UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period
ended
OR
For the transition period from to
(Exact Name of Registrant as Specified in Charter)
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
c/o Pacifico Capital LLC
(Address of Principal Executive Offices) (Zip Code)
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Units, each consisting of one share of Common Stock and one right to receive one-tenth (1/10) of a share of common stock | PAFOU | The Nasdaq Stock Market LLC | ||
| The | ||||
| Rights | PAFOR | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐
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, 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). Yes
As of November 14, 2022, there were
Table of Contents
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
PACIFICO ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expense | ||||||||
| Marketable securities held in trust account | ||||||||
| Total Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Due to related party | $ | $ | ||||||
| Accounts payable | ||||||||
| Franchise taxes payable | ||||||||
| Income taxes payable | ||||||||
| Promissory note – related party | ||||||||
| Promissory note – Caravelle | ||||||||
| Deferred underwriter commissions | ||||||||
| Total Current Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Redeemable Common Stock | ||||||||
| Common stock subject to possible redemption, $ | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities, Redeemable Common Stock and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1
PACIFICO ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the three months ended September 30, | For the nine months ended September 30, | For the period from March 2, 2021 (inception) through September 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| General and administrative expenses | $ | $ | $ | $ | ||||||||||||
| Franchise tax expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest earned on investment held in Trust Account | ||||||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income taxes provision | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | $ | $ | $ | |||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
PACIFICO ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY (DEFICIT)
| Common Stock | Additional Paid-In | Accumulated | Total Stockholders’ Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Accretion of initial measurement of common stock subject to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Accretion of initial measurement of common stock subject to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Additional amount deposited into trust | — | — | — | ( | ) | ( | ) | |||||||||||||
| Accretion of initial measurement of common stock subject to redemption value | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance as of September 30, 2022 | $ | $ | — | $ | ( | ) | $ | ( | ) | |||||||||||
| Common stock | Additional paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | capital | deficit | equity | ||||||||||||||||
| Balance–March 2, 2021 (Inception) | $ | $ | $ | $ | ||||||||||||||||
| Common stock issued to initial stockholders | ||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Sale of public units in initial public offering | — | |||||||||||||||||||
| Sale of private units | — | |||||||||||||||||||
| Sale of unit purchase option to underwriter | — | — | — | |||||||||||||||||
| Underwriter commissions | — | — | ( | ) | — | ( | ) | |||||||||||||
| Offering costs | — | — | ( | ) | — | ( | ) | |||||||||||||
| Initial measurement of common stock subject to redemption under ASC 480-10-S99 against additional paid-in capital | ( | ) | ( | ) | ( | ) | — | ( | ) | |||||||||||
| Accretion of initial measurement of common stock subject to redemption value | — | — | ( | ) | — | ( | ) | |||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
PACIFICO ACQUISITION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| For the Nine Months Ended September 30, | ||||||||
| Cash flows from operating activities: | 2022 | 2021 | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Interest earned in trust account | ( | ) | ( | ) | ||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Due to related party | ( | ) | ||||||
| Accounts payable | ||||||||
| Franchise tax Payable | ( | ) | ||||||
| Income tax Payable | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account to pay franchise taxes | $ | $ | ||||||
| Cash deposited in trust account | ( | ) | ( | ) | ||||
| Net cash provided by investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of pubic units in Initial Public Offering | $ | $ | ||||||
| Proceeds from sale of private units | ||||||||
| Proceeds from sale of unit purchase option | ||||||||
| Proceeds from issuance of common stock to initial stockholders | ||||||||
| Payment of underwriter commissions | ( | ) | ||||||
| Payment of offering costs | ( | ) | ||||||
| Proceeds from issuance of promissory note to Caravelle | ||||||||
| Proceeds from issuance of promissory note to related party | ||||||||
| Repayment of promissory note to related party | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Deferred underwriter commission | $ | $ | ||||||
| Accretion of carrying value to redemption value | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
PACIFICO ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Organization and Business Operations
Pacifico Acquisition Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware corporation on March 2, 2021. 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 or entities (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2022, the Company had not yet commenced any operations and had not generated revenue. All activities through September 30, 2022 relate to the Company’s formation and the initial public offering (the “IPO”) described below. The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Pacifico Capital LLC, a Delaware limited liability company (the “Sponsor”).
On April 5, 2022, Pacifico entered into a Merger Agreement (the “Merger Agreement”), by and among Caravelle International Group, a Cayman Islands exempted company (“PubCo”) and a wholly-owned subsidiary of the Company, Pacifico International Group, a Cayman Islands exempted company and a direct wholly-owned subsidiary of PubCo (“Merger Sub 1”), Pacifico Merger Sub 2 Inc., a Delaware corporation and a direct wholly-owned subsidiary of PubCo (“Merger Sub 2” and, together with PubCo and Merger Sub 1, each, individually, an “Acquisition Entity” and, collectively, the “Acquisition Entities”), and Caravelle Group Co., Ltd, a Cayman Islands exempted company (“Caravelle”), pursuant to which (a) Merger Sub 1 will merge with and into Caravelle (the “Initial Merger”), and Caravelle will be the surviving corporation of the Initial Merger and a direct wholly owned subsidiary of PubCo, and (b) following confirmation of the effectiveness of the Initial Merger, Merger Sub 2 will merge with and into Pacifico (the “SPAC Merger” and together with the Initial Merger, the “Merger”), and Pacifico will be the surviving corporation of the SPAC Merger and a direct wholly owned subsidiary of PubCo (collectively, the “Business Combination”). Following the Business Combination, PubCo will be a publicly traded holding company listed on a national stock exchange in the United States. These entities had not commenced any operations as of September 30, 2022. The board of directors of Pacifico has unanimously approved the Merger Agreement.
On May 13, 2022, the draft registration statement on Form F-4 was submitted with the SEC regarding the proposed Merger between Pacifico and Caravelle.
On July 18, 2022, the Amendment No. 1 to the draft registration statement on Form F-4 was submitted to address the comments received from the SEC dated June 9, 2022 regarding the draft registration statement on Form F-4.
On August 15, 2022, Pacifico executed the Amended
and Restated Agreement and Plan of Merger which removed PIPE as a closing condition and changed the deadline and account for Caravelle
to deposit the first $
On August 18, 2022, the Amendment No. 2 to the draft registration statement on Form F-4 was submitted to address the comments received from the SEC dated August 4, 2022 regarding the Amendment No. 1.
On September 13, 2022, pursuant to the amended Merger
Agreement, Caravelle remitted a cash payment of $
On September 22, 2022, the registration statement on Form F-4 was filed with the SEC regarding the proposed Merger between Pacifico and Caravelle.
Financing
The registration statement for the Company’s
IPO (as described in Note 3) was declared effective on September 13, 2021. On September 16, 2021, the Company consummated
the IPO of
5
The Company granted the underwriters a 45-day option
to purchase up to
Upon the closing of the Over-allotment on September 22,
2021, the Company consummated the Private Placement sale of an additional
Offering costs amounted to $
On April 14, 2022, the Sponsor loaned the Company
an additional $
On August 8, 2022, the Company entered into
a $
On September 13, 2022, the Company entered into a
$
On September 15, 2022, the Company entered into a
$
Trust Account
Upon the closing of the IPO and the private placement
(including Over-allotment), a total of $
The funds held in the Trust Account can be invested
in United States government treasury bills, notes or bonds having a maturity of
Placing funds in the Trust account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements.
In addition, interest income earned on the funds in the Trust account may be released to the Company to pay its income or other tax obligations. With these exceptions, expenses incurred by the Company may be paid prior to a business combination only from the net proceeds of the IPO and private placement not held in the Trust Account.
Business Combination
Pursuant to NASDAQ listing rules, the Company’s initial business combination must occur with one or more target businesses having an aggregate fair market value equal to at least 80% of the value of the funds in the Trust account (excluding any taxes payable on the income earned on the Trust account), which the Company refers to as the 80% test, at the time of the execution of a definitive agreement for its initial business combination, although the Company may structure a business combination with one or more target businesses whose fair market value significantly exceeds 80% of the trust account balance. If the Company is no longer listed on NASDAQ, it will not be required to satisfy the 80% test.
6
The Company currently anticipates structuring a business combination to acquire 100% of the equity interests or assets of the target business or businesses. The Company may, however, structure a business combination where the Company merges directly with the target business or where the Company acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons, but the Company will only complete such business combination if the post-transaction company owns 50% or more of the outstanding voting securities of the target or otherwise owns a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% test.
The Company will provide its holders of the outstanding
Public Shares (the “Public Stockholders”) 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 stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination
or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro
rata portion of the amount then in the Trust Account (initially anticipated to be $
Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Sponsor and any of the Company’s officers or directors that may hold Insider Shares (as defined in Note 5) (the “Initial Stockholders”) and Chardan have agreed (a) to vote their Insider Shares, Private Shares (as defined in Note 5) and any Public Shares purchased during or after the IPO in favor of approving a Business Combination and (b) not to convert any shares (including the Insider Shares) in connection with a stockholder vote to approve, or sell the shares to the Company in any tender offer in connection with, a proposed Business Combination.
If the Company seeks stockholder approval of a Business
Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation
provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is
acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate
of
The Company will have until 15 months from the
closing of the IPO to consummate a Business Combination. On April 5, 2022, the Company entered into a merger agreement with Caravelle
International Group.
7
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 not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest (which interest shall be net of taxes payable, and less certain amount of interest to pay dissolution expenses) divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Initial Stockholders and Chardan have agreed
to waive their liquidation rights with respect to the Insider Shares and Private Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the Initial Stockholders or Chardan acquires Public Shares in or after the IPO, such Public
Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within
the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6)
held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in
such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption
of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for
distribution will be less than the IPO price per Unit ($
In order to protect the amounts held in the Trust
Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products
sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce
the amount of funds in the Trust Account to below $
Risks and Uncertainties
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the world. As of the date the financial statements were issued, there was considerable uncertainty around the expected duration of this pandemic. Management continues to evaluate the impact of the COVID-19 pandemic and the Company has concluded that while it is reasonably possible that COVID-19 could have a negative effect on completing the Proposed Public Offering and subsequently identifying a target company for a Business Combination, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy is not determinable as of the date of these unaudited condensed consolidated financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited condensed consolidated financial statements.
On August 16, 2022, the Inflation Reduction Act of
2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
8
Going Concern
As of September 30, 2022, the Company had
$
On September 13, 2022, pursuant to the amended Merger
Agreement, Caravelle deposited into the Company’s Trust Account an additional $
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. Dollars and in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as outlined in Note 1 (PubCo, Merger Sub 1 and Merger Sub 2) where the Company has the ability to exercise control. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended December 31, 2021, as filed with the SEC on March 31, 2022. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
9
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30,2022.
Offering Costs Associated with the IPO
Offering costs consist of underwriting, legal, accounting,
registration and other expenses incurred through the balance sheet date that are directly related to the IPO. Offering costs amounted
to $
Concentration of Credit Risk
Financial instruments that potentially subject the
Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage of $
Cash and Investments Held in Trust Account
The Company’s portfolio of investments held in the Trust Account
is comprised of investments in money market funds that invest in U.S. government securities. The Company’s investments held
in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the
end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included
in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated
fair value of investments held in the Trust Account are determined using available market information. Trust Account activities during
nine months ended September 30, 2022 included interest income of $
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
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 in the absence of additional paid-in capital) over an expected 12-month period leading up to a Business Combination.
10
At September 30,2022, the amount of common stock subject to possible redemption reflected in the balance sheet are reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to public rights | ( | ) | ||
| Allocation of offering costs related to redeemable shares | ( | ) | ||
| Plus: | ||||
| Additional amount deposited into trust | ||||
| Accretion of carrying value to redemption value | ||||
| Common stock subject to possible redemption | $ |
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The condensed statements of operations include a presentation of income (loss) per redeemable share and income (loss) per non-redeemable share following the two-class method of income per share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the common shares subject to possible redemption was considered to be dividends paid to the public shareholders. As of September 30,2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
The net income (loss) per share presented in the condensed statement of operations is based on the following:
| For the | For the | |||||||
| three months | nine months | |||||||
| ended | ended | |||||||
| September 30, | September 30, | |||||||
| 2022 | 2022 | |||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Accretion of common stock to redemption value | ( | ) | ( | ) | ||||
| Net loss including accretion of common stock to redemption value | $ | ( | ) | $ | ( | ) | ||
| For the three months ended | ||||||||
| September 30, 2022 | ||||||||
| Non- | ||||||||
| Redeemable | redeemable | |||||||
| shares | shares | |||||||
| Basic and diluted net income/(loss) per share: | ||||||||
| Numerators: | ||||||||
| Allocation of net loss including accretion of common stock | $ | ( | ) | $ | ( | ) | ||
| Accretion of common stock to redemption value | ||||||||
| Allocation of net income (loss) | $ | $ | ( | ) | ||||
| Denominators: | ||||||||
| Weighted-average shares outstanding | ||||||||
| $ | $ | ( | ) | |||||
11
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 -270-25-2 requires that an annual effective tax rate be determined
and such annual effective rate applied to year to date income in interim periods under ASC 740-270-30-5. The Company’s effective
tax rate was
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 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 has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 825, “Financial Instrument,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
12
Note 3 — Initial Public Offering
On September 16, 2021, the Company sold
The Company incurred total costs of $
Note 4 — Private Placement
Concurrently with the closing of the IPO, the Company’s
Sponsor and Chardan (and/or their designees) purchased an aggregate of
The Private Units are identical to the Public Units except with respect to certain registration rights and transfer restrictions. The proceeds from the Private Units were added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Units and all underlying securities will expire worthless.
Note 5 — Related Party Transactions
Promissory Note — Related Party
On March 15, 2021, the Sponsor loaned the Company
an aggregate of up to $
On April 14, 2022, the Sponsor loaned the Company
an additional $
13
On August 8, 2022, the Company entered into a $
On September 13, 2022, pursuant to the amended Merger
Agreement, Caravelle remitted a cash payment of $
On September 15, 2022, the Company entered into a
$
Insider Shares
On April 13, 2021, the Company issued
The Initial Stockholders have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of their Insider Shares until, with respect to 50% of the Insider Shares, the earlier of six months after the consummation of a Business Combination and the date on which the closing price of the common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after a Business Combination and, with respect to the remaining 50% of the Insider Shares, until the six months after the consummation of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Note 6 — Commitments and contingency
Registration Rights
The holders of the Insider Shares, Private Units (and all underlying securities), and any shares that may be issued upon conversion of working capital loans (may be provided by the Company’s insiders, officers, directors, or their affiliates to finance transaction costs in connection with searching for a target business or consummating a Business Combination) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of IPO. The holders of the majority of these securities are 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 the Insider Shares are to be released from escrow. The holders of a majority of the Private Units and units issued in payment of working capital loans made to the Company can elect to exercise these registration rights at any time commencing on the date that the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
14
Underwriting Agreement
The underwriters were paid a cash underwriting discount
of
Unit Purchase Option
The Company sold to Chardan (and/or its designees), for $100, an option (“UPO”) to purchase 158,125 units as the over-allotment option was fully exercised on September 22, 2021. The UPO will be exercisable at any time, in whole or in part, between the close of the IPO and fifth anniversary of the effective date of the registration at a price per Unit equal to $11.50 (or 115% of the volume weighted average trading price of the ordinary shares during the 20 trading day period starting on the trading day immediately prior to consummation of an initial Business Combination). The option and the underlying securities that may be issued upon exercise of the option, have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(e)(1) of FINRA’s NASDAQ Conduct Rules. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the date of IPO except to any underwriter and selected dealer participating in the IPO and their bona fide officers or partners.
Right of First Refusal
The Company has granted Chardan a right of first
refusal, for a period of 15 months after the date of the consummation of a Business Combination, to act as lead underwriters or
minimally as a co-manager, with at least
Professional Fees
The Company has engaged a merger and acquisition
advisor and capital market advisor in connection with business combination to provide services such as introducing the Company to potential
investors that are interested in purchasing the Company’s securities in connection with the initial business combination, assisting
the Company in negotiating the terms and conditions with the target company. The Company will pay the advisor a cash fee or in shares
in a total amount of approximately $
Note 7 — Stockholders’ Equity
Common Stock — The
Company is authorized to issue
Rights — Except in
cases where the Company is not the surviving company in a Business Combination, each holder of a Public Right will automatically receive
one-tenth (1/10) of
15
The Company will not issue fractional shares in connection with an exchange of Public Rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General Corporation Law. As a result, the holders of the Public Rights must hold rights in multiples of 10 in order to receive shares for all of the holders’ rights upon closing of a Business Combination. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Rights will not receive any of such funds with respect to their Public Rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Rights, and the Public Rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the Public 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.
Note 8 — Fair Value Measurements
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
| September 30, 2022 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities held in trust account | ||||||||||||||||
| December 31, 2021 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||
| Assets | ||||||||||||||||
| Marketable securities held in trust account | ||||||||||||||||
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to November 14, 2022, the date that the unaudited condensed consolidated financial statements were issued. Other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
On October 24, 2022, the Company issued a $
On October 27, 2022, the Company received the
$
On October 14 and November 4, 2022, the Amendment No. 1 and Amendment 2 to Form F-4 registration statement, were filed respectively. The registration statement was declared effective by the SEC on November 9, 2022.
On November 10, the Company filed a definitive proxy statement with the SEC for its stockholders’ special meeting.
16
Item 2. Management’s Discussion and Analysis of Financial Statements
References to the “Company,” “PAFO,” “our,” “us” or “we” refer to Pacifico Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its majority owned subsidiaries where the Company has the ability to exercise control. All significant intercompany balances and transactions have been eliminated in consolidation. Activities in relation to the noncontrolling interest are not considered to be significant and are, therefore, not presented in the accompanying unaudited condensed consolidated financial statements.
Overview
We are a blank check company formed under the laws of the State of Delaware on March 2, 2021. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a business combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through September 30, 2022 were organizational activities and those necessary to prepare for our initial public offering (“IPO”), and, after our IPO, searching for a target business to acquire. We do not expect to generate any operating revenues until after the completion of our initial business combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the IPO. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a business combination.
For the quarter ended September 30, 2022, we had a net loss of $12,480, which comprised of income of $40,132 derived primarily from general and administrative expenses of approximately $177,360, offset by interest earned on marketable securities of approximately $225,292. For the nine months ended September 30, 2022, we had a net loss of $384,745, which consisted of loss of approximately $332,133 derived primarily from general and administrative expenses of $616,516, offset by $307,783 interest income earned on marketable securities from our trust account. Income tax expense was $52,612 for each of the three months and nine months period.
17
Liquidity and Capital Resources
On September 16, 2021, we consummated the IPO of 5,000,000 units (the “Public Units”). Each Unit consists of one share of Common Stock (“Common Stock”) and one right (“Right”) to receive one-tenth (1/10) of a share of Common Stock upon the consummation of an initial business combination. The Public Units were sold at an offering price of $10.00 per Public Unit, generating gross proceeds of $50,000,000. Simultaneously with the closing of the IPO on September 16, 2021, the Company consummated the private placement (“Private Placement”) with Pacifico Capital LLC, its sponsor, purchasing 231,250 units, and Chardan purchasing 50,000 units, in the aggregate a total of 281,250 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $2,812,500.
On September 20, 2021, the underwriter fully exercised its over-allotment option and the closing of the issuance and sale of the additional Public Units occurred on September 22, 2021. The total aggregate issuance by the Company of 750,000 units at a price of $10.00 per unit resulted in total gross proceeds of $7,500,000. On September 22, 2021, simultaneously with the sale of the over-allotment Units, the company consummated the private sale of an additional 26,250 Private Units, generating gross proceeds of $262,500.
A total of $58,075,000 of the net proceeds from the sale of Public Units in the Initial Public Offering (including the over-allotment option units) and the Private Placements on September 16, 2021 and September 22, 2021, were placed in a trust account established for the benefit of the Company’s public shareholders.
Following the IPO, the full exercise of the over-allotment option, and the sale of the private placement units, we had $72,436 of cash held outside of the Trust Account, after payment of costs related to the IPO, and available for working capital purposes as of September 30, 2022. We incurred a total of $4,759,144 in transaction costs, including $1,437,500 of underwriting fees, $2,469,769 of deferred underwriting fees and $851,875 of other offering costs (including $320,994 of the estimated cost of Unit Purchase Option issued to the underwriter).
As of September 30, 2022, we had marketable securities held in the Trust Account of $58,945,268 consisting of securities held in a treasury trust fund that invests in United States government treasury bills, bonds or notes with a maturity of 185 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2022, we withdrew $13,819 interest earned on the Trust Account to pay our taxes. We intend to use substantially all of the funds held in the Trust Account, to acquire a target business and to pay our expenses relating thereto. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the remaining funds held in the Trust Account will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our business combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.
As of September 30, 2022, we had cash of $11,892 outside the Trust Account. For the three and nine months period ending September 30, 2022, cash used in operating activities was $186,739 and $519,745, respectively. We intend to use the funds held outside the Trust Account for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination.
18
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, our insiders, officers and directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. If we complete a business combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used for such repayment. Up to $600,000 of such loans may be convertible into Private Units, at a price of $10.00 per Unit, at the option of the lender. The Private Units would be identical to the Private Placement Units.
On August 8, 2022 and September 15, 2022, the Sponsor loaned an additional $100,000 and $50,000, respectively, pursuant to two promissory notes which are unsecured, interest-free and due after the date on which the Company consummates an initial business combination. The Sponsor has the right to convert each promissory note into private units at $10.00 per unit.
On September 13, 2022, pursuant to the amended Merger Agreement, Caravelle loaned the Company $575,000 pursuant to a promissory note and deposited into the Company’s Trust Account an additional $575,000 (representing $0.10 per each share of redeemable common stock) to extend the time for Pacifico to complete the Business Combination by three months until December 16, 2022. It is uncertain that the Company will be able to consummate a Business Combination by this date. If a Business Combination is not consummated by the required date, there will be a mandatory liquidation and subsequent dissolution. In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, management has determined that mandatory liquidation, and subsequent dissolution, should the Company be unable to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. No adjustments have been made to the carrying amounts of assets and liabilities should the Company be required to liquidate after December 16, 2022.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2022. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.
Upon closing of a business combination, the underwriters will be entitled to a deferred fee of $0.375 per public share, or $2,156,250 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement. The underwriters will also be entitled to 43,125 common shares, to be issued if the Company closes a business combination.
The Company has engaged a merger and acquisition advisor and capital market advisor in connection with business combination to provide services such as introducing the Company to potential investors that are interested in purchasing the Company’s securities in connection with the initial business combination, assisting the Company in negotiating the terms and conditions with the target company. The Company will pay the advisor a cash fee or in shares in a total amount of approximately $4.625 million. In addition, the Company has committed to pay additional $50,000 professional fees upon the closing of a business combination.
19
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the period reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common stock Subject to Possible Redemption
We account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
We have 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 in the absence of additional paid-in capital) over an expected 12-month period leading up to a business combination.
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The unaudited condensed statements of operations include a presentation of income (loss) per redeemable share and income (loss) per non-redeemable share following the two-class method of income per share. In order to determine the net income (loss) attributable to both the redeemable shares and non-redeemable shares, the Company first considered the undistributed income (loss) allocable to both the redeemable shares and non-redeemable shares and the undistributed income (loss) is calculated using the total net loss less any dividends paid. The Company then allocated the undistributed income (loss) ratably based on the weighted average number of shares outstanding between the redeemable and non-redeemable shares. Any remeasurement of the accretion to redemption value of the common shares subject to possible redemption was considered to be dividends paid to the public shareholders.
Offering Costs
Offering costs consist of underwriting, legal, accounting, registration and other expenses incurred through the balance sheet date that are directly related to the IPO. The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering”. Offering costs are allocated between public shares and public rights based on the estimated fair values of public shares and public rights at the date of issuance.
20
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company we are not required to make disclosures under this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the fiscal quarter ended September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended September 30, 2022, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in the final prospectus for our IPO filed with the SEC and our previously filed Annual Report on 10-K and Quarterly Reports on Form 10-Q. As of the date of this Quarterly Report, there have been no material changes to the previously disclosed risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The registration statement (the “Registration Statement”) for our IPO was declared effective on September 13, 2021. On September 16, 2021, we consummated the IPO of 5,000,000 units (the “Public Units”). Each Unit consists of one share of Common Stock (“Common Stock”) and one right (“Right”) to receive one-tenth (1/10) of a share of Common Stock upon the consummation of an initial business combination. The Public Units were sold at an offering price of $10.00 per Public Unit, generating gross proceeds of $50,000,000. Simultaneously with the closing of the IPO on September 16, 2021, the Company consummated the private placement (“Private Placement”) with Pacifico Capital LLC, its sponsor, purchasing 231,250 units, and Chardan purchasing 50,000 units, in the aggregate a total of 281,250 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $2,812,500.
On September 20, 2021, the underwriter fully exercised its over-allotment option and the closing of the issuance and sale of the additional Public Units occurred on September 22, 2021. The total aggregate issuance by the Company of 750,000 units at a price of $10.00 per unit resulted in total gross proceeds of $7,500,000. On September 22, 2021, simultaneously with the sale of the over-allotment Units, the company consummated the private sale of an additional 26,250 Private Units, generating gross proceeds of $262,500.
Upon the closing of the IPO and the Private Placement (including the exercise of the over-allotment) $58,075,000 ($10.10 per share) of the net proceeds of the sale of the Public Shares in the IPO and the Private Placement were placed in a trust account (“Trust Account”) located in the United States with American Stock Transfer & Trust Company acting as trustee, and held as cash or invested only 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 money market funds meeting certain conditions under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a business combination and (ii) the distribution of the Trust Account as described below.
We paid $1,437,500 of underwriting fees, (not including the 3.75% deferred underwriting commission payable at the consummation of the initial business combination) and approximately $851,875 (including $320,994 of the estimated cost of Unit Purchase Option issued to the underwriter) for other costs and expenses related to our formation and the IPO.
For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Form 10-Q.
22
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits.
| * | 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. |
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: November 14, 2022 | PACIFICO ACQUISITION CORP. | |
| By: | /s/ Edward Cong Wang | |
| Name: | Edward Cong Wang | |
| Title: | Chief Executive Officer and Director (Principal Executive Officer) | |
| By: | /s/ Yi Zhong | |
| Name: | Yi Zhong | |
| Title: | Chief Financial Officer and Director (Principal Financial and Accounting Officer) | |
24