NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in United States Dollars (“US$”), except for number of shares)
NOTE 1 –
ORGANIZATION AND BUSINESS BACKGROUND
Venus Acquisition Corporation (“Venus”
or the “Company”) is a blank check company incorporated in the Cayman Islands on May 14, 2018. The Company was formed for
the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with
one or more businesses (“Business Combination”).
On June 10, 2021, the Company, VIYI Algorithm
Inc., a Cayman Islands exempted company (“VIYI”), Venus Merger Sub Corp., a Cayman Islands exempted company and wholly-owned
subsidiary of the Company (the “Merger Sub”) and WiMi Hologram Cloud Inc., a Cayman Islands company and the legal and beneficial
owner of a majority of the issued and outstanding voting securities of VIYI (“Majority Shareholder”), entered into a Merger
Agreement (the “Merger Agreement”). Venus Merger Sub Corp. is a company incorporated in the Cayman Islands for the purpose
of effecting the Business Combination and to serve as the vehicle for, and be subsumed by, VIYI Algorithm Inc., pursuant to the terms
of the Merger Agreement Merger Sub is wholly owned by Venus. See the further description below regarding the proposed business combination
with VIYI.
The Company is an early stage and an emerging
growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
All activities through June 30, 2022 relate to
the Company’s formation, completion of its initial public offering (the “Initial Public Offering”) which occurred on
February 11, 2021 and negotiation and consummation of the proposed Business Combination with VIYI. 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, which proceeds are held in trust.
Financing
The registration statement for the Company’s
Initial Public Offering became effective on February 8, 2021. On February 11, 2021, the Company consummated the Initial Public Offering
of 4,600,000 units (the “Public Units”), which includes the full exercise by the underwriter of its over-allotment option
in the amount of 600,000 Public Units, at $10.00 per Public Unit, generating gross proceeds of $46,000,000 which is described in Note
3.
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of, 225,000 units (the “Private Units”) at a price of $10.00 per Private
Unit in a private placement to Yolanda Management Corporation (the “Sponsor”), generating gross proceeds of $2,250,000, which
is described in Note 4.
Transaction costs amounted to $2,462,767, consisting
of $805,000 of underwriting fees, $1,150,000 of deferred underwriting fees and $507,767 of other offering costs.
Trust
Account
Following the closing of the Initial Public Offering
on February 11, 2021, the aggregate amount of $46,460,000 ($10.10 per Public Unit) was placed in a trust account (the “Trust Account”)
with Wilmington Trust, National Association acting as trustee. The funds held in the Trust Account can be invested in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in
any open-ended investment company that holds itself out as a money market fund meeting certain conditions of Rule 2a-7 of the Investment
Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution
of the funds in the Trust Account to the Company’s shareholders, as described below, except that interest earned on the Trust Account
can be released to the Company to pay its tax obligations. At closing of the Initial Public Offering, the sum of $418,430 was released
to the Company to fund its working capital needs.
Business
Combination
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 held in trust and 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 (as defined below) (less any deferred underwriting commissions and taxes payable on interest
earned) at the time of the signing of an agreement to enter into 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, as amended (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 an Initial
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.
Notwithstanding the foregoing, 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 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.
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, offer such redemption pursuant to the tender offer rules of the Securities and Exchange
Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in
a proxy statement with the SEC prior to completing a Business Combination.
The shareholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.10 per Public Share, subject to increase of
up to an additional $0.30 per Public Share in the event that the Sponsor elects to extend the period of time to consummate a Business
Combination (see below), 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 (as discussed in Note 6). There will be no redemption
rights upon the completion of a Business Combination with respect to the Company’s rights or warrants. The ordinary shares will
be recorded at redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with
Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”).
The Sponsor and any of the Company’s officers
or directors that may hold Founder Shares (as defined in Note 6) (the “shareholders”) and the underwriters will agree (a)
to vote their Founder Shares, the 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 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 Founder Shares) and Private Shares
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 relating to shareholders’
rights of pre-Business Combination activity and (d) that the Founder Shares and Private Shares shall not participate in any liquidating
distributions upon winding up if a Business Combination is not consummated. However, the shareholders 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.
On June 10, 2021, the Company entered into the
Merger Agreement, which provides for a Business Combination between Venus and VIYI Algorithm Inc. Pursuant to the Merger Agreement, the
Business Combination will be effected as a stock transaction and is intended to be qualified as a tax-free reorganization. The Merger
Agreement is by and among Venus, Merger Sub, VIYI, and WiMi Hologram Cloud Inc, a Cayman Islands limited liability company as the representative
of VIYI’s shareholders. The aggregate consideration for the Acquisition Merger is $400,000,000, payable in the form of 39,600,000
newly issued ordinary shares of Merger Sub (“Merger Sub Ordinary Share”) valued at $10.10 per share.
Upon the closing of the Business Combination,
the former Venus shareholders will receive the consideration specified below and the former VIYI shareholders will receive an aggregate
of 39,600,000 shares of Merger Sub Ordinary Share.
The Company will be seeking approval from its
shareholders of the proposed Business Combination and Merger with VIYI. The Company has filed a Preliminary Proxy Statement on Schedule
14A with the SEC regarding the terms and conditions of the proposed Merger with VIYI and other matters. The Preliminary Proxy Statement
is under review by the SEC. Assuming SEC finishes the review of the Proxy Statement, of which there can be no assurance, the Company
will provide its shareholders with definitive materials to consider in connection with the solicitation for approval of the Merger with
VIYI and other matters as described in the Proxy Statement.
On February 11, 2022, March 11, 2022, April 11, 2022, May 11, 2022, June 11, 2022, July 11, 2022 and August 11, 2022, the Company issued
an unsecured promissory note, each in an amount of $ to the Sponsor, pursuant to which such amount had been deposited
into the Trust Account in order to extend the amount of available time to complete a business combination until September 11, 2022. However,
if the Company anticipates that it may not be able to consummate a Business Combination within 12 months (including the proposed Business
combination with VIYI), the Company may extend the period of time to consummate a Business Combination up to nine times, each by an additional
month (for a total of 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 affiliate or designees must deposit into the Trust
Account $153,333
(approximately $0.033
per Public Share), up to an aggregate of $1,380,000,
or $0.30
per Public Share, on or prior to the date of the applicable deadline, for each one month extension. Any funds which may be provided
to extend the time frame will be in the form of a loan to us from our sponsor. For the extensions that we have made, the loans are interest
free and will not be repaid unless and until we complete a business combination. For the extensions that may be made in the future, the
final and definitive terms of the loan in connection with any such loans have not yet been negotiated, but any such loan would be interest
free and not repaid unless and until we complete a business combination.
As of the date of these unaudited condensed consolidated
financial statements, the Company has extended the period of time to consummate a business combination six times by an additional one
month each time (for a total of up to 6 months from the consummation of the Public Offering to complete a business combination). The insiders
have received non-interest bearing, unsecured promissory notes equal to the amount of any such deposits (i.e., $153,333 for each of the
six extensions since February 2022). Such notes would either be paid upon consummation of its initial business combination, or, at the
lender’s discretion, converted upon consummation of its business combination into additional Private Units at a price of $10.00
per unit.
On each of February 11, 2022, March 11,
2022, April 11, 2022, May 11, 2022, June 11, 2022, July 11, 2022 and August 11, 2022, the Company issued an unsecured promissory note in an amount
of $
to the sponsor, pursuant to which such amount had been deposited into the Trust Account in order to extend the amount of available
time to complete a business combination until September 11, 2022. Company has two more times to extend the amount of available
time to complete a business combination until October 11, 2022. As of June 30, 2022 and December 31, 2021, the note payable balance
of $766,665
and $0,
respectively.
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 ten 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
(i) $10.10 per share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust
Account due to reductions in the value of the trust assets, 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, 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.
Liquidity
and going concern
The Company initially had 12 months from the
consummation of this offering to consummate the initial business combination. If the Company does not complete a business
combination within 12 months from the consummation of the Public Offering, the Company will trigger an automatic winding up,
dissolution and liquidation pursuant to the terms of the amended and restated memorandum and articles of association. As a result,
this has the same effect as if the Company had formally gone through a voluntary liquidation procedure under the Companies Law.
Accordingly, no vote would be required from our shareholders to commence such a voluntary winding up, dissolution and liquidation.
However, the Company may extend the period of time to consummate a business combination nine times (for a total of up to 21 months
from the consummation of the Public Offering to complete a business combination). As of the date of this report, the Company has
extended six times by an additional one month each time (for a total of up to 18 months from the consummation of the Public Offering
to complete a business combination), and so it now has until September 11, 2022 to consummate a business combination. Pursuant to
the terms of the current amended and restated memorandum and articles of association and the trust agreement between the Company and
Wilmington Trust, National Association, in order to extend the time available for the Company to consummate our initial business
combination, the Company’s insiders or their affiliates or designees, upon five days advance notice prior to the applicable
deadline, must deposit into the Trust Account $0.033 per public share, on or prior to the date of the applicable deadline. The
insiders have received non-interest bearing, unsecured promissory notes equal to the amount of any such deposits (i.e., $153,333 for
each of the extensions since February 2022) that will not be repaid in the event that we are unable to close a business combination
unless there are funds available outside the Trust Account to do so. Such notes would either be paid upon consummation of the
Company’s initial business combination, or, at the lender’s discretion, converted upon consummation of our business
combination into additional Private Units at a price of $10.00 per unit. The Company’s shareholders have approved the issuance
of the Private Units upon conversion of such notes, to the extent the holder wishes to so convert such notes at the time of the
consummation of the Company’s initial business combination. In the event that the Company receives notice from the
Company’s insiders five days prior to the applicable deadline of their intent to effect an extension, the Company intends to
issue a press release announcing such intention at least three days prior to the applicable deadline. In addition, the Company
intends to issue a press release the day after the applicable deadline announcing whether or not the funds had been timely
deposited. If the Company is unable to consummate the Company’s initial business combination by September 11, 2022 (unless
further extended), the Company will, as promptly as possible but not more than ten business days thereafter, redeem 100% of the
Company’s outstanding public shares for a pro rata portion of the funds held in the Trust Account, including a pro rata
portion of any interest earned on the funds held in the Trust Account and not necessary to pay taxes, and then seek to liquidate and
dissolve. However, the Company may not be able to distribute such amounts as a result of claims of creditors which may take priority
over the claims of the Company’s public shareholders. In the event of dissolution and liquidation, the public rights will
expire and will be worthless.
Accordingly,
the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required
to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new
financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern if a business combination is not consummated by September 11, 2022 (unless
further extended). These unaudited condensed consolidated financial statements do not include any adjustments relating to the
recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to
continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of presentation
The accompanying unaudited condensed consolidated
financial statements are presented in U.S. Dollars and conformity with accounting principles generally accepted in the United States of
America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. The interim financial information provided is
unaudited, but includes all adjustments which management considers necessary for the fair presentation of the results for these periods.
Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 2022. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion
and Analysis, and the unaudited condensed consolidated financial statements and notes thereto included in the Company’s Form 10-K
for the fiscal year ended December 31, 2021, filed with the SEC on March 25, 2022.
Principles of Consolidation
The unaudited condensed consolidated financial
statements include the unaudited condensed consolidated financial statements of the Company and its subsidiaries. All significant intercompany
transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.
Subsidiaries are those entities in which the Company,
directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies,
to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
The accompanying unaudited condensed consolidated
financial statements reflect the activities of the Company and each of the following entities:
Schedule of Subsidiary |
|
|
|
|
Name |
|
Background |
|
Ownership |
Venus Merger Sub Corp. |
|
A Cayman Islands company Incorporated on May 25, 2021 |
|
100% Owned by Venus |
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 auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and
proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts
emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that
is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company
can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that
when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging
growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison
of the Company’s unaudited condensed consolidated financial statements with another public company which is neither an emerging
growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because
of the potential differences in accounting standards used.
Use of Estimates
The preparation of unaudited condensed consolidated
financial statements in conformity with U.S. 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 unaudited condensed consolidated financial
statements and the reported amounts of income 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 unaudited condensed consolidated financial statements, which management considered in formulating its
estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
Cash and cash equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of June 30, 2022 and December 31, 2021.
Cash and Investments Held in Trust Account
At June 30, 2022 and December 31, 2021, the assets
held in the Trust Account are held in cash and US Treasury securities. Investment securities in the Company’s Trust Account consisted
of $47,306,580 and $46,469,183 in United States Treasury Bills.
The Company classified investments that are directly
invested in U.S. Treasuries as available for sales and money market funds are classified in accordance with the trading method. All marketable
securities are recorded at their estimated fair value. Unrealized gains and losses for available-for-sale securities are recorded in other
comprehensive income (loss). The Company evaluates its investments to assess whether those with unrealized loss positions are other than
temporarily impaired. Impairments are considered other than temporary if they are related to deterioration in credit risk or if it is
likely the Company will sell the securities before the recovery of the cost basis. Realized gains and losses and declines in value determined
to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net
in the unaudited condensed consolidated statements of operations.
Warrants liabilities
The Company accounts for warrants (Public Warrants
or Private Warrants) as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific
terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480 and ASC 815, “Derivatives
and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant
to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could
potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions
for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance
and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance.
For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded
as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations. The Company has elected
to account for its Public Warrants as equity and the Private Warrants as liabilities.
Ordinary Shares Subject to Possible Redemption
The Company accounts for its ordinary shares subject
to possible redemption in accordance with the guidance in ASC 480. Ordinary share subject to mandatory redemption (if any) is classified
as a liability instrument and is measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that 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. As of June 30, 2022 and December 31, 2021, the Company’s ordinary shares feature certain redemption rights that are considered
to be outside of the Company’s control. 4,600,000 and 4,600,000 ordinary shares subject to possible redemption are presented as
temporary equity, outside of the shareholders’ equity section of the Company’s unaudited condensed consolidated balance sheets.
The Company has made a policy election in accordance
with ASC 480-10-S99-3A and recognizes changes in redemption value in accumulated deficit immediately as if the end of the first reporting
period after the Initial Public Offering was the redemption date. Redemption value is remeasured to reflect the interest earned on the
Trust Account balance that are available for distribution to redeeming shareholders.
Offering Costs
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A – “Expenses of Offering”. Offering
costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public
Offering and that were charged to shareholders’ equity upon the completion of the Public Offering.
Fair Value of Financial Instruments
FASB ASC Topic 820 “Fair Value Measurements
and Disclosures” defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach,
income approach and cost approach shall be used to measure fair value. FASB ASC Topic 820 establishes a fair value hierarchy for inputs,
which represent the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable
and unobservable inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market
data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that
the buyer and seller would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three
levels based on the inputs as follows:
Level 1 — |
Valuations based on unadjusted quoted prices in
active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts
are not being applied. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation
of these securities does not entail a significant degree of judgment.
|
Level 2 — |
Valuations based on (i) quoted prices in active
markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical or similar assets, (iii) inputs
other than quoted prices for the assets or liabilities, or (iv) inputs that are derived principally from or corroborated by market through
correlation or other means.
|
Level 3 — |
Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value of the Company’s certain
assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,”
approximates the carrying amounts represented in the consolidated balance sheet. The fair values of cash and cash equivalents, and other
current assets, accrued expenses, due to sponsor are estimated to approximate the carrying values as of June 30, 2022 and December 31,
2021 due to the short maturities of such instruments. See Note 8 for the disclosure of the Company’s assets and liabilities that
were measured at fair value on a recurring basis.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of cash and trust accounts in a financial institution which, at times may exceed the
Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the
Company is not exposed to significant risks on such accounts.
Income Taxes
The Company complies with the accounting and reporting
requirements of ASC Topic 740, “Income Taxes,” (“ASC 740”) which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial
statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws
and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 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 British Virgin Islands is the Company’s 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
and no amounts accrued for interest and penalties as of June 30, 2022 and December 31, 2021. 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 may be subject to potential examination
by foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount
of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws.
The Company’s tax provision is zero and
it has no deferred tax assets. The Company is considered to be an exempted British Virgin Islands Company and is presently not subject
to income taxes or income tax filing requirements in the British Virgin Islands or the United States.
Net Loss Per Share
The Company calculates net loss per share in accordance
with ASC Topic 260, “Earnings per Share”. In order to determine the net income (loss) attributable to both the redeemable
shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable ordinary
shares and non-redeemable ordinary shares and the undistributed income (loss) is calculated using the total net loss less any dividends
paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between
the redeemable and non-redeemable ordinary shares. Any remeasurement of the accretion to redemption value of the ordinary shares subject
to possible redemption was considered to be dividends paid to the public shareholders. As of June 30, 2022 the Company has not considered
the effect of the warrants sold in the Initial Public Offering to purchase an aggregate of 2,412,500 shares in the calculation of diluted
net loss per share, since the exercise of the warrants is contingent upon the occurrence of future events and the inclusion of such warrants
would be anti-dilutive and the Company did not have any other dilutive securities and other contracts that could, potentially, be exercised
or converted into ordinary share and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic
loss per share for the period presented.
The net loss per share presented in the statement
of operations is based on the following:
Net loss per share presented in the statement of operations | |
| | | |
| | |
| |
Six Months
Ended June 30, | |
| |
2022 | | |
2021 | |
| |
| | |
(As restated) | |
Net loss | |
$ | (197,426 | ) | |
$ | (306,463 | ) |
Accretion of carrying value to redemption value | |
| (837,397 | ) | |
| (3,632,808 | ) |
Net loss | |
$ | (1,034,823 | ) | |
$ | (3,939,271 | ) |
| |
| | | |
| | |
| |
Three Months
Ended June 30, | |
| |
2022 | | |
2021 | |
| |
| | |
(As restated) | |
Net loss | |
$ | (23,603 | ) | |
$ | (218,140 | ) |
Accretion of carrying value to redemption value | |
| (526,916 | ) | |
| - | |
Net loss | |
$ | (550,519 | ) | |
$ | (218,140 | ) |
Basic and
diluted net loss per share | |
| | | |
| | | |
| | | |
| | |
| |
Six Months
Ended
June 30,
2022 | | |
Six Months
Ended
June 30,
2021 | |
| |
Redeemable
Ordinary
shares | | |
Non-Redeemable
Ordinary
shares | | |
Redeemable
Ordinary
shares | | |
Non-Redeemable
Ordinary
shares | |
Basic and diluted net (loss) income per share: | |
| | | |
| | | |
| | | |
| | |
Numerators: | |
| | | |
| | | |
| | | |
| | |
Allocation of net loss including carrying value to redemption value | |
$ | (786,808 | ) | |
$ | (248,015 | ) | |
$ | (2,832,465 | ) | |
$ | (1,106,806 | ) |
Accretion of carrying value to redemption value | |
| 837,397 | | |
| - | | |
| 3,632,808 | | |
| - | |
Allocation of net income (loss) | |
| 50,589 | | |
| (248,015 | ) | |
| 800,343 | | |
| (1,106,806 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominators: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 4,600,000 | | |
| 1,450,000 | | |
| 3,532,597 | | |
| 1,380,387 | |
Basic and diluted net income (loss) per share | |
$ | 0.01 | | |
$ | (0.17 | ) | |
$ | 0.23 | | |
$ | (0.80 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
Three Months
Ended
June 30,
2022 | | |
Three Months
Ended
June 30,
2021 | |
| |
Redeemable
Ordinary
shares | | |
Non-Redeemable
Ordinary
shares | | |
Redeemable
Ordinary
shares | | |
Non-Redeemable
Ordinary
shares | |
Basic and diluted net loss per share: | |
| | | |
| | | |
| | | |
| | |
Numerators: | |
| | | |
| | | |
| | | |
| | |
Allocation of net loss including carrying value to redemption value | |
$ | (448,576 | ) | |
$ | (131,943 | ) | |
$ | (165,859 | ) | |
$ | (52,281 | ) |
Accretion of carrying value to redemption value | |
| 526,916 | | |
| - | | |
| - | | |
| - | |
Allocation
of net income (loss) | |
| 108,340 | | |
| (131,943 | ) | |
| (165,859 | ) | |
| (52,281 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominators: | |
| | | |
| | | |
| | | |
| | |
Weighted-average shares outstanding | |
| 4,600,000 | | |
| 1,450,000 | | |
| 4,600,000 | | |
| 1,450,000 | |
Basic and diluted net income (loss) per share | |
$ | 0.02 | | |
$ | (0.09 | ) | |
$ | (0.04 | ) | |
$ | (0.04 | ) |
Recently Issued Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited
condensed consolidated financial statements.
NOTE 3 — CASH AND INVESTMENT HELD IN
TRUST ACCOUNT
As of June 30, 2022, investment securities in
the Company’s Trust Account consisted of $47,306,580 in United States Treasury Bills and $0 in cash. As of December 31, 2021, investment
securities in the Company’s Trust Account consisted of $46,469,183 in United States Treasury Bills and $0 in cash. The Company classifies
its United States Treasury securities as available-for-sale. Available-for-sale marketable securities are recorded at their estimated
fair value on the accompanying June 30, 2022 unaudited condensed consolidated balance sheet. The carrying value, including gross unrealized
holding gain as other comprehensive income and fair value of held to marketable securities on June 30, 2022 and December 31, 2021 are
as follows:
Schedule of carrying value, including gross unrealized holding gain as other comprehensive income and fair value of held to marketable
securities | |
| | | |
| | | |
| | |
| |
Carrying
Value as of
June 30,
2022 | | |
Gross
Unrealized
Holding loss | | |
Fair Value
as of
June 30,
2022 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
| | |
| |
Available-for-sale marketable securities | |
| | | |
| | | |
| | |
U.S. Treasury Securities | |
$ | 47,306,580 | | |
$ | - | | |
$ | 47,306,580 | |
| |
Carrying
Value as of
December 31,
2021 | | |
Gross
Unrealized
Holding loss | | |
Fair Value
as of
December 31,
2021 | |
| |
| | |
| | |
| |
Available-for-sale marketable securities | |
| | | |
| | | |
| | |
U.S. Treasury Securities | |
$ | 46,469,183 | | |
$ | - | | |
$ | 46,469,183 | |
NOTE 4 – INITIAL PUBLIC OFFERING
On February 11, 2021, the Company sold 4,600,000
Units which includes a full exercise by the underwriters of their over-allotment option in the amount of 600,000 Public Units, at a purchase
price of $10.00 per Unit. Each Unit will consist of one ordinary share, one right (“Public Right”) and one redeemable Public
Warrant. Each Public Right will convert into one-tenth (1/10) of one ordinary share. Each Public Warrant will entitle the holder to purchase
one-half of one ordinary share at an exercise price of $11.50 per whole share (see Note 7).
If the Company does not complete its Business
Combination within the necessary time period described in Note 1, the Public Rights will expire and be worthless. Since the Company is
not required to net cash settle the Rights and the Rights are convertible upon the consummation of an initial Business Combination, the
management determined that the Rights are classified within shareholders’ equity upon their issuance in accordance with ASC 815-40.
The proceeds from the sale are allocated to Public Shares and Rights based on the relative fair value of the securities in accordance
with ASC 470-20-30. The value of the Public Shares and Rights will be based on the closing price paid by investors.
The Company paid an upfront underwriting discount
of $805,000 (1.75%) of the per unit offering price to the underwriter at the closing of the Public Offering, with an additional fee of
$1,150,000 (the “Deferred Discount”) of 2.5% of the gross offering proceeds payable upon the Company’s completion of
the Business Combination. The Deferred Discount will become payable to the underwriter from the amounts held in the Trust Account solely
in the event the Company completes its Business Combination. In the event that the Company does not close the Business Combination, the
underwriter has waived its right to receive the Deferred Discount. The underwriter is not entitled to any interest accrued on the Deferred
Discount.
NOTE 5 – PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering on February 11, 2021, the Sponsor purchased an aggregate of or 225,000 Private Units at a price of $10.00 per Private
Unit, ($2,250,000 in the aggregate), from the Company in a private placement. 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. The Private Units are identical to the Units sold in the
Initial Public Offering, except for the private warrants (“Private Warrants”), as described in Note 8. 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 Units and underlying securities will
be worthless.
NOTE 6 – RELATED PARTY TRANSACTIONS
Founder Shares
In May 2018, the Company issued one ordinary share
to the Sponsor for no consideration. On August 21, 2019, the Company cancelled the one share for no consideration and the Sponsor purchased
ordinary shares for an aggregate price of $25,000. The founder shares were for purposes hereof referred to as the
“Founder Shares”.
The founders and our officers and directors have
agreed not to transfer, assign or sell any of the Founder Shares (except to certain permitted transferees) until, with respect to 50%
of the Founder Shares, the earlier of (i) six months after the date of the consummation of a Business Combination, or (ii) the date on
which the closing price of the Company’s ordinary shares equals or exceeds $ per share (as adjusted for share splits, share
dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after a Business
Combination, with respect to the remaining 50% of the Founder Shares, upon six months after the date of the consummation of a Business
Combination, or earlier, in each case, if, subsequent to a Business Combination, the Company consummates a subsequent liquidation, merger,
share exchange or other similar transaction which results in all of the Company’s shareholders having the right to exchange their
ordinary shares for cash, securities or other property.
Administrative Services Arrangement
An affiliate of the Sponsor agreed, commencing
on February 8, 2021 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to make available
to the Company certain general and administrative services, including office space, utilities and administrative services, as the Company
may require from time to time. The Company has agreed to pay the affiliate of the Sponsor $10,000 per month for these services.
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or 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 notes may be converted upon consummation of a Business Combination into additional
Private 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. As of June 30, 2022 and December 31, 2021, the loan balance was $643,421 and $373,421, respectively.
Related Party Extension Loans
As discussed in Note 1, the Company may extend
the period of time to consummate a Business Combination up to nine times, each by an additional month (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 designees must deposit into the Trust Account $153,333 (approximately $0.033 per Public Share), up to an aggregate of $1,380,000,
or $0.30 per public share, on or prior to the date of the applicable deadline, for each one month extension. Any such payments would be
made in the form of a loan. The principal of the promissory note may be drawn down from time to time prior to the earlier of December
31, 2022 or the date of consummates the 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. If the Company does not complete a Business Combination,
the Company will not repay such loans. Furthermore, the letter agreement with the shareholders contains a provision pursuant to which
the Sponsor has agreed to waive its right to be repaid for such loans in the event that the Company does not complete a Business Combination.
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 11, 2022, March 11, 2022, April
11, 2022, May 11, 2022, June 11, 2022, July 11, 2022 and August 11, 2022, the Company issued an unsecured promissory note, each in
an amount of $
to the Sponsor, pursuant to which such amount had been deposited into the Trust Account in order to extend the amount of available
time to complete a business combination until September 11, 2022. The Notes are non-interest bearing and are payable upon the
closing of a business combination. In addition, the Notes may be converted, at the lender’s discretion, into additional
Private Units at a price of $10.00
per unit. As of June 30, 2022 and December 31, 2021, $766,665
and $0
were outstanding, respectively.
NOTE 7 – SHAREHOLDERS’ DEFICIT
Ordinary Shares — The Company is authorized
to issue 50,000,000 ordinary shares, with a par value of $0.001 per share. Holders of the ordinary shares are entitled to one vote for
each ordinary share. At June 30, 2022, there were 1,450,000 ordinary shares issued and outstanding, excluding 4,600,000 ordinary shares
subject to possible redemption.
Rights — Each holder of a right will receive
one-tenth (1/10) of one ordinary share upon consummation of a Business Combination, even if the holder of such right redeemed all shares
held by it in connection with a Business Combination. No fractional shares will be issued upon exchange of the rights. 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 ordinary shares
will receive in the transaction on an as-converted into 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 shares issuable
upon exchange of the rights will be freely tradable (except to the extent held by affiliates of the Company).
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.
Public Warrants
Each public warrant entitles the holder thereof
to purchase one-half (1/2) of one ordinary share at a price of $11.50 per full share, subject to adjustment as described in this prospectus.
Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares. This means that only
an even number of warrants may be exercised at any given time by a warrant holder.
No public warrants will be exercisable for cash
unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants
and a current prospectus relating to such ordinary shares. It is the Company’s current intention to have an effective and current
registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary
shares in effect promptly following consummation of an initial business combination.
Notwithstanding the foregoing, if a registration
statement covering the ordinary shares issuable upon exercise of the public warrants is not effective within 90 days following the consummation
of our initial business combination, public warrant holders may, until such time as there is an effective registration statement and during
any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to
an available exemption from registration under the Securities Act. In such event, each holder would pay the exercise price by surrendering
the warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares
underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “Fair Market Value”
(defined below) by (y) the Fair Market Value. The “Fair Market Value” shall mean the average reported last sale price of the
ordinary shares for the 10 trading days ending on the day prior to the date of exercise. For example, if a holder held 300 warrants to
purchase 150 shares and the Fair Market Value on the date prior to exercise was $15.00, that holder would receive 35 shares without the
payment of any additional cash consideration. If an exemption from registration is not available, holders will not be able to exercise
their warrants on a cashless basis.
The 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 statement relating to the
IPO. The warrants will expire at 5:00 p.m., New York City time, on the fifth anniversary of our completion of an initial business combination,
or earlier upon redemption.
The Company may redeem the outstanding warrants, in
whole and not in part, at a price of $0.01 per warrant:
| ● | at
any time while the Public Warrants are exercisable, |
| ● | upon
not less than 30 days’ prior written notice of redemption to each Public Warrant holder, |
| ● | if,
and only if, the reported last sale price of the ordinary shares equals or exceeds $16.50 per share, for any 20 trading days within a
30 trading day period ending on the third trading day prior to the notice of redemption to Public Warrant holders, and |
| ● | if,
and only if, there is a current registration statement in effect with respect to the issuance of the ordinary shares underlying such
warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until
the date of redemption. |
If the foregoing conditions are satisfied and
the Company would issue a notice of redemption, each warrant holder can exercise his, her or its warrant prior to the scheduled redemption
date. However, the price of the ordinary shares may fall below the $18.00 trigger price as well as the $11.50 warrant exercise price per
full share after the redemption notice is issued and not limit our ability to complete the redemption.
The redemption criteria for the warrants have
been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide
a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as
a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
If the Company call the warrants for redemption
as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless
basis.” In such event, each holder would pay the exercise price by surrendering the whole warrants for that number of ordinary shares
equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the
difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value.
The “fair market value” shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending
on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Whether the Company will
exercise our option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors
including the price of our ordinary shares at the time the warrants are called for redemption, the Company’s cash needs at such
time and concerns regarding dilutive share issuances.
NOTE 8 –
FAIR VALUE MEASUREMENTS
The fair value
of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received
in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between
market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks
to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs
(internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to
classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities.
An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency
and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of
Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities
in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions
that market participants would use in pricing the asset or liability. |
The following
table presents information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2022 and
December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Schedule of Company's assets that are measured at fair value on a recurring basis | |
| | | |
| | | |
| | | |
| | |
| |
June 30, | | |
Quoted Prices In Active Markets | | |
Significant Other Observable Inputs | | |
Significant Other Unobservable Inputs | |
Description | |
2022 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| | | |
| | | |
| | | |
| | |
U.S. Treasury Securities held in Trust Account* | |
$ | 47,306,580 | | |
$ | 47,306,580 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant liabilities | |
$ | 420,000 | | |
$ | - | | |
$ | - | | |
$ | 420,000 | |
| |
December 31, | | |
Quoted Prices In Active Markets | | |
Significant Other Observable Inputs | | |
Significant Other Unobservable Inputs | |
Description | |
2021 | | |
(Level 1) | | |
(Level 2) | | |
(Level 3) | |
Assets: | |
| | | |
| | | |
| | | |
| | |
U.S. Treasury Securities held in Trust Account* | |
$ | 46,469,183 | | |
$ | 46,469,183 | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant liabilities | |
$ | 410,000 | | |
$ | - | | |
$ | - | | |
$ | 410,000 | |
| * | included in cash and investments held in trust account on
the Company’s unaudited condensed consolidated balance sheet. |
The private warrants
are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the unaudited condensed
consolidated balance sheets.
The Company established
the initial fair value for the private warrants at $380,000 on February 11, 2021, the date of the Company’s Initial Public Offering,
using a Black-Scholes model. The Company allocated the proceeds received from the sale of Private Units, first to the private warrants
based on their fair values as determined at initial measurement, with the remaining proceeds recorded as ordinary shares subject to possible
redemption, and ordinary shares based on their relative fair values recorded at the initial measurement date. The warrants were classified
as Level 3 at the initial measurement date due to the use of unobservable inputs.
The key inputs
into the binomial model and Black-Scholes model were as follows at their measurement dates:
Schedule of binomial model and Black-Scholes model | |
| | | |
| | | |
| | |
| |
June 30,
2022 | | |
December
31, 2021 | | |
February
11, 2021 (Initial measurement) | |
Input | |
| | | |
| | | |
| | |
Share price | |
$ | 10.22 | | |
$ | 10.08 | | |
$ | 10.00 | |
Risk-free interest rate | |
| 3.00 | % | |
| 1.26 | % | |
| 0.46 | % |
Volatility | |
| 44 | % | |
| 44.26 | % | |
| 44 | % |
Exercise price | |
| 11.50 | | |
$ | 11.50 | | |
$ | 11.50 | |
Warrant life | |
| 5 years | | |
| 5 years | | |
| 5 years | |
As of June 30,
2022, the aggregate value of the Private Warrants was $0.42 million. The change in fair value from December 31, 2021 to June 30, 2022
was approximately $10,000.
As of December 31, 2021, the aggregate
value of the Private Warrants was $0.41 million. The change in fair value from February 11, 2021 to December 31, 2021 was approximately
$30,000.
To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Because of the
inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used
had a ready market for the investments existed. Accordingly, the degree of judgment exercised by the Company in determining fair value
is greatest for investments categorized in Level 3. 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.
NOTE 9 – 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 unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
Registration Rights
The holders of the Founder Shares, Private Units
(and their underlying securities) and any Units that may be issued upon conversion of the Working Capital Loans (and underlying securities)
will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of
the Proposed Offering. 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 consummation of a Business Combination and rights to require the Company to register for resale such
securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the filing of
any such registration statements.
Leases
The Company terminated into short-term agreements
for temporary office space. For the six months ended June 30, 2022 and 2021, the Company incurred rent expense of $901 and $6,109, respectively.
Underwriting Agreement
The underwriters are entitled to a deferred fee
of 2.5% of the gross proceeds of the Initial Public Offering, or $1,150,000. 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.
Merger Agreement
On June 10, 2021, the Company, VIYI, Merger Sub,
and WiMi, entered into the Merger Agreement. WiMi holds approximately 73% of the share capital of VIYI.
Pursuant to the Merger Agreement, upon the terms
and subject to the conditions of the Merger Agreement and in accordance with the Cayman Islands Companies Act (as revised), the parties
intend to effect a business combination transaction whereby the Merger Sub will merge with and into VIYI, with VIYI being the surviving
entity and becoming a wholly owned subsidiary of the Company on the terms and subject to the conditions set forth in the Merger Agreement
and simultaneously with the closing the Company will change our name to “MicroAlgo Inc.”
The Board of Directors of both the Company and
VIYI and the shareholders of VIYI have approved the Merger Agreement and the transactions contemplated by it.
Pursuant to the Merger Agreement, the merger is
structured as a stock for stock transaction and is intended to be qualified as a tax-free reorganization. The terms of the merger provide
for a valuation of VIYI and its subsidiaries and businesses of $400,000,000. Based upon a per share value of $10.10 per share, the VIYI
shareholders will receive approximately 39,600,000 ordinary shares of the Company which will represent approximately 85% of the combined
outstanding shares following the closing, assuming no redemptions by our shareholders and assuming conversion of our outstanding rights
into 485,000 ordinary shares. Currently, there are 6,050,000 ordinary shares of the Company issued and outstanding (including 4,600,000
ordinary shares subject to possible redemption) (assuming all the units were separated into their component parts on such date).
At the effective time of the Merger Agreement,
all outstanding options and other convertible securities of VIYI will be cancelled or converted into ordinary shares of VIYI and exchanged
for the Company’s ordinary shares as part of the consideration described above.
As contemplated by and as a condition of the Merger
Agreement, the Company entered into a backstop agreement with Ever Abundant Investments Limited, dated as of June 10, 2021. On January
24, 2022, the Company agreed with Ever Abundant Investments Limited to terminate the backstop agreement.
In addition, on January 24, 2022, the Company
entered into a second amendment to the Merger Agreement with VIYI and WiMi. The purposes of the amendment were to:
1. extend the outside termination date of the
proposed merger to June 30, 2022;
2. provide for the termination of the original
backstop agreement and the execution of the new backstop agreement with the majority shareholder of VIYI; and
3. acknowledge the existence of new potential
governmental approvals required under recent changes in China law.
Pursuant to the amendment to the Merger Agreement,
on January 24, 2022, the Company entered into a backstop agreement with WiMi. Under the new agreement, WiMi agreed to purchase (i) ordinary
shares in open market transactions in connection with any tendered or proposed redemptions, and (ii) from the Company ordinary shares
in a private placement transaction exempt from registration under the Securities Act of 1933, as amended. Any purchases, either from our
shareholders seeking to redeem ordinary shares, or from the Company are limited to up to $15 million in gross amount. WiMi has agreed
that any ordinary shares acquired by it will not be subject to redemption under the Company’s corporate organizational documents
and also waived any claims against our Trust Account.
On August 2, 2022, the Company entered into a
third amendment to the Merger Agreement with VIYI and WiMi. The purposes of the amendment were to:
1. extend the outside termination date of the
proposed merger to November 11, 2022;
2. include as a closing condition the requirement
that the requisite vote of the shareholders of VIYI has been obtained;
3. include
the requirement of the audited financial statement of VIYI for the year ended 2021 and reviewed financial statement of VIYI for the periods
ended June 30, 2022 and March 31, 2022; and
4. make
conforming changes to reflect that Purchaser will file a proxy statement with the Securities and Exchange Commission following the execution
of the Amendment relating to the approval of the Purchaser’s shareholders of the Merger and the transactions contemplated by the
Merger Agreement.
Consummation of the transactions contemplated
by the Merger Agreement are subject to customary conditions of the respective parties, including the approval of the Merger Agreement
by the Company’s shareholders, and minimum net tangible assets immediately after the closing. Other than as specifically discussed,
this report does not assume the closing of the business combination with VIYI.
On August 10, 2022, the Company entered into a
fourth amendment to the Merger Agreement with VIYI and WiMi. The purposes of the amendment were to the
requirement of VIYI’s for delivering to Company the quarterly reviewed financial statements for the period ended June 30, 2022 from
a representation and warranty to a covenant with such financial statements to be delivered not later than September 15, 2022, and to make
certain other conforming changes regarding the current status.
NOTE 10 – SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent
Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date
but before the unaudited condensed consolidated financial statements are issued, the Company has evaluated all events or transactions
that occurred after June 30, 2022, up through August 15, 2022 when the Company issued the unaudited condensed consolidated financial
statements.