UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
File No.
| (Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
| + |
| (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 | ||
| The
| ||||
| The Stock Market LLC | ||||
| The
| ||||
| The
|
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.
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).
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 | ☐ | ||
| ☒ | Smaller reporting company | ||||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of November 14, 2023, there were ordinary shares of the Registrant, par value $0.0001 per share, issued and outstanding.
HHG CAPITAL CORPORATION
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
HHG CAPITAL CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
| (Audited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepayment | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Investments held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accrual and other payable | $ | $ | ||||||
| Amount due to a related party | ||||||||
| Promissory note – related party | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting compensation | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| Ordinary shares subject to possible redemption: and shares issued and outstanding at redemption value at September 30, 2023 and December 31, 2022 | ||||||||
| Shareholders’ deficit: | ||||||||
| Ordinary shares, $ par value; shares authorized; shares issued and outstanding (excluding and shares subject to redemption) at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 1 |
HHG CAPITAL CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| General and administrative expenses | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other income: | ||||||||||||||||
| Dividend income earned in investments held in Trust Account | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income | ||||||||||||||||
| Total other income | ||||||||||||||||
| NET INCOME (LOSS) | $ | $ | $ | $ | ( | ) | ||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Unrealized gain on available-for-sale securities | ||||||||||||||||
| Reclassification of realized gain on available-for-sale securities, net to net income | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE INCOME (LOSS) | $ | $ | $ | $ | ( | ) | ||||||||||
| Basic and diluted weighted average shares outstanding, ordinary shares subject to possible redemption | ||||||||||||||||
| Basic and diluted net income per ordinary shares subject to possible redemption | $ | $ | $ | $ | ||||||||||||
| Basic and diluted weighted average shares outstanding, non-redeemable ordinary share | ||||||||||||||||
| Basic and diluted net income (loss) per non-redeemable ordinary share | $ | $ | ) | $ | ) | $ | ) | |||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 2 |
HHG CAPITAL CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY
| Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||
| Ordinary shares | Additional | Accumulated other | Total | |||||||||||||||||||||
| No. of shares | Amount | paid-in capital | comprehensive income | Accumulated deficit | shareholders’ deficit | |||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Accretion of carrying value to redemption value | - | ( | ) | ( | ) | |||||||||||||||||||
| Net income for the period | - | |||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||
| Ordinary shares | Additional | Accumulated other | Total | |||||||||||||||||||||
| No. of shares | Amount | paid-in capital | comprehensive (loss) income | Accumulated deficit | shareholders’ equity (deficit) | |||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | | ||||||||||||||||
| Accretion of carrying value to redemption value | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Unrealized holding gain on available-for-sales securities | - | |||||||||||||||||||||||
| Reclassification of realized gain on available-for-sale securities, net to net income | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| 3 |
| Three Months Ended September 30, 2023 | ||||||||||||||||||||||||
| Ordinary shares | Additional | Accumulated other | Total | |||||||||||||||||||||
| No. of shares | Amount | paid-in capital | comprehensive (loss) income | Accumulated deficit | shareholders’ | |||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Accretion of carrying value to redemption value | - | ( | ) | ( | ) | |||||||||||||||||||
| Net income for the period | - | |||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Three Months Ended September 30, 2022 | ||||||||||||||||||||||||
| Ordinary shares | Additional | Accumulated other | Total | |||||||||||||||||||||
No. of shares | Amount | paid-in capital | comprehensive (loss) income | Accumulated deficit | shareholders’ equity (deficit) | |||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Accretion of carrying value to redemption value | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Unrealized holding gain on available-for-sales securities | - | |||||||||||||||||||||||
| Reclassification of realized gain on available-for-sale securities, net to net income | ( | ) | ( | ) | ||||||||||||||||||||
| Net income for the period | - | |||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
HHG CAPITAL CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities | ||||||||
| Dividend income earned in investments held in Trust Account | ( | ) | ( | ) | ||||
| Waiver of amount due to a related party | ( | ) | ||||||
| Change in operating assets and liabilities | ||||||||
| Increase in prepayment | ( | ) | ( | ) | ||||
| Increase (decrease) in accrual and other payable | ( | ) | ||||||
| Amount due to a related party | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Proceeds of extension payments deposited in Trust Account | ( | ) | ( | ) | ||||
| Withdraw of investments in Trust Account | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of promissory note | ||||||||
| Repayment to a related party | ( | ) | ||||||
| Redemption of ordinary shares | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| NET CHANGE IN CASH | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | |||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | ||||||||
| Accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) | ||
See accompanying notes to unaudited condensed consolidated financial statements.
| 5 |
HHG CAPITAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BUSINESS BACKGROUND
HHG Capital Corporation (the “Company” or “we”, “us” and “our”) is a newly organized blank check company incorporated on July 15, 2020, under the laws of the British Virgin Islands for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or entities (“Business Combination”). Currently, the Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination, except for any entity with its principal business operations in China (including Hong Kong).
On March 15, 2023, the Company entered into non-binding letter of intent with Perfect Hexagon Group Limited.
On August 2, 2023, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Perfect Hexagon Holdings Limited, a British Virgin Islands business company and wholly owned subsidiary of the Company (“Purchaser”), Perfect Acquisitions Limited, a British Virgin Islands business company and wholly owned subsidiary of Purchaser (“Merger Sub”), and Perfect Hexagon Group Limited, a British Virgin Islands business company ( “Perfect Hexagon”). Upon the closing of the transactions contemplated by the Merger Agreement, (a) the Company will be merged with and into Purchaser (the “Reincorporation Merger”), with Purchaser surviving the Reincorporation Merger, and (b) Merger Sub will be merged with and into Perfect Hexagon (the “Acquisition Merger”), with Perfect Hexagon surviving the Acquisition Merger as a direct wholly owned subsidiary of Purchaser (collectively, the “Merger” or the “Business Combination”). Following the Business Combination, Purchaser will be a publicly traded company listed on a stock exchange in the United States.
Pursuant to the terms of the Merger Agreement, the
aggregate consideration to be paid at the closing of the Business Combination to existing shareholders of Perfect Hexagon is $
As of September 30, 2023, the Company had not commenced any operations. The Company’s entire activities from inception up to September 23, 2021 relate to the Company’s formation and the Initial Public Offering as described below. Since the Initial Public Offering, the Company’s activity has been limited to the evaluation of business combination candidates. The Company has selected December 31 as its fiscal year end.
Financing
The
registration statement for the Company’s Initial Public Offering (the “Initial Public Offering” or “IPO”
as described in Note 4) became effective on September 20, 2021. On September 23, 2021, the Company consummated the Initial Public Offering
of ordinary units (the “Public Units”), generating gross proceeds of $
Simultaneously,
the underwriters exercised the over-allotment option in full. The underwriters purchased an additional Units (the “Over-Allotment
Units”) at an offering price of $ per Unit, generating gross proceeds to the Company of $
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of units (the “Private Units”)
at a price of $ per Private Unit in a private placement, generating gross proceeds of $
Transaction
costs paid upon the consummation of the Initial Public Offering amounted to $
| 6 |
Trust Account
Upon
the closing of the Initial Public Offering, the exercise of the over-allotment option and the closing of the private placement,
$
Business Combination
The Company will provide its shareholders with the opportunity to redeem all or a portion of their ordinary shares obtained in the Initial Public Offering (“Public Shares”) upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then on deposit in the Trust Account (initially $ per share, plus any pro rata dividend 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 shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 4). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants and rights. The ordinary shares subject to redemption was initially recorded at its fair value at the date of issuance 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.”
The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $
The
Company’s initial shareholders (the “initial shareholders”) have agreed (a) to vote their insider 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, or vote in favor of, an amendment to the Company’s Second Amended
and Restated Memorandum and Articles of Association that would stop the public shareholders from converting or selling their shares to
the Company in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem 100%
of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) unless
the Company provides dissenting public shareholders with the opportunity to convert their Public Shares into the right to receive cash
from the Trust Account in connection with any such vote; (c) not to convert any insider shares and Private Units (including underlying
securities) (as well as any Public Shares purchased during or after the Initial Public Offering) into the right to receive cash from
the Trust Account in connection with a shareholder vote to approve a Business Combination (or sell any shares in a tender offer in connection
with a Business Combination) or a vote to amend the provisions of the Second Amended and Restated Memorandum and Articles of Association
relating to shareholders’ rights of pre-Business Combination activity and (d) that the insider 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 initial 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.
| 7 |
On
August 17, 2022, the Company has reached an agreement (the “Waiver Agreement”) with Kok Wai Hooy (“Sponsor”), who is its largest public
shareholder, and with certain other holders of Public Shares (the “Anchor Shareholders”) who, as of August 17, 2022, together
own Public Shares, which represent % of all outstanding Ordinary Shares that are owned by its public shareholders. Pursuant
to the Waiver Agreement, the Anchor Shareholders have agreed to waive their pro rata share of all Extension Payments made into the Trust
Account after the date thereof. As a result, each monthly Extension Payment (of $
On September 19, 2022, the shareholders of the Company approved an amended and restated memorandum and articles of association (the “Charter Amendment”), giving the Company the right to extend the date by which it has to complete a business combination up to twelve (12) times for an additional one (1) month each time, from September 23, 2022 up to September 23, 2023. Additionally, the Charter Amendment also allowed the holders of the Public Shares to redeem the shares when the Directors of the Company propose any amendment to the Company’s amended and restated memorandum and article of association that would affect the substance or timing of the redemption of the Public Shares. Accordingly, on September 19, 2022, Public Shares were redeemed for the pro-rata share of the deposits then in the Trust Account.
Along with the Company’s amendment to the amended and restated memorandum and article of association, the Company entered into an amendment (the “Trust Amendment”) to the investment management trust agreement, dated as of September 19, 2021, with American Stock Transfer & Trust Company. Pursuant to the Trust Amendment, the Company has the right to extend the time to complete a business combination twelve (12) times for an additional one (1) month each time from September 23, 2022, up to September 23, 2023, by depositing $ for each issued and outstanding Public Shares for each one-month extension, excluding Public Shares hold by the Anchor Shareholders.
On September 21, 2023, the shareholders of the Company approved an amended and restated memorandum and articles of association (the “Charter Amendment II”), giving the Company the right to extend the date by which it has to complete a business combination up to twelve (12) times for an additional one (1) month each time, from September 23, 2023 to up to September 23, 2024. Additionally, the Charter Amendment II also allowed the holders of the Public Shares to redeem the shares when the Directors of the Company propose any amendment to the Company’s amended and restated memorandum and article of association that would affect the substance or timing of the redemption of the Public Shares. Accordingly, on September 22, 2023, Public Shares were redeemed for the pro-rata share of the deposits then in the Trust Account.
Along with the Company’s amendment to the amended and restated memorandum and article of association, the Company entered into an amendment (the “Trust Amendment II”) to the investment management trust agreement, dated as of September 19, 2021, with Equiniti Trust Company LLC (formerly known as American Stock Transfer & Trust Company). Pursuant to the Trust Amendment II, the Company has the right to extend the time to complete a business combination twelve (12) times for an additional one (1) month each time from September 23, 2023, to September 23, 2024, by depositing $ for each issued and outstanding Company ordinary share issued in the IPO that has not been redeemed held by shareholders who did not enter into the Waiver Agreement (each, a “non-waiving Public Share”) or each one-month extension.
| 8 |
The Company was using part of proceeds
from promissory note – related party which deposited into the Trust Account in order to extend the amount of available time to complete
a business combination. On
each of September 21, 2022, October 31, 2022, November 28, 2022, December 21, 2022, January 20, 2023, February 21, 2023, March 21, 2023,
April 21, 2023, May 23, 2023, June 23, 2023 and July 23, 2023, the Company had deposited $
On
August 2, 2023, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with PubCo, Merger Sub,
and Investor. Upon the closing of the transactions contemplated by the Merger Agreement, (a) the Company will be merged with and into
PubCo (the “Reincorporation Merger”), with PubCo surviving the Reincorporation Merger, and (b) Merger Sub will be merged
with and into the Company (the “Acquisition Merger”), with the Company surviving the Acquisition Merger as a direct wholly
owned subsidiary of PubCo (collectively, the “Merger” or the “Business Combination”). Pursuant to the terms of
the Merger Agreement, the aggregate consideration to be paid at the closing of the Business Combination to existing shareholders of the
Investor is $
Liquidation
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 % 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 dividend earned (net of taxes payable), 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 underwriters have 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 $ as initially deposited in the Trust Account.
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 $ per share (whether or not the underwriters’ over-allotment option is exercised in full), 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
For
the nine months ended September 30, 2023, the Company generated net income of $
| 9 |
In connection with the Company’s assessment of going concern in accordance with the authoritative guidance in ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has concluded that the Company has incurred net cash used in operating activities and determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to raise additional funds to meet its obligations and complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until November 23, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date without an extension to the acquisition period, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after November 23, 2023. Pursuant to the Trust Amendment II, the Company has the right to extend the time to complete a business combination twelve (12) times for an additional one (1) month each time from September 23, 2023, to September 23, 2024, by depositing $ for each issued and outstanding Company ordinary share issued in the IPO for each one-month extension.
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 through one year from the date of these financial statements if a Business Combination is not consummated. 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 – SIGNIFICANT ACCOUNTING POLICIES
| ● | Basis of presentation |
These accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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 period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on April 13, 2023.
| ● | Principles of consolidation |
The unaudited condensed consolidated financial statements include the 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.
| 10 |
The accompanying unaudited condensed consolidated financial statements reflect the activities of the Company and each of the following entities:
| Name | Background | Ownership | ||
| ● | 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 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 |
In preparing these unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes 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 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, actual results may differ from these estimates.
| ● | Cash and cash equivalents |
The
Company’s cash consists of deposit with financial institution. 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
| ● | Concentration of credit risk |
Financial instruments that potentially subject the Company to the concentration of credit risk consist of these cash accounts 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.
| 11 |
| ● | Investments held in Trust Account |
At September 30, 2023 and December 31, 2022, substantially all of the assets held in the Trust Account were held in money market funds. Assets held in money market funds were invested primarily in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All marketable securities are recorded at their fair value. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive income. 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, net in the unaudited condensed consolidated statements of comprehensive income (loss).
| ● | Warrant accounting |
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 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 unaudited condensed consolidated statements of comprehensive income (loss).
As the warrants issued upon the IPO and private placements meet the criteria for equity classification under ASC 480, therefore, the warrants are classified as equity.
| ● | 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 shares subject to mandatory redemption (if any) 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 ordinary shares issued upon the consummation of the IPO and the exercise of the over-allotment option 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 September 30, 2023 and December 31, 2022, ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity (deficit) 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 additional paid-in
capital or accumulated deficit if additional paid in capital equals to zero over an expected 12-month period leading up to a Business
Combination. For the nine months ended September 30, 2023 and 2022, the Company recorded $
| ● | Income taxes |
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
| 12 |
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their consolidated financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. The Company and subsidiaries’ management determined that the British Virgin Islands is the Company and subsidiaries’ major tax jurisdiction. The Company and subsidiaries recognize 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 September 30, 2023 and December 31, 2022. The Company and subsidiaries are currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company and subsidiaries 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 and subsidiaries’ management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company and subsidiaries’ tax provision is
The Company and subsidiaries are 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 income (loss) per share |
The Company complies with accounting and disclosure requirements of ASC Topic 260, “Earnings Per Share” (“ASC 260”). 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 common stock and non-redeemable common stock 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 share. Any remeasurement of the accretion to redemption value of the ordinary share subject to possible redemption was considered to be dividends paid to the public shareholders. For the three and nine months ended September 30, 2023 and 2022, the Company has not considered the effect of the warrants sold in the Initial Public Offering in the calculation of diluted net income (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 shares and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic (income) loss per share for the periods presented.
| For the Three Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Net income | $ | $ | ||||||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
| Net income (loss) including accretion of carrying value to redemption value | $ | $ | ( | ) | ||||
| For the Nine Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Accretion of carrying value to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of carrying value to redemption value | $ | ( | ) | $ | ( | ) | ||
| 13 |
| For the Three Months Ended | ||||||||||||||||
| September 30, 2023 | September 30, 2022 | |||||||||||||||
| Redeemable | Non-Redeemable | Redeemable | Non-Redeemable | |||||||||||||
| Ordinary Share | Ordinary Share | Ordinary Share | Ordinary Share | |||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net income (loss) including carrying value to redemption value | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Accretion of carrying value to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | $ | $ | $ | ( | ) | ||||||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | $ | $ | ) | |||||||||||
| For the Nine Months Ended | ||||||||||||||||
| September 30, 2023 | September 30, 2022 | |||||||||||||||
| Redeemable | Non-Redeemable | Redeemable | Non-Redeemable | |||||||||||||
| Ordinary Share | Ordinary Share | Ordinary Share | Ordinary Share | |||||||||||||
| Basic and diluted net loss per share: | ||||||||||||||||
| Numerators: | ||||||||||||||||
| Allocation of net loss including carrying value to redemption value | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Accretion of carrying value to redemption value | ||||||||||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominators: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | ) | $ | $ | ) | ||||||||||
| ● | Related parties |
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.
| ● | Fair value of financial instrument |
ASC Topic 820 “Fair Value Measurements” (“ASC 820”) 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. ASC 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.
| 14 |
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 820 approximates the carrying amounts represented in the unaudited condensed consolidated balance sheets. The fair values of cash, and other current assets, accrued expenses, amount due to sponsor are estimated to approximate the carrying values as of September 30, 2023 and December 31, 2022 due to the short maturities of such instruments. The Company measured its investments held in trust account at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 and the fair value is based on Level 1 inputs.
The following table presents information about the Company’s assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.
| September 30, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| Description | 2023 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
Money market funds invested in U.S. Treasury Securities* | $ | $ | $ | $ | ||||||||||||
| December 31, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
| Description | 2022 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Assets: | ||||||||||||||||
Money market funds invested in U.S. Treasury Securities* | $ | $ | $ | $ | ||||||||||||
| * |
| 15 |
| ● | Recent accounting pronouncements |
The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on the results of operations, financial condition, or cash flows, based on the current information.
NOTE 3 – INVESTMENTS HELD IN TRUST ACCOUNT
As
of September 30, 2023, investment securities in the Company’s Trust Account consisted of $
For the Nine Months Ended September 30, 2023 | For the Year Ended December 31, 2022 | |||||||
| Balance brought forward | $ | $ | ||||||
| Plus: | ||||||||
| Dividend income earned in Trust Account | ||||||||
| Business combination extension fee | ||||||||
| Gross unrealized holding gain | ||||||||
| Reclassification of realized gain on available-for-sale securities, net to net income | ( | ) | ||||||
| Less: | ||||||||
| Share redemption during the year | ( | ) | ( | ) | ||||
| Balance carried forward | $ | $ | ||||||
NOTE 4 – INITIAL PUBLIC OFFERING
On
September 23, 2021, the Company sold Public Units at a price of $ per Unit. Simultaneously, the Company sold an additional
units to cover over-allotments. Each Public Unit consists of one ordinary share, one right (“Public Right”) and one
redeemable warrant (“Public Warrant”).
The
Company paid an upfront underwriting discount of $
Besides
the upfront underwriting discount of $
| 16 |
As
a result of the aforementioned allocation, upon the completion of the IPO, $
NOTE 5 – PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) with
its Sponsor of
The Private Units are identical to the units sold in the Initial Public Offering except with certain registration rights and transfer restrictions.
NOTE 6 – RELATED PARTY TRANSACTIONS
Insider Shares
In
July 2020, the Company issued an aggregate of founder shares to the initial shareholders for an aggregate purchase price of $
In
November 2020, the Company issued an aggregate of additional founder shares to the initial shareholders for an aggregate purchase
price of $
In February 2021, the Company issued an aggregate of additional founder shares to the initial shareholders. On May 27, 2021 initial shareholders transferred a total of shares to the Expert Capital Investments Limited (“Expert”). Expert then transferred all of its shares to our Sponsor on June 21, 2021. On June 28, 2021, our Sponsor transferred an aggregate of ordinary shares to the new management and directors. The value of the transferred shares was insignificant.
Promissory Note — Related Party
On August 8 and October 9, 2023, the Company issued
an unsecured promissory notes to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $
As of September 30, 2023 and December 31, 2022, the Sponsor had advanced
the Company an aggregate amount of $
Working Capital Loan
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 $
Administrative Services Agreement
The
Company is obligated, commencing from the date of the consummation of the offering, to pay the Sponsor a monthly fee of $
Private Placement
The Company consummated the Private Placement with
its Sponsor of Private Units at a price of $ per Private Unit, generating total proceeds of $
Waiver Agreement
On August 17, 2022, the Company entered into the Waiver
Agreement with the Sponsor and the Anchor Shareholders, who agreed to waive their pro rata share of all Extension Payments made into the
Trust Account after the date thereof. As a result, each monthly Extension Payment (of $
NOTE 7 – SHAREHOLDER’S DEFICIT
On
September 23, 2021, the Company completed the Initial Public Offering and issued an aggregate of
| 17 |
Ordinary shares
The Company is authorized to issue ordinary shares at par $. Holders of the Company’s ordinary shares are entitled to one vote for each share.
Rights
If the Company is unable to complete a Business Combination within the required time period and the Company redeems the Public Shares for the funds held in the trust account, holders of rights will not receive any of such funds for their rights and the rights will expire worthless.
Warrants
The Public Warrants will become exercisable on the later of (a) the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. 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 Public Warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration statement covering the ordinary shares issuable upon the exercise of the Public Warrants is not effective within 90 days from the consummation of a Business Combination, the 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 the Public Warrants on a cashless basis pursuant to the exemption from registration provided by Section 3(a)(9) of the Securities Act provided that such exemption is available. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis. The Public Warrants will expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The
Company may call the warrants for redemption, in whole and not in part, at a price of $
| ● | 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 $ 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. |
The Private Warrants are identical to the Public Warrants underlying the Units being sold in the Initial Public Offering. The Private Warrants (including the ordinary shares issuable upon exercise of the private warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination.
If the Company calls the warrants for redemption, management will have the option to require all holders that wish to exercise the 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, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances 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 respect to such warrants. Accordingly, the warrants may expire worthless.
The Company assessed the key terms applicable to the Public Warrants as well as the Private Warrants and classified the Public Warrants and Private Warrants as equity in accordance with ASC 480 and ASC 815.
| 18 |
The Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance in ASC 480. Ordinary shares subject to mandatory redemption (if any) 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 Public Shares feature certain redemption rights that are subject to the occurrence of uncertain future events and considered to be outside of the Company’s control. On September 21, 2022, upon the Company’s shareholders approval of the Charter Amendment, shares were redeemed by certain shareholders at a price of approximately $ per share, including dividend generated in the Trust Account, in an aggregate amount of $. On December 1, 2022, the aggregate amount adjusted to $. On September 21, 2023, upon the Company’s shareholders approval of the Charter Amendment II, shares were redeemed by certain shareholders at a price of approximately $ per share, including dividend generated in the Trust Account, in an aggregate amount of $.
Accordingly, at September 30, 2023 and December 31, 2022, and ordinary shares subject to possible redemption, respectively, are presented as temporary equity, outside of the shareholders’ deficit section of the Company’s unaudited condensed consolidated balance sheets.
| September 30, 2023 | December 31, 2022 | |||||||
| Total ordinary shares issued | ||||||||
| Share issued classified as equity | ( | ) | ( | ) | ||||
| Share redemption | ( | ) | ( | ) | ||||
| Ordinary shares, subject to possible redemption | ||||||||
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management is currently evaluating the impact of the recent conflict between Russia and Ukraine and the conflict between Israel and Hamas and the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the pandemic could have a negative effect on the Company’s future financial position, results of its operations and/or search for a target company. There has not been a significant impact as of the date of these unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the future outcome of this uncertainty. Additionally, If the Company is unable to complete a Business Combination within the Combination Period, the Company will cease all operations except for the purpose of winding up and redeem % of the outstanding Public Shares for amount then on deposit in the Trust Account. Furthermore, the ordinary shares included in the units offered in the IPO provide the holder redemption upon the consummation of the initial Business Combination or the liquidation. These risks and uncertainties also impact the Company’s future financial positions, results of its operations. Please refer to Note 1 for detail discussion of these risks and uncertainties.
Registration Rights
The holders of the insider shares, the Private Units (and their underlying securities) and the warrants that may be issued upon conversion of the Working Capital Loans (and their underlying securities) are entitled to registration rights pursuant to a registration rights agreement signed on September 20, 2021. The holders of a majority of these securities will be entitled to make up to two demands that the Company register such securities. The holders of the majority of the insider shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these ordinary shares are to be released from escrow. The holders of a majority of the Private Units and warrants issued in payment of Working Capital Loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
underwriters were entitled to an underwriting fee of
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 this unaudited condensed consolidated financial statement are issued, the Company has evaluated all events or transactions that occurred after September 30, 2023, up through the date was the Company issued the unaudited condensed consolidated financial statements.
On
October 20, 2023, the Company deposited $
On October 9, 2023, the Company issued an unsecured
promissory notes to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $
| 19 |
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 HHG Capital Corporation. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Mr. Kok Wai Hooy. 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 includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 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, without limitation, 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 registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at http://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.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. The only activities from July 15, 2020 (inception) through September 30, 2023, were organizational activities and those necessary to prepare for the IPO and, following the consummation of the IPO, the evaluation of business combination candidates. We do not expect to generate any operating revenues until after the completion of our initial business combination. We will generate non-operating income in the form of dividend income earned in investments held in Trust Account. We have incurred expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2023, we had a net income of $491,951, which was comprised of interest income from dividend income earned in investments held in Trust Account of $453,381 and other income from waiver of unpaid administrative service monthly fee of $210,000 offset by general and administrative expenses of $171,430.
For the nine months ended September 30, 2023, we had a net income of $954,230, which was comprised of interest income from our cash in bank of $3,471 and dividend income earned in investments held in Trust Account of $1,198,613, and other income from waiver of unpaid administrative service monthly fee of $210,000 offset by general and administrative expenses of $457,854.
For the three months ended September 30, 2022, we had a net income of $199,020, which was comprised of interest income from our cash in bank of $2 and dividend income earned in investments held in Trust Account of $262,281 offset by general and administrative expenses of $63,263.
For the nine months ended September 30, 2022, we had a net loss of $90,903, which was comprised of general and administrative expenses of $397,280 offset by interest income from our cash in bank of $8 and dividend income earned in investments held in Trust Account of $306,369.
| 20 |
Liquidity and Capital Resources
As of September 30, 2023, we had cash of $6,546. Until the consummation of the initial public offering, the Company’s only source of liquidity was an initial purchase of ordinary shares by the initial shareholders, monies loaned by the related party under an unsecured promissory note.
On September 19, 2022, the shareholders of the Company approved an amended and restated memorandum and articles of association (the “Charter Amendment”), giving the Company the right to extend the date by which it has to complete a business combination up to twelve (12) times for an additional one (1) month each time, from September 23, 2022 up to September 23, 2023. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. This belief is based on the fact that while we may begin preliminary due diligence of a target business in connection with an indication of interest, we intend to undertake in-depth due diligence, depending on the circumstances of the relevant prospective acquisition, only after we have negotiated and signed a letter of intent or other preliminary agreement that addresses the terms of our initial business combination. However, if our estimate of the costs of undertaking in-depth due diligence and negotiating our initial business combination is less than the actual amount necessary to do so, or the amount of interest available to use from the trust account is minimal as a result of the current interest rate environment, we may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable. In this event, we could seek such additional capital through loans or additional investments from members of our management team, but such members of our management team are not under any obligation to advance funds to, or invest in, us. In the event that the 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. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of our business combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional Private Units at a price of $10.00 per unit. The terms of such loans by our initial shareholders, officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.
On September 19, 2022, the shareholders of the Company approved an amended and restated memorandum and articles of association (the “Charter Amendment”), giving the Company the right to extend the date by which it has to complete a business combination up to twelve (12) times for an additional one (1) month each time, from September 23, 2022 up to September 23, 2023. Additionally, the Charter Amendment also allowed the holders of the Public Shares to redeem the shares when the Directors of the Company propose any amendment to the Company’s amended and restated memorandum and article of association that would affect the substance or timing of the redemption of the Public Shares. Accordingly, on September 19, 2022, 2,393,594 Public Shares were redeemed for the pro-rata share of the deposits then in 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 a business combination.
On September 21, 2023, the shareholders of the Company approved an amended and restated memorandum and articles of association (the “Charter Amendment II”), giving the Company the right to extend the date by which it has to complete a business combination up to twelve (12) times for an additional one (1) month each time, from September 23, 2023 to up to September 23, 2024. Additionally, the Charter Amendment II also allowed the holders of the Public Shares to redeem the shares when the Directors of the Company propose any amendment to the Company’s amended and restated memorandum and article of association that would affect the substance or timing of the redemption of the Public Shares. Accordingly, on September 22, 2023, 32,845 Public Shares were redeemed for the pro-rata share of the deposits then in the Trust Account.
Along with the Company’s amendment to the amended and restated memorandum and article of association, the Company entered into an amendment (the “Trust Amendment II”) to the investment management trust agreement, dated as of September 19, 2021, with Equiniti Trust Company LLC (formerly known as American Stock Transfer & Trust Company). Pursuant to the Trust Amendment II, the Company has the right to extend the time to complete a business combination twelve (12) times for an additional one (1) month each time from September 23, 2023, to September 23, 2024, by depositing $0.0333 for each issued and outstanding Company ordinary share issued in the IPO that has not been redeemed held by shareholders who did not enter into the Waiver Agreement (each, a “non-waiving Public Share”) or each one-month extension.
| 21 |
On each of September 21, 2022, October 31, 2022, November 28, 2022, December 21, 2022, January 20, 2023, February 21, 2023, March 21, 2023, April 21, 2023, May 23, 2023, June 23, 2023 and July 23, 2023, the Company had deposited $9,080 into the Trust Account in order to extend the amount of available time to complete a business combination until August 23, 2023. On each of August 23, September 23 and October 20, 2023, the Company had deposited $7,985 into the Trust Account in order to extend the amount of available time to complete a business combination until November 23, 2023.
For the nine months ended September 30, 2023, the Company generated net income of $954,230, but had cash used in operating activities of $281,696. As of September 30, 2023, the Company had cash of $6,546 with working capital deficit of $176,423. We may need to raise additional capital through loans or additional investments from its Sponsor or third parties.
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 through one year from the date of these financial statements if a Business Combination is not consummated. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
In connection with the Company’s assessment of going concern in accordance with the authoritative guidance in ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has concluded that the Company has incurred net cash used in operating activities and determined that the mandatory liquidation and subsequent dissolution, should the Company be unable to raise additional funds to meet its obligations and complete a Business Combination, raises substantial doubt about the Company’s ability to continue as a going concern. The Company has until November 23, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date without an extension to the acquisition period, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after November 23, 2023. Pursuant to the Trust Amendment II, the Company has the right to extend the time to complete a business combination twelve (12) times for an additional one (1) month each time from September 23, 2023, to September 23, 2024, by depositing $0.0333 for each issued and outstanding Company ordinary share issued in the IPO for each one-month extension.
As of the date of this report, the Company has until November 23, 2023 to consummate a business combination but may further extend the period ten more times for one month each time up to September 23, 2024. If a Business Combination is not consummated by November 23, 2023 and an extension is not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, 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 as of September 30, 2023.
We may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable. In this event, we could seek such additional capital through loans or additional investments from members of our management team, but such members of our management team are not under any obligation to advance funds to, or invest in, us. In the event that the 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. Such loans would be evidenced by promissory notes. The notes would either be paid upon consummation of our initial business combination, without interest, or, at the lender’s discretion, up to $500,000 of the notes may be converted upon consummation of our business combination into additional private units at a price of $10.00 per unit. The terms of such loans by our initial shareholders, officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.
Critical Accounting Policies
The preparation of these 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. Actual results could differ from those estimates.
Warrant accounting
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 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.
| 22 |
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 unaudited condensed consolidated statements of comprehensive income (loss).
As the warrants issued upon the IPO and private placements meet the criteria for equity classification under ASC 480, therefore, the warrants are classified as equity.
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 shares subject to mandatory redemption (if any) 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 ordinary shares issued upon the consummation of the IPO and the exercise of the over-allotment option 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 September 30, 2023 and December 31, 2022, 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 additional paid-in capital or accumulated deficit if additional paid in capital equals to zero over an expected 12-month period leading up to a Business Combination. For the nine months ended September 30, 2023 and 2022, the Company recorded $1,279,240 and $9,198,310 accretion of carrying value to redemption value, respectively.
Net income (loss) per share
The Company complies with accounting and disclosure requirements of 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 common stock and non-redeemable common stock 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 share. Any remeasurement of the accretion to redemption value of the ordinary share subject to possible redemption was considered to be dividends paid to the public shareholders. For the three and six months ended September 30, 2023 and 2022, the Company has not considered the effect of the warrants sold in the Initial Public Offering in the calculation of diluted net income (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 common stock and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic (income) loss per share for the periods presented.
Recent Accounting Standards
The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on the results of operations, financial condition, or cash flows, based on the current information.
| 23 |
Off-Balance Sheet Arrangements
As of September 30, 2023 and December 31, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Commitments and 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 a monthly fee of $10,000 for general and administrative services, including office space, utilities and administrative services to the Company. We began incurring these fees on September 23, 2021 and will continue to incur these fees monthly until the earlier of the completion of the business combination and the Company’s liquidation. On September 4, 2023, the Sponsor agreed to waive the monthly fee of $10,000 commencing from July 1, 2023.
Administrative Services Agreement
The Company is obligated, commencing from the date of the consummation of the offering, to pay the Sponsor a monthly fee of $10,000 for general and administrative services. This agreement will terminate upon completion of the Company’s Business Combination or the liquidation of the trust account to public shareholders. For the nine months ended September 30, 2023 and 2022, the Company incurred $60,000 and $90,000 expenses, respectively, in connection with the execution of the administrative service agreement. On September 4, 2023, the Sponsor agreed to waive monthly fee of $10,000 commencing from July 1, 2023 and all the $210,000 outstanding balance as of June 30, 2023. As of September 30, 2023 and December 31, 2022, the Company had unpaid administrative service monthly fee of $0 and $150,000, respectively, which are recorded as amounts due to a related party in the respective unaudited condensed consolidated balance sheets.
Registration Rights
The holders of our insider shares issued and outstanding prior to our initial public offering, as well as the holders of the Private Units (and all underlying securities) and any securities our initial shareholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us, are entitled to registration rights pursuant to a registration rights agreement entered into concurrently without an initial public offering. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters were entitled to an underwriting fee of 3.2% of the gross proceeds from offering to the maximum of $1,615,000. A total of $805,000 was paid upon the closing of the Initial Public Offering. At the closing of any Business Combination, the Underwriters will receive a cash payment equal to the greater of: (i)$575,000 or (ii) a fee equal to 4.5% (or 0.5% with respect to investors in the Offering introduced to the Underwriters by the Company’s sponsor, or Company’s management, subject to a total maximum underwriting fee of $1,615,000.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company and are not required to provide the information otherwise required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2023, our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting related to a lack of accounting staff with appropriate knowledge of U.S. GAAP and SEC reporting. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the unaudited condensed financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows of the periods presented.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2023, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 24 |
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
The Company is not party to any legal proceedings as of the filing date of this Form 10-Q.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sale of Unregistered Securities
None.
Use of Proceeds
For a description of the use of the proceeds generated in the IPO, see Part I, Item 2 of this Quarterly Report on Form 10-Q.
Purchases of Equity Securities by the Issuer and Related Purchasers
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
| 25 |
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
| 26 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HHG CAPITAL CORPORATION | ||
| Date: November 14, 2023 | By: | /s/ Chee Shiong (Keith) Kok |
| Name: | Chee Shiong (Keith) Kok | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 14, 2023 | By: | /s/ Shuk Man (Lora) Chan |
| Name: | Shuk Man (Lora) Chan | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
| 27 |