offering costs |
|
|
6,900,000 |
|
|
|
6,900 |
|
|
|
— |
|
|
|
— |
|
|
|
63,130,555 |
|
|
|
— |
|
|
|
63,137,455 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sale
of 250,500 Private Units, net of fair value allocated to warrant
liability |
|
|
250,500 |
|
|
|
251 |
|
|
|
— |
|
|
|
— |
|
|
|
2,444,629 |
|
|
|
— |
|
|
|
2,444,880 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of
Representative Shares |
|
|
69,000 |
|
|
|
69 |
|
|
|
— |
|
|
|
— |
|
|
|
(69 |
) |
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sale
of Unit Purchase Option |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
100 |
|
|
|
— |
|
|
|
100 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares subject to possible redemption |
|
|
(5,931,338 |
) |
|
|
(5,931 |
) |
|
|
— |
|
|
|
— |
|
|
|
(59,307,449 |
) |
|
|
— |
|
|
|
(59,313,380 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,288,838 |
) |
|
|
(1,288,838 |
) |
|
Balance – March 31, 2020 |
|
|
1,288,162 |
|
|
$ |
1,289 |
|
|
|
1,725,000 |
|
|
$ |
1,725 |
|
|
$ |
6,291,041 |
|
|
$ |
(1,294,050 |
) |
|
$ |
5,000,005 |
|
The accompanying notes are an integral part of the unaudited
condensed financial statements.
YUNHONG INTERNATIONAL
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| |
|
Nine Months Ended
March 31,
|
|
| |
|
2021 |
|
|
2020 |
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,583,978 |
) |
|
$ |
(1,288,969 |
) |
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
|
Interest income earned on marketable securities held in Trust
Account |
|
|
(18,735 |
) |
|
|
(75,369 |
) |
|
Unrealized loss on marketable securities |
|
|
— |
|
|
|
1,151,591 |
|
|
Fees charged to Trust Account |
|
|
27,060 |
|
|
|
21,602 |
|
|
Change in fair value of warrant liability |
|
|
929,565 |
|
|
|
71,505 |
|
|
Transaction costs associated with Initial Public Offering |
|
|
— |
|
|
|
89,670 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
23,650 |
|
|
|
(29,663 |
) |
|
Accrued expenses |
|
|
164,494 |
|
|
|
58,708 |
|
|
Net cash used in operating activities |
|
|
(457,944 |
) |
|
|
(925 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Investment of cash in Trust Account |
|
|
— |
|
|
|
(69,000,000 |
) |
|
Investment of cash into Trust Account - extension loan |
|
|
(690,000 |
) |
|
|
— |
|
|
Net cash used in investing activities |
|
|
(690,000 |
) |
|
|
(69,000,000 |
) |
| |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from sale of Units, net of underwriting discount paid |
|
|
— |
|
|
|
67,620,000 |
|
|
Proceeds from sale of Private Units |
|
|
— |
|
|
|
2,505,000 |
|
|
Proceeds from sale of unit purchase option |
|
|
— |
|
|
|
100 |
|
|
Repayment of advance from related party |
|
|
(50,000 |
) |
|
|
— |
|
|
Proceeds from promissory note – related party |
|
|
— |
|
|
|
10,000 |
|
|
Repayment of promissory note - related party |
|
|
(210,659 |
) |
|
|
— |
|
|
Proceeds from promissory note - other |
|
|
690,000 |
|
|
|
— |
|
|
Payment of offering costs |
|
|
— |
|
|
|
(314,448 |
) |
|
Net cash provided by financing activities |
|
|
429,341 |
|
|
|
69,820,652 |
|
| |
|
|
|
|
|
|
|
|
|
Net change in cash |
|
|
(718,603 |
) |
|
|
819,727 |
|
|
Cash at beginning of period |
|
|
819,755 |
|
|
|
19 |
|
|
Cash at end of period |
|
$ |
101,152 |
|
|
$ |
819,746 |
|
| |
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Initial classification of ordinary shares subject to possible
redemption |
|
$ |
— |
|
|
$ |
60,512,460 |
|
|
Change in value of ordinary shares subject to possible
redemption |
|
$ |
(1,583,980 |
) |
|
$ |
(1,199,080 |
) |
|
Deferred underwriting fee payable |
|
$ |
— |
|
|
$ |
2,415,000 |
|
|
Offering costs paid through promissory note – related party |
|
$ |
— |
|
|
$ |
109,509 |
|
|
Issuance of Representative Shares |
|
$ |
— |
|
|
$ |
69 |
|
The accompanying notes are an integral part of the unaudited
condensed financial statements.
NOTE 1. DESCRIPTION OF
ORGANIZATION AND BUSINESS OPERATIONS
Yunhong International (the “Company”) is a blank check company
incorporated in the Cayman Islands on January 10, 2019. The Company
was formed for the purpose of acquiring, engaging in a share
exchange, share reconstruction and amalgamation with, purchasing
all or substantially all of the assets of, entering into
contractual arrangements with, or engaging in any other similar
business combination with one or more businesses or entities
(“Business Combination”). Although the Company is not limited to a
particular industry or geographic region for purposes of
consummating a Business Combination, the Company intends to focus
on businesses that have their primary operations located in Asia
(excluding China). The Company is an early stage and emerging
growth company and, as such, the Company is subject to all of the
risks associated with early stage and emerging growth
companies.
At March 31, 2021, the Company had not yet commenced any
operations. All activity through March 31, 2021 relates to the
Company’s formation, the initial public offering (the “Initial
Public Offering”) (as discussed below) and identifying a target
company for a Business Combination. The Company will not generate
any operating revenues until after the completion of a Business
Combination, at the earliest. The Company generates non-operating
income in the form of interest income from the proceeds derived
from the Initial Public Offering.
The registration statement for the Company’s Initial Public
Offering was declared effective on February 12, 2020. On February
18, 2020, the Company consummated the Initial Public Offering of
6,000,000 units (“Units” and, with respect to the Class A ordinary
shares included in the Units sold, the “Public Shares”) at $10.00
per Unit, generating gross proceeds of $60,000,000, which is
described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the
Company consummated the sale of 232,500 units (the “Private Units”)
at a price of $10.00 per Private Unit in a private placement to the
Company’s sponsor, LF International Pte. Ltd. (the “Sponsor”),
generating gross proceeds of $2,325,000, which is described in Note
4.
Following the closing of the Initial Public Offering on February
18, 2020, an amount of $60,000,000 ($10.00 per Unit) from the net
proceeds of the sale of the Units in the Initial Public Offering
and the sale of the Private Units was placed in a trust account
(“Trust Account”), until the earlier of: (i) the completion of a
Business Combination or (ii) the distribution of the funds in the
Trust Account to the Company’s shareholders, as described below.
The Trust Account is controlled by the terms of the Investment
Management Trust Agreement, dated February 12, 2020, by and between
the Company and American Stock Transfer & Trust Company LLC, as
the trustee (the “Trust Agreement”) (see Note 9 for additional
information).
On February 24, 2020, in connection with the underwriters’ election
to fully exercise their over-allotment option, the Company
consummated the sale of an additional 900,000 Units at $10.00 per
Unit and the sale of an additional 18,000 Private Units at $10.00
per Private Unit, generating total gross proceeds of $9,180,000.
Following the closing, an additional $9,000,000 was deposited into
the Trust Account, bringing the aggregate proceeds held in the
Trust Account to $69,000,000.
Transaction costs amounted to $4,330,715, consisting of $1,380,000
of underwriting fees, $2,415,000 of deferred underwriting fees and
$535,715 of other offering costs.
The Company’s management has broad discretion with respect to the
specific application of the net proceeds of the Initial Public
Offering and sale of the Private Units, although substantially all
of the net proceeds are intended to be applied generally toward
consummating a Business Combination. NASDAQ rules provide that the
Business Combination must be with one or more target businesses
that together have a fair market value equal to at least 80% of the
balance in the Trust Account (less any deferred underwriting
commissions and taxes payable on interest earned and less any
interest earned thereon that is released for taxes) at the time of
signing a definitive agreement in connection with a Business
Combination. The Company will only complete a Business Combination
if the post-Business Combination 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 (the “Investment Company
Act”). There is no assurance that the Company will be able to
successfully effect a Business Combination.
The Company will provide its 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. In connection with a proposed
Business Combination, the Company may seek shareholder approval of
a Business Combination at a meeting called for such purpose at
which shareholders may seek to redeem their shares, regardless of
whether they vote for or against a Business Combination.
The Company will proceed with a Business Combination only if the
Company has net tangible assets of at least $5,000,001 upon such
consummation of a Business Combination and, if the Company seeks
shareholder approval, a majority of the outstanding shares voted
are voted in favor of the Business Combination. If the Company
seeks shareholder approval of a Business Combination and it does
not conduct redemptions pursuant to the tender offer rules, the
Company’s Amended and Restated Memorandum and Articles of
Association, as amended, 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 seeking
redemption rights with respect to 15% or more of the Public Shares
without the Company’s prior written consent.
The shareholders will be entitled to redeem their Public Shares for
a pro rata portion of the amount then in the Trust Account ($10.00
per share, plus any pro rata interest earned on the funds held in
the Trust Account and not previously released to the Company to pay
its tax obligations). The per-share amount to be distributed to
shareholders who redeem their Public Shares will not be reduced by
the deferred underwriting commissions the Company will pay to the
underwriter. There will be no redemption rights upon the completion
of a Business Combination with respect to the Company’s warrants or
rights.
If a shareholder vote is not required 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 Association, as amended, offer such
redemption pursuant to the tender offer rules of the Securities and
Exchange Commission (“SEC”), and file tender offer documents with
the SEC prior to completing a Business Combination.
The Sponsor has agreed (a) to vote its Class B ordinary shares, the
Class A ordinary shares included in the Private Units (the “Private
Shares”) and any Public Shares purchased during or after the
Initial Public Offering in favor of a Business Combination, (b) not
to propose an amendment to the Company’s Amended and Restated
Memorandum and Articles of Association, as amended, with respect to
the Company’s pre-Business Combination activities prior to the
consummation of a Business Combination unless the Company provides
dissenting public shareholders with the opportunity to redeem their
Public Shares in conjunction with any such amendment; (c) not to
redeem any shares (including the Class B ordinary shares) and
Private Units (including underlying securities) into the right to
receive cash from the Trust Account in connection with a
shareholder vote to approve a Business Combination (or to sell any
shares in a tender offer in connection with a Business Combination
if the Company does not seek shareholder approval in connection
therewith) or a vote to amend the provisions of the Amended and
Restated Memorandum and Articles of Association, as amended,
relating to shareholders’ rights of pre-Business Combination
activity and (d) that the Class B ordinary shares and Private Units
(including underlying securities) shall not participate in any
liquidating distributions upon winding up if a Business Combination
is not consummated. However, the Sponsor will be entitled to
liquidating distributions from the Trust Account with respect to
any Public Shares purchased during or after the Initial Public
Offering if the Company fails to complete its Business
Combination.
The Company initially had until February 18, 2021 to consummate a
Business Combination. However, if the Company anticipated that it
may not be able to consummate a Business Combination by February
18, 2021, the Company may extend the period of time to consummate a
Business Combination up to three times, each by an additional three
months (for a total of up to 21 months to complete a Business
Combination) (the “Combination Period”). In order to extend the
time available for the Company to consummate a Business
Combination, the Sponsor or its affiliates or designees must
deposit into the Trust Account $690,000 ($0.10 per share), on or
prior to the applicable deadline for each three month extension (or
up to an aggregate of $2,070,000, or $0.30 per share, if the
Company extends for the full nine months).
On February 10, 2021, the period of time for the Company to
consummate a Business Combination was extended for an additional
three-month period ending on May 18, 2021, and, accordingly,
$690,000 was deposited into the Trust Account. The deposit was
funded by non-interest bearing unsecured convertible promissory
note from Ares Motor Works (“Ares”).
If the Company is unable to complete a Business Combination within
the Combination Period, the Company will (i) cease all operations
except for the purpose of winding up, (ii) as promptly as
reasonably possible but no more than five business days thereafter,
redeem 100% of the outstanding Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in
the Trust Account, including interest earned (net of taxes payable
and less interest to pay dissolution expenses up to $50,000),
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 liquidation
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 Company’s
board of directors, proceed to commence a voluntary liquidation and
thereby a formal dissolution of the Company, subject in each case
to its obligations to provide for claims of creditors and the
requirements of applicable law. The underwriter has agreed to waive
its rights to the deferred underwriting commission held in the
Trust Account in the event the Company does not complete a Business
Combination within the Combination Period and, in such event, such
amounts will be included with the 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 assets remaining available for distribution will
be less than the Initial Public Offering price per Unit
($10.00).
The Sponsor has agreed that it will 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 amounts in the Trust Account to below $10.00
per share, except as to any claims by a third party who executed a
waiver of any and all rights to seek access to the Trust Account
and except as to any claims under the Company’s indemnity of the
underwriters of the Initial Public Offering against certain
liabilities, including liabilities under the Securities Act of
1933, as amended (the “Securities Act”). 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 (except for the Company’s
independent public registered accounting firm), 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
In connection with the Company’s assessment of going concern
considerations in accordance with Financial Accounting Standard
Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures
of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that the mandatory liquidation
and subsequent dissolution raises substantial doubt about the
Company’s ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities
should the Company be required to liquidate after May 18, 2021.
The period of time for the Company to consummate a Business
Combination was extended for two (2) additional three-month periods
on February 10, 2021 and May 13, 2021. The May 13, 2021 additional
three month extension is for the three month period ending on
August 18, 2021. On February 10, 2021, $690,000 was deposited into
the Trust Account. The deposit was funded by non-interest bearing
unsecured convertible promissory notes from Ares. The note is
repayable on or before November 18, 2021 (subject to the waiver
against trust limitations) and may be converted into shares of the
Company or its successor entity at a price of $10.00 per share at
the option of the lender.
On May 13, 2021, $690,000 was deposited into the Trust Account. The
deposit was funded by non-interest bearing unsecured convertible
promissory notes from Giga Energy Inc. (f/k/a Ares Motor Works)
(“Giga Energy”). The note is repayable on or before November 18,
2021 (subject to the waiver against trust limitations) and may be
converted into shares of the Company or its successor entity at a
price of $10.00 per share at the option of the lender.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim
financial information and in accordance with the instructions to
Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain
information or footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or
omitted, pursuant to the rules and regulations of the SEC for
interim financial reporting. Accordingly, they do not include all
the information and footnotes necessary for a comprehensive
presentation of financial position, results of operations, or cash
flows. In the opinion of management, the accompanying unaudited
condensed financial statements include all adjustments, consisting
of a normal recurring nature, which are necessary for a fair
presentation of the financial position, operating results and cash
flows for the periods presented.
The accompanying unaudited condensed financial statements should be
read in conjunction with the Company’s Annual Report on Form 10-KA
for the year ended June 30, 2020, as filed with the SEC on July 23,
2021, which contains the audited financial statements and notes
thereto. The financial information as of June 30, 2020 is derived
from the audited financial statements presented in the Company’s
Annual Report on Form 10-KA for the year June 30, 2020. The interim
results for the three and nine months ended March 31, 2021 are not
necessarily indicative of the results to be expected for the year
ending June 30, 2021, or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section
2(a) of the Securities Act, as modified by the Jumpstart Our
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 independent registered public accounting firm
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 condensed financial statements in conformity
with 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 revenues and
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 condensed financial statements, which
management considered in formulating its estimate, could change in
the near term due to one or more future confirming events. One of
the more significant accounting estimates included in these
financial statements is the determination of the fair value of the
warrant liability. Such estimates may be subject to change as more
current information becomes available and 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
March 31, 2021 and June 30, 2020.
Class A Ordinary Shares Subject to Possible
Redemption
The Company accounts for its Class A ordinary shares subject to
possible redemption in accordance with the guidance in ASC Topic
480 “Distinguishing Liabilities from Equity.” Class A ordinary
shares subject to mandatory redemption are classified as a
liability instrument and are measured at fair value. Conditionally
redeemable ordinary shares (including ordinary shares that feature
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) are classified as
temporary equity. At all other times, ordinary shares are
classified as shareholders’ equity. The Company’s redeemable Class
A ordinary shares feature certain redemption rights that are
considered to be outside of the Company’s control and subject to
occurrence of uncertain future events. Accordingly, at March 31,
2021 and June 30, 2020, Class A ordinary shares subject to possible
redemption are presented as temporary equity, outside of the
shareholders’ equity section of the Company’s condensed balance
sheets.
Offering Costs
Offering costs consisted of legal, accounting, underwriting fees
and other costs incurred through the Initial Public Offering that
are directly related to the Initial Public Offering. Offering costs
amounting to $4,241,045 were charged to shareholders’ equity and
$89,670 of the offering costs were allocated to the warrant
liabilities and charged to the statement of operations upon the
completion of the Initial Public Offering.
Warrant Liability
The Company accounts for the Warrants in accordance with the
guidance contained in ASC 815-40 under which the Warrants do not
meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, the Company classifies the Warrants as
liabilities at their fair value and adjust the Warrants to fair
value at each reporting period. This liability is subject to
re-measurement at each balance sheet date until exercised, and any
change in fair value is recognized in our statement of operations.
The Private Placement Warrants and the Public Warrants for periods
where no observable traded price was available are valued using a
Monte Carlo simulation. For periods subsequent to the detachment of
the Public Warrants from the Units, the Public Warrant quoted
market price was used as the fair value as of each relevant
date.
Income Taxes
ASC Topic 740 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. The Company’s management determined that the Cayman
Islands is the Company’s only major tax jurisdiction. The Company
recognizes accrued interest and penalties related to unrecognized
tax benefits, if any, as income tax expense. There were no
unrecognized tax benefits as of March 31, 2021 and June 30, 2020
and no amounts accrued for interest and penalties. The Company is
currently not aware of any issues under review that could result in
significant payments, accruals or material deviation from its
position.
The Company is considered an exempted Cayman Islands company with
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. As such, the Company’s tax
provision is zero for the periods presented.
Net Income (Loss) Per Ordinary Share
Net income (loss) per ordinary share is computed by dividing net
income (loss) by the weighted average number of ordinary shares
outstanding for the period. The Company has not considered the
effect of (1) warrants sold in the Initial Public Offering and the
private placement to purchase 3,575,250 Class A ordinary shares,
(2) rights sold in the Initial Public Offering and the private
placement that convert into 715,050 Class A ordinary shares and (3)
345,000 Class A ordinary shares, warrants to purchase 172,500 Class
A ordinary shares and rights that convert into 34,500 Class A
ordinary shares in the unit purchase option sold to the
underwriters, in the calculation of diluted loss per share, since
the exercise of the warrants, the conversion of the rights into
Class A ordinary shares and the exercise of the unit purchase
option would be anti-dilutive under the treasury stock method.
The Company’s condensed statements of operations include a
presentation of income (loss) per share for ordinary shares subject
to possible redemption in a manner similar to the two-class method
of income (loss) per share. Net income per share, basic and
diluted, for Class A redeemable ordinary shares is calculated by
dividing the interest income earned on the Trust Account, by the
weighted average number of Class A redeemable ordinary shares
outstanding for the period. Net loss per share, basic and diluted,
for Class A and B non-redeemable ordinary shares is calculated by
dividing the net loss, adjusted for income attributable to Class A
redeemable ordinary shares, by the weighted average number of Class
A and B non-redeemable ordinary shares outstanding for the period.
Class A and B non-redeemable ordinary shares includes the Private
Units, the Representative Shares (as defined in Note 7) and Founder
Shares (as defined in Note 5) as these shares do not have any
redemption features and do not participate in the income or losses
of the Trust Account.
The following table reflects the calculation of basic and diluted
net income (loss) per ordinary share (in dollars, except per share
amounts):
| |
|
Three Months Ended
March 31, |
|
|
Nine Months Ended
March 31, |
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Redeemable Class A Ordinary Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Earnings allocable to Redeemable Class A Ordinary
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
$ |
5,025 |
|
|
$ |
75,369 |
|
|
$ |
18,735 |
|
|
$ |
75,369 |
|
|
Unrealized loss on marketable securities held in the Trust
Account |
|
|
— |
|
|
|
(1,151,591 |
) |
|
|
— |
|
|
|
(1,151,591 |
) |
|
Net Earnings |
|
$ |
5,025 |
|
|
$ |
(1,076,222 |
) |
|
$ |
18,735 |
|
|
$ |
(1,076,222 |
) |
|
Denominator: Weighted Average Redeemable Class A Ordinary
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Class A Ordinary Shares, Basic and Diluted |
|
|
6,900,000 |
|
|
|
6,771,429 |
|
|
|
6,900,000 |
|
|
|
6,771,429 |
|
|
Earnings/Basic and Diluted Redeemable Class A Ordinary Shares |
|
$ |
0.00 |
|
|
$ |
(0.19 |
) |
|
$ |
0.00 |
|
|
$ |
(0.19 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Class A and B Ordinary Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: Net Loss minus Redeemable Net Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
651,281 |
|
|
$ |
(1,288,
838 |
) |
|
$ |
(1,583,978 |
) |
|
$ |
(1,288,969 |
) |
|
Redeemable Net Earnings |
|
$ |
(5,025 |
) |
|
$ |
(1,076,222 |
) |
|
$ |
(18,735 |
) |
|
$ |
(1,076,222 |
) |
|
Non-Redeemable Net Income (Loss) |
|
$ |
(646,256 |
) |
|
$ |
(2,365,
060 |
) |
|
$ |
(1,602,713 |
) |
|
$ |
(2,365,191 |
) |
|
Denominator: Weighted Average Non-Redeemable Class A and B Ordinary
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable
Class A and B Ordinary Shares, Basic and Diluted
(1) |
|
|
2,044,500 |
|
|
|
1,870,681 |
|
|
|
2,044,500 |
|
|
|
1,773,207 |
|
|
Loss/Basic and Diluted Non-Redeemable Class A and B Ordinary
Shares |
|
$ |
0.32 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.78 |
) |
|
$ |
(0.03 |
) |
As of March 31, 2021 and 2020, basic and diluted shares are the
same as there are no securities that are dilutive to the
shareholders.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist of a foreign cash account in a
financial institution. The Company has not experienced losses on
this account and management believes the Company is not exposed to
significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which
qualify as financial instruments under ASC Topic 820, “Fair Value
Measurement,” approximates the carrying amounts represented in the
accompanying condensed balance sheets, primarily due to their
short-term nature, except for the Warrants (see Note 9).
Recently Issued Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)
(“ASU 2020-06”) to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require
separation of beneficial conversion and cash conversion features
from convertible instruments and simplifies the derivative scope
exception guidance pertaining to equity classification of contracts
in an entity’s own equity. The new standard also introduces
additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity’s own
equity. ASU 2020-06 amends the diluted earnings per share guidance,
including the requirement to use the if-converted method for all
convertible instruments. ASU 2020-06 is effective January 1, 2022
and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The
Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash
flows.
Management does not believe that any other recently issued, but not
yet effective, accounting standards, if currently adopted, would
have a material effect on the Company’s financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 6,900,000
Units at a purchase price of $10.00 per Unit, which includes the
exercise by the underwriters of their over-allotment option in full
of 900,000 Units at $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 an
exercise price of $11.50 per whole share (see Note 7). Each Public
Right entitles the holder to receive one-tenth of one Class A
ordinary share upon the consummation of a Business Combination (see
Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the
Sponsor purchased an aggregate of 232,500 Private Units at a price
of $10.00 per Private Unit, or $2,325,000 in the aggregate. On
February 24, 2020, in connection with the underwriters’ exercise of
the over-allotment option in full, the Sponsor purchased an
additional 18,000 Private Units for an aggregate purchase price of
$180,000. Each Private Unit consists of one Private Share, one-half
of one redeemable warrant (each, a “Private Warrant”) and one right
(each, a “Private Right”). Each whole Private Warrant is
exercisable to purchase one Class A ordinary share at a price of
$11.50 per whole share. Each Private Right entitles the holder to
receive one-tenth of one Class A ordinary share upon the
consummation of a Business Combination. The proceeds from the sale
of the Private Units were added to the net proceeds from the
Initial Public Offering 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 Units will be
used to fund the redemption of the Public Shares (subject to the
requirements of applicable law) and the Private Warrants (and
underlying securities) and Private Rights will expire
worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In January 2019, the Company issued one Class B ordinary share to
the Sponsor for no consideration. On May 23, 2019, the Company
cancelled the one share and issued to the Sponsor 1,437,500 Class B
ordinary shares (the “Founder Shares”) for an aggregate purchase
price of $25,000, or approximately $0.017 per share. In February
2020, the Company effected a 1.2 for 1 stock dividend for each
Founder Share outstanding, resulting in the Sponsor holding an
aggregate of 1,725,000 Founder Shares, of which up to 225,000
shares were subject to forfeiture to the extent that the
underwriters’ over-allotment option was not exercised in full or in
part, so that the Sponsor would own, on an as-converted basis, 20%
of the Company’s issued and outstanding shares after the Initial
Public Offering. All share and per share amounts have been
retroactively restated to reflect the share transactions. As a
result of the underwriters’ election to fully exercise their
over-allotment option, 225,000 Founder Shares are no longer subject
to forfeiture.
The initial shareholders agreed, subject to limited exceptions, not
to transfer, assign or sell any of their Founder Shares until the
earlier to occur of: (A) six months after the completion of
the initial Business Combination or (B) subsequent to the
initial Business Combination, (x) if the last sale price of
the Class A ordinary shares equal or exceed $12.00 per share (as
adjusted for share splits, share capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any
30-trading day period commencing at least 150 days after the
initial Business Combination, or (y) the date on which the
Company completes a liquidation, merger, capital stock exchange or
other similar transaction that results in all of the Company’s
shareholders having the right to exchange their Class A ordinary
shares for cash, securities or other property.
Advances from Related Party
During the year ended June 30, 2020, the Sponsor advanced the
Company funds in the aggregate amount of $232,796 to cover certain
working capital expenses. The advances are non-interest bearing and
payable upon demand. The Company repaid $50,000 of such advances
during the quarter ended March 31, 2021. Advances totaling
$182,796 are outstanding as of March 31, 2021.
Promissory Note – Related Party
On May 23, 2019, the Company issued an unsecured promissory note to
the Sponsor, as amended and restated on January 17, 2020 (the
“Promissory Note”). Pursuant to the Promissory Note, the Company
may borrow up to an aggregate principal amount of $300,000 to cover
expenses related to the Initial Public Offering (the “Promissory
Note”). The Promissory Note was non-interest bearing and payable on
the earlier of June 30, 2020 or the completion of the Initial
Public Offering. As of June 30, 2020, there was $210,659
outstanding under the Promissory Note. The outstanding balance
under the Promissory Note of $210,659 was repaid in July 2020.
Administrative Services Agreement
The Company entered into an agreement, commencing on February 18,
2020 through the earlier of the consummation of a Business
Combination or the Company’s liquidation, to pay the Sponsor a
monthly fee of $10,000 for office space, administrative and support
services. On April 15, 2020, the Company entered into an assignment
agreement with the Sponsor and an affiliate of the Sponsor,
pursuant to which all of the Sponsor’s rights and obligations under
the agreement were assigned to the affiliate of the Sponsor. For
the three and nine months ended March 31, 2021, the Company
incurred $30,000 and $90,000 in fees for these services,
respectively. At March 31, 2021, $20,000 is included in accrued
expenses in the accompanying condensed balance sheets.
Related Party Loans
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”). Such Working Capital Loans would be evidenced by
promissory notes. The notes would either be repaid upon
consummation of a Business Combination, without interest, or, at
the lender’s discretion, up to $1,500,000 of such Working Capital
Loans may be converted upon consummation of a Business Combination
into additional units at a price of $10.00 per Unit. 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. The units would
be identical to the Private Units. As of March 31, 2021 and June
30, 2020, no Working Capital Loans were outstanding.
Related Party Extension Loans
As discussed in Note 1, the Company may extend the period of time
to consummate a Business Combination three times by an additional
three months each time (for a total of 21 months to complete a
Business Combination). In order to extend the time available for
the Company to consummate a Business Combination, the Sponsor or
its affiliates or designee must deposit into the Trust Account for
each three-month extension $690,000 ($0.10 per share), on or prior
to the date of the applicable deadline. Any such payments would be
made in the form of a loan and will be non-interest bearing and
payable upon the consummation of a Business Combination. If the
Company completes a Business Combination, the Company would repay
such loaned amounts out of the proceeds of the Trust Account
released to the Company. Up to $1,500,000 of such loans may be
convertible into shares at a price of $10.00 per share at the
option of the lender. If the Company does not complete a Business
Combination, the Company will not repay such loans. The Sponsor and
its affiliates or designees are not obligated to fund the Trust
Account to extend the time for the Company to complete a Business
Combination.
On February 10, 2021, the period of time for the Company to
consummate a Business Combination was extended for an additional
three-month period ending on May 18, 2021, and, accordingly,
$690,000 was deposited into the Trust Account. The deposit was
funded by non-interest bearing unsecured convertible promissory
notes from Ares. The note is repayable on or before November 18,
2021 (subject to the waiver against trust limitations) and may be
converted into shares of the Company or its successor entity at a
price of $10.00 per share at the option of the lender.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19
pandemic 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 condensed financial statements. The condensed
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Registration Rights
Pursuant to a registration rights agreement entered into on
February 12, 2020, the holders of the Founder Shares, the Private
Units, securities underlying the unit purchase option issued to the
underwriters and units that may be issued upon conversion of
Working Capital Loans (and in each case holders of their component
securities, as applicable), are entitled to registration rights
requiring the Company to register such securities for resale (in
the case of the Founder Shares, only after conversion to Class A
ordinary shares). The holders of these securities are entitled to
make up to three demands, excluding short form demands, that the
Company register such securities. In addition, the holders have
certain “piggy-back” registration rights with respect to
registration statements filed subsequent to the completion of a
Business Combination and rights to require the Company to register
for resale such securities pursuant to Rule 415 under the
Securities Act. However, the registration rights agreement provides
that the Company will not permit any registration statement filed
under the Securities Act to become effective until termination of
the applicable lock-up period. The Company will bear the expenses
incurred in connection with the filing of any such registration
statements.
Underwriting Agreement
The underwriters are entitled to a deferred fee of 3.5% of the
gross proceeds of the Initial Public Offering, or $2,415,000. The
deferred fee will be paid in cash upon the closing of a Business
Combination from the amounts held in the Trust Account, subject to
the terms of the underwriting agreement.
Right of First Refusal
For a period beginning on the closing of Initial Public Offering
and ending 12 months from the closing of a Business Combination,
the Company has granted the underwriters a right of first refusal
to act as lead-left book running manager and lead left manager for
any and all future private or public equity, convertible and debt
offerings during such period. In accordance with FINRA Rule
5110(f)(2)(E)(i), such right of first refusal shall not have a
duration of more than three years from the effective date of the
registration statements for the Initial Public Offering.
NOTE 7. SHAREHOLDERS’ EQUITY
Preference Shares — The Company is authorized to
issue 1,000,000 preference shares with a par value of $0.001 per
share with such designations, voting and other rights and
preferences as may be determined from time to time by the Company’s
board of directors. At March 31, 2021 and June 30, 2020, there were
no preference shares issued or outstanding.
Class A Ordinary Shares — The Company is
authorized to issue 47,000,000 Class A ordinary shares with a par
value of $0.001 per share. Holders of Class A ordinary shares are
entitled to one vote for each share. At March 31, 2021 and June 30,
2020, there were 1,271,149 and 1,112,751 Class A ordinary shares
issued and outstanding, excluding 5,948,351and 6,106,749 shares
subject to possible redemption, respectively.
Class B Ordinary Shares — The Company is
authorized to issue 2,000,000 Class B ordinary shares with a par
value of $0.001 per share. At March 31, 2021 and June 30, 2020,
there were 1,725,000 Class B ordinary shares issued and
outstanding.
The Class B ordinary shares will automatically convert into Class A
ordinary shares at the time of a Business Combination on a
one-for-one basis, subject to adjustment for share splits, share
capitalizations, reorganizations, recapitalizations and the like.
In the case that additional Class A ordinary shares, or
equity-linked securities, are issued or deemed issued in excess of
the amounts sold in Initial Public Offering and related to the
closing of the Business Combination, the ratio at which Class B
ordinary shares shall convert into Class A ordinary shares will be
adjusted (unless the holders of a majority of the issued and
outstanding Class B ordinary shares agree to waive such
anti-dilution adjustment with respect to any such issuance or
deemed issuance) so that the number of Class A ordinary shares
issuable upon conversion of all Class B ordinary shares will equal,
in the aggregate, 20% of the sum of all ordinary shares outstanding
upon completion of the Initial Public Offering plus all Class A
ordinary shares and equity-linked securities issued or deemed
issued in connection with the Business Combination (excluding any
shares or equity-linked securities issued, or to be issued, to any
seller in the Business Combination or any private
placement-equivalent units issued to the Sponsor or its affiliates
upon conversion of loans made to the Company). Holders of Founder
Shares may also elect to convert their Class B ordinary shares into
an equal number of Class A ordinary shares, subject to adjustment
as provided above, at any time.
NOTE 8. WARRANTS
Warrants — As of March 31, 2021 and June 30,
2020 there were 3,450,000 Public Warrants outstanding. Public
Warrants may only be exercised for a whole number of shares. No
fractional shares will be issued upon exercise of the Public
Warrants. The Public Warrants will become exercisable on the later
of (a) the consummation of a Business Combination or (b) 12 months
from the effective date of the registration statements for the
Initial Public Offering. The Public Warrants will expire five years
from the consummation of a Business Combination or earlier upon
redemption or liquidation.
The Company will not be obligated to deliver any Class A ordinary
shares pursuant to the exercise of a warrant and will have no
obligation to settle such warrant exercise unless a registration
statement under the Securities Act with respect to the Class A
ordinary shares underlying the warrants is then effective and a
prospectus relating thereto is current, subject to the Company
satisfying its obligations with respect to registration.
The Company has agreed that as soon as practicable, but in no event
later than 15 business days after the closing of a Business
Combination, the Company will use its best efforts to file, and
within 60 business days following a Business Combination to have
declared effective, a registration statement covering the Class A
ordinary shares issuable upon exercise of the warrants. The Company
will use its best efforts to cause the same to become effective and
to maintain the effectiveness of such registration statement, and a
current prospectus relating thereto, until the expiration of the
warrants in accordance with the provisions of the warrant
agreement. No warrants will be exercisable for cash unless the
Company has an effective and current registration statement
covering the Class A ordinary shares issuable upon exercise of the
warrants and a current prospectus relating to such Class A ordinary
shares. Notwithstanding the foregoing, if a registration
statement covering the Class A ordinary shares issuable upon
exercise of the warrants is not effective within a specified period
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 pursuant to the exemption provided by Section
3(a)(9) of the Securities Act, provided that such exemption is
available. If that exemption, or another exemption, is not
available, holders will not be able to exercise their warrants on a
cashless basis.
The Company may call the warrants for redemption (excluding the
Private Warrants but including any outstanding warrants issued upon
exercise of the unit purchase option):
|
|
· |
in
whole and not in part; |
|
|
· |
at a
price of $0.01 per warrant; |
|
|
· |
upon
not less than 30 days’ prior written notice of redemption (the
“30-day redemption period”) to each warrant holder; and |
|
|
· |
if,
and only if, the reported last sale price of the Class A ordinary
shares equal or exceed $16.50 per share (as adjusted for share
splits, share capitalizations, rights issuances, subdivisions,
reorganizations, recapitalizations and the like) for any 20 trading
days within a 30-trading day period ending on the third trading day
prior to the date the Company sends to the notice of redemption to
the warrant holders. |
If and when the warrants become redeemable by the Company, the
Company may not exercise its redemption right if the issuance of
shares upon exercise of the warrants is not exempt from
registration or qualification under applicable state blue sky laws
or the Company is unable to effect such registration or
qualification.
If the Company calls the Public Warrants for redemption, management
will have the option to require any holder that wishes to exercise
the Public Warrants to do so on a “cashless basis,” as described in
the warrant agreement. The exercise price and number of ordinary
shares issuable upon exercise of the warrants may be adjusted in
certain circumstances including in the event of a share dividend,
or recapitalization, reorganization, merger or consolidation.
However, the warrants will not be adjusted for issuance of ordinary
shares at a price below its exercise price. Additionally, in no
event will the Company be required to net cash settle the warrants.
If the Company is unable to complete a Business Combination within
the Combination Period and the Company liquidates the funds held in
the Trust Account, holders of warrants will not receive any of such
funds with respect to their warrants, nor will they receive any
distribution from the Company’s assets held outside of the Trust
Account with the respect to such warrants. Accordingly, the
warrants may expire worthless.
In addition, if (x) the Company issues additional Class A ordinary
shares or equity-linked securities for capital raising purposes in
connection with the closing of a Business Combination at an issue
price or effective issue price of less than $9.20 per share (with
such issue price or effective issue price to be determined in good
faith by the Company’s board of directors and, in the case of any
such issuance to the Sponsor or its affiliates, without taking into
account any Founder Shares held by the Sponsor or such affiliates,
as applicable, 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 a Business Combination on the date of
the consummation of a Business Combination (net of redemptions),
and (z) the volume weighted average trading price of the Company’s
Class A ordinary shares during the 20 trading day period starting
on the trading day prior to the day on which the Company
consummates a Business Combination (such price, the “Market Value”)
is below $9.20 per share, the exercise price of the warrants will
be adjusted (to the nearest cent) to be equal to 115% of the higher
of the Market Value and the Newly Issued Price, and the $16.50 per
share redemption trigger price will be adjusted (to the nearest
cent) to be equal to 180% of the higher of the Market Value and the
Newly Issued Price.
As of March 31, 2021 and June 30, 2020 there were 125,250 Private
Warrants outstanding. The Private Warrants are identical to the
Public Warrants underlying the Units sold in the Initial Public
Offering, except that the Private Warrants and the Class A ordinary
shares issuable upon the exercise of the Private Warrants will not
be transferable, assignable or salable until 30 days after the
completion of a Business Combination, subject to certain limited
exceptions. Additionally, the Private Warrants will be exercisable
on a cashless basis and be non-redeemable so long as they are held
by the initial purchasers or their permitted transferees. If the
Private Warrants are held by someone other than the initial
purchasers or their permitted transferees, the Private Warrants
will be redeemable by the Company and exercisable by such holders
on the same basis as the Public Warrants.
Rights — As of March 31, 2021 and June 30, 2020 there
were 715,050 Rights outstanding. Each holder of a right will
receive one-tenth (1/10) of one Class A ordinary share upon
consummation of a Business Combination, even if the holder of such
right redeemed all Class A ordinary shares held by it in connection
with a Business Combination. No additional consideration will be
required to be paid by a holder of rights in order to receive its
additional shares upon consummation of a Business Combination as
the consideration related thereto has been included in the unit
purchase price paid for by investors in the Initial Public
Offering. If the Company enters into a definitive agreement for a
Business Combination in which the Company will not be the surviving
entity, the definitive agreement will provide for the holders of
rights to receive the same per share consideration the holders of
the Class A ordinary shares will receive in the transaction on an
as-converted into Class A ordinary share basis and each holder of a
right will be required to affirmatively convert its rights in order
to receive 1/10 share underlying each right (without paying
additional consideration).
The Company will not issue fractional shares in connection with an
exchange of rights. Fractional shares will either be rounded down
to the nearest whole share or otherwise addressed in accordance
with the applicable provisions of Cayman Islands law. As a result,
the holders of the rights must hold rights in multiples of 10 in
order to receive shares for all of the holders’ rights upon closing
of a Business Combination. If the Company is unable to complete a
Business Combination within the Combination Period and the Company
liquidates the funds held in the Trust Account, holders of rights
will not receive any of such funds with respect to their rights,
nor will they receive any distribution from the Company’s assets
held outside of the Trust Account with respect to such rights, and
the rights will expire worthless. Further, there are no contractual
penalties for failure to deliver securities to the holders of the
rights upon consummation of a Business Combination. Additionally,
in no event will the Company be required to net cash settle the
rights. Accordingly, the rights may expire worthless.
Representative Shares
On February 18, 2020, the Company issued to the designees of the
underwriters 60,000 Class A ordinary shares (the “Representative
Shares”). On February 24, 2020, in connection with the
underwriters’ election to exercise the over-allotment option in
full, the Company issued an additional 9,000 Representative Shares
to the designees of the underwriters. The Company accounted for the
Representative Shares as an offering cost of the Initial Public
Offering, with a corresponding credit to shareholders’ equity. The
Company estimated the fair value of Representative Shares to be
$690,000 based upon the price of the Units sold in the Initial
Public Offering. The holders of the Representative 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 its redemption rights with respect to such
shares in connection with the completion of our initial 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 Representative Shares have been deemed compensation by FINRA
and are therefore subject to a lock-up for a period of 180 days
immediately following the date of the effectiveness of the
registration statement related to the Initial Public Offering
pursuant to Rule 5110(g)(1) of FINRA’s NASD Conduct Rules. Pursuant
to FINRA Rule 5110(g)(1), these securities will not be the subject
of any hedging, short sale, derivative, put or call transaction
that would result in the economic disposition of the securities by
any person for a period of 180 days immediately following the
effective date of the registration statements related to the
Initial Public Offering, 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 Initial Public Offering except to any
underwriter and selected dealer participating in the Initial Public
Offering and their bona fide officers or partners.
Unit Purchase Option
On February 18, 2020, the Company sold to the underwriters (and its
designees), for $100, an option to purchase up to 300,000 Units
exercisable at $12.25 per Unit (or an aggregate exercise price of
$4,226,250) commencing on the later of February 12, 2021 and the
closing of a Business Combination. On February 24, 2020, in
connection with the underwriters’ election to exercise the
over-allotment option in full, the Company issued the underwriters
an option to purchase up to an additional 45,000 Units exercisable
at $12.25 per Unit for no additional consideration. The unit
purchase option may be exercised for cash or on a cashless basis,
at the holder’s option, and expires February 12, 2025. The Units
issuable upon exercise of the option are identical to those offered
in the Initial Public Offering. The Company accounted for the unit
purchase option, inclusive of the receipt of $100 cash payment, as
an expense of the Initial Public Offering resulting in a charge
directly to shareholders’ equity. The Company estimated the fair
value of the unit purchase option is approximately $893,000, or
$2.59 per Unit, using the Black-Scholes option-pricing model. The
fair value of the unit purchase option granted to the underwriters
was estimated as of the date of grant using the following
assumptions: (1) expected volatility of 35%, (2) risk-free interest
rate of 1.39% and (3) expected life of five years. The option and
such units purchased pursuant to the option, as well as the Class A
ordinary shares underlying such units, the rights included in such
units, the Class A ordinary shares that are issuable for the rights
included in such units, the warrants included in such units, and
the shares underlying such warrants, have been deemed compensation
by FINRA and are therefore subject to a 180-day lock-up pursuant to
Rule 5110(g)(1) of FINRA’s NASDAQ Conduct Rules. Additionally, the
option may not be sold, transferred, assigned, pledged or
hypothecated for a one-year period (including the foregoing 180-day
period) following the date of Initial Public Offering except to any
underwriter and selected dealer participating in the Initial Public
Offering and their bona fide officers or partners. The option
grants to holders demand and “piggy back” rights for periods of
five and seven years, respectively, from the effective date of the
registration statements with respect to the registration under the
Securities Act of the securities directly and indirectly issuable
upon exercise of the option. The Company will bear all fees and
expenses attendant to registering the securities, other than
underwriting commissions which will be paid for by the holders
themselves. The exercise price and number of units issuable upon
exercise of the option may be adjusted in certain circumstances
including in the event of a stock dividend, or the Company’s
recapitalization, reorganization, merger or consolidation. However,
the option will not be adjusted for issuances of Class A ordinary
shares at a price below its exercise price.
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial
assets and liabilities that are re-measured and reported at fair
value at each reporting period, and non-financial assets and
liabilities that are re-measured and reported at fair value at
least annually.
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 Company classifies its U.S. Treasury and equivalent securities
as held-to-maturity in accordance with ASC 320 “Investments - Debt
and Equity Securities.” Held-to-maturity securities are those
securities which the Company has the ability and intent to hold
until maturity. Held-to-maturity treasury securities are recorded
at amortized cost on the accompanying condensed balance sheets and
adjusted for the amortization or accretion of premiums or
discounts.
At March 31, 2021, assets held in the Trust Account were comprised
of $63,866,065 in mutual and money market funds and $5,183,118 in
U.S. Treasury Securities. At June 30, 2020, assets held in the
Trust Account were comprised of $63,846,914 in mutual and money
market funds and $5,210,594 in U.S. Treasury Securities.
The following table presents information about the Company’s assets
that are measured at fair value on a recurring basis at March 31,
2021, and June 30, 2020, and indicates the fair value hierarchy of
the valuation inputs the Company utilized to determine such fair
value. The gross holding gains and fair value of held-to-maturity
securities at March 31, 2021, and June 30, 2020, are as
follows:
| |
|
Held-To-Maturity |
|
Level |
|
|
Amortized Cost |
|
|
Gross
Holding
(Loss) Gain |
|
|
Fair Value |
|
|
March
31, 2021 |
|
U.S. Treasury Securities (Mature on 1/31/2021) |
|
|
1 |
|
|
$ |
5,183,118 |
|
|
$ |
(19,001 |
) |
|
$ |
5,164,117 |
|
|
June
30, 2020 |
|
U.S. Treasury Securities (Matured on 8/15/2020) |
|
|
1 |
|
|
$ |
5,210,594 |
|
|
$ |
1,363 |
|
|
$ |
5,211,957 |
|
|
Description |
|
Level |
|
|
March 31,
2021 |
|
|
June 30,
2020 |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liabilities – Public Warrants |
|
|
1 |
|
|
|
1,759,500 |
|
|
|
862,500 |
|
|
Warrant Liabilities – Private Warrants |
|
|
3 |
|
|
|
65,130 |
|
|
|
32,565 |
|
The Warrants were accounted for as liabilities in accordance with
ASC 815-40 and are presented within warrant liabilities on the
balance sheets. The warrant liabilities are measured at fair value
at inception and on a recurring basis, with changes in fair value
presented within change in fair value of warrant liabilities in the
consolidated statement of operations.
Level 3 financial liabilities consist of the Private Warrant
liability for which there is no current market for these securities
such that the determination of fair value requires significant
judgment or estimation. Changes in fair value measurements
categorized within Level 3 of the fair value hierarchy are analyzed
each period based on changes in estimates or assumptions and
recorded as appropriate.
The fair value of the Private Warrants was estimated at March 31,
2021 and June 30, 2020 to be $0.52 and $0.26, respectively, using
the Monte Carlo Simulation approach and the following
assumptions:
| |
|
March 31,
2021 |
|
|
June 30,
2020 |
|
|
Risk-free
interest rate |
|
|
1.04 |
% |
|
|
0.39 |
% |
|
Expected
Term |
|
|
5.0 |
|
|
|
6.0 |
|
|
Dividend
yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
Expected
volatility |
|
|
12.3 |
% |
|
|
6.3 |
% |
|
Exercise
price |
|
$ |
11.50 |
|
|
$ |
11.50 |
|
|
Unit
Price |
|
$ |
10.03 |
|
|
$ |
9.76 |
|
The following table presents the changes in the fair value of Level
3 warrant liabilities:
| |
|
Private Warrants |
|
|
Fair value as of June 30, 2020 |
|
$ |
32,565 |
|
|
Change in valuation inputs or other assumptions |
|
|
32,565 |
|
|
Fair value as of March 31, 2021 |
|
$ |
65,130 |
|
There were no transfers in or out of Level 3 from other levels in
the fair value hierarchy during the three months ended March 31,
2021.
NOTE 10. TRUST ACCOUNT
During the preparation of the quarterly report for the quarter
ended March 31, 2020, the Company determined that American Stock
Transfer & Trust Company LLC, as the trustee, and Morgan
Stanley, as custodian, had not invested the Trust Account funds in
accordance with the Trust Agreement. Thereafter, the Company
immediately took steps to liquidate such investments and to
reinvest the funds only in the types of securities specified under
the Trust Agreement (the date of such reinvestment, May 5, 2020, is
referred to herein as the “Reinvestment Date”). As of March 31,
2020, the Company had an unrealized loss on marketable securities
held in the Trust Account of $1,151,591 (including principal and
interest). Between March 31, 2020 and the Reinvestment Date, the
Company recouped part of the losses and on the Reinvestment Date
the Company had an unrealized loss on marketable securities held in
the Trust Account of $565,000 (the “Shortfall”). The Shortfall
represents the difference between the aggregate amount of the funds
in the Trust Account as of the Reinvestment Date and the amount
that would have been in the Trust Account on the Reinvestment Date
had the funds in the Trust Account always been invested pursuant to
the requirements set forth in the Trust Agreement. To remedy the
issue, and for no additional consideration, on May 14, 2020 the
Sponsor funded the Trust Account in the amount of the Shortfall.
Since the amount of the Shortfall funded by the Sponsor is not
required to be repaid by the Company, the Company recorded this
amount as a credit to additional paid in capital during the year
ended June 30, 2020.
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that
occurred after the balance sheet date up to the date that the
financial statements were issued. Based upon this review, other
than as described below, the Company did not identify any
subsequent events that would have required adjustment or disclosure
in the financial statements.
On May 13, 2021, the period of time for the Company to consummate a
Business Combination was extended for an additional three-month
period ending on August 18, 2021, and, accordingly, $690,000 was
deposited into the Trust Account. The deposit was funded by
non-interest bearing unsecured convertible promissory notes from
Giga Energy. The note is repayable on or before November 18, 2021
(subject to the waiver against trust limitations) and may be
converted into shares of the Company or its successor entity at a
price of $10.00 per share at the option of the lender.
On May 14, 2021, the Company entered into a Share Exchange
Agreement (the “Share Exchange Agreement”) with Giga Energy a
corporation formed under the laws of the Province of British
Columbia, Canada, each of Giga Energy’s shareholders named therein
(collectively, the “Sellers”), LF International Pte. Ltd., a
Republic of Singapore company, in the capacity as the
representative from and after the closing of the Transactions (as
defined below) (the “Closing”) for the Company’s shareholders other
than the Sellers (the “Purchaser Representative”), and Yang Lan, in
the capacity as the representative for the Sellers thereunder (the
“Seller Representative”). Pursuant to the Share Exchange Agreement,
among other things and subject to the terms and conditions
contained therein, the Company will effect an acquisition of Giga
Energy, by acquiring from the Sellers all of the issued and
outstanding equity interests of Giga Energy (together with the
other transactions contemplated by the Share Exchange Agreement,
the “Transactions”).
Pursuant to the Share Exchange Agreement, in exchange for all of
the outstanding shares of Giga Energy, the Company will issue to
the Sellers a number of the Company ordinary shares (the “Exchange
Shares”) equal in value to US$7,354,615,385, with the the Company
ordinary shares valued at US$10.00 per share, with fifteen percent
(15%) of such Exchange Shares (“Escrow Shares”) being deposited
into a segregated escrow at the Closing (along with dividends and
other earnings otherwise payable with respect to such Escrow
Shares). The Escrow Shares and other escrow property shall serve as
a source of security for the Sellers’ indemnification obligations
and any purchase price adjustments. The Exchange Shares, including
the Escrow Shares, will be allocated among the Sellers pro-rata
based on each Seller’s ownership of Giga Energy immediately prior
to the Closing. Certain Sellers will have their portion of the
Exchange Shares subject to a lock-up as set forth in the Lock-Up
Agreements as described below under the heading “Lock-Up
Agreement.”
The Escrow Shares will be held in an escrow account to be
maintained by Continental Stock Transfer & Trust Company, in
its capacity as the escrow agent, or such other escrow agent as
agreed by the Company and Giga Energy prior to the Closing (the
“Escrow Agent”). While the Escrow Shares are held in escrow, the
Sellers will be entitled to vote their portion of the Escrow
Shares.
Simultaneously with the Closing of the Share Exchange Agreement,
the Company, the Purchaser Representative and the Sellers will also
enter into a Registration Rights Agreement (the “Registration
Rights Agreement”). Under the Registration Rights Agreement, the
Sellers hold registration rights that obligate the Company to
register for resale under the Securities Act of 1933, as amended
(the “Securities Act”), all or any portion of the Exchange Shares
(the “Registrable Securities”) so long as such shares are not then
restricted under the Lock-Up Agreement. Sellers holding a
majority-in-interest of all Registrable Securities then issued and
outstanding are entitled under the Registration Rights Agreement to
make a written demand for registration under the Securities Act of
all or part of their Registrable Securities, so long as such shares
are not then restricted under the Lock-Up Agreement (including
shares held in escrow under the Escrow Agreement). Subject to
certain exceptions, if at any time after the Closing of the
Transactions, the Company proposes to file a registration statement
under the Securities Act with respect to its securities, under the
Registration Rights Agreement, The Company shall give notice to the
Sellers as to the proposed filing and offer the Sellers holding
Registrable Securities an opportunity to register the sale of such
number of Registrable Securities as requested by the Sellers in
writing. In addition, subject to certain exceptions, Sellers
holding Registrable Securities are entitled under the Registration
Rights Agreement to request in writing that the Company register
the resale of any or all of such Registrable Securities on Form S-3
or F-3 and any similar short-form registration that may be
available at such time.
Under the Registration Rights Agreement, the Company agrees to
indemnify the Sellers and certain persons or entities related to
the Sellers such as their officers, directors, employees, agents
and representatives (the “Seller Indemnified Parties”) against any
losses or damages resulting from any untrue statement or omission
of a material fact in any registration statement or prospectus
pursuant to which they sell Registrable Securities, unless such
liability arose from their misstatement or omission in any
registration statement or prospectus and the Sellers agree to
indemnify the Company and certain persons or entities related to
the Company such as its officers and directors and underwriters
against all losses caused by their misstatements or omissions in
those documents.
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or
the “Company” refer to Yunhong International. References to our
“management” or our “management team” refer to our officers and
directors, references to the “Sponsor” refer to LF International
Pte. Ltd. The following discussion and analysis of the Company’s
financial condition and results of operations should be read in
conjunction with the financial statements and the notes thereto
contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and
uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act that are not historical facts,
and involve risks and uncertainties that could cause actual results
to differ materially from those expected and projected. All
statements other than statements of historical fact included in
this Form 10-Q including statements in this “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” regarding the Company’s financial position, business
strategy and the plans and objectives of management for future
operations, are forward-looking statements. Words such as “expect,”
“believe,” “anticipate,” “intend,” “estimate,” “seek” and
variations and similar words and expressions are intended to
identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but
reflect management’s current beliefs, based on information
currently available. A number of factors could cause actual events,
performance or results to differ materially from the events,
performance and results discussed in the forward-looking
statements. For information identifying important factors that
could cause actual results to differ materially from those
anticipated in the forward-looking statements, please refer to the
Risk Factors section of the Company’s Annual Report on Form 10-KA
filed with the SEC. The Company’s securities filings can be
accessed on the EDGAR section of the SEC’s website at www.sec.gov.
Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise
any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
We are a blank check company incorporated as a Cayman Islands
exempted company and incorporated for the purpose of effecting a
merger, share exchange, asset acquisition, stock purchase,
reorganization or similar Business Combination with one or more
businesses. We have not selected any specific Business Combination
target. We intend to effectuate our initial Business Combination
using cash from the proceeds of our Initial Public Offering and the
private placement of the private units, the proceeds of the sale of
our securities in connection with our initial Business Combination,
our shares, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of
our acquisition plans. We cannot assure you that our plans to raise
capital or to complete our initial Business Combination will be
successful.
Results of Operations
We have neither engaged in any operations nor generated any
revenues to date. Our only activities since inception have been
organizational activities, those necessary to prepare for our
Initial Public Offering, and after the Initial Public Offering,
identifying a target company for a Business Combination. We will
not generate any operating revenues until after completion of our
initial Business Combination, at the earliest. We generate
non-operating income in the form of interest income on marketable
securities held in the Trust Account. We incur expenses as a result
of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence
expenses in connection with completing a Business Combination.
For the three months ended March 31, 2021, we had a net income of
$651,281, which consists of change in fair value of warrant
liability of $823,560 and interest earned on marketable securities
held in the Trust Account of $5,025, offset by general and
administrative expenses of $177,304.
For the nine months ended March 31, 2021, we had a net loss of
$1,583,978, which consists of general and administrative expenses
of $673,148 and change in fair value of warrant liability of
$929,565, offset by interest earned on marketable securities held
in the Trust Account of $18,735.
For the three months ended March 31, 2020, we had a net loss of
$1,288,838, which consists of general and administrative expenses
of $51,441, change in fair value of warrant liability of $71,505,
transaction costs associated with Initial Public Offering of
$89,670, unrealized loss on marketable securities held in the Trust
Account of $1,151,591, offset by interest earned on marketable
securities held in the Trust Account of $75,369.
For the nine months ended March 31, 2020, we had a net loss of
$1,288,969, which consists of general and administrative expenses
of $51,572, change in fair value of warrant liability of $71,505,
transaction costs associated with Initial Public Offering of
$89,670, unrealized loss on marketable securities held in the Trust
Account of $1,151,591, offset by interest earned on marketable
securities held in the Trust Account of $75,369.
Liquidity and Capital Resources
On February 18, 2020, we consummated the Initial Public Offering of
6,000,000 units at $10.00 per unit, generating gross proceeds of
$60,000,000. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 232,500 private placement
units to the Sponsor at a price of $10.00 per unit, generating
gross proceeds of $2,325,000.
On February 24, 2020, in connection with the underwriters’ election
to fully exercise their over-allotment option, we consummated the
sale of an additional 900,000 units at $10.00 per Unit and the sale
of an additional 18,000 private units at $10.00 per private
placement unit, generating total gross proceeds of $9,180,000.
Following our Initial Public Offering, the exercise of the
over-allotment option and the sale of the private units, a total of
$69,000,000 was placed in the Trust Account. We incurred $4,330,715
in transaction costs, including $1,380,000 of underwriting fees,
$2,415,000 of deferred underwriting fees and $535,715 of other
offering costs.
For the nine months ended March 31, 2021, cash used in operating
activities was $457,944, which consisted of our net loss of
$1,583,978 was affected by interest earned on marketable securities
held in the Trust Account of $18,735, offset by fees charged to
Trust Account of $27,060 and change in fair value of warrant
liability of $929,565. Changes in operating assets and liabilities
provided $188,144 of cash from operating activities.
For the nine months ended March 31, 2020, cash used in operating
activities was $925. Net loss of $1,288,969 was affected by
interest earned on marketable securities held in the Trust Account
of $75,369, offset by unrealized loss on marketable securities held
in the Trust Account of $1,151,591, fees charged to Trust Account
of $21,602, change in fair value of warrant liability of $71,505,
and transaction costs associated with Initial Public Offering of
$89,670. Changes in operating liabilities provided $29,045 of cash
from operating activities.
As of March 31, 2021, we had cash and marketable securities of
$69,739,183 held in the Trust Account. We intend to use
substantially all of the funds held in the Trust Account, including
any amounts representing interest earned on the Trust Account
(which interest shall be net of taxes payable and excluding
deferred underwriting commissions) to complete our initial Business
Combination. To the extent that our ordinary shares or debt is
used, in whole or in part, as consideration to complete our initial
Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations
of the target business or businesses, make other acquisitions and
pursue our growth strategies.
As of March 31, 2021, we had cash of $101,152 outside of the Trust
Account. We intend to use the funds held outside the Trust Account
primarily to identify and evaluate target businesses, perform
business due diligence on prospective target businesses, travel to
and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete our initial
Business Combination.
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. if we complete our initial Business
Combination, we would repay such loaned amounts. in the event that
our initial Business Combination does not close, we may use a
portion of the working capital held outside the Trust Account to
repay such loaned amounts but no proceeds from our Trust Account
would be used for such repayment. 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. The units would be identical to the private
units.
On February 10, 2021, the period of time for us to consummate a
Business Combination was extended for an additional three-month
period ending on May 18, 2021, and, accordingly, $690,000 was
deposited into the Trust Account. The deposit was by non-interest
bearing unsecured convertible promissory notes from Ares. The note
is repayable upon the consummation of a Business Combination and
may be converted into units at a price of $10.00 per unit at the
option of the lender.
During the preparation of the quarterly report for the quarter
ended March 31, 2020, we determined that American Stock Transfer
& Trust Company LLC, as the trustee, and Morgan Stanley, as
custodian, had not invested the Trust Account funds in accordance
with the Trust Agreement. Thereafter, we immediately took steps to
liquidate such investments and to reinvest the funds only in the
types of securities specified under the Trust Agreement (the date
of such reinvestment, May 5, 2020, is referred to herein as the
“Reinvestment Date”). As of March 31, 2020, we had an unrealized
loss on marketable securities held in the Trust Account of
$1,151,591 (including principal and interest). Between March 31,
2020 and the Reinvestment Date, we recouped part of the losses and
on the Reinvestment Date we had an unrealized loss on marketable
securities held in the Trust Account of $565,000 (the “Shortfall”).
The Shortfall represents the difference between the aggregate
amount of the funds in the Trust Account as of the Reinvestment
Date and the amount that would have been in the Trust Account on
the Reinvestment Date had the funds in the Trust Account always
been invested pursuant to the requirements set forth in the Trust
Agreement. To remedy the issue, and for no additional
consideration, on May 14, 2020 the Sponsor funded the Trust Account
in the amount of the Shortfall. Since the amount of the Shortfall
funded by the Sponsor is not required to be repaid by us, we
recorded this amount as a credit to additional paid in capital.
We do not believe we will need to raise additional funds in order
to meet the expenditures required for operating our business.
However, if our estimates of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating an
initial Business Combination are less than the actual amount
necessary to do so, we may have insufficient funds available to
operate our business prior to our initial Business Combination.
Moreover, we may need to obtain additional financing either to
complete our initial Business Combination or because we become
obligated to redeem a significant number of our public shares upon
completion of our initial Business Combination, in which case we
may issue additional securities or incur debt in connection with
such Business Combination.
Going Concern
Management has determined that the mandatory liquidation date of
May 18, 2021 and subsequent dissolution raises 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 March 31, 2021. 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.
Contractual Obligations
We do not have any long-term debt, capital lease obligations,
operating lease obligations or long-term liabilities, other than an
agreement to pay our Sponsor, and since April 2020, an affiliate of
our Sponsor a monthly fee of $10,000 for office space,
administrative and support services to us. We began incurring these
fees on February 18, 2020 and will continue to incur these fees
monthly until the earlier of the completion of our initial Business
Combination and our liquidation.
The underwriters are entitled to a deferred fee of 3.5% of the
gross proceeds of the Initial Public Offering, or $2,415,000. The
deferred fee will be paid in cash upon the closing of a Business
Combination from the amounts held in the Trust Account, subject to
the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of 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 periods reported. Actual results could
materially differ from those estimates. We have identified the
following critical accounting policies:
Warrant Liability
We account for the Warrants in accordance with the guidance
contained in ASC 815-40 under which the Warrants do not meet the
criteria for equity treatment and must be recorded as liabilities.
Accordingly, we classify the Warrants as liabilities at their fair
value and adjust the Warrants to fair value at each reporting
period. This liability is subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The Private Placement
Warrants and the Public Warrants for periods where no observable
traded price was available are valued using a Monte Carlo
simulation. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was
used as the fair value as of each relevant date.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible
redemption in accordance with the guidance in Accounting Standards
Codification (“ASC”) Topic 480 “Distinguishing Liabilities from
Equity.” Class A ordinary shares subject to mandatory redemption is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable ordinary shares (including ordinary shares
that features redemption rights that is either within the control
of the holder or subject to redemption upon the occurrence of
uncertain events not solely within our control) is classified as
temporary equity. At all other times, ordinary shares are
classified as shareholders’ equity. Our Class A ordinary shares
feature certain redemption rights that are considered to be outside
of our control and subject to occurrence of uncertain future
events. Accordingly, Class A ordinary shares subject to possible
redemption is presented as temporary equity, outside of the
shareholders’ equity section of our condensed interim balance
sheets.
Net Loss Per Ordinary Share
We apply the two-class method in calculating earnings per share.
Net income (loss) per ordinary share, basic and diluted, for Class
A redeemable ordinary shares is calculated by dividing the interest
income and unrealized losses on the Trust Account by the weighted
average number of Class A redeemable ordinary shares outstanding
since original issuance. Net income (loss) per ordinary share,
basic and diluted, for Class A and Class B non-redeemable ordinary
shares is calculated by dividing the net income (loss), less income
attributable to Class A redeemable ordinary shares, by the weighted
average number of Class A and Class B non-redeemable ordinary
shares outstanding for the periods presented.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40)
(“ASU 2020-06”) to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require
separation of beneficial conversion and cash conversion features
from convertible instruments and simplifies the derivative scope
exception guidance pertaining to equity classification of contracts
in an entity’s own equity. The new standard also introduces
additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity’s own
equity. ASU 2020-06 amends the diluted earnings per share guidance,
including the requirement to use the if-converted method for all
convertible instruments. ASU 2020-06 is effective January 1, 2022
and should be applied on a full or modified retrospective basis,
with early adoption permitted beginning on January 1, 2021. The
Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash
flows.
Management does not believe that any other recently issued, but not
yet effective, accounting standards, if currently adopted, would
have a material effect on our condensed financial statements.
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting company.
ITEM 4. CONTROLS AND
PROCEDURES
Disclosure controls and procedures are designed to ensure that
information required to be disclosed by us in our Exchange Act
reports is recorded, processed, summarized, and reported within the
time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management,
including our principal executive officer and principal financial
officer 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 principal executive officer and principal financial
and accounting officer, we conducted an evaluation of the
effectiveness of our disclosure controls and procedures as of the
end of the fiscal quarter ended March 31, 2021, as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Based upon that evaluation, our principal executive officer and
principal financial and accounting officer concluded that, solely
due to the Company’s restatement of its financial statements to
reclassify the Company’s warrants as described in the 10-K/A filed
July 23, 2021, a material weakness existed and our disclosure
controls and procedures were not effective as of March 31,
2021.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been
no change in our internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting. However, as
management has identified a material weakness in our internal
control over financial reporting with respect to the classification
of the Company’s Warrants as components of equity instead of as
liabilities, as well as the related determination of the fair value
of warrant liabilities, additional paid-in capital and accumulated
deficit, and related financial disclosures, the Company intends to
address this material weakness by enhancing its processes to
identify and appropriately apply applicable accounting requirements
to better evaluate its research and understanding of the nuances of
the complex accounting standards that apply to its financial
statements. The Company’s current plans include providing
enhanced access to accounting literature, research materials and
documents and increased communication among its personnel and
third-party professionals with whom it consults regarding complex
accounting applications. The Company has also retained the services
of a valuation expert to assist in valuation analysis of the
Warrants on a quarterly basis.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Not required for a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS.
None.
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.
|
* |
Filed
herewith. |
| ** |
Furnished
herewith. |
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|
YUNHONG
INTERNATIONAL |
| |
|
|
| Date:
July 30, 2021 |
/s/
Patrick Orlando |
| |
Name: |
Patrick
Orlando |
|
|
Title: |
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
| Date:
July 30, 2021 |
/s/
Andrey Novikov |
| |
Name: |
Andrey
Novikov |
|
|
Title: |
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
Yunhong (NASDAQ:ZGYH)
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