Borealis Foods Inc 10-K for FY2022
Borealis Foods Inc. (BRLS)
About this 10-K
Borealis Foods Inc filed this 10-K on March 31, 2023, covering the fiscal year ended December 31, 2022 (FY2022).
Headline figures
Fiscal year ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $302.54K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices)
(Zip Code)
7
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of Each Class | Trading Symbol (s) | Name of Each Exchange on Which Registered | ||
| Units, each consisting of one Class A ordinary share and one Warrant | OXUSU | The Nasdaq Stock Market LLC | ||
| The | ||||
| Warrants, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50 | OXUSW | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark if the Registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the Registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐
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, smaller reporting company, or an emerging growth company. See 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
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of June 30, 2022 (the last business day of the registrant’s
most recently completed second fiscal quarter), the aggregate market value of the Class A ordinary shares of the registrant (based upon
the closing price of the registrant’s Class A ordinary shares at that date as reported by the Nasdaq Stock Market LLC), excluding
outstanding shares beneficially owned by persons who may be deemed affiliates of the registrant, was $
As of March
24, 2023, there were
TABLE OF CONTENTS
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PART I
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some statements contained in this Annual Report on Form 10-K (this “Annual Report”) are forward-looking in nature. Our forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future, including with respect to our proposed Business Combination (as defined below) with Borealis Foods Inc., a corporation incorporated under the laws of Canada (“Borealis”). In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Annual Report may include, for example, statements about:
| ● | our ability to complete our initial Business Combination (as defined below), including the proposed Business Combination with Borealis; |
| ● | our expectations around the performance of Borealis or any other prospective target business or businesses; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial Business Combination (as defined below); |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial Business Combination (as defined below); |
| ● | our potential ability to obtain additional financing to complete our initial Business Combination (as defined below); |
| ● | our pool of prospective target businesses if the proposed Business Combination (as defined below) with Borealis is not completed; |
| ● | our ability to consummate an initial Business Combination (as defined below) due to the uncertainty resulting from the recent COVID-19 pandemic, the invasion of Ukraine by Russia and resulting sanctions, and other events (such as terrorist attacks, geopolitical unrest, natural disasters or a significant outbreak of other infectious diseases); |
| ● | the ability of our officers and directors to generate a number of potential Business Combination (as defined below) opportunities; |
| ● | our public securities’ potential liquidity and trading; |
| ● | the use of proceeds not held in the trust account or available to us from interest income on the trust account balance; |
| ● | the trust account not being subject to claims of third parties; |
| ● | our financial performance; or |
| ● | the other risk and uncertainties discussed in “Item 1A. Risk Factors,” elsewhere in this Annual Report and in our other filings with the Securities and Exchange Commission (the “SEC”), including in our preliminary prospectus/proxy statement to be included in a Registration Statement on Form S-4 that will be filed with the SEC relating to the proposed Business Combination (as defined below) with Borealis. |
The forward-looking statements contained in this Annual Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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ITEM 1. BUSINESS
We are a blank check company incorporated as a Cayman Islands exempted company. We were formed for the purpose of entering into a merger, capital share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination (a “Business Combination”) with one or more businesses or entities, which we refer to as a “target business.” While we may pursue an initial Business Combination with any target business and in any sector or geographical location, we intend to focus our search on targets in energy transition technologies, such as battery materials, energy storage, electric vehicle (“EV”) infrastructure and advanced recycling in emerging/frontier countries including the Commonwealth of Independent States (“CIS”), South and South-East Asia and Middle East and North Africa (“MENA”) regions.
On September 8, 2021, we consummated an initial public offering (the “Initial Public Offering”) of 15,000,000 units at $10.00 per unit and the sale of 8,400,000 warrants at a price of $1.00 per private warrant in a private placement to our sponsor, Oxus Capital Pte. Ltd and its underwriters that closed simultaneously with the closing of the Initial Public Offering. We have listed the units on the Nasdaq Capital Market (“Nasdaq”). On September 13, 2021, the underwriters exercised their over-allotment option in full, according to which we consummated the sale of an additional 2,250,000 units, at $10.00 per unit, and the sale of an additional 900,000 private warrants, at $1.00 per private warrant, generating total gross proceeds of $23.40 million.
A total of $175,950,000 of the net proceeds from the Initial Public Offering (including the additional units) and the sale of private placement warrants and additional private placement warrants was deposited in a trust account established for the benefit of our public shareholders.
Proposed Business Combination
On February 23, 2023, Oxus Acquisition Corp. (the “Company” or “Oxus”) entered into a business combination agreement by and among the Company, 1000397116 Ontario Inc., a corporation incorporated under the laws of the province of Ontario, Canada (“Newco”) and a wholly-owned subsidiary of the Company, and Borealis (as may be amended and/or restated from time to time, the “Business Combination Agreement”). Pursuant to the Business Combination Agreement, among other things: (a) the Company will domesticate and continue as a corporation existing under the laws of the province of Ontario, Canada (the “Continuance” and, the Company as the continuing entity, “New Oxus”); (b) on the closing date, Newco and Borealis will amalgamate in accordance with the terms of the plan of arrangement (the “Borealis Amalgamation” and Newco and Borealis as amalgamated, “Amalco”), with Amalco surviving the Borealis Amalgamation as a wholly-owned subsidiary of New Oxus; and (c) on the closing date, immediately following the Borealis Amalgamation, Amalco and New Oxus will amalgamate (the “New Oxus Amalgamation,” and together with the Continuance, the Borealis Amalgamation and other transactions contemplated by the Business Combination, the plan of arrangement and the ancillary agreements, the “Proposed Transaction”), with New Oxus surviving the New Oxus Amalgamation. The Business Combination Agreement was unanimously approved by Oxus’ and Borealis’ respective board of directors. Under the Business Combination Agreement, the shareholders of Borealis (“Borealis Shareholders”) will receive from New Oxus, in the aggregate, a number of shares of New Oxus equal to (a) the Borealis Value (as defined below) divided by (b) $10.00. The Borealis Value will be equal to $150 million less net indebtedness (aggregate consolidated amount of indebtedness of Borealis minus cash) (the “Borealis Value”).
The Business Combination Agreement contains customary representations and warranties, covenants and closing conditions, including, but not limited to, approval by the Company’s and Borealis’ respective shareholders of the Business Combination Agreement and the Proposed Transaction. The terms of the Business Combination Agreement and other related ancillary agreements entered into or to be entered into in connection with the closing of the Proposed Transaction, including those briefly described below, are summarized in more detail in the Company’s Form 8-K filed with the SEC on March 1, 2023.
Shareholder Support Agreements
Concurrently with the execution and delivery of the Business Combination Agreement, Oxus, Borealis and certain Borealis Shareholders entered into the Shareholder Support Agreements pursuant to which, among other things, such Borealis Shareholders have agreed to vote their Borealis shares in favor of the Proposed Transaction and not sell or transfer their Borealis shares.
Sponsor Support Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, Oxus, Borealis and our sponsor entered into the Sponsor Support Agreement pursuant to which, among other things, our sponsor agreed to (A) vote its founder shares in favor of the Proposed Transaction and any proposals the parties deem necessary or desirable to effectuate the Proposed Transaction (the “Oxus Proposals”), (B) not redeem its founder shares, (C) waive certain of its anti-dilution rights, (D) convert the Sponsor Convertible Notes (as defined therein), and (E) forfeit certain sponsor founder shares as a part of incentive equity compensation for directors, officers and employees of New Oxus (subject to terms and conditions set forth in the Sponsor Support Agreement).
Registration Rights Agreement
In connection with the closing of the Proposed Transaction, Oxus and certain Borealis Shareholders and certain shareholders of Oxus (the “Holders”) will enter into the Registration Rights Agreement, pursuant to which Oxus will be obligated to file a registration statement to register the resale of certain securities of Oxus held by the Holders. The Registration Rights Agreement will also provide the Holders with “piggy-back” registration rights, subject to certain requirements and customary conditions.
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Lock-Up Agreements
In connection with the closing of the Proposed Transaction, Oxus and certain directors/officers/five percent (5%) or greater shareholders of Borealis (the “Subject Party”) will enter into the Lock-Up Agreements, pursuant to which (A) fifty percent (50%) of the shares of New Oxus held by the Subject Party (the “Restricted Securities”) will be locked-up during the period commencing from the closing and ending on the earlier to occur of (i) twelve (12) months after the date of the closing and (ii) the date on which the closing price of common shares of New Oxus equals or exceeds $12.00 per share (as adjusted to take into account any stock split, stock dividend, reverse stock split, recapitalization or similar event) for any twenty (20) trading days within a thirty (30)-trading day period starting after the closing, and (B) fifty percent (50%) of the Restricted Securities will be locked-up during the period commencing from the closing and ending on twelve (12) months after the date of the closing, subject to certain specifications and exceptions.
Extension
On March 2, 2023, our shareholders approved an amendment to our Amended and Restated Memorandum and Articles of Association (as amended, the “Charter”) (the “Extension Amendment”). The Extension Amendment extends the date by which we must consummate our initial Business Combination (the “Extension”) from March 8, 2023, upon additional funds being deposited into the Company’s trust account (such date, the “Termination Date”) to up to December 8, 2023, or such earlier date as determined by our board of directors (the “Board,” such date, the “Extended Date”).
In connection with the shareholder vote to approve the Extension Amendment, the Holders of 15,300,532 Class A ordinary shares property exercised their right to redeem their shares for cash at a redemption price of approximately $10.41 per share, for an aggregate redemption amount of approximately $159.34 million (the “March Redemption”), leaving approximately $20.3 million in the Trust Account.
Our sponsor has agreed to loan the Company (i) the lesser of (a) an aggregate of $180,000 or (b) $0.12 per public share that remain outstanding and is not redeemed in connection with the Extension plus (ii) the lesser of (a) an aggregate of $60,000 or (b) $0.04 per public share that remain outstanding and is not redeemed in connection with the Extension for each of the six subsequent calendar months commencing on June 8, 2023 (the “Extension Loan”), which amount will be deposited into the Trust Account. On March 3, 2023, our sponsor funded $200,000 through the Amended Note (as defined below), out of which $180,000 was deposited into the Trust Account as the initial deposit of the Extension Loan.
On March 15, 2023, our sponsor funded an additional $100,000 through the Amended Note (as defined below).
Our Founder and Management Team
We seek to capitalize on the substantial deal sourcing, investing and operating expertise of our founder, non-executive Chairman and director, Kenges Rakishev, our Chief Executive Officer, Kanat Mynzhanov, and our Chief Financial Officer, Askar Mametov, as well as our independent directors, Shiv Vikram Khemka, Christophe Charlier and Karim Zahmoul.
Mr. Rakishev is a global investor and entrepreneur who focuses on acquiring and investing in businesses that can benefit from his group’s operating expertise. Over the course of his career, Mr. Rakishev has acquired and directly or indirectly invested in more than 50 businesses in metals & mining, oil, petrochemical, banking, fintech, information technology, ecommerce, logistics and insurance industries, including a current portfolio of ten active companies worldwide. He is the sole shareholder and chief executive officer of Fincraft (listed on the Kazakhstan Stock Exchange since 2019), chairman of the board of Fincraft Resources JSC (formerly SAT & Company)(listed on the Kazakhstan Stock Exchange since 2008), chairman of the board of Battery Metals Technologies Ltd.,, president of Kazakhstan Boxing Federation, independent director of Satbayev Kazakh National Technical University, co-founder of Saby Charitable Foundation, and was one of the early investors in StoreDot and Net Element (Nasdaq: NETE). Mr. Rakishev was ranked 12th on the Forbes list of the most influential persons in Kazakhstan in 2020.
In 2013, Singulariteam Fund, a venture capital fund owned by one of Mr. Rakishev’s group’s companies, was an early investor in StoreDot. StoreDot is a pioneer of extreme fast charging (XFC) batteries that overcome the critical barrier to mainstream EV adoption — range and charging anxiety. The company has revolutionized the conventional Li-ion battery by designing and synthesizing proprietary organic and inorganic compounds, making it possible to fully charge an EV in just five minutes. The company was named “the pioneer of 2020” by BNEF, as one of ten game-changing technology companies creating a more sustainable future.
Mr. Rakishev is a significant shareholder and Chairman of Fincraft Resources JSC, which has expertise building, investing and operating internationally in the natural resources and disruptive technology industries. Through its subsidiary Battery Metals Technologies Ltd., the company is targeting metals necessary for electrification (in particular, nickel, cobalt and lithium) and has a significant nickel opportunity project in Kazakhstan. Kazakhstan is strategically located, linking China and South Asia with Russia and Western Europe by road, rail and port, and therefore is of great importance to China’s “Belt and Road” strategy. Fincraft Resources JSC recognized the potential to produce nickel from laterite ores of the Gornostaevskoe deposit using in-situ leaching (ISL) techniques, which offers significant economic, environmental and ecological advantages over conventional mining by extracting metals from the ground without physically removing the rock in which they are found. As a result, little or no tailing or waste rock is generated. In addition, ISL allows for increasing and decreasing production output more cost effectively than conventional mining.
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From 2013 to 2018, Mr. Rakishev was a non-executive director of Central Asia Metals Plc (AIM: CAML). In 2014, Mr. Rakishev became a major shareholder of BTA, which is currently a subsidiary of Fincraft. As of April 2021, Fincraft has over $1.2 billion in total assets. From 2015 to 2017, Mr. Rakishev was a controlling shareholder and served as the chairman of Kazkommertsbank JSC, the largest Kazakh commercial bank. From 2017 to 2019, Mr. Rakishev was a major shareholder of Petropavlovsk Plc., a member of London’s FTSE 250 index and is one of the five largest gold mining companies in Russia. In these positions, he offered support on strategic development, including helping to resolve management conflicts as well as short-term liquidity issues.
Mr. Rakishev is an active investor in start-ups that are developing some of the most disruptive and impressive technologies today, from EV battery technology, mobile payments, artificial intelligence and augmented reality to robotics and healthcare technology. He helps to establish an entrepreneurial environment as a foundation for growth, while offering support, resources, and advice.
In addition to Mr. Rakishev, we expect to benefit from the experience and networks of the following members of our management team:
Kanat Mynzhanov has served as our Chief Executive Officer and director since our inception in February 2021. Mr. Mynzhanov led and co-founded a hedge fund, Bellprescot Prime Fund and asset management firm Bellprescot Asset Management in September 2016. He served as the director of the investment advisory firm, Bellprescot Ltd. from September 2016 until April 2021. He served as the chief investment officer of Bellprescot Asset Management from September 2016 to June 2020. The hedge fund’s primary focus of investments was technology driven public companies with leading and disruptive products and service, including internet of things and cloud, autonomous driving, artificial intelligence, machine learning, semiconductors, cybersecurity and robotics. Since 2018, Mr. Mynzhanov advised on several private equities deals in fintech (payments, remittances and alternative financing), mobility (including EV battery metals and EV battery technology) and structured products, including tokenization and syndicated co-lending. Prior to founding the hedge fund, Mr. Mynzhanov served as the head of investments at Kazatomprom-Damu, an investment subsidiary of NAC Kazatomprom JSC, where he led and mentored a team of highly skilled investment managers responsible for mergers and acquisitions, joint ventures and business development across metals & mining, rare metals and alternative energy industries. Mr. Mynzhanov joined NAC Kazatomprom JSC in 2014 as an investment manager and during his time he oversaw numerous projects and established strong connections with some of the largest global firms in the industry. From March 2011 to March 2014 Mr. Mynzhanov consulted and led the business development of tungsten concentrate producer in CIS region. From November 2008 to March 2011 Mr. Mynzhanov led and participated in operational, commercial and investment management of oil tankers firm in London. Over the years Mr. Mynzhanov consulted for various firms, including those in the metals and mining sector, on raising capital through initial public offerings, as well as restructuring and various business developments.
Askar Mametov has served as our Chief Financial Officer since our inception in February 2021. Mr. Mametov has over 15 years of executive experience in mining, oil and gas, infrastructure and transportation industries with a thorough understanding of financial reporting (US GAAP and IFRS), taxation and accounting, financial planning and analysis. Previously, Mr. Mametov served as chief financial officer of KM Gold Inc., a public Kazakh gold mining company (KASE: KMGD) from August 2016 until October 2019. He led the public listing of the company on the Kazakhstan Stock Exchange in 2016. Prior to that, Mr. Mametov served as financial controller of Sequa Petroleum Kazakhstan, a subsidiary of Sequa Petroleum, an oil and gas company listed on Euronext Access (EPA: MLSEQ), from January 2014 to July 2016. From 2007 to 2014, Mr. Mametov served in multiple roles at Caspian Services Inc. (Nasdaq: CSSV), including management reporting, US GAAP financial reporting, as well as IFRS financial reporting. In 2007, Mr. Mametov worked at Beeline Kazakhstan, a subsidiary of VEON (Nasdaq: VEON). From 2005 to 2007, Mr. Mametov served as financial reporting specialist and consortium accountant for PetroKazakhstan Inc. (TSX: PKZ), a Canadian oil company. Mr. Mametov is a member of IMA (Institute of Management Accountants) and since 2014, has served as the President of Kazakhstan Chapter of IMA.
We have a highly accomplished team of independent directors who are experienced in executive leadership, company governance and operations oversight. Our board members have served as directors, partners, executives and advisors for a number of publicly-traded companies. We believe that our independent directors’ combination of relationships, experience and expertise in a number of sectors (natural resources, green infrastructure, high technology, solid state batteries, financial services, telecom) and markets (India, Russia, the Middle East, Europe, North America, the CIS and other emerging markets) puts us in a strong position to complete a Business Combination.
Shiv Vikram Khemka is one of our independent directors. Mr. Khemka has served as a vice-chairman of SUN Group, a 120-year-old family enterprise comprised of both operating and investment companies, since 1990. SUN Group is active in asset management, natural resources, green infrastructure and high technology. SUN co-founded SUN Mobility, an energy tech company focused on becoming a leader in EV energy. SUN is also a significant investor in a leading EV solid state battery manufacturer. The group has been active in various regions around the world, including India, Russia, the Middle East, Central and South-East Asia. Mr. Khemka is the chairman of the Entrepreneurship Sports Generation and executive chairman of the Global Education and Leadership Foundation. He is currently a member of the board of governors at Junior Achievement Worldwide and is a member of the Leadership Council at the Brooking Centre for Universal Education. The World Economic Forum elected Mr. Khemka a “Global Leader for Tomorrow” and he was also a member of the organization’s Global Agenda Council on Education. He has served on both the Brown University and Yale University’s President’s Councils. Mr. Khemka has also served as a board member on the Stanford Philanthropy and Civic Society (PACS) centre and was advisory board member of the Davis Center for Russian and Eurasian studies at Harvard University. He is currently a founding member of V20, a global community of values experts and practitioners that engage with G20, and serves as the chairman of Aikido Aikikai Foundation of India. Mr. Khemka was awarded the Dr. Jean Mayer Global Citizenship Award from Tufts University, and the Outstanding Contribution to Education Prize and the India Alumni Award from the Wharton School of Business.
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Christophe Charlier is one of our independent directors. Mr. Charlier is an international financier with over 25 years of experience in investment banking, private equity and international management. Throughout his career he has acted as principal or advised on a number of landmark transactions in the telecom, financial services, natural resources and sports and entertainment industries across developed and emerging markets. He has served as an independent director of La Française de l’Energie, a French gas production company since April 2016, and chairman of Pure Grass Films, a UK-based film and TV series production company, since 2012. Mr. Charlier served as chairman of the board of directors of Renaissance Capital, a leading investment bank focused on emerging and frontier markets, from April 2017 to March 2020. As chairman, Mr. Charlier coordinated the work of Renaissance Capital’s board of directors and oversaw strategic development, the global brand, and relationships with key clients and stakeholders globally, as well as compliance with listing requirements of the Astana International Exchange (AIX) in Kazakhstan. Previously, Mr. Charlier served as deputy CEO of Onexim Group, a leading private equity fund based in Moscow from September 2008 to June 2014. In this capacity, he served on the boards of directors of several of Russia’s largest companies, including RusAl, Polyus Gold, Quadra-Power Generation, and RBC. He also acted as chairman of the NBA’s Brooklyn Nets franchise from 2010 to 2014. Prior to that from February 2002 to March 2004, Mr. Charlier was director of strategic development of Norilsk Nickel, leading its acquisition of strategic stakes in Stillwater Mining Company and Gold Fields. He started his investment banking career in 1995 at JPMorgan in the M&A Group in NY.
Karim Zahmoul is one of our independent directors. Mr. Zamoul has 25 years of investment banking experience. He has served as a Founder and CEO of EMVirya Ltd, an FCA regulated investment advisor based in London since February, 2018. EMVirya Ltd, is a privately held financial services firm with extensive experience in global emerging markets that is positioning itself at the cross road of Emerging markets and renewable energy. Prior to founding EMVirya, Mr. Zahmoul was a Partner at Temporis Capital from September 2014 to April 2017 in London, where he was responsible for the firm’s international investments business and developed renewable energy project in the emerging market jurisdiction including extended focus in Morocco and Argentina. Prior to that from 2004 to 2014, Mr. Zahmoul was a Managing Director at Barclays Investment Bank where he held various senior positions over his 10-year tenure at the bank. In his last position, he was responsible for the Global Emerging Market business for the investment bank. Prior to Barclays from 1999 to 2004, Mr. Zahmoul spent five years at Deutsche Bank where he was a Managing Director and Head of Emerging Market Structuring for the Americas in New York. He started his financial career and spent six years at Goldman Sachs, in both New York and London, where his last position was Executive Director in EEMEA Trading. Mr. Zahmoul received an MSc and a BSc from Columbia School of Engineering and Applied Sciences in Operation Research and a BA in Physics from Columbia College.
Notwithstanding the foregoing, the past successes of Mr. Rakishev and our other officers and directors, and their respective affiliates do not guarantee that we will be able to identify a suitable candidate for our initial Business Combination or realize success with respect to any Business Combination we may consummate. You should not rely on the historical record of such individuals’ or entity’s performance as indicative of our future performance. Additionally, in the course of their respective careers, members of our management team may have been involved in businesses and deals that were unsuccessful. In addition, our officers and directors may have conflicts of interest with other entities to which they owe fiduciary or contractual obligations with respect to initial Business Combination opportunities.
Business Strategy
Our acquisition and value creation strategy is to identify and complete the initial Business Combination with a target in an industry that complements the experience and expertise of our founder and management team. We believe our founder’s broad experience owning and operating private and public companies positions us for a successful Business Combination. We also believe the resources and experience of our management team will provide us with an in-depth understanding of targets located in the CIS and other countries in South and South-East Asia and MENA regions, operating in energy transition technologies.
We expect to distinguish ourselves by leveraging our extensive internal and external network of relationships to create a significant pipeline of Business Combination opportunities. We have significant experience dealing with key stakeholders, including shareholders, administrators, governmental agencies as well as equity sponsors, lending institutions, family offices, investment banks, restructuring advisers, attorneys, brokers and employees built over many years of investing and operating businesses in different regions.
We believe our sponsor’s and management team’s deal sourcing, investing and operating expertise, as well as their extensive network of contacts in our focus regions will uniquely position us to take advantage of positive trends in our target industries. We believe this expertise and network of contacts will provide us access to a number of potential target businesses that could be attractive public companies in the United States.
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We will evaluate a wide-range of organic and strategic growth opportunities to identify synergies, bolster a target’s competitive position and develop new areas of growth for it. We also intend to leverage our management team’s vision and substantial expertise in building vertically-integrated businesses when possible.
Acquisition Criteria
We intend to acquire a company that we believe can offer an attractive risk-adjusted returns for shareholders. Fundamental analysis, including historical and projected financial and operating data, extensive financial modelling and in-depth market risks reviews are the core to our investment strategy, as well as extensive legal and intellectual properties due diligence to evaluate a target company and to complete a thorough analysis of the potential impact of a Business Combination.
We intend to acquire companies or assets that we believe have some or all of the following attributes:
| ● | The potential to benefit from being publicly traded with access to the public capital markets and reduced cost of equity and debt capital to pursue further growth opportunities; |
| ● | A professional management team whose interests are aligned with our investors (we may enhance the capabilities of the target’s business team by recruiting talent through our network of contacts); |
| ● | The potential to grow organically as well as through acquisitions; |
| ● | A defensible position within a target market as a result of a differentiated technology or other competitive advantages; |
| ● | A proven business model; |
| ● | The collective capabilities of our management can be leveraged to tangibly improve the operations and market position of the target; and |
| ● | A history of strong operating and financial results with proven track records. |
Given our management team’s extensive experience investing in a target’s industries, we expect that we may be familiar with the prospective target’s end-market, competitive landscape and business model. We intend to construct an operating and financial plan designed to significantly increase shareholder value. When necessary, we intend to assemble a team of industry and financial experts to supplement the management teams’ efforts. We expect to demonstrate to the target and its shareholders that we have the resources and expertise to provide the strategic and operational direction necessary to grow the business and improve the overall strategic prospects for the combined companies.
These criteria and guidelines are not intended to be exhaustive. Any evaluation relating to the merits of an initial Business Combination may be based, to the extent relevant, on these general criteria and guidelines as well as other considerations, factors, guidelines, and criteria that our management team may deem relevant. In the event that we decide to enter into a Business Combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria and guidelines in our shareholder communications related to our initial Business Combination, which would be in the form of proxy solicitation or tender offer materials, as applicable, that we would file with the SEC.
In evaluating a prospective target business, we expect to conduct a thorough due diligence review which may encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial and other information that will be made available to us. We will also utilize our operational and capital allocation experience.
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We are not prohibited from pursuing an initial Business Combination with a business that is affiliated with our sponsor, officers, or directors. In the event we seek to complete our initial Business Combination with a business that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that our initial Business Combination is fair to our company from a financial point of view.
Members of our management team will directly or indirectly own founder shares and/or private warrants following the Initial Public Offering and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial Business Combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular Business Combination if the retention or resignation of any such officers and directors is included by a target business as a condition to our initial Business Combination.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a Business Combination opportunity to such entities. Accordingly, if any of our officers or directors becomes aware of a Business Combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability complete our Business Combination. Our Charter provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Effecting a Business Combination
General
We are not presently engaged in, and we will not engage in, any substantive commercial business for an indefinite period of time following the Initial Public Offering. We intend to utilize cash derived from the proceeds of the Initial Public Offering and the private placement of private warrants, our ordinary shares, debt or a combination of these in effecting a Business Combination, including the proposed Business Combination with Borealis. A Business Combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various federal and state securities laws. In the alternative, we may seek to consummate a Business Combination with a company that may be financially unstable or in its early stages of development or growth. While we may seek to effect simultaneous Business Combinations with more than one target business, we will probably have the ability, as a result of our limited resources, to effect only a single Business Combination.
Sources of Target Businesses
We expect that our principal means of identifying potential target businesses will be through the extensive contacts and relationships of our sponsor, initial shareholders, officers and directors. While our officers and directors are not required to commit any specific amount of time in identifying or performing due diligence on potential target businesses, our officers and directors believe that the relationships they have developed over their careers and their access to our sponsor’s contacts and resources will generate a number of potential Business Combination opportunities that will warrant further investigation. We also anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers, venture capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses they think we may be interested in on an unsolicited basis, since many of these sources will have read this Annual Report and know what types of businesses we are targeting.
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Our officers and directors must present to us all target business opportunities that have a fair market value of at least 80% of the assets held in the trust account at the time of the agreement to enter into the initial Business Combination, subject to any pre-existing fiduciary or contractual obligations. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis (other than EarlyBirdCapital and Sova Capital as described elsewhere in this Annual Report), we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. In no event, however, will our sponsor, initial shareholders, officers, directors or their respective affiliates be paid any compensation or fees of any kind, including finder’s, consulting fees and other similar fees, prior to, or for any services they render in order to effectuate, the consummation of an initial Business Combination (regardless of the type of transaction that it is), other than the $10,000 per month administrative fee, the repayment of up to $300,000 in loans from our sponsor and reimbursement of any out-of-pocket expenses. Our audit committee will review and approve all reimbursements and payments made to our sponsor, initial shareholders, officers, directors or our or their respective affiliates, with any interested director abstaining from such review and approval.
We have no present intention to enter into a Business Combination with a target business that is affiliated with any of our officers, directors or sponsor. However, we are not restricted from entering into any such transactions and may do so if (i) such transaction is approved by a majority of our disinterested independent directors and (ii) we obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions, that the Business Combination is fair to our unaffiliated shareholders from a financial point of view.
Selection of a Target Business and Structuring of a Business Combination
Subject to our management team’s pre-existing fiduciary obligations and the limitations that a target business have a fair market value of at least 80% of the balance in the trust account at the time of the execution of a definitive agreement for our initial Business Combination, as described below in more detail, and that we must acquire a controlling interest in the target business, our management will have virtually unrestricted flexibility in identifying and selecting a prospective target business. We have not established any specific attributes or criteria (financial or otherwise) for prospective target businesses other than as described above under the caption “Investment Criteria.” In evaluating a prospective target business, our management may consider a variety of factors, including one or more of the following:
| ● | financial condition and results of operation; |
| ● | growth potential; |
| ● | brand recognition and potential; |
| ● | experience and skill of management and availability of additional personnel; |
| ● | capital requirements; |
| ● | competitive position; |
| ● | barriers to entry; |
| ● | stage of development of the products, processes or services; |
| ● | existing distribution and potential for expansion; |
| ● | degree of current or potential market acceptance of the products, processes or services; |
| ● | proprietary aspects of products and the extent of intellectual property or other protection for products or formulas; |
| ● | impact of regulation on the business; |
| ● | regulatory environment of the industry; |
| ● | costs associated with effecting the Business Combination; |
| ● | industry leadership, sustainability of market share and attractiveness of market industries in which a target business participates; and |
| ● | macro competitive dynamics in the industry within which the company competes. |
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular Business Combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting a Business Combination consistent with our business objective. In evaluating a prospective target business, we will conduct an extensive due diligence review which will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information which is made available to us. This due diligence review will be conducted either by our management or by unaffiliated third parties we may engage, although we have no current intention to engage any such third parties.
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The time and costs required to select and evaluate a target business and to structure and complete the Business Combination cannot presently be ascertained with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which a Business Combination is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a Business Combination.
Fair Market Value of Target Business
The Nasdaq listing rules require that the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account at the time of the execution of a definitive agreement for our initial Business Combination. Notwithstanding the foregoing, if we are not then listed on Nasdaq for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.
We currently anticipate structuring a Business Combination to acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial Business Combination where we merge directly with the target business or a newly formed subsidiary or where we acquire 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 we will only complete such Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders prior to the Business Combination may collectively own a minority interest in the post- transaction company, depending on valuations ascribed to the target and us in the Business Combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we could acquire a 100% controlling interest in the target; however, as a result of the issuance of a substantial number of new shares, our shareholders immediately prior to our initial Business Combination could own less than a majority of our outstanding shares subsequent to our initial Business Combination. 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% of trust account balance test.
The fair market value of the target will be determined by our board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book value). The proxy solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide public shareholders with our analysis of the fair market value of the target business, as well as the basis for our determinations. If our board is not able to independently determine that the target business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that commonly renders valuation opinions, with respect to the satisfaction of such criteria. We will not be required to obtain an opinion from an investment banking firm as to the fair market value if our board of directors independently determines that the target business complies with the 80% threshold.
Lack of Business Diversification
We may seek to effect a Business Combination with more than one target business, although we expect to complete our Business Combination with just one business. Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance of a single business operation. Unlike other entities which may have the resources to complete several Business Combinations of entities operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. By consummating a Business Combination with only a single entity, our lack of diversification may:
| ● | subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to a Business Combination, and |
| ● | result in our dependency upon the performance of a single operating business or the development or market acceptance of a single or limited number of products, processes or services. |
If we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us, and delay our ability, to complete the Business Combination. With multiple acquisitions, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business.
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Limited Ability to Evaluate the Target Business’ Management
Although we intend to scrutinize the management of a prospective target business when evaluating the desirability of effecting a Business Combination, we cannot assure you that our assessment of the target business’ management will prove to be correct. In addition, we cannot assure you that the future management will have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of our officers and directors, if any, in the target business following a Business Combination cannot presently be stated with any certainty. While it is possible that some of our key personnel will remain associated in senior management or advisory positions with us following a Business Combination, it is unlikely that they will devote their full-time efforts to our affairs subsequent to a Business Combination. Moreover, they would only be able to remain with the company after the consummation of a Business Combination if they are able to negotiate employment or consulting agreements in connection with the Business Combination. Such negotiations would take place simultaneously with the negotiation of the Business Combination and could provide for them to receive compensation in the form of cash payments and/or our securities for services they would render to the company after the consummation of the Business Combination. While the personal and financial interests of our key personnel may influence their motivation in identifying and selecting a target business, their ability to remain with the company after the consummation of a Business Combination will not be the determining factor in our decision as to whether or not we will proceed with any potential Business Combination. Additionally, we cannot assure you that our officers and directors will have significant experience or knowledge relating to the operations of the particular target business.
Following a Business Combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers we do recruit will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Shareholders May Not Have the Ability to Approve an Initial Business Combination
In connection with any proposed Business Combination, including the proposed Business Combination with Borealis, we will either (1) seek shareholder approval of our initial Business Combination at a meeting called for such purpose at which shareholders may seek to convert their shares, regardless of whether they vote for or against the proposed Business Combination or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our shareholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a shareholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein. The decision as to whether we will seek shareholder approval of a proposed Business Combination or will allow shareholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek shareholder approval. If we determine to engage in a tender offer, such tender offer will be structured so that each shareholder may tender all of his, her or its shares rather than some pro rata portion of his, her or its shares. In that case, we will file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial Business Combination as is required under the SEC’s proxy rules. Whether we seek shareholder approval or engage in a tender offer, we will consummate our initial Business Combination only if we have net tangible assets of at least $5,000,001 either immediately prior to or upon consummation of such Business Combination and, if we seek shareholder approval, a majority of the outstanding ordinary shares voted are voted in favor of the Business Combination.
We chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act. However, if we seek to consummate an initial Business Combination with a target business that imposes any type of working capital closing condition or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial Business Combination, we may need to have more than $5,000,001 in net tangible assets upon consummation and this may force us to seek third party financing which may not be available on terms acceptable to us or at all. As a result, we may not be able to consummate such initial Business Combination and we may not be able to locate another suitable target within the applicable time period, if at all. Public shareholders may therefore have to wait until after the Extended Date in order to be able to receive a pro rata share of the trust account.
Our sponsor, initial shareholders, officers and directors have agreed (1) to vote any ordinary shares owned by them in favor of any proposed Business Combination, (2) not to convert any ordinary shares in connection with a shareholder vote to approve a proposed initial Business Combination and (3) not sell any ordinary shares in any tender in connection with a proposed initial Business Combination.
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None of our officers, directors, sponsor, initial shareholders or their affiliates has indicated any intention to purchase units or Class A ordinary shares in the Initial Public Offering or from persons in the open market or in private transactions. However, if we hold a meeting to approve a proposed Business Combination and a significant number of shareholders vote, or indicate an intention to vote, against such proposed Business Combination or that they wish to convert their shares, our officers, directors, sponsor, initial shareholders or their affiliates could make such purchases in the open market or in private transactions in order to influence the vote and reduce the number of conversions. Notwithstanding the foregoing, our officers, directors, sponsor, initial shareholders and their affiliates will not make purchases of ordinary shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s shares.
Conversion Rights
At any meeting called to approve an initial Business Combination, public shareholders may seek to convert their shares, regardless of whether they vote for or against the proposed Business Combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial Business Combination, less any taxes then due but not yet paid. Alternatively, we may provide our public shareholders with the opportunity to sell their Class A ordinary shares to us through a tender offer (and thereby avoid the need for a shareholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, less any taxes then due but not yet paid.
Our sponsor, initial shareholders and our officers and directors will not have conversion rights with respect to any ordinary shares owned by them, directly or indirectly, whether acquired prior to the Initial Public Offering or purchased by them in the Initial Public Offering or in the aftermarket. In addition, the holders of the underwriter founder shares have agreed to waive their conversion rights with respect to the underwriter founder shares they hold.
We may require public shareholders, whether they are a record holder or hold their shares in “street name,” to either (i) tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically using Depository Trust Company’s Deposit/Withdrawal At Custodian System (the “DWAC System”), at the holder’s option, in each case prior to a date set forth in the proxy materials sent in connection with the proposal to approve the Business Combination.
There is a nominal cost associated with the above-referenced delivery process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker a nominal amount and it would be up to the broker whether or not to pass this cost on to the holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise conversion rights. The need to deliver shares is a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated. However, in the event we require shareholders seeking to exercise conversion rights prior to the consummation of the proposed Business Combination and the proposed Business Combination is not consummated this may result in an increased cost to shareholders.
Any proxy solicitation materials we furnish to shareholders in connection with a vote for any proposed Business Combination will indicate whether we are requiring shareholders to satisfy such certification and delivery requirements. Accordingly, a shareholder would have from the time the shareholder received our proxy statement up until the vote on the proposal to approve the Business Combination to deliver his shares if he wishes to seek to exercise his conversion rights. This time period varies depending on the specific facts of each transaction. However, as the delivery process can be accomplished by the shareholder, whether or not he is a record holder or his shares are held in “street name,” in a matter of hours by simply contacting the transfer agent or his broker and requesting delivery of his shares through the DWAC System, we believe this time period is sufficient for an average investor. However, we cannot assure you of this fact. Please see the section titled “Item 1A. Risk Factors — Risks Associated with Our Business — In connection with any shareholder meeting called to approve a proposed initial Business Combination, we may require shareholders who wish to convert their shares in connection with a proposed Business Combination to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights” for further information on the risks of failing to comply with these requirements.
Any request to convert such shares once made, may be withdrawn at any time up to the vote on the proposed Business Combination or the expiration of the tender offer. Furthermore, if a holder of public shares delivered his certificate in connection with an election of their conversion and subsequently decides prior to the applicable date not to elect to exercise such rights, he may simply request that the transfer agent return the certificate (physically or electronically).
If the initial Business Combination is not approved or completed for any reason, then our public shareholders who elected to exercise their conversion rights would not be entitled to convert their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any shares delivered by public holders.
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Limitation on Conversion upon Completion of our Initial Business Combination if We Seek Shareholder Approval
Notwithstanding the foregoing, if we seek shareholder approval of our initial Business Combination and we do not conduct conversions in connection with our initial Business Combination pursuant to the tender offer rules, our Charter provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking conversion rights with respect to more than an aggregate of 15% of the shares sold in the Initial Public Offering, which we refer to as the “Excess Shares.” We believe this restriction will discourage shareholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their conversion rights against a proposed Business Combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public shareholder holding more than an aggregate of 15% of the shares sold in the Initial Public Offering could threaten to exercise its conversion rights if such holder’s shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our shareholders’ ability to convert no more than 15% of the shares sold in the Initial Public Offering without our prior consent, we believe we will limit the ability of a small group of shareholders to unreasonably attempt to block our ability to complete our initial Business Combination, particularly in connection with a Business Combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our initial Business Combination.
Liquidation if No Business Combination
Our Charter provides that we will have until the Extended Date to complete an initial Business Combination. If we have not completed an initial Business Combination by such date, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not previously released to us but net of taxes payable, divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.
Our sponsor, initial shareholders, officers and directors have agreed that they will not propose any amendment to Charter (A) to modify the substance or timing of our obligations with respect to conversion rights as described in this Annual Report or (B) with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity, unless we provide our public shareholders with the opportunity to convert their public shares upon such approval at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest not previously released to us but net of taxes payable, divided by the number of then outstanding public shares. This conversion right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, initial shareholders, executive officers, directors or any other person.
We are required to seek to have all third parties (including any vendors or other entities we engage after the Initial Public Offering) and any prospective target businesses enter into agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account. As a result, the claims that could be made against us will be limited, thereby lessening the likelihood that any claim would result in any liability extending to the trust. We therefore believe that any necessary provision for creditors will be reduced and should not have a significant impact on our ability to distribute the funds in the trust account to our public shareholders. Nevertheless, Marcum LLP, our independent registered public accounting firm, and the underwriters of our Initial Public Offering, will not execute agreements with us waiving such claims to the monies held in the trust account. Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses will execute such agreements. Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse against the trust account. Our sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced below $10.20 per share by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but we cannot assure you that it will be able to satisfy its indemnification obligations if it is required to do so. We have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we believe it is unlikely that our sponsor will be able to satisfy its indemnification obligations if it is required to do so. Additionally, the agreement our sponsor entered into specifically provides for two exceptions to the indemnity it has given: it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed an agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account, or (2) as to any claims for indemnification by the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. As a result, if we liquidate, the per-share distribution from the trust account could be less than $10.20 due to claims or potential claims of creditors.
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We anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after our 18th month and anticipate it will take no more than 10 business days to effectuate such distribution. The holders of the founder shares and private shares have waived their rights to participate in any liquidation distribution from the trust account with respect to such shares. There will be no distribution from the trust account with respect to our warrants, which will expire worthless. We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account. If such funds are insufficient, our sponsor has contractually agreed to advance us the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $15,000) and has contractually agreed not to seek repayment for such expenses.
If we are unable to complete an initial Business Combination and expend all of the net proceeds of the Initial Public Offering, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the initial per-share redemption price would be $10.20.
Our public shareholders shall be entitled to receive funds from the trust account only in the event of our failure to complete a Business Combination within the required time period, if the shareholders seek to have us convert or purchase their respective shares upon a Business Combination which is actually completed by us or upon certain amendments to our Charter prior to consummating an initial Business Combination. In no other circumstances shall a shareholder have any right or interest of any kind to or in the trust account.
If we are forced to file a winding-up petition bankruptcy case or a winding-up petition or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy or insolvency law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public shareholders at least $10.20 per share.
If we are forced to file a winding-up petition bankruptcy case or a winding-up petition or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As court could seek to recover all amounts received by our shareholders. Furthermore, because we intend to distribute the proceeds held in the trust account to our public shareholders promptly after the Extended Date, this may be viewed or interpreted as giving preference to our public shareholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our board may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public shareholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Charter
Our Charter contains certain requirements and restrictions relating to the Initial Public Offering that will apply to us until the consummation of our initial Business Combination. These provisions cannot be amended without the approval of a majority of our shareholders. If we seek to amend any provisions of our Charter (A) to modify the substance or timing of our obligations with respect to conversion rights as described in this Annual Report or (B) with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity, we will provide our public shareholders with the opportunity to convert their public shares upon the approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest not previously released to us but net of taxes payable, divided by the number of then outstanding public shares. This conversion right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, initial shareholders, executive officers, directors or any other person. Our sponsor, initial shareholders, officers and directors have agreed to waive any conversion rights with respect to any founder shares, private shares and any public shares they may hold in connection with any vote to amend our Charter. Specifically, our Charter provides, among other things, that:
| ● | we shall either (1) seek shareholder approval of our initial Business Combination at a meeting called for such purpose at which shareholders may seek to convert their shares, regardless of whether they vote for or against the proposed Business Combination or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our shareholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a shareholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein; |
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| ● | we will consummate our initial Business Combination only if we have net tangible assets of at least $5,000,001 either immediately prior to or upon consummation of such Business Combination and, if we seek shareholder approval, a majority of the outstanding ordinary shares are voted in favor of the Business Combination; |
| ● | if our initial Business Combination is not consummated by the Extended Date, then we will redeem all of the outstanding public shares and thereafter liquidate and dissolve our company; |
| ● | upon the consummation of the Initial Public Offering, $176 million shall be placed into the trust account; |
| ● | we may not consummate any other Business Combination, merger, share exchange, asset acquisition, share purchase, reorganization or similar transaction prior to our initial Business Combination; and |
| ● | prior to our initial Business Combination, we may not issue additional shares that participate in any manner in the proceeds of the trust account, or that votes as a class with the ordinary shares sold in the Initial Public Offering on an initial Business Combination. |
Corporate Information
Our executive offices are located at 300/26 Dostyk Avenue, Almaty, Kazakhstan 050020 and our telephone number is +7 (727) 355-8021. Our corporate website address is www.oxusacquisition.com. The information contained on, or accessible through our corporate website or any other website that we may maintain is not incorporated by reference into this Annual Report.
We are a Cayman Islands exempted company. Exempted companies are Cayman Islands companies conducting business mainly outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Act (As Revised). As an exempted company, we have applied for and received a tax exemption undertaking from the Cayman Islands government that, in accordance with Section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands, for a period of 20 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations will apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax will be payable (i) on or in respect of our shares, debentures or other obligations or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us.
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company for up to five years. However, if our annual gross revenue is $1.07 billion or more, if our non-convertible debt issued within a three year period exceeds $1 billion or the market value of our ordinary shares that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, we would cease to be an emerging growth company as of the following fiscal year.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.
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Competition
In identifying, evaluating and selecting a target business, we have in the past and, if the proposed Business Combination with Borealis is not completed, may in the future encounter intense competition from other entities having a business objective similar to ours. Many of these entities are well established and have extensive experience identifying and effecting Business Combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there may be numerous potential target businesses that we could acquire with the net proceeds of the Initial Public Offering, our ability to compete in acquiring certain sizable target businesses may be limited by our available financial resources.
The following also may not be viewed favorably by certain target businesses:
| ● | our obligation to seek shareholder approval of a Business Combination or engage in a tender offer may delay the completion of a transaction; |
| ● | our obligation to convert or repurchase Class A ordinary shares held by our public shareholders may reduce the resources available to us for a Business Combination; and |
| ● | our outstanding warrants and unit purchase options, and the potential future dilution they represent. |
Any of these factors may place us at a competitive disadvantage in successfully negotiating a Business Combination. Our management believes, however, that our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately held entities having a similar business objective as ours in acquiring a target business with significant growth potential on favorable terms.
If we succeed in effecting a Business Combination, there will be, in all likelihood, intense competition from competitors of the target business. We cannot assure you that, subsequent to a Business Combination, we will have the resources or ability to compete effectively.
Employees
We have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they deem necessary to our affairs. The amount of time they will devote in any time period will vary based on whether a target business (such as Borealis)has been selected for the Business Combination and the stage of the Business Combination process the company is in. Accordingly, once a suitable target business to acquire (such as Borealis) has been located, management may spend more time investigating such target business and negotiating and processing the Business Combination (and consequently spend more time on our affairs) than had been spent prior to locating a suitable target business. We presently expect our executive officers to devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full- time employees prior to the consummation of a Business Combination.
Periodic Reporting and Audited Financial Statements
We have registered our units, Class A ordinary shares and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual report will contain financial statements audited and reported on by our independent registered public accountants.
We will provide shareholders with audited financial statements of the prospective target business as part of any proxy solicitation materials or tender offer documents sent to shareholders to assist them in assessing the target business. These financial statements will need to be prepared in accordance with or reconciled to United States generally accepted accounting principles or international financial reporting standards as promulgated by the International Accounting Standards Board. We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have the necessary financial statements. To the extent that this requirement cannot be met, we may not be able to acquire the proposed target business.
We may be required to have our internal control procedures audited for the fiscal year ending December 31, 2022 as required by the Sarbanes-Oxley Act. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
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RISKS FACTORS SUMMARY
An investment in our securities involves a high degree of risk. The occurrence of one or more of the events or circumstances described in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include, but are not limited to, the following:
| ● | We may not be able to complete our initial Business Combination before the Extended Date, in which case we would cease all operations except for the purpose of winding up, and we would redeem our public shares for a pro rata portion of the funds in the trust account, and we would liquidate. In such event, our warrants would expire worthless. |
| ● | Your only opportunity to affect the investment decision regarding a potential Business Combination may be limited to the exercise of your right to convert your shares to cash. |
| ● | Our initial shareholders control a substantial interest in us and thus may influence certain actions requiring a shareholder vote. |
| ● | We may not obtain a fairness opinion with respect to the target business that we seek to acquire and therefore you may be relying solely on the judgment of our board of directors in approving a proposed Business Combination. |
| ● | We may issue additional shares or debt securities to complete a Business Combination, which would reduce the equity interest of our shareholders and likely cause a change in control of our ownership. |
| ● | We may be unable to obtain additional financing, if required, to complete a Business Combination or to fund the operations and growth of the target business. |
| ● | Resources could be wasted in researching acquisitions that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. |
| ● | Our search for a Business Combination, and any target business with which we ultimately consummate a Business Combination, may be materially adversely affected by the recent coronavirus (COVID-19) pandemic and other events, and the status of debt and equity markets. |
| ● | We may have a limited ability to assess the management of a prospective target business and, as a result, may effect our initial Business Combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company. |
| ● | If we consummate a Business Combination with a target company with assets located in the CIS or other country in South and South-East Asia and MENA regions, our results of operations and prospects could be subject to the economic, political, and legal policies, developments, and conditions in the country in which we operate. Further, the laws applicable to such company will likely govern all of our material agreements and we may not be able to enforce our legal rights. |
| ● | There may be tax consequences to our Business Combination that may adversely affect us. |
| ● | Our officers and directors presently have fiduciary or contractual obligations to other entities and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented. |
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| ● | Our officers and directors may have interests in a potential Business Combination that are different than yours, which may create conflicts of interest. |
| ● | Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. |
| ● | We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by a majority of the then outstanding public warrants. |
| ● | We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless. |
| ● | If third parties bring claims against us, and if our directors decide not to enforce the indemnification obligations of our sponsor, or if our sponsor does not have the funds to indemnify us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by shareholders may be less than $10.20 per share. |
| ● | Provisions in our Charter may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our ordinary shares and could entrench management. |
| ● | Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares. |
| ● | We may not hold an annual meeting of shareholders until after the consummation of our initial Business Combination. |
| ● | We are a newly formed company with no operating history, and, accordingly, you have no basis on which to evaluate our ability to achieve our business objective. |
| ● | If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial Business Combination. |
| ● | We are an emerging growth company and smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies. |
| ● | Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss. |
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ITEM 1A. RISK FACTORS
This Annual Report contains forward-looking information based on our current expectations. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report, including our financial statements and the related notes appearing at the end of this Annual Report, before deciding whether to invest in our units. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. For risk factors related to Borealis and our Proposed Transaction, please review the Registration Statement on Form S-4 to be filed with the SEC, including the preliminary proxy statement/prospectus of Oxus to be included therein, and the definitive proxy statement/prospectus to be filed by Oxus.
Risks Associated with Our Business
We are a newly formed company with no operating history and, accordingly, you will not have any basis on which to evaluate our ability to achieve our business objective.
We are a newly formed company with no operating results to date. Since we do not have an operating history, you will have no basis upon which to evaluate our ability to achieve our business objective, which is to acquire an operating business. We will not generate any revenues until, at the earliest, after the consummation of a Business Combination, such as the consummation of the proposed Business Combination with Borealis.
If we are unable to consummate a Business Combination, our public shareholders may be forced to wait until after the Extended Date before receiving distributions from the trust account.
We have until the Extended Date to complete a Business Combination. We have no obligation to return funds to investors prior to such date unless we consummate a Business Combination prior thereto and only then in cases where investors have sought to convert or sell their shares to us. Only after the expiration of this full time period will public security holders be entitled to distributions from the trust account if we are unable to complete a Business Combination. Accordingly, investors’ funds may be unavailable to them until after such date and to liquidate your investment, public security holders may be forced to sell their public shares or warrants, potentially at a loss.
Our public shareholders may not be afforded an opportunity to vote on our proposed Business Combination.
We will either (1) seek shareholder approval of our initial Business Combination at a meeting called for such purpose at which public shareholders may seek to convert their shares, regardless of whether they vote for or against the proposed Business Combination or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our public shareholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a shareholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described elsewhere in this Annual Report. Accordingly, it is possible that we will consummate our initial Business Combination even if holders of a majority of our public shares do not approve of the Business Combination we consummate. The decision as to whether we will seek shareholder approval of a proposed Business Combination or will allow shareholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek shareholder approval. For instance, Nasdaq rules currently allow us to engage in a tender offer in lieu of a shareholder meeting but would still require us to obtain shareholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any Business Combination. Therefore, if we were structuring a Business Combination that required us to issue more than 20% of our outstanding shares, we would seek shareholder approval of such Business Combination instead of conducting a tender offer.
You will not be entitled to protections normally afforded to investors of blank check companies.
Since the net proceeds of the Initial Public Offering are intended to be used to complete a Business Combination with a target business that has not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However, since we have net tangible assets in excess of $5,000,001, we are exempt from rules promulgated by the SEC to protect investors of blank check companies such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules which would, for example, completely restrict the transferability of our securities and restrict the use of interest earned on the funds held in the trust account. Because we are not subject to Rule 419, our units will be immediately tradable and we will be entitled to withdraw amounts from the funds held in the trust account prior to the completion of a Business Combination.
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If we determine to change our acquisition criteria or guidelines, many of the disclosures contained in this Annual Report would not be applicable and you would be investing in our company without any basis on which to evaluate the potential target business we may acquire.
We could seek to deviate from the acquisition criteria or guidelines disclosed in this Annual Report although we have no current intention to do so. Accordingly, investors may be making an investment in our company without any basis on which to evaluate the potential target business we may acquire. Regardless of whether or not we deviate from the acquisition criteria or guidelines in connection with any proposed Business Combination, investors will always be given the opportunity to convert their shares or sell them to us in a tender offer in connection with any proposed Business Combination as described in this Annual Report.
We may issue additional Class A ordinary shares or preferred shares or debt securities to complete our initial Business Combination or under an employee incentive plan after completion of our initial Business Combination. We may also issue Class A ordinary shares upon the conversion of the Class B ordinary shares at a ratio greater than one-to-one at the time of our initial Business Combination as a result of the anti-dilution provisions contained in our amended and restated memorandum and articles of association. Any such issuances would dilute the interest of our shareholders and likely present other risks.
Our Charter authorizes the issuance of up to 500,000,000 Class A ordinary shares, par value $0.0001 per share, 50,000,000 Class B ordinary shares, par value $0.0001 per share, and 5,000,000 preferred shares, par value $0.0001 per share. As of March 24, 2023, there are 497,750,532 and 45,687,500 authorized but unissued Class A ordinary shares and Class B ordinary shares, respectively, available for issuance, which amount takes into account the Class A ordinary shares reserved for issuance upon exercise of outstanding warrants but not the Class A ordinary shares issuable upon conversion of Class B ordinary shares. As of March 1, 2023, there are no preferred shares issued and outstanding. Class B ordinary shares are convertible into Class A ordinary shares initially at a one-for-one ratio but subject to adjustment as set forth herein, including in certain circumstances in which we issue Class A ordinary shares or equity-linked securities related to our initial Business Combination. Class B ordinary shares are also convertible at the option of the holder at any time.
We may issue a substantial number of additional Class A ordinary shares or preferred shares to complete our initial Business Combination or under an employee incentive plan after completion of our initial Business Combination (although our Charter provides that we may not issue securities that can vote with ordinary shareholders on matters related to our pre-initial Business Combination activity). We may also issue Class A ordinary shares to redeem the warrants or upon conversion of the Class B ordinary shares at a ratio greater than one-to-one at the time of our initial Business Combination as a result of the anti-dilution provisions contained in our Charter. However, our Charter provides, among other things, that prior to or in connection with our initial Business Combination, we may not issue additional shares that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial Business Combination. These provisions of our Charter, like all provisions of our Charter, may be amended with the approval of our shareholders. However, our sponsor, initial shareholders, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our Charter (A) to modify the substance or timing of our obligations with respect to conversion rights as described in this Annual Report or (B) with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity, unless we provide our public shareholders with the opportunity to convert their public shares upon approval of any such amendment 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), divided by the number of then outstanding public shares.
The issuance of additional Class A ordinary shares or preferred shares:
| ● | may significantly dilute the equity interest of investors in the Initial Public Offering; |
| ● | may subordinate the rights of holders of ordinary shares if preferred shares are issued with rights senior to those afforded our ordinary shares; |
| ● | could cause a change of control if a substantial number of our ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and |
| ● | may adversely affect prevailing market prices for our units, Class A ordinary shares and/or warrants. |
Similarly, if we issue debt securities, it could result in:
| ● | default and foreclosure on our assets if our operating revenues after a Business Combination are insufficient to repay our debt obligations; |
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| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding. |
If we incur indebtedness, our lenders will not have a claim on the cash in the trust account and such indebtedness will not decrease the per-share conversion amount in the trust account.
If the net proceeds of the Initial Public Offering not being held in trust are insufficient to allow us to operate until the Extended Date, we may be unable to complete a Business Combination.
Of the net proceeds of the Initial Public Offering, only approximately $1,750,000 will be available to us initially outside the trust account to fund our working capital requirements. We believe that, upon closing of the Initial Public Offering, such funds will be sufficient to allow us to operate until the Extended Date; however, we cannot assure you that our estimate is accurate. Accordingly, if we use all of the funds held outside of the trust account, we may not have sufficient funds available with which to structure, negotiate or close an initial Business Combination. In such event, we would need to borrow funds from our sponsor, initial shareholders, officers or directors or their affiliates to operate or may be forced to liquidate. Our sponsor, initial shareholders, officers, directors and their affiliates may, but are not obligated to, loan us on a non-interest bearing basis funds, from time to time or at any time, in whatever amount that they deem reasonable in their sole discretion for our working capital needs. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial Business Combination, without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of $1.00 per warrant.
If third parties bring claims against us, the proceeds held in trust could be reduced and the per-share redemption price received by shareholders may be less than $10.20.
Our placing of funds in trust may not protect those funds from third party claims against us. Although we will seek to have all vendors and service providers we engage and prospective target businesses we negotiate with execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders, they may not execute such agreements. Furthermore, even if such entities execute such agreements with us, they may seek recourse against the trust account. A court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of our public shareholders. If we are unable to complete a Business Combination and distribute the proceeds held in trust to our public shareholders, our sponsor has agreed (subject to certain exceptions described elsewhere in this Annual Report) that it will be liable to ensure that the proceeds in the trust account are not reduced below $10.20 per share by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we believe it is unlikely that our sponsor will be able to satisfy its indemnification obligations if it is required to do so. As a result, the per-share distribution from the trust account may be less than $10.20, plus interest, due to such claims.
Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, we may not be able to return to our public shareholders at least $10.20.
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Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them.
Our Charter provides that we will continue in existence only until the Extended Date. If we have not completed a Business Combination by such date, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not previously released to us but net of taxes payable, divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our shareholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our shareholders may extend well beyond the third anniversary of the date of distribution. Accordingly, we cannot assure you that third parties will not seek to recover from our shareholders amounts owed to them by us.
If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our shareholders. Furthermore, because we intend to distribute the proceeds held in the trust account to our public shareholders promptly after expiration of the time we have to complete an initial Business Combination, this may be viewed or interpreted as giving preference to our public shareholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our board may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public shareholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our directors may decide not to enforce our sponsor’s indemnification obligations, resulting in a reduction in the amount of funds in the trust account available for distribution to our public shareholders.
In the event that the proceeds in the trust account are reduced below $10.20 per public share and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce such indemnification obligations. It is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public shareholders may be reduced below $10.20 per share.
If we do not maintain a current and effective prospectus relating to the Class A ordinary shares issuable upon exercise of the warrants, holders will only be able to exercise such warrants on a “cashless basis.”
If we do not maintain a current and effective prospectus relating to the Class A ordinary shares issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available. As a result, the number of Class A ordinary shares that holders will receive upon exercise of the warrants will be fewer than it would have been had such holder exercised his warrant for cash. Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise their warrants for cash if a current and effective prospectus relating to the Class A ordinary shares issuable upon exercise of the warrants is available. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet these conditions and to file and maintain a current and effective prospectus relating to the Class A ordinary shares issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so. If we are unable to do so, the potential “upside” of the holder’s investment in our company may be reduced or the warrants may expire worthless.
An investor will only be able to exercise a warrant if the issuance of Class A ordinary shares upon such exercise has been registered or qualified or is deemed exempt under the securities laws of the state of residence of the holder of the warrants.
No warrants will be exercisable and we will not be obligated to issue Class A ordinary shares unless the Class A ordinary shares issuable upon such exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. If the Class A ordinary shares issuable upon exercise of the warrants are not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, the warrants may be deprived of any value, the market for the warrants may be limited and they may expire worthless if they cannot be sold.
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We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of our Class A ordinary shares purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants are issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder (i) to cure any ambiguity or correct any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement set forth in the prospectus for our Initial Public Offering, or to cure, correct or supplement any defective provision, or (ii) to add or change any other provisions with respect to matters or questions arising under the warrant agreement as the parties to the warrant agreement may deem necessary or desirable and that the parties deem to not adversely affect the interests of the registered holders of the warrants. The warrant agreement requires the approval by the holders of at least 50% of the then outstanding public warrants in order to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or shares, shorten the exercise period or decrease the number of our Class A ordinary shares purchasable upon exercise of a warrant.
Our warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
Our warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
A provision of our warrant agreement may make it more difficult for us to consummate an initial Business Combination.
If:
| ● | we issue additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of our initial Business Combination at a Newly Issued Price of less than $9.20 per share of Class A ordinary shares, |
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| ● | the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial Business Combination on the date of the consummation of our initial Business Combination (net of redemptions), and |
| ● | the volume weighted average trading price of the Company’s ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (the “Market Value”) is below $9.20 per share, |
then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the Newly Issued Price, and the $18.00 per share redemption trigger price of the warrants will be adjusted (to the nearest cent) to be equal to 180% of the greater of (i) the Market Value or (ii) the Newly Issued Price. This may make it more difficult for us to consummate an initial Business Combination with a target business.
Our ability to successfully effect a Business Combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following a Business Combination. While we intend to closely scrutinize any individuals we engage after a Business Combination, we cannot assure you that our assessment of these individuals will prove to be correct.
Our ability to successfully effect a Business Combination is dependent upon the efforts of our key personnel. We believe that our success depends on the continued service of our key personnel, at least until we have consummated our initial Business Combination. We cannot assure you that any of our key personnel will remain with us for the immediate or foreseeable future. In addition, none of our officers is required to commit any specified amount of time to our affairs and, accordingly, our officers will have conflicts of interest in allocating management time among various business activities, including identifying potential Business Combinations and monitoring the related due diligence. We do not have employment agreements with, or key-man insurance on the life of, any of our officers. The unexpected loss of the services of our key personnel could have a detrimental effect on us.
The role of our key personnel after a Business Combination, however, cannot presently be ascertained. Although some of our key personnel serve in senior management or advisory positions following a Business Combination, it is likely that most, if not all, of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after a Business Combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a public company which could cause us to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
Our officers and directors may not have significant experience or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.
We may consummate a Business Combination with a target business in any geographic location or industry we choose. We cannot assure you that our officers or directors will have enough experience or have sufficient knowledge relating to the jurisdiction of the target or its industry to make an informed decision regarding a Business Combination.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular Business Combination. These agreements may provide for them to receive compensation following a Business Combination and as a result, may cause them to have conflicts of interest in determining whether a particular Business Combination is the most advantageous.
Our key personnel will be able to remain with the company after the consummation of a Business Combination only if they are able to negotiate employment or consulting agreements or other appropriate arrangements in connection with the Business Combination. Such negotiations would take place simultaneously with the negotiation of the Business Combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to the company after the consummation of the Business Combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business.
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Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This could have a negative impact on our ability to consummate a Business Combination.
Our officers and directors will not commit their full time to our affairs. We presently expect each of our officers and directors to devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full-time employees prior to the consummation of our initial Business Combination. The foregoing could have a negative impact on our ability to consummate our initial Business Combination.
Our officers and directors may have a conflict of interest in determining whether a particular target business is appropriate for a Business Combination.
Our initial shareholders waived their right to convert founder shares or any other shares purchased in the Initial Public Offering or thereafter, or to receive distributions from the trust account with respect to its founder shares upon our liquidation if we are unable to consummate a Business Combination. Accordingly, the shares acquired prior to the Initial Public Offering, as well as the private warrants and any warrants purchased by our officers or directors in the aftermarket, will be worthless if we do not consummate a Business Combination. The personal and financial interests of our directors and officers may influence their motivation in timely identifying and selecting a target business and completing a Business Combination and in determining whether the terms, conditions and timing of a particular Business Combination are appropriate and in our shareholders’ best interest.
Our officers and directors or their affiliates have pre-existing fiduciary and contractual obligations and may in the future become affiliated with other entities engaged in business activities similar to those intended to be conducted by us. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
Our officers and directors or their affiliates have pre-existing fiduciary and contractual obligations to other companies. Accordingly, they may participate in transactions and have obligations that may be in conflict or competition with our consummation of our initial Business Combination. As a result, a potential target business may be presented by our management team to another entity prior to its presentation to us and we may not be afforded the opportunity to engage in a transaction with such target business. Additionally, our officers and directors may in the future become affiliated with entities that are engaged in a similar business, including another blank check company that may have acquisition objectives that are similar to ours. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to other entities prior to its presentation to us, subject to our officers’ and directors’ fiduciary duties under Cayman Islands law.
EarlyBirdCapital and Sova Capital may have a conflict of interest in rendering services to us in connection with our initial Business Combination.
We have engaged EarlyBirdCapital and Sova Capital to assist us in connection with our initial Business Combination. We will pay EarlyBirdCapital and Sova Capital a cash fee for such services in an aggregate amount equal to up to 3.0% of the total gross proceeds raised in the offering only if we consummate our initial Business Combination. This financial interest may result in EarlyBirdCapital and Sova Capital having a conflict of interest when providing the services to us in connection with an initial Business Combination.
Nasdaq may delist our securities from quotation on its exchange which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our securities have been listed on Nasdaq, a national securities exchange, upon consummation of the Initial Public Offering. Although, after giving effect to the Initial Public Offering, we expect to meet on a pro forma basis Nasdaq’s minimum initial listing standards, which generally only require that we meet certain requirements relating to shareholders’ equity, market capitalization, aggregate market value of publicly held shares and distribution requirements, we cannot assure you that our securities will be, or will continue to be, listed on Nasdaq in the future or prior to an initial Business Combination. Additionally, in connection with our initial Business Combination, it is likely that Nasdaq will require us to file a new initial listing application and meet its initial listing requirements as opposed to its more lenient continued listing requirements. We cannot assure you that we will be able to meet those initial listing requirements at that time. Nasdaq will also have discretionary authority to not approve our listing if it determines that the listing of the company to be acquired is against public policy at that time.
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If Nasdaq delists our securities from trading on its exchange, or we are not listed in connection with our initial Business Combination, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
| ● | reduced liquidity with respect to our securities; |
| ● | a determination that our Class A ordinary shares are “penny stock” which will require brokers trading in our Class A ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our Class A ordinary shares; |
| ● | a limited amount of news and analyst coverage for our company; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our units and eventually our Class A ordinary shares and warrants will be listed on Nasdaq, our units, Class A ordinary shares and warrants will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
If we seek shareholder approval of our initial Business Combination and we do not conduct conversions pursuant to the tender offer rules, and if you or a “group” of shareholders are deemed to hold in excess of 15% of our Class A ordinary shares, you will lose the ability to redeem all such shares in excess of 15% of our Class A ordinary shares.
If we seek shareholder approval of our initial Business Combination and we do not conduct conversions in connection with our initial Business Combination pursuant to the tender offer rules, our Charter provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking conversion rights with respect to more than an aggregate of 15% of the shares sold in the Initial Public Offering without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our initial Business Combination. Your inability to convert the Excess Shares will reduce your influence over our ability to complete our initial Business Combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive conversion distributions with respect to the Excess Shares if we complete our initial Business Combination. As a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your shares in open market transactions, potentially at a loss.
We are an emerging growth company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our 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. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the aggregate worldwide market value of our Class A ordinary shares held by non-affiliates equals or exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
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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 an election to opt out is irrevocable. We have 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, we, 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 our 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.
We may only be able to complete one Business Combination with the proceeds of the Initial Public Offering, which will cause us to be solely dependent on a single business which may have a limited number of products or services.
It is likely we will consummate a Business Combination with a single target business, such as Borealis, although we have the ability to simultaneously acquire several target businesses. By consummating a Business Combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several Business Combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
| ● | solely dependent upon the performance of a single business, or |
| ● | dependent upon the development or market acceptance of a single or limited number of products, processes or services. |
This lack of diversification may subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to a Business Combination.
Alternatively, if we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other Business Combinations, which may make it more difficult for us, and delay our ability, to complete the Business Combination. With multiple Business Combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
The ability of our shareholders to exercise their conversion rights or sell their shares to us in a tender offer may not allow us to effectuate the most desirable Business Combination or optimize our capital structure.
If our Business Combination requires us to use substantially all of our cash to pay the purchase price, because we will not know how many shareholders may exercise conversion rights or seek to sell their shares to us in a tender offer, we may either need to reserve part of the trust account for possible payment upon such conversion, or we may need to arrange third party financing to help fund our Business Combination. In the event that the acquisition involves the issuance of our share as consideration, we may be required to issue a higher percentage of our share to make up for a shortfall in funds. Raising additional funds to cover any shortfall may involve dilutive equity financing or incurring indebtedness at higher than desirable levels. Furthermore, this dilution would increase to the extent that the anti-dilution provision of the Class B ordinary shares results in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares at the time of our Business Combination. This may limit our ability to effectuate the most attractive Business Combination available to us.
In connection with any vote to approve a Business Combination, we will offer each public shareholder the option to vote in favor of a proposed Business Combination and still seek conversion of his, her or its shares.
In connection with any vote to approve a Business Combination, we will offer each public shareholder (but not our sponsor, initial shareholders, representatives, officers or directors) the right to have his, her or its Class A ordinary shares converted to cash (subject to the limitations described elsewhere in this Annual Report) regardless of whether such shareholder votes for or against such proposed Business Combination or does not vote at all. The ability to seek conversion while voting in favor of our proposed Business Combination may make it more likely that we will consummate a Business Combination.
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In connection with any shareholder meeting called to approve a proposed initial Business Combination, we may require shareholders who wish to convert their shares in connection with a proposed Business Combination to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights.
In connection with any shareholder meeting called to approve a proposed initial Business Combination, each public shareholder will have the right, regardless of whether he is voting for or against such proposed Business Combination or does not vote at all, to demand that we convert his shares into a pro rata share of the trust account as of two business days prior to the consummation of the initial Business Combination. We may require public shareholders who wish to convert their shares in connection with a proposed Business Combination to either (i) tender their certificates to our transfer agent or (ii) deliver their shares to the transfer agent electronically using the Depository Trust Company’s (“DTC”) DWAC System, at the holders’ option, in each case prior to a date set forth in the tender offer documents or proxy materials sent in connection with the proposal to approve the Business Combination. In order to obtain a physical share certificate, a shareholder’s broker and/or clearing broker, DTC and our transfer agent will need to act to facilitate this request. It is our understanding that shareholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, because we do not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks to obtain a physical share certificate. While we have been advised that it takes a short time to deliver shares through the DWAC System, we cannot assure you of this fact. Accordingly, if it takes longer than we anticipate for shareholders to deliver their shares, shareholders who wish to convert may be unable to meet the deadline for exercising their conversion rights and thus may be unable to convert their shares.
If, in connection with any shareholder meeting called to approve a proposed Business Combination, we require public shareholders who wish to convert their shares to comply with specific requirements for conversion, such converting shareholders may be unable to sell their securities when they wish to in the event that the proposed Business Combination is not approved.
If we require public shareholders who wish to convert their shares to comply with specific requirements for conversion and such proposed Business Combination is not consummated, we will promptly return such certificates to the tendering public shareholders. Accordingly, investors who attempted to convert their shares in such a circumstance will be unable to sell their securities after the failed acquisition until we have returned their securities to them. The market price for our Class A ordinary shares may decline during this time and you may not be able to sell your securities when you wish to, even while other shareholders that did not seek conversion may be able to sell their securities.
Because of our structure, other companies may have a competitive advantage and we may not be able to consummate an attractive Business Combination.
We expect to encounter intense competition from entities other than blank check companies having a business objective similar to ours, including venture capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these entities are well established and have extensive experience in identifying and effecting Business Combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe that there are numerous potential target businesses that we could acquire with the net proceeds of the Initial Public Offering, our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, seeking shareholder approval or engaging in a tender offer in connection with any proposed Business Combination may delay the consummation of such a transaction. Additionally, our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Any of the foregoing may place us at a competitive disadvantage in successfully negotiating a Business Combination.
We may be unable to obtain additional financing, if required, to complete a Business Combination or to fund the operations and growth of the target business, which could compel us to restructure or abandon a particular Business Combination.
Although we believe that the net proceeds of the Initial Public Offering, together with interest earned on the funds held in the trust account available to us, will be sufficient to allow us to consummate a Business Combination, we cannot ascertain the capital requirements for any particular transaction, including the proposed Business Combination with Borealis. If the net proceeds of the Initial Public Offering prove to be insufficient, either because of the size of the Business Combination, the depletion of the available net proceeds in search of a target business, or the obligation to convert into cash a significant number of shares from dissenting shareholders, we will be required to seek additional financing. Such financing may not be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to consummate a particular Business Combination, we would be compelled to either restructure the transaction or abandon that particular Business Combination and seek an alternative target business candidate. In addition, if we consummate a Business Combination, we may require additional financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our sponsor, officers, directors or shareholders is required to provide any financing to us in connection with or after a Business Combination.
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Our initial shareholders control a substantial interest in us and thus may influence certain actions requiring a shareholder vote.
Our initial shareholders own approximately 65.7% of our issued and outstanding shares of ordinary shares (without taking into account underwriter founder shares and assuming our initial shareholders do not purchase any units in the Initial Public Offering). None of our sponsor, officers, directors, initial shareholders or their affiliates has indicated any intention to purchase units in the Initial Public Offering or any units or ordinary shares from persons in the open market or in private transactions. However, our sponsor, officers, directors, initial shareholders or their affiliates could determine in the future to make such purchases in the open market or in private transactions, to the extent permitted by law, in order to influence the vote or magnitude of the number of shareholders seeking to tender their shares to us. In connection with any vote for a proposed Business Combination, our initial shareholders, including our sponsor, as well as all of our officers and directors, have agreed to vote the ordinary shares owned by them immediately before the Initial Public Offering as well as any Class A ordinary shares acquired in the Initial Public Offering or in the aftermarket in favor of such proposed Business Combination.
Our board of directors is and will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. It is unlikely that there will be an annual meeting of shareholders to elect new directors prior to the consummation of a Business Combination, in which case all of the current directors will continue in office until at least the consummation of the Business Combination. Accordingly, you may not be able to exercise your voting rights under corporate law up to until the Extended Date. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our sponsor, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our initial shareholders will continue to exert control at least until the consummation of a Business Combination.
Our initial shareholders paid an aggregate of $25,000 for the founder shares, or approximately $0.006 per founder share. As a result of this low initial price, our initial shareholders stand to make a substantial profit even if an initial Business Combination subsequently declines in value or is unprofitable for our public shareholders.
As a result of the low acquisition cost of our founder shares, our initial shareholders could make a substantial profit even if we select and consummate an initial Business Combination with an acquisition target that subsequently declines in value or is unprofitable for our public shareholders. Thus, our sponsor, directors and officers may have more of an economic incentive for us to enter into an initial Business Combination with a riskier, weaker-performing or financially unstable business, or an entity lacking an established record of revenues or earnings, than would be the case if our initial shareholders had paid the full offering price for their founder shares.
Our outstanding warrants may have an adverse effect on the market price of our Class A ordinary shares and make it more difficult to effect a Business Combination.
We have issued warrants to purchase 17,250,000 Class A ordinary shares and private warrants to purchase 9,300,000 Class A ordinary shares, $11.50 per share. We may also issue other warrants to our sponsor, initial shareholders, officers, directors or their affiliates in payment of working capital loans made to us as described in this Annual Report. To the extent we issue Class A ordinary shares to effect a Business Combination, the potential for the issuance of a substantial number of additional shares upon exercise of these warrants could make us a less attractive acquisition vehicle in the eyes of a target business. Such securities, when exercised, will increase the number of issued and outstanding ordinary shares and reduce the value of the shares issued to complete the Business Combination. Accordingly, our warrants may make it more difficult to effectuate a Business Combination or increase the cost of acquiring the target business. Additionally, the sale, or even the possibility of sale, of the shares underlying the warrants could have an adverse effect on the market price for our securities or on our ability to obtain future financing. If and to the extent these warrants are exercised, you may experience dilution to your holdings.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading-day period commencing at any time after the warrants become exercisable and ending on the third business day prior to proper notice of such redemption provided that on the date we give notice of redemption and during the entire period thereafter until the time we redeem the warrants, we have an effective registration statement under the Securities Act covering the Class A ordinary shares issuable upon exercise of the warrants and a current prospectus relating to them is available. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.
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Our management’s ability to require holders of our warrants to exercise such warrants on a cashless basis will cause holders to receive fewer Class A ordinary shares upon their exercise of the warrants than they would have received had they been able to exercise their warrants for cash.
If we call our public warrants for redemption after the redemption criteria described elsewhere in this Annual Report have been satisfied, our management will have the option to require any holder that wishes to exercise his warrant (including any private warrants) to do so on a “cashless basis.” If our management chooses to require holders to exercise their warrants on a cashless basis, the number of Class A ordinary shares received by a holder upon exercise will be fewer than it would have been had such holder exercised his warrant for cash. This will have the effect of reducing the potential “upside” of the holder’s investment in our company.
If our security holders exercise their registration rights, it may have an adverse effect on the market price of our Class A ordinary shares and the existence of these rights may make it more difficult to effect a Business Combination.
The holders of the majority of the founder shares are entitled to make a demand that we register the resale of the founder shares at any time commencing three months prior to the date on which the founder shares may be released from escrow. Additionally, the holders of the private warrants and any warrants our sponsor, initial shareholders, officers, directors, or their affiliates may be issued in payment of working capital loans made to us, are entitled to demand that we register the resale of the private warrants and any other warrants we issue to them (and the underlying securities) commencing at any time after we consummate an initial Business Combination. The presence of these additional securities trading in the public market may have an adverse effect on the market price of our securities. In addition, the existence of these rights may make it more difficult to effectuate a Business Combination or increase the cost of acquiring the target business, as the shareholders of the target business may be discouraged from entering into a Business Combination with us or will request a higher price for their securities because of the potential effect the exercise of such rights may have on the trading market for our Class A ordinary shares.
If we are deemed to be an investment company for purposes of the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities would be severely restricted and, as a result, we may abandon our efforts to consummate an initial Business Combination and liquidate.
On March 30, 2022, the SEC issued proposed rules relating to certain activities of special purpose acquisition companies (“SPACs”) (the “SPAC Rule Proposals”), relating to, among other things, circumstances in which SPACs could potentially be subject to the Investment Company Act and the regulations thereunder. The SPAC Rule Proposals would provide a safe harbor for such companies from the definition of “investment company” under Section 3(a)(1)(A) of the Investment Company Act, provided that a SPAC satisfies certain criteria, including a limited time period to announce and complete a de-SPAC transaction. Specifically, to comply with the safe harbor, the SPAC Rule Proposals would require a company to file a Current Report on Form 8-K announcing that it has entered into an agreement with a target company for an initial Business Combination no later than 18 months after the effective date of its registration statement for its initial public offering (the “IPO Registration Statement”). The company would then be required to complete its initial Business Combination no later than 24 months after the effective date of the IPO Registration Statement.
There is currently uncertainty concerning the applicability of the Investment Company Act to a SPAC. It is possible that a claim could be made that we have been operating as an unregistered investment company. This risk may be increased if we continue to hold the funds in the trust account in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, rather than instructing the trustee to liquidate the securities in the trust account and hold the funds in the trust account in cash.
If we are deemed to be an investment company under the Investment Company Act, our activities would be severely restricted. In addition, we would be subject to burdensome compliance requirements. We do not believe that our principal activities will subject us to regulation as an investment company under the Investment Company Act. However, if we are deemed to be an investment company and subject to compliance with and regulation under the Investment Company Act, we would be subject to additional regulatory burdens and expenses for which we have not allotted funds. As a result, unless we are able to modify our activities so that we would not be deemed an investment company, we would expect to abandon our efforts to complete an initial Business Combination and instead to liquidate. If we are required to liquidate, our stockholders would not be able to realize the benefits of owning stock in a successor operating business, including the potential appreciation in the value of our stock and warrants following such a transaction, and our warrants would expire worthless.
If we instruct the trustee to liquidate the securities held in the trust account and instead to hold the funds in the trust account in cash in order to seek to mitigate the risk that we could be deemed to be an investment company for purposes of the Investment Company Act, we would likely receive minimal interest, if any, on the funds held in the trust account, which would reduce the dollar amount the public shareholders would receive upon any redemption or liquidation of the Company.
The funds in the trust account have, since our Initial Public Offering, been held only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act. However, to mitigate the risk of us being deemed to be an unregistered investment company (including under the subjective test of Section 3(a)(1)(A) of the Investment Company Act) and thus subject to regulation under the Investment Company Act, we may, at any time, instruct the trustee with respect to the trust account to liquidate the U.S. government treasury obligations or money market funds held in the trust account and thereafter to hold all funds in the trust account in cash until the earlier of consummation of an initial Business Combination or liquidation of the Company. Following such liquidation of the securities held in the trust account, we would likely receive minimal interest, if any, on the funds held in the trust account. However, interest previously earned on the funds held in the trust account still may be released to us to pay our taxes, if any, and certain other expenses as permitted. As a result, any decision to liquidate the securities held in the trust account and thereafter to hold all funds in the trust account in cash would reduce the dollar amount the public shareholders would receive upon any redemption or liquidation of the Company. As of the date of this Annual Report, we have not yet made any such determination to liquidate the securities held in the trust account.
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The longer that the funds in the trust account are held in short-term U.S. government treasury obligations or in money market funds invested exclusively in such securities, the greater the risk that we may be considered an unregistered investment company, in which case we may be required to liquidate the Company. Accordingly, we may determine, in our discretion, to liquidate the securities held in the trust account at any time and instead hold all funds in the trust account in cash, which would further reduce the dollar amount the public shareholders would receive upon any redemption or liquidation of the Company. As of the date of this proxy statement/prospectus, we are currently holding the funds in our trust account in money market funds.
If we do not conduct an adequate due diligence investigation of a target business, we may be required to subsequently take write-downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our share price, which could cause you to lose some or all of your investment.
We must conduct a due diligence investigation of the target businesses we intend to acquire. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance and legal professionals who must be involved in the due diligence process. Even if we conduct extensive due diligence on a target business, this diligence may not reveal all material issues that may affect a particular target business, and factors outside the control of the target business and outside of our control may later arise. If our diligence fails to identify issues specific to a target business, industry or the environment in which the target business operates, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our Class A ordinary shares. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post- combination debt financing.
The requirement that we complete an initial Business Combination before the Extended Date may give potential target businesses leverage over us in negotiating a Business Combination.
We have until the Extended Date to complete an initial Business Combination. Any potential target business with which we enter into negotiations concerning a Business Combination will be aware of this requirement. Consequently, such target business may obtain leverage over us in negotiating a Business Combination, knowing that if we do not complete a Business Combination with that particular target business, we may be unable to complete a Business Combination with any other target business. This risk will increase as we get closer to the time limit referenced above.
We may not be able to complete our initial Business Combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public shareholders may only receive $10.20 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
Our Charter provides that we must complete our initial Business Combination by the Extended Date. We may not be able to find a suitable target business and complete our initial Business Combination within such time period. Our ability to complete our initial Business Combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. For example, the coronavirus (COVID-19) pandemic continues to persist both in the U.S. and globally and, while the extent of the impact of the COVID-19 pandemic on us will depend on future developments, it could limit our ability to complete our initial Business Combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Additionally, the COVID-19 pandemic and other events (such as terrorist attacks, international unrest, natural disasters or a significant outbreak of other infectious diseases) may negatively impact businesses we may seek to acquire.
If we have not completed our initial Business Combination within such time period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such case, our public shareholders may only receive $10.20 per share, and our warrants will expire worthless. In certain circumstances, our public shareholders may receive less than $10.20 per share on the redemption of their shares. See “ITEM 1A. Risk Factors — Risks Associated with Our Business — If third parties bring claims against us, the proceeds held in trust could be reduced and the per-share redemption price received by shareholders may be less than $10.20” and other risk factors.
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Our search for a Business Combination, and any target business with which we ultimately consummate a Business Combination, may be materially adversely affected by the coronavirus (COVID-19) pandemic and the status of debt and equity markets.
The COVID-19 pandemic has adversely affected, and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) could adversely affect, the economies and financial markets worldwide, and the business of any potential target business with which we consummate a Business Combination could be materially and adversely affected. Furthermore, we may be unable to complete a Business Combination if concerns relating to COVID-19 continue to restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a Business Combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 (including variant mutations of the virus) and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) continue for an extensive period of time, our ability to consummate a Business Combination, such as the proposed Business Combination with Borealis, or the operations of a target business with which we ultimately consummate a Business Combination, may be materially adversely affected.
In addition, our ability to consummate a transaction may be dependent upon its ability to raise equity and debt financing which may be impacted by COVID-19 and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases), including as a result of increased market volatility, decreased market liquidity in third-party financing being unavailable on terms acceptable to us or at all.
We may not obtain a fairness opinion with respect to the target business that we seek to acquire and therefore you may be relying solely on the judgment of our board of directors in approving a proposed Business Combination.
We will only be required to obtain a fairness opinion with respect to the target business that we seek to acquire if it is an entity that is affiliated with any of our sponsor, initial shareholders, officers, directors or their affiliates. In all other instances, we will have no obligation to obtain an opinion. Accordingly, investors will be relying solely on the judgment of our board of directors in approving a proposed Business Combination.
Resources could be spent researching acquisitions that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.
It is anticipated that the investigation of each specific target business and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If a decision is made not to complete a specific Business Combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific target business, we may fail to consummate the Business Combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business.
As the number of SPACs evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase the cost of our initial Business Combination and could even result in our inability to find a target or to consummate an initial Business Combination.
In recent years, the number of SPACs that have been formed has increased substantially. Many potential targets for SPACs have already entered into an initial Business Combination, and there are still many SPACs seeking targets for their initial Business Combination, as well as many such companies currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an initial Business Combination.
In addition, because there are more SPACs seeking to enter into an initial Business Combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close Business Combinations or operate targets post-Business Combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an initial Business Combination, and may result in our inability to consummate an initial Business Combination on terms favorable to our investors altogether.
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Changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial Business Combination.
Recently, the market for directors and officers liability insurance for SPACs has changed. The premiums charged for such policies have generally increased and the terms of such policies have generally become less favorable. There can be no assurance that these trends will not continue.
The increased cost and decreased availability of directors and officers liability insurance could make it more difficult and more expensive for us to negotiate an initial Business Combination. In order to obtain directors and officers liability insurance or modify its coverage as a result of becoming a public company, the post-Business Combination entity might need to incur greater expense, accept less favorable terms or both. However, any failure to obtain adequate directors and officers liability insurance could have an adverse impact on the post-Business Combination’s ability to attract and retain qualified officers and directors.
In addition, even after we were to complete an initial Business Combination, our directors and officers could still be subject to potential liability from claims arising from conduct alleged to have occurred prior to the initial Business Combination. As a result, in order to protect our directors and officers, the post-Business Combination entity will likely need to purchase additional insurance with respect to any such claims (“run-off insurance”). The need for run-off insurance would be an added expense for the post-Business Combination entity, and could interfere with or frustrate our ability to consummate an initial Business Combination on terms favorable to our investors.
Compliance with the Sarbanes-Oxley Act of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our system of internal controls and may require that we have such system of internal controls audited beginning with our Annual Report on Form 10-K for the year ending December 31, 2022. If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or shareholder litigation. Any inability to provide reliable financial reports could harm our business. Section 404 of the Sarbanes-Oxley Act also requires that our independent registered public accounting firm report on management’s evaluation of our system of internal controls. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition. Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Class A ordinary shares.
Provisions in our Charter may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A ordinary shares and could entrench management.
Our Charter contains provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests. Our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. As a result, at a given annual meeting only a minority of the board of directors may be considered for election. Since our “staggered board” may prevent our shareholders from replacing a majority of our board of directors at any given annual meeting, it may entrench management and discourage unsolicited shareholder proposals that may be in the best interests of shareholders. Moreover, our board of directors has the ability to designate the terms of and issue new series of preferred shares.
Because we must furnish our shareholders with target business financial statements prepared in accordance with U.S. generally accepted accounting principles or international financial reporting standards, we will not be able to complete a Business Combination with prospective target businesses unless their financial statements are prepared in accordance with U.S. generally accepted accounting principles or international financial reporting standards.
The federal proxy rules require that a proxy statement with respect to a vote on a Business Combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. We will include the same financial statement disclosure in connection with any tender offer documents we use, whether or not they are required under the tender offer rules. Additionally, to the extent we furnish our shareholders with financial statements prepared in accordance with IFRS, such financial statements will need to be audited in accordance with U.S. GAAP at the time of the consummation of the Business Combination. These financial statement requirements may limit the pool of potential target businesses we may acquire.
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We may issue our shares to investors in connection with our initial Business Combination at a price that is less than the prevailing market price of our shares at that time.
In connection with our initial Business Combination, we may issue shares to investors in private placement transactions (so-called PIPE transactions) at a price of $10.00 per share or which approximates the per-share amounts in our trust account at such time, which is generally approximately $10.20. The purpose of such issuances will be to enable us to provide sufficient liquidity to the post-Business Combination entity. The price of the shares we issue may therefore be less, and potentially significantly less, than the market price for our shares at such time.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.
On March 30, 2022, the SEC issued proposed rules that would, among other items, impose additional disclosure requirements in Business Combination transactions involving SPACs and private operating companies; amend the financial statement requirements applicable to Business Combination transactions involving such companies; update and expand guidance regarding the general use of projections in SEC filings, as well as when projections are disclosed in connection with proposed Business Combination transactions; increase the potential liability of certain participants in proposed Business Combination transactions; and impact the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940. These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect our business, including our ability to negotiate and complete our initial Business Combination and may increase the costs and time related thereto.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our search for a Business Combination, and any target business with which we ultimately consummate a Business Combination, may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.
U.S. and global markets are experiencing volatility
and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On
February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing
military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility
in commodity prices, credit and capital markets, as well as supply chain interruptions. In addition, although we may pursue an initial
Business Combination with any target business and in any sector or geographical location, we intend to focus our search on targets in
energy transition technologies, such as battery materials, energy storage, EV infrastructure and advanced recycling in emerging/frontier
countries including the CIS, South and South-East Asia and MENA regions. The military conflict between Russia and Ukraine and the resulting
sanctions may limit our target geographic region. We are continuing to monitor the situation in Ukraine and globally and assessing its
potential impact on our business. Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in
the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties
being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called
Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions
from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system, expansive ban on imports and
exports of products to and from Russia and ban on exportation of U.S denominated banknotes to Russia or persons locates there. Additional
potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could
adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially
making it more difficult for us to obtain additional funds. Any of the above-mentioned factors could affect our ability to search for
a target and consummate a Business Combination. The extent and duration of the military action, sanctions and resulting market disruptions
are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this
Annual Report on Form 10-K.
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Risks Associated with Acquiring and Operating a Business Outside of the United States
If we effect a Business Combination with a company located in CIS or another foreign jurisdiction in South and South-East Asia and MENA regions we would be subject to a variety of additional risks that may negatively impact our operations.
If we are successful in consummating a Business Combination with a target business in CIS, or if we effect a Business Combination with a company located in another foreign region, we would be subject to any special considerations or risks associated with companies operating in the target business’ home jurisdiction, including any of the following:
| ● | rules and regulations or currency conversion or corporate withholding taxes on individuals; |
| ● | tariffs and trade barriers; |
| ● | regulations related to customs and import/export matters; |
| ● | longer payment cycles; |
| ● | tax issues, such as tax law changes and variations in tax laws as compared to the United States; |
| ● | currency fluctuations and exchange controls; |
| ● | challenges in collecting accounts receivable; |
| ● | cultural and language differences; |
| ● | employment regulations; |
| ● | public health or safety concerns and governmental restrictions, including those caused by outbreaks of infectious disease, such as the recent COVID-19 pandemic; |
| ● | crime, strikes, riots, civil disturbances, terrorist attacks and wars, such as recent military action in Ukraine; and |
| ● | deterioration of political relations with the United States, which could result in uncertainty and/or changes in or to existing trade treaties. |
In particular, if we acquire a target business in CIS or another foreign jurisdiction in South and South-East Asia and MENA regions, we would be subject to the risk of changes in economic conditions, social conditions and political conditions inherent in such jurisdiction, including changes in laws and policies that govern foreign investment, as well as changes in United States laws and regulations relating to foreign trade and investment. We cannot assure you that we would be able to adequately address these additional risks. If we were unable to do so, our operations might suffer.
Emerging markets are subject to different risks as compared to more developed markets.
Operating a business in CIS or another emerging country in South and South-East Asia and MENA regions involves a greater degree of risk than operating a business in more developed markets, including, in some cases, increased political, economic and legal risks. Emerging market governments and judiciaries often exercise broad, unchecked discretion and are susceptible to abuse and corruption. Moreover, financial turmoil in any emerging market country tends to adversely affect the value of investments in all emerging market countries as investors move their money to more stable, developed markets. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in companies in emerging economies could dampen foreign investment in such countries and regions and adversely affect their economies. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved in, and are familiar with, investing in emerging markets.
Our officers and directors may not have significant experience or knowledge regarding the jurisdiction or industry of the target business we may seek to acquire.
We may consummate a Business Combination with a target business in any geographic location or industry we choose. We cannot assure you that our officers and directors will have enough experience or have sufficient knowledge relating to the jurisdiction of the target or its industry to make an informed decision regarding a Business Combination.
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Because of the costs and difficulties inherent in managing cross-border business operations, our results of operations may be negatively impacted.
Managing a business, operations, personnel or assets in another country is challenging and costly. Any management that we may have (whether based abroad or in the U.S.) may be inexperienced in cross-border business practices and unaware of significant differences in accounting rules, legal regimes and labor practices. Even with a seasoned and experienced management team, the costs and difficulties inherent in managing cross-border business operations, personnel and assets can be significant (and much higher than in a purely domestic business) and may negatively impact our financial and operational performance.
If our management following our initial Business Combination is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with such laws, which could lead to various regulatory issues.
Following our initial Business Combination, our management team may resign from their positions as officers or directors of the company and the management team of the target business at the time of the Business Combination will likely remain in place. Management of the target business may not be familiar with United States securities laws. If new management is unfamiliar with our laws, they may have to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues, which may adversely affect our operations.
If we effect a Business Combination with a company located outside of the United States, such as Borealis, the laws of the country in which such company operates will likely govern many of our material agreements and we may not be able to enforce our legal rights.
If we effect a Business Combination with a company located outside of the United States, such as Borealis, the laws of the country in which such company operates will likely govern many of the material agreements relating to its operations. We cannot assure you that the target business will be able to enforce any of its material agreements or that remedies will be available in this new jurisdiction. The system of laws and the enforcement of existing laws in such jurisdiction may not be certain in implementation and interpretation. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital. Additionally, if we acquire a company located outside of the United States, it is likely that substantially all of our assets would be located outside of the United States and some of our officers and directors might reside outside of the United States. As a result, it may not be possible for investors in the United States to enforce their legal rights against or to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities against our directors and officers under federal securities laws.
We may re-incorporate in another jurisdiction in connection with our initial Business Combination, and the laws of such jurisdiction will likely govern all of our material agreements and we may not be able to enforce our legal rights.
In connection with our initial Business Combination, we may relocate the home jurisdiction of our business from the Cayman Islands to another jurisdiction. For example, as part of our proposed transaction with Borealis, the Company will domesticate and continue as a corporation existing under the laws of the province of Ontario, Canada. If we determine to do this, the laws of such jurisdiction would likely govern all of our material agreements. The system of laws and the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital. Any such reincorporation may subject us to foreign regulations that could materially and adversely affect our business.
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After our initial Business Combination, it is likely that a majority of our directors and officers will live outside the United States and all of our assets will be located outside the United States; therefore investors may not be able to enforce federal securities laws or their other legal rights.
It is likely that after our initial Business Combination, including our proposed transaction with Borealis, a majority of our directors and officers will reside outside of the United States and all of our assets will be located outside of the United States. As a result, it may be difficult, or in some cases impossible, for investors in the United States to enforce their legal rights against or to effect service of process upon all of our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities under United States laws.
We may migrate to another jurisdiction in connection with our initial Business Combination and such migration may result in taxes imposed on shareholders.
As a Cayman Islands entity, we do not have access to a network of income tax treaties to protect us from withholding taxes or gains taxes that may be imposed by other jurisdictions. As a result, it may not be possible to effect repatriation of earnings or the receipt of income from our investments in a tax efficient manner. Accordingly, we may, in connection with our initial Business Combination or earlier, and subject to requisite shareholder approval under the Cayman Islands law, transfer by way of continuation (migrate) to a different jurisdiction, including, for example, the jurisdiction in which the target company or business is located. Such a transaction may require a shareholder to recognize taxable income in the jurisdiction in which the shareholder is a tax resident and/or the jurisdictions in which its owners are resident if it is a tax transparent entity under the tax laws of such jurisdictions (including under any anti-deferral regime). We do not intend to make any cash distributions to shareholders to pay such taxes. Shareholders may also be subject to withholding taxes or other taxes imposed by the jurisdiction where we are migrated to with respect to their ownership of us.
There may be tax consequences to our Business Combinations that may adversely affect us.
While we expect to undertake any merger or acquisition so as to minimize taxes both to the acquired business and/or assets and us, such Business Combination might not meet the statutory requirements of a tax-free reorganization, or the parties might not obtain the intended tax-free treatment upon a transfer of shares or assets. A non-qualifying reorganization could result in the imposition of substantial taxes.
We may be a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors.
If we are a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. holder of our Class A ordinary shares or warrants, the U.S. holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. Our PFIC status for our current and subsequent taxable years may depend upon the status of an acquired company pursuant to a Business Combination and whether we qualify for the PFIC start-up exception. The application of the start-up exception is uncertain, and there can be no assurance that we will qualify for the start-up exception. Accordingly, there can be no assurances with respect to our status as a PFIC for our current taxable year or any subsequent taxable year. Our actual PFIC status for any taxable year will not be determinable until after the end of such taxable year. Moreover, if we determine we are a PFIC for any taxable year, we will endeavor to provide a U.S. holder such information as the Internal Revenue Service (“IRS”) may require, including a PFIC annual information statement in order to enable the U.S. holder to make and maintain a “qualified electing fund” election, but there can be no assurance that we will timely provide such required information, and such election would likely be unavailable with respect to our warrants in all cases. We urge U.S. holders to consult their tax advisors regarding the possible application of the PFIC rules to holders of our Class A ordinary shares and warrants.
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We have identified a material weakness in our internal control over financial reporting as of December 31, 2021 and December 31, 2022 . If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
We have identified a material weakness in our internal controls over financial reporting related to the accounting for our complex financial instruments. In light of the material weakness identified, although we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or, detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
A material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such a case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, our securities price may decline and we may face litigation as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
As of December 31, 2022, we had working capital deficiency of $1.58 million. Further, we have incurred and expect to continue to incur significant costs in pursuit of our finance and acquisition plans. In addition, we expect to have negative cash flows from operations as we pursue an initial Business Combination target. Management’s plans to address this need for capital through our initial Business Combination which are discussed elsewhere in this document. We cannot assure you that our plans to raise capital or to consummate an initial Business Combination will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this Form 10-K do not include any adjustments that might result from our inability to continue as a going concern.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We currently maintain our principal executive offices at 300/26 Dostyk Avenue, Almaty, 050020, Kazakhstan. The cost for this space is included in the $10,000 per-month administrative fee our sponsor will charge us for general and administrative services, including office space, utilities and administrative support, commencing on September 8, 2021, pursuant to a letter agreement between us and our sponsor. We believe, based on rents and fees for similar services, that the administrative fee charged by our sponsor is at least as favorable as we could have obtained from an unaffiliated person. We consider our current office space, combined with the other office space otherwise available to our executive officers, adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our equity securities trade on the Nasdaq. Each of our units consists of one Class A ordinary share and one warrant and, commencing on September 3, 2021, trades on the Nasdaq under the symbol “OXUSU.” The Class A ordinary shares and warrants underlying our units began trading separately on the Nasdaq under the symbols “OXUS” and “OXUSW,” respectively, on October 6, 2021.
Holders of Record
On March 24, 2023, there were one holder of record of our units and three holders of record of our Class A ordinary shares and five holders of record of our warrants. Such numbers do not include beneficial owners holding our securities through nominee names.
Dividends
We have not paid any cash dividends on our ordinary shares to date and do not intend to pay cash dividends prior to the completion of our initial Business Combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial Business Combination. The payment of any cash dividends subsequent to our initial Business Combination will be within the discretion of our board of directors at such time. In addition, our board of directors is not currently contemplating and does not anticipate declaring any share dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our initial Business Combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Use of Proceeds from our Initial Public Offering
On September 8, 2021, the Company consummated the Initial Public Offering of 15,000,000 units at $10.00 per unit and the sale of 8,400,000 private warrants at a price of $1.00 per private warrant in a private placement to the Company’s sponsor and its underwriters that closed simultaneously with the closing of the Initial Public Offering. On September 13, 2021, the underwriters exercised their over-allotment option in full, according to which the Company consummated the sale of an additional 2,250,000 units, at $10.00 per unit, and the sale of an additional 900,000 private warrants, at $1.00 per private warrant, generating total gross proceeds of $23.40 million.
A total of $175,950,000 of the net proceeds from the Initial Public Offering (including the additional units) and the sale of private placement warrants and additional private placement warrants was deposited in a trust account with Continental Stock Transfer & Company as trustee, established for the benefit of the Company’s public shareholders. Transaction costs amounted to $3.70 million consisting of $3.00 million in cash of underwriting fees and $0.70 million of other offering costs.
In connection with the shareholder vote to approve the Extension Amendment in the Extraordinary General Meeting on March 2, 2023, the holders of 15,300,532 Class A ordinary shares property exercised their right to redeem their shares for cash at a redemption price of approximately $10.41 per share, for an aggregate redemption amount of approximately $159.34 million, leaving approximately $20.3 million in the trust account.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part II, Item 7 of this Annual Report.
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ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report to “we,” “us” or the “Company” refer to Oxus Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “sponsor” refer to Oxus Capital Pte. Ltd. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
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 Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated in the Cayman Islands on February 3, 2021 for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses. We intend to effectuate our initial Business Combination using cash from the proceeds of our Initial Public Offering and the sale of the private warrants, our shares, debt or a combination of cash, equity and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Proposed Business Combination
On February 23, 2023, Oxus entered into the Business Combination Agreement by and among the Company, Newco and Borealis. Pursuant to the Business Combination Agreement, among other things: (a) the Company will domesticate and continue as a corporation existing under the laws of the province of Ontario, Canada; (b) on the closing date, Newco and Borealis will amalgamate in accordance with the terms of the plan of arrangement, with Amalco surviving the Borealis Amalgamation as a wholly-owned subsidiary of New Oxus; and (c) on the closing date, immediately following the Borealis Amalgamation, Amalco and New Oxus will amalgamate, with New Oxus surviving the New Oxus Amalgamation. The Business Combination Agreement was unanimously approved by Oxus’ and Borealis’ respective board of directors. Under the Business Combination Agreement, Borealis Shareholders will receive from New Oxus, in the aggregate, a number of shares of New Oxus equal to (a) the Borealis Value divided by (b) $10.00.
The Business Combination Agreement contains customary representations and warranties, covenants and closing conditions, including, but not limited to, approval by the Company’s and Borealis’ respective shareholders of the Business Combination Agreement and the Proposed Transaction. The terms of the Business Combination Agreement and other related ancillary agreements entered into or to be entered into in connection with the closing of the Proposed Transaction, including those briefly described below, are summarized in more detail in the Company’s Form 8-K filed with the SEC on March 1, 2023.
Shareholder Support Agreements
Concurrently with the execution and delivery of the Business Combination Agreement, Oxus, Borealis and certain Borealis Shareholders entered into the Shareholder Support Agreements pursuant to which, among other things, such Borealis Shareholders have agreed to vote their Borealis shares in favor of the Proposed Transaction and not sell or transfer their Borealis shares.
Sponsor Support Agreement
Concurrently with the execution and delivery of the Business Combination Agreement, Oxus, Borealis and the sponsor entered into the Sponsor Support Agreement pursuant to which, among other things, the sponsor agreed to (A) vote its founder shares in favor of the Proposed Transaction and the Oxus Proposals, (B) not redeem its founder shares, (C) waive certain of its anti-dilution rights, (D) convert the Sponsor Convertible Notes, and (E) forfeit certain sponsor founder shares as a part of incentive equity compensation for directors, officers and employees of New Oxus (subject to terms and conditions set forth in the Sponsor Support Agreement).
Registration Rights Agreement
In connection with the closing of the Proposed Transaction, Oxus and certain Borealis Shareholders and the Holders will enter into the Registration Rights Agreement, pursuant to which Oxus will be obligated to file a registration statement to register the resale of certain securities of Oxus held by the Holders. The Registration Rights Agreement will also provide the Holders with “piggy-back” registration rights, subject to certain requirements and customary conditions.
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Lock-Up Agreements
In connection with the closing of the Proposed Transaction, Oxus and certain Subject Party will enter into Lock-Up Agreements, pursuant to which (A) fifty percent (50%) of the shares of the Restricted Securities will be locked-up during the period commencing from the closing and ending on the earlier to occur of (i) twelve (12) months after the date of the closing and (ii) the date on which the closing price of common shares of New Oxus equals or exceeds $12.00 per share (as adjusted to take into account any stock split, stock dividend, reverse stock split, recapitalization or similar event) for any twenty (20) trading days within a thirty (30)-trading day period starting after the closing, and (B) fifty percent (50%) of the Restricted Securities will be locked-up during the period commencing from the closing and ending on twelve (12) months after the date of the closing, subject to certain specifications and exceptions.
Extension
On March 2, 2023, our shareholders approved an amendment the Extension Amendment. The Extension Amendment extends the date by which we must consummate our initial Business Combination from the Termination Date, upon additional funds being deposited into the Company’s trust account to up to the Extended Date.
In connection with the shareholder vote to approve the Extension Amendment, the holders of 15,300,532 Class A ordinary shares property exercised their right to redeem their shares for cash at a redemption price of approximately $10.41 per share, for an aggregate redemption amount of approximately $159.34 million, leaving approximately $20.3 million in the trust account.
Our sponsor has agreed to loan the Company (i) the lesser of (a) an aggregate of $180,000 or (b) $0.12 per public share that remain outstanding and is not redeemed in connection with the Extension plus (ii) the lesser of (a) an aggregate of $60,000 or (b) $0.04 per public share that remain outstanding and is not redeemed in connection with the Extension for each of the six subsequent calendar months commencing on June 8, 2023 (the “Extension Loan”), which amount will be deposited into the Trust Account. On March 3, 2023, our sponsor funded $200,000 through the Amended Note (as defined below), out of which $180,000 was deposited into the Trust Account as the initial deposit of the Extension Loan.
On March 15, 2023, our sponsor funded an additional $100,000 through the Amended Note.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through December 31, 2022, were organizational activities and those necessary to prepare for the Initial Public Offering, described below. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the year ended December 31, 2022, we had a net loss of $0.30 million, which consisted of dividend income of $2.58 million, interest income of $4,010, foreign exchange gains of $1,073, offset by operating expenses of $2.89 million.
For the period from February 3, 2021 (inception) through December 31, 2021, we had a net loss of $0.41 million, which consisted of dividend income of $3,964, offset by change in fair value over-allotment liability of approximately $0.02 million, and operating expenses of $0.43 million.
Liquidity
Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of ordinary shares by the sponsor and loans from the sponsor.
On September 8, 2021, the Company consummated the Initial Public Offering of 15,000,000 units, at a price of $10.00 per unit, generating gross proceeds of $150.00 million. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 8,400,000 private warrants at a price of $1.00 per warrant in a private placement to the sponsor and the underwriters, generating gross proceeds of $8.40 million. On September 13, 2021, the underwriters exercised the over-allotment option in full and purchased an additional 2,250,000 units, generating gross proceeds of $22.50 million. In connection with the underwriters’ full exercise of the over-allotment option, the Company issued an additional 900,000 private warrants at a price of $1.00 per warrant in a private placement to the sponsor and the underwriters, generating gross proceeds of $0.90 million.
Following the Initial Public Offering and the private placement, a total of $175.95 million was placed in the Trust Account (at $10.20 per Unit). We incurred $4.15 million in transaction costs, including $3.45 million of underwriting fees and $0.70 million of other offering costs.
For the year ended December 31, 2022, cash used in operating activities was $2.11 million. Net loss of $0.30 million was offset by the dividend received of $2.58 million and foreign exchange gain of $1,073. Changes in operating assets and liabilities provided $0.78 million of total cash for operating activities.
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For the period from February 3, 2021 (inception) through December 31, 2021, cash used in operating activities was $0.60 million. Net loss of $0.41 million was offset by the dividend received of $3,964. Changes in operating assets and liabilities provided $0.17 million of total cash for operating activities.
As of December 31, 2022 and December 31, 2021, we had marketable securities held in the trust account of $178.53 million and $175.95 million respectively. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of December 31, 2022 and December 31, 2021, we had cash of $0.68 million and $1.12 million outside of the trust account, respectively. 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.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete 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.
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with ASC Topic 205-40 Presentation of Financial Statements – Going Concern, the Company has until the Extended Date to consummate a Business Combination. If a Business Combination is not consummated by this date and an extension not requested by the sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Although the Company intends to consummate a Business Combination on or before the Extended Date, it is uncertain that the Company will be able to consummate a Business Combination by this time. Management has determined that the liquidity condition, coupled with the mandatory liquidation, should a Business Combination not occur, and an extension is not requested by the sponsor, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Further to the extension of the Termination Date from March 8, 2023 to December 8, 2023, the Company’s plan is to complete a Business Combination on or prior to December 8, 2023, however it is uncertain that the Company will be able to consummate a Business Combination or obtain an extension by this time. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after December 8, 2023.
As of December 31, 2022, the Company had $0.68 million in its operating bank account, $178.53 million of marketable securities held in the trust account to be used for a Business Combination or to repurchase or redeem its ordinary shares in connection therewith and a working capital deficiency of $1.58 million.
Until the consummation of a Business Combination, the Company will be using the funds not held in the trust account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
The Company will need to raise additional capital through loans or additional investments from its sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. 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.
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Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 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.
We have engaged EarlyBirdCapital, Inc. and Sova Capital Limited as advisors in connection with our Business Combination to assist us in holding meetings with our shareholders to discuss the potential Business Combination and the target business’ attributes, introduce us to potential investors that are interested in purchasing our securities in connection with our initial Business Combination, assist us in obtaining shareholder approval for the Business Combination and assist us with our press releases and public filings in connection with the Business Combination. We will pay EarlyBirdCapital, Inc. and Sova Capital Limited a cash fee of up to an aggregate of $5.23 million for such services upon the consummation of our initial Business Combination (exclusive of any applicable finders’ fees which might become payable); provided that up to 25% of the fee may be allocated at our sole discretion to other Financial Industry Regulatory Authority members that assist us in identifying or consummating an initial Business Combination.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has identified the following as its critical accounting policies:
Warrants
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15.
We account for the public warrants and private warrants collectively (“warrants”), as either equity or liability-classified instruments based on an assessment of the specific terms of the Warrants and the applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the Warrants meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to our own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the Warrants 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, such warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, such warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of liability-classified warrants are recognized as a non-cash gain or loss on the statements of operations. We evaluated the public warrants and private warrants in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” and concluded that they met the criteria for equity classification and are required to be recorded as part a component of additional paid-in capital at the time of issuance.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (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 feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2022 and December 31, 2021, 17,250,000 shares of Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheets.
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Net Loss Per Ordinary Share
We comply with accounting and disclosure requirements FASB ASC, Topic 260, “Earnings Per Share.” Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period. The Company applies the two-class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A ordinary share is excluded from EPS as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.
The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information appears following Item 16 of this Annual Report and is included herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022 and December 31, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Annual Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
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Management’s Report on Internal Control Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2022. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our system of internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022 based upon criteria in Internal Control – Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, management determined that our internal control over financial reporting was not effective as of December 31, 2022, due to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. 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 financial statements included in this Form 10-K present fairly in all material respects our financial position, results of operations, and cash flows for the period presented.
Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
This Annual Report on Form 10-K does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in internal controls over financial reporting.
There were no changes in the Company’s internal controls over financial reporting that occurred during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management has identified a material weakness in internal controls related to the accounting for complex financial instruments. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to continue to enhance our system of evaluating and implementing the accounting standards that apply to our financial statements, including through enhanced analyses by our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Our current directors and executive officers are listed below.
| Name | Age | Title | ||||
| Kenges Rakishev | 43 | Non-executive Chairman and Director | ||||
| Kanat Mynzhanov | 39 | Chief Executive Officer and Director | ||||
| Askar Mametov | 39 | Chief Financial Officer | ||||
| Christophe Charlier | 50 | Director | ||||
| Karim Zahmoul | 56 | Director | ||||
| Shiv Vikram Khemka | 60 | Director | ||||
Kenges Rakishev has served as our non-executive Chairman since our inception in February 2021 and as our director since July 2021. Mr. Rakishev is a global investor and entrepreneur who focuses on acquiring and investing in businesses that can benefit from his group’s operating expertise. Over the course of his career, Mr. Rakishev has acquired and directly or indirectly invested in more than 50 businesses in metals & mining, oil, petrochemical, banking, fintech, information technology, ecommerce, logistics and insurance industries, including a current portfolio of ten active companies worldwide. Mr. Rakishev is the sole shareholder and has served as the chief executive officer of Fincraft Group LLP (listed on the Kazakhstan Stock Exchange since 2019), a diversified holding company, since March 2021 and as the chairman of the board of Fincraft Resources JSC (formerly SAT & Company)(listed on the Kazakhstan Stock Exchange since 2008) a diversified holding company with a focus on building, investing and operating internationally in the natural resources and disruptive technology industries, since September 2008. In addition, he has served as the chairman of the board of Battery Metals Technologies Ltd., an electric vehicle battery metals company, since December 2020 and as the director of Evoshare Limited, an international fast moving consumer goods (FMCG) company, since July 2013. Mr. Rakishev served as a director and chairman of the board of NetElement, global technology-driven group specializing in mobile payments and value-added transactional services, from October 2012 until November 2018. He served as a non-executive director of Central Asia Metals Plc (AIM: CAML) from 2013 to May 2018. Mr. Rakishev was a controlling shareholder and served as the chairman of Kazkommertsbank JSC, the largest Kazakh commercial bank from March 2015 to June 2017. From December 2017 to July 2019, Mr. Rakishev was a major shareholder of Petropavlovsk Plc., a member of the London’s FTSE 250 index and one of the five largest gold mining companies in Russia. In these positions, he offered support on strategic development, including helping to resolve management conflicts as well as short-term liquidity issues. Throughout his career, Mr. Rakishev has served in several notable positions in the public sector including independent director of Satbayev Kazakh National Technical University, co-founder of Saby Charitable Foundation, vice-president of the Union of Chambers of Commerce of the Republic of Kazakhstan, president of Kazakhstan Boxing Federation, vice-president of The Boxing Association of Republic of Kazakhstan and vice-president of the Asian Boxing Confederation. Mr. Rakishev holds a B.A. (Law) from the Kazakh State Law Academy and a B.A. (International Economics) from the Kazakh Economic University. Mr. Rakishev also has an AMP Diploma from Oxford University.
We believe that Mr. Rakishev’s qualifications to serve on our Board of Directors include his extensive experience in investment and financial industry.
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Kanat Mynzhanov has served as our Chief Executive Officer and director since our inception in February 2021. Mr. Mynzhanov led and co-founded a hedge fund, Bellprescot Prime Fund and asset management firm Bellprescot Asset Management in September 2016. He served as the director of the investment advisory firm, Bellprescot Ltd. from September 2016 until April 2021. He served as the chief investment officer of Bellprescot Asset Management from September 2016 to June 2020. The hedge fund’s primary focus of investments was technology driven public companies with leading and disruptive products and service, including internet of things and cloud, autonomous driving, artificial intelligence, machine learning, semiconductors, cybersecurity and robotics. Since 2018, Mr. Mynzhanov advised on several private equities deals in fintech (payments, remittances and alternative financing), mobility (including EV battery metals and EV battery technology) and structured products, including tokenization and syndicated co-lending. Prior to founding the hedge fund, Mr. Mynzhanov served as the head of investments at Kazatomprom-Damu, an investment subsidiary of NAC Kazatomprom JSC, where he led and mentored a team of highly skilled investment managers responsible for mergers and acquisitions, joint ventures and business development across metals & mining, rare metals and alternative energy industries. Mr. Mynzhanov joined NAC Kazatomprom JSC in 2014 as an investment manager and during his time he oversaw numerous projects and established strong connections with some of the largest global firms in the industry. From March 2011 to March 2014 Mr. Mynzhanov consulted and led the business development of tungsten concentrate producer in CIS region. From November 2008 to March 2011 Mr. Mynzhanov led and participated in operational, commercial and investment management of oil tankers firm in London. Over the years Mr. Mynzhanov consulted for various firms, including those in the metals and mining sector, on raising capital through initial public offerings, as well as restructuring and various business developments. Mr. Mynzhanov holds a Master of Science from University of Westminster.
We believe that Mr. Mynzhanov’s qualifications to serve on our Board of Directors include his extensive experience in investment and financial industry.
Askar Mametov has served as our Chief Financial Officer since our inception in February 2021. Mr. Mametov has over 15 years of executive experience in mining, oil and gas, infrastructure and transportation industries with a thorough understanding of financial reporting (US GAAP and IFRS), taxation and accounting, financial planning and analysis. Mr. Mametov has served as the Director of Kaznedraproject LLP, a private Kazkh oil and gas exploration company, since July 2019. Previously, Mr. Mametov served as chief financial officer of KM Gold Inc., a public Kazakh gold mining company (KASE: KMGD) from August 2016 until October 2019. He led the process of public listing of the company on Kazakhstan Stock Exchange in 2016. Prior to that, Mr. Mametov served as financial controller of Sequa Petroleum Kazakhstan, a subsidiary of Sequa Petroleum, an oil and gas company, listed on Euronext Access (EPA: MLSEQ) from January 2014 to July 2016. From 2007 to 2014, Mr. Mametov served in multiple roles at Caspian Services Inc. (Nasdaq: CSSV), including management reporting, US GAAP financial reporting, as well as IFRS financial reporting for Kazakhstani Stock Exchange (KASE: US_CSSV). In 2007, Mr. Mametov worked at Beeline Kazakhstan, a subsidiary of VEON (Nasdaq: VEON). VEON (former Vympelcom), which operates through a number of connectivity and digital services’ brands. From 2005 to 2007, Mr. Mametov served as financial reporting specialist and consortium accountant in PetroKazakhstan Inc. (TSX: PKZ), a Canadian oil company. Mr. Mametov is a member of IMA (Institute of Management Accountants) and since 2014, has served as the President of Kazakhstan Chapter of IMA. Mr. Mametov earned a B.S. in Accounting and MBA in Financial Reporting from KIMEP University.
We believe that Mr. Mametov’s qualifications to serve as our Chief Financial Officer include his extensive experience in financial industry and expertise in finance and accounting.
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Christophe Charlier has served as one of our independent directors since September 2021. Mr. Charlier is an international financier with over 25 years of experience in investment banking, private equity and international management. Throughout his career he has acted as principal or advised on a number of landmark transactions in the telecoms, financial services, natural resources and sports and entertainment industries across developed and emerging markets. He has served as co-Chairman of Tingo Inc., an African fintech company, since September 2021, an independent director of La Française de l’Energie, a French clean energy production company since April 2016, and chairman of Pure Grass Films, a UK-based film and TV series production company, since 2012. Mr. Charlier served as chairman of the board of directors of Renaissance Capital, a leading investment bank focused on emerging and frontier markets, from April 2017 to March 2020. As Chairman, Mr. Charlier coordinated the work of Renaissance Capital’s board of directors and oversaw strategic development, the global brand, and relationships with key clients and stakeholders globally. Previously, Mr. Charlier served as deputy CEO of Onexim Group, a leading private equity fund based in Moscow from September 2008 to June 2014. In this capacity, he served on the boards of directors of several of Russia’s largest companies including RusAl, Polyus Gold, Quadra-Power Generation, and RBC. He also acted as chairman of the NBA’s Brooklyn Nets franchise from 2010 to 2014. Prior to that from February 2002 to March 2004, Mr. Charlier was director of strategic development of Norilsk Nickel, leading its acquisition of strategic stakes in Stillwater Mining Company and Gold Fields. He started his investment banking career in 1995 at JPMorgan in the M&A Group in New York. Mr. Charlier graduated cum laude in Finance from the Wharton School and in International Relations from the College of Arts & Sciences of the University of Pennsylvania in 1994.
We believe that Mr. Charlier’s qualifications to serve on our Board of Directors include his extensive experience as an international financier and as a director of the boards of directors of the companies listed above.
Karim Zahmoul has served as one of our independent directors since June 2022. Mr. Zahmoul has 25 years of investment banking experience. He has served as a Founder and CEO of EMVirya Ltd, an FCA regulated investment advisor based in London since February, 2018. EMVirya Ltd, is a privately held financial services firm with extensive experience in global emerging markets that is positioning itself at the cross road of Emerging markets and renewable energy. Prior to founding EMVirya, Mr. Zahmoul was a Partner at Temporis Capital from September 2014 to April 2017 in London, where he was responsible for the firm’s international investments business and developed renewable energy project in the emerging market jurisdiction including extended focus in Morocco and Argentina. Prior to that from 2004 to 2014, Mr. Zahmoul was a Managing Director at Barclays Investment Bank where he held various senior positions over his 10-year tenure at the bank. In his last position, he was responsible for the Global Emerging Market business for the investment bank. Prior to Barclays from 1999 to 2004, Mr. Zahmoul spent five years at Deutsche Bank where he was a Managing Director and Head of Emerging Market Structuring for the Americas in New York. He started his financial career and spent six years at Goldman Sachs, in both New York and London, where his last position was Executive Director in EEMEA Trading. Mr. Zahmoul received an MSc and a BSc from Columbia School of Engineering and Applied Sciences in Operation Research and a BA in Physics from Columbia College. The Company believes that Mr. Zahmoul’s qualifications to serve on our Board of Directors include his extensive experience in investment and financial industry.
We believe that Mr. Zahmoul’s qualifications to serve on our Board of Directors include his extensive experience in investment and financial industry.
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Shiv Vikram Khemka has served as one of our independent directors commencing since September 2021. Mr. Khemka is a vice-chairman of SUN Group, a 120-year-old family enterprise comprised of both operating and investment companies. He has served as a vice-chairman of SUN Group since 1990. SUN Group is active in asset management, natural resources, green infrastructure and high technology. SUN has partnered to establish SUN Mobility, an energy tech company focused on becoming a leader in EV energy. SUN is also a significant investor in a leading EV solid state battery manufacturer. The group has been active in various regions around the world, including India, the Middle East, Central and South-East Asia. Mr. Khemka is the chairman of the Entrepreneurship Sports Generation, also executive chairman of the Global Education and Leadership Foundation. He is currently a member of the board of governors at Junior Achievement Worldwide and is a member of the Leadership Council at the Brooking Centre for Universal Education. The World Economic Forum elected Mr. Khemka a “Global Leader for Tomorrow” and he was also a member of the organization’s Global Agenda Council on Education. He has served on both the Brown University and Yale University’s President’s Councils. Mr. Khemka has also served as a board member on the Stanford Philanthropy and Civic Society (PACS) centre. He is currently a founding member of V20, a global community of values experts and practitioners that engage with G20, and is the chairman of Aikido Aikikai Foundation of India. He was awarded the Dr. Jean Mayer Global Citizenship Award from Tufts University, the Outstanding Contribution to Education Prize and the India Alumni Award from the Wharton School of Business. Mr. Khemka studied at Eton College, earned a BA in economics from Brown (’85), an MBA/MA with distinction from the Wharton School of Business and the Lauder Institute at the University of Pennsylvania (’90).
We believe that Mr. Khemka’s qualifications to serve on our Board of Directors include his extensive experience in investment and financial industry.
Number and Terms of Office of Officers and Directors
Our board of directors consists of five members. Our board of directors is divided into three classes, with only one class of directors being elected in each year, and with each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. The term of office of the first class of directors, consisting of Karim Zahmoul, will expire at our first annual meeting of shareholders. The term of office of the second class of directors, consisting of Christophe Charlier and Shiv Vikram Khemka, will expire at our second annual meeting of shareholders. The term of office of the third class of directors, consisting of Kenges Rakishev and Kanat Mynzhanov, will expire at our third annual meeting of shareholders.
Prior to the completion of our initial Business Combination, any vacancy on our board of directors may be filled by a nominee chosen by holders of a majority of our founder shares.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint officers as it deems appropriate pursuant to our Charter.
Audit Committee
We have established an audit committee of the board of directors, which consists of Christophe Charlier (chairman), Shiv Vikram Khemka and Karim Zahmoul, each of whom is an independent director under Nasdaq’s listing standards. The audit committee’s duties, which are specified in our Audit Committee Charter, include, but are not limited to:
| ● | reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K; |
| ● | discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; |
| ● | discussing with management major risk assessment and risk management policies; |
| ● | monitoring the independence of the independent auditor; |
| ● | verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; |
| ● | reviewing and approving all related party transactions; |
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| ● | inquiring and discussing with management our compliance with applicable laws and regulations; |
| ● | pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; |
| ● | appointing or replacing the independent auditor; |
| ● | determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
| ● | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and |
| ● | approving reimbursement of expenses incurred by our management team in identifying potential target businesses. |
Financial Experts on Audit Committee
The audit committee will at all times be composed exclusively of “independent directors” who are “financially literate” as defined under Nasdaq’s listing standards. Nasdaq’s standards define “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement.
In addition, we must certify to Nasdaq that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication. The board of directors has determined that Christophe Charlier qualifies as an “audit committee financial expert,” as defined under rules and regulations of the SEC.
Nominating Committee
We have established a nominating committee of the board of directors, which consists of Christophe Charlier (chairman), Shiv Vikram Khemka and Karim Zahmoul, each of whom is an independent director under Nasdaq’s listing standards. The nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The nominating committee considers persons identified by its members, management, shareholders, investment bankers and others.
Guidelines for Selecting Director Nominees
The guidelines for selecting nominees, which are specified in the Nominating Committee Charter, generally provide those persons to be nominated:
| ● | should have demonstrated notable or significant achievements in business, education or public service; |
| ● | should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and |
| ● | should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the shareholders. |
The Nominating Committee will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by shareholders and other persons.
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Compensation Committee
We have established a compensation committee of the board of directors, which consists of Christophe Charlier (chairman), Shiv Vikram Khemka and Karim Zahmoul, each of whom is an independent director under Nasdaq’s listing standards. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
| ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
| ● | reviewing and approving the compensation of all of our other executive officers; |
| ● | reviewing our executive compensation policies and plans; |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; |
| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
| ● | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
| ● | reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Code of Ethics
We have adopted a code of ethics that applies to all of our executive officers, directors and employees. The code of ethics codifies the business and ethical principles that govern all aspects of our business.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. These reporting persons are also required to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of such forms, we believe that for the year ended December 31, 2022, there were no delinquent filers.
ITEM 11. EXECUTIVE COMPENSATION
Executive Officer and Director Compensation
No executive officer has received any cash compensation for services rendered to us. Commencing on September 8, 2021 through the acquisition of a target business or our liquidation of the trust account, we will pay our sponsor $10,000 per month for providing us with general and administrative services, including office space, utilities and administrative support. However, this arrangement is solely for our benefit and is not intended to provide our officers or directors compensation in lieu of a salary.
Other than the $10,000 per month administrative fee and the repayment of up to $300,000 in loans from our sponsor, no compensation or fees of any kind, including finder’s, consulting fees and other similar fees, will be paid to our sponsor, initial shareholders, members of our management team or their respective affiliates, for services rendered prior to or in connection with the consummation of our initial Business Combination (regardless of the type of transaction that it is). However, they will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses and Business Combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable by us.
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After our initial Business Combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to shareholders, to the extent then known, in the proxy solicitation materials furnished to our shareholders. However, the amount of such compensation may not be known at the time of the shareholder meeting held to consider an initial Business Combination, as it will be up to the directors of the post-combination business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its determination in a Current Report on Form 8-K or a periodic report, as required by the SEC.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of March 1, 2023 based on information obtained from the persons named below, with respect to the beneficial ownership of our ordinary shares by:
| ● |
each person known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares;
| |
| ● |
each of our executive officers, directors and director nominees that beneficially owns ordinary shares; and
| |
| ● | all our executive officers and directors as a group. |
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares beneficially owned by them. The following table does not give effect to the March Redemption.
| Number of Shares Beneficially Owned |
Percentage of Outstanding Ordinary Shares | |||||||
| Name and Address of Beneficial Owner(1) | ||||||||
| Oxus Capital PTE. LTD.(2) | 4,162,500 | (3) | 19.2 | % | ||||
| Adage Capital Partners, L.P.(4) | 1,300,000 | 7.4 | % | |||||
| D.E. Shaw Valence Portfolios, L.L.C.(5) | 1,501,019 | 8.6 | % | |||||
| Barclays PLC(8) | 1,068,484 | 6.1 | % | |||||
| Polar Asset Management Partners Inc.(9) | 1,327,678 | 7.6 | % | |||||
| Periscope Capital Inc.(10) | 1,043,450 | 6.0 | % | |||||
| Kenges Rakishev(2) | 4,162,500 | (3) | 19.2 | % | ||||
| Kanat Mynzhanov(6) | — | — | ||||||
| Askar Mametov | — | — | ||||||
| Karim Zahmoul | 50,000 | * | ||||||
| Christophe Charlier | 50,000 | * | ||||||
| Shiv Vikram Khemka | 50,000 | * | ||||||
| All directors and executive officers as a group (6 individuals) | 4,312,500 | (6)(7) | 19.7 | % | ||||
| * | Less than one percent. |
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| (1) | Unless otherwise noted, the business address of each of the following entities or individuals is 300/26 Dostyk Avenue, Almaty 050020. |
| (2) | Represents securities held by Oxus Capital PTE. LTD., our sponsor, of which Kenges Rakishev is the controlling shareholder. |
| (3) | Consists of 4,162,500 Class B ordinary shares. |
| (4) | Based on a Schedule 13G filed on September 20, 2021, by Adage Capital Partners, L.P., a Delaware limited partnership (“ACP”) with respect to the Class A ordinary shares directly owned by it; Adage Capital Partners GP, L.L.C., a limited liability company organized under the laws of the State of Delaware (“ACPGP”), as general partner of ACP with respect to the Class A ordinary shares directly owned by ACP; Adage Capital Advisors, L.L.C., a limited liability company organized under the laws of the State of Delaware (“ACA”), as managing member of ACPGP, general partner of ACP, with respect to the Class A ordinary shares directly owned by ACP; Robert Atchinson (“Mr. Atchinson”), as managing member of ACA, managing member of ACPGP, general partner of ACP with respect to the Class A ordinary shares directly owned by ACP; Phillip Gross (“Mr. Gross”), as managing member of ACA, managing member of ACPGP, general partner of ACP with respect to the Class A ordinary shares directly owned by ACP (foregoing persons are hereinafter sometimes collectively referred to as the “Reporting Persons”). The address of the business office of each of the Reporting Persons is 200 Clarendon Street, 52nd Floor, Boston, Massachusetts 02116. |
| (5) | Based on a Schedule 13G/A filed on February 14, 2023, by D. E. Shaw Valence Portfolios, L.L.C., a limited liability company organized under the laws of the state of Delaware; D. E. Shaw & Co., L.L.C., a limited liability company organized under the laws of the state of Delaware; D. E. Shaw & Co., L.P., a limited partnership organized under the laws of the state of Delaware and David E. Shaw, a citizen of the United States of America. David E. Shaw does not own any shares directly. By virtue of David E. Shaw’s position as President and sole shareholder of D. E. Shaw & Co., Inc., which is the general partner of D. E. Shaw & Co., L.P., which in turn is the investment adviser of D. E. Shaw Valence Portfolios, L.L.C. and D. E. Shaw Oculus Portfolios, L.L.C., and by virtue of David E. Shaw’s position as President and sole shareholder of D. E. Shaw & Co. II, Inc., which is the managing member of D. E. Shaw & Co., L.L.C., which in turn is the manager of D. E. Shaw Valence Portfolios, L.L.C. and D. E. Shaw Oculus Portfolios, L.L.C., David E. Shaw may be deemed to have the shared power to vote or direct the vote of, and the shared power to dispose or direct the disposition of, the 1,704,487 shares as described above constituting 9.7% of the outstanding shares and, therefore, David E. Shaw may be deemed to be the beneficial owner of such shares. David E. Shaw disclaims beneficial ownership of such 1,704,487 shares. The business address for each reporting person is 1166 Avenue of the Americas, 9th Floor, New York, NY 10036. |
| (6) | Does not include certain shares indirectly owned by this individual as a result of his membership interest in our sponsor. |
| (7) | Interests shown include founder shares, classified as Class B ordinary shares. Such shares are convertible into Class A ordinary shares on a one for one basis, subject to adjustment. |
| (8) | Based on a Schedule 13G filed on February 14, 2022, by Barclays PLC, a public limited company of the UK, Barclays Bank PLC, a public limited company of the UK, and Barclays Capital Inc., a Connecticut corporation. The business address for Barclays PLC and Barclays Bank PLC is 1 Churchill Place, London, E14 5HP, England. The business address for Barclays Capital Inc. is 745 Seventh Ave., New York, NY 10019. |
| (9) | Based on a Schedule 13G/A filed on February 10, 2023, by Polar Asset Management Partners Inc., a company incorporated under the laws of Ontario, Canada, which serves as the investment advisor to Polar Multi-Strategy Master Fund, a Cayman Islands exempted company (“PMSMF”) and certain managed accounts (together with PMSMF, the “Polar Vehicles”) with respect to the shares directly held by the Polar Vehicles. The business address for each of the reporting person is 16 York Street, Suite 2900, Toronto, ON, Canada M5J0E6. |
|
(10) |
Based on a Schedule 13G filed on February 13, 2023, by Periscope Capital Inc., a company incorporated under the laws of Canada (“Periscope”). Periscope, which is the beneficial owner of 932,250 ordinary shares of Oxus, acts as investment manager of, and exercises investment discretion with respect to, certain private investment funds (each, a “Periscope Fund”) that collectively directly own 111,200 ordinary shares of Oxus. The business address of Periscope is 333 Bay Street, Suite 1240, Toronto, Ontario, Canada M5H 2R2. |
All of the founder shares outstanding prior to September 2, 2021 are placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, until (i) with respect to 50% of the founder shares, the earlier of one year after the date of the consummation of our initial Business Combination and the date on which the closing price of our Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations) for any 20 trading days within a 30-trading day period commencing after the consummation of our initial Business Combination and (ii) with respect to the remaining 50% of the founder shares, the one-year anniversary of the consummation of our initial Business Combination, or, in each case, earlier if, subsequent to our initial Business Combination, we consummate a liquidation, merger, share exchange or other similar transaction which results in all of our shareholders having the right to exchange their ordinary shares for cash, securities or other property.
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During the escrow period, the holders of the founder shares will not be able to sell or transfer their securities except for transfers, assignments or sales (i) among our initial shareholders or to our initial shareholders’ members, officers, directors, consultants or their affiliates, (ii) to a holder’s shareholders or members upon its liquidation, (iii) by bona fide gift to a member of the holder’s immediate family or to a trust, the beneficiary of which is the holder or a member of the holder’s immediate family, for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon death, (v) pursuant to a qualified domestic relations order, (vi) to us for no value for cancellation in connection with the consummation of our initial Business Combination, or (vii) in connection with the consummation of a Business Combination at prices no greater than the price at which the shares were originally purchased, in each case (except for clause (vi) or with our prior consent) where the transferee agrees to the terms of the escrow agreement and to be bound by these transfer restrictions, but will retain all other rights as our shareholders, including, without limitation, the right to vote their ordinary shares and the right to receive cash dividends, if declared. If dividends are declared and payable in ordinary shares, such dividends will also be placed in escrow. If we are unable to effect a Business Combination and liquidate, there will be no liquidation distribution with respect to the founder shares.
In order to meet our working capital needs following the consummation of the Initial Public Offering, our sponsor, initial shareholders, officers, directors and 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. Each loan would be evidenced by a promissory note.
The notes would either be paid upon consummation of our initial Business Combination, without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of $1.00 per warrant. The warrants would be identical to the private warrants. In the event that the initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account other than the interest earned thereon would be used for such repayment.
Our executive officers and our sponsor are our “promoters,” as that term is defined under the federal securities laws.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Certain Relationships and Related Transactions
On March 22, 2021, we issued an aggregate of 8,625,000 Class B ordinary shares for an aggregate purchase price of $25,000, or approximately $0.003 per share, to our sponsor. In addition, we issued 200,000 Class A ordinary shares, at a price of $0.0001 per share, to each of EarlyBirdCapital and Sova Capital and/or their respective designees for an aggregate of 400,000 Class A ordinary shares in a private placement in March 2021. On June 10, 2021 and July 14, 2021, our sponsor forfeited an aggregate of 4,312,500 founder shares, such that our sponsor owned an aggregate of 4,312,500 founder shares. In addition, on June 10, 2021 and July 14, 2021, each of EarlyBirdCapital and Sova Capital forfeited 50,000 underwriter founder shares. In July 2021, our sponsor transferred 50,000 founder shares to each of our independent director nominees at their original purchase price. The underwriters exercised their over-allotment option in full, and therefore no founder shares of our initial shareholders is forfeited.
Our sponsor and EarlyBirdCapital and Sova Capital (and/or their respective designees) have purchased from us an aggregate of 8,400,000 private warrants at $1.00 per warrant for a total purchase price of $8,400,000, in a private placement that occurred simultaneously with the consummation of the Initial Public Offering. Among the private warrants, 7,650,000 warrants were purchased by our sponsor and 375,000 warrants were purchased by each of EarlyBirdCapital and Sova Capital. In connection with the underwriters’ exercise of their over-allotment option in full, our sponsor, EarlyBirdCapital and Sova Capital purchased from us 900,000 additional private warrants, including 40,179 private warrants purchased by each of EarlyBirdCapital and Sova Capital, at a price of $1.00 per warrant, in an amount that is necessary to maintain in the trust account $10.20 per unit sold to the public in the Initial Public Offering. These additional private warrants were purchased in a private placement that occurred simultaneously with the purchase of units resulting from the exercise of the over-allotment option. The purchase price for the private warrants was delivered to an escrow account at least 24 hours prior to the closing of the Initial Public Offering and was deposited into the trust account simultaneously with the consummation of the offering. The private warrants are identical to the warrants underlying the units sold in the Initial Public Offering. Our initial shareholders have agreed not to transfer, assign or sell any of the private warrants (except to certain permitted transferees) until after the completion of our initial Business Combination. Furthermore, our initial shareholders have agreed (A) to vote the private shares in favor of any proposed Business Combination, (B) not to convert any private shares in connection with a shareholder vote to approve a proposed initial Business Combination or sell any private shares to us in a tender offer in connection with a proposed initial Business Combination and (C) that the private shares shall not participate in any liquidating distribution from our trust account upon winding up if a Business Combination is not consummated. In the event of a liquidation prior to our initial Business Combination, the private warrants will likely be worthless.
53
In order to meet our working capital needs following the consummation of the Initial Public Offering, our sponsor, initial shareholders, 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. Each loan would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial Business Combination, without interest, or, at holder’s discretion, up to $1,500,000 of the notes may be converted into warrants at a price of $1.00 per warrant. The warrants would be identical to the private warrants. In the event that the initial Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account other than the interest earned thereon would be used for such repayment.
The holders of our founder shares issued and outstanding as of September 2, 2021, as well as the holders of the private warrants and any warrants our sponsor, initial shareholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us (and all underlying securities), will be entitled to registration rights pursuant to an agreement signed on September 2, 2021. The holders of a majority of these securities are entitled to make up to two demands that we register such securities. The holders of the majority of the founder shares can elect to exercise these registration rights at any time commencing three months prior to the date on which the founder shares are to be released from escrow. The holders of a majority of the private warrants and warrants issued in payment of working capital loans made to us (or underlying securities) can elect to exercise these registration rights at any time after we consummate a Business Combination. 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.
Our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of the Initial Public Offering under an unsecured promissory note. We have repaid the $279,935 of the loan from the proceeds of the Initial Public Offering not being placed in trust upon consummation of the Initial Public Offering. No such amount was outstanding as of December 31, 2022.
On September 8, 2022, we entered into a promissory note (the “Promissory Note”) with our sponsor pursuant to which we may borrow up to an aggregate principal amount of $1,500,000. The Promissory Note is non-interest bearing and due on the date on which we consummate our initial Business Combination. If we complete a Business Combination, we would repay any loaned amounts, without interest, upon consummation of the Business Combination. 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 any loaned amounts but no proceeds from our trust account would be used for such repayment. The issuance of the Promissory Note was unanimously approved by our board of directors, including all the members of the audit committee, on September 6, 2022. As of December 31, 2022, $1.5 million was outstanding under the Promissory Note.
On February 28, 2023, we entered into an Amended and Restated Promissory Note (the “Amended Note”) with our sponsor pursuant to which we may borrow up to an aggregate principal amount of $3,500,000. The Amended Note amended, replaced and superseded in its entirety the Promissory Note, and any unpaid principal balance of the indebtedness evidenced by the Promissory Note has been merged into and evidenced by the Amended Note. The Amended Note is non-interest bearing and due on the date on which we consummate our initial Business Combination. If we complete a Business Combination, we would repay any loaned amounts, without interest, upon consummation of the Business Combination. 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 any loaned amounts but no proceeds from our trust account would be used for such repayment. As of March 31, 2023, there was outstanding unpaid balance of $1,800,000 under the Amended Note.
Our sponsor has agreed that, commencing on September 2, 2021 and through the earlier of our consummation of our initial Business Combination or the liquidation of the trust account, it will make available to us certain general and administrative services, including office space, utilities and administrative support, as we may require from time to time. We have agreed to pay $10,000 per month for these services. We believe, based on rents and fees for similar services, that the administrative fee is at least as favorable as we could have obtained from an unaffiliated person.
54
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our Charter.
Other than the $10,000 per month administrative fee, the repayment of up to $3,500,000 in loans from and the repayment of the Amended Note to our sponsor, no compensation or fees of any kind will be paid to our sponsor, initial shareholders, members of our management team or their respective affiliates, for services rendered prior to or in connection with the consummation of our initial Business Combination (regardless of the type of transaction that it is). However, such individuals will receive reimbursement for any out-of-pocket expenses incurred by them in connection with activities on our behalf, such as identifying potential target businesses, performing business due diligence on suitable target businesses and Business Combinations as well as traveling to and from the offices, plants or similar locations of prospective target businesses to examine their operations. There is no limit on the amount of out-of-pocket expenses reimbursable by us.
After our initial Business Combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to shareholders, to the extent then known, in the proxy solicitation materials furnished to our shareholders. However, the amount of such compensation may not be known at the time of the shareholder meeting held to consider an initial Business Combination, as it will be up to the directors of the post-combination business to determine executive and director compensation. In this event, such compensation will be publicly disclosed at the time of its determination in a Current Report on Form 8-K or a periodic report, as required by the SEC.
All ongoing and future transactions between us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions will require prior approval by a majority of our uninterested “independent” directors or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested “independent” directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties.
Related Party Policy
Our code of ethics requires us to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interests, except under guidelines approved by the board of directors (or the audit committee). Related-party transactions are defined as transactions in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our ordinary shares, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
Our audit committee, pursuant to its written charter, will be responsible for reviewing and approving related-party transactions to the extent we enter into such transactions. The audit committee will consider all relevant factors when determining whether to approve a related party transaction, including whether the related party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. No director may participate in the approval of any transaction in which he is a related party, but that director is required to provide the audit committee with all material information concerning the transaction. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial Business Combination with an entity that is affiliated with any of our sponsor, officers or directors unless we have obtained an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions, that the Business Combination is fair to our unaffiliated shareholders from a financial point of view. We will also need to obtain approval of a majority of our disinterested independent directors.
55
Director Independence
Currently, Christophe Charlier, Karim Zahmoul and Shiv Vikram Khemka would each be considered an “independent director” under the Nasdaq listing rules, which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.
Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Any affiliated transactions will be on terms no less favorable to us than could be obtained from independent parties. Our board of directors will review and approve all affiliated transactions with any interested director abstaining from such review and approval.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The firm of Marcum LLP, or Marcum, acts as our independent registered public accounting firm. The following is a summary of fees paid to Marcum for services rendered.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Marcum in connection with regulatory filings. During the year ended December 31, 2022, and the period from February 3, 2021 (inception) through December 31, 2021, fees for our independent registered public accounting firm were $82,400 and $58,710 respectively for the services Marcum performed in connection with our Initial Public Offering and the audit of our December 31, 2022 financial statements included in this report.
Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. During the period from the year ended December 31, 2022 and for the period from February 3, 2021 (inception) through December 31, 2021, our independent registered public accounting firm did not render assurance and related services related to the performance of the audit or review of financial statements.
Tax Fees. We did not pay Marcum for tax planning and tax advice during the period from the year ended December 31, 2022 and for the period from February 3, 2021 (inception) through December 31, 2021.
All Other Fees. We did not pay Marcum for other services during the period from the year ended December 31, 2022 and for the period from February 3, 2021 (inception) through December 31, 2021.
Pre-Approval Policy
Our audit committee was formed in connection with the effectiveness of our registration statement for our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all audit services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report or incorporated herein by reference:
| (1) | Financial Statements |
| (2) | Financial Statements Schedule |
None
56
| (3) | Exhibits: |
The following documents are included as exhibits to this Annual Report:
| * | Filed herewith. |
| ** | Furnished herewith. |
| (1) | Incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 9, 2021. |
| (2) | Incorporated by reference to an exhibit to the Registrant’s Form S-1 (File No. 333-258183), filed with the SEC on July 27, 2021, as amended. |
| (3) | Incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K, filed with the SEC on September 14, 2022. |
| (4) | Incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K, filed with the SEC on March 31, 2022. |
| (5) | Incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 3, 2023. |
| (6) | Incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K, filed with the SEC on March 1, 2023. |
ITEM 16. FORM 10-K SUMMARY
None
57
OXUS ACQUISITION CORP.
FORM THE YEAR ENDED DECEMBER 31, 2022
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Oxus Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Oxus Acquisition Corp. (the “Company”) as of December 31, 2022 and 2021, the related statements of operations, changes in shareholders’ (deficit) equity and cash flows for the year ended December 31, 2022 and for the period from February 3, 2021 (inception) through December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the year ended December 31, 2022 and for the period from February 3, 2021 (inception) through December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working capital as of December 31, 2022 are not sufficient to complete its planned activities for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB, Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Marcum LLP
We have served as the Company’s auditor since 2021.
March 31, 2023
F-2
OXUS ACQUISITION CORP.
BALANCE SHEETS
| December 31, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses, current | ||||||||
| Total Current Assets | ||||||||
| Marketable securities held in Trust Account | ||||||||
| Prepaid expenses, non-current | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accrued offering costs and expenses | $ | $ | ||||||
| Promissory note | ||||||||
| Related party payable | ||||||||
| Total Current Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Class A ordinary shares, par value $ | ||||||||
| Shareholders’ (Deficit) Equity | ||||||||
| Preferred shares, $ | ||||||||
| Class A ordinary shares, $ | ||||||||
| Class B ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ (Deficit) Equity | ( | ) | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
F-3
OXUS ACQUISITION CORP.
STATEMENTS OF OPERATIONS
| For
the Year Ended December 31, 2022 | For
the Period from February 3, 2021 (Inception) through December 31, 2021 | |||||||
| Formation and operating expenses | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Dividend income | ||||||||
| Interest income | ||||||||
| Foreign exchange gain | ||||||||
| Change in fair value of over-allotment liability | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of the financial statements.
F-4
OXUS ACQUISITION CORP.
STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY
For the Year Ended December 31, 2022
| Class A
Ordinary Shares | Class B
Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance – December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Remeasurement of Class A ordinary shares to redemption amount | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – December 31, 2022 | $ | $ | $ | - | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
For the Period from February 3, 2021 (Inception) through December, 2021
| Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance – February 3, 2021 (inception) | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Issuance of Class B ordinary shares to Sponsor | ||||||||||||||||||||||||||||
| Issuance of Underwriter Founder Shares | ||||||||||||||||||||||||||||
| Cash received from sale of Private Warrants | - | - | ||||||||||||||||||||||||||
| Reclassification for Class A ordinary shares to redemption amount | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Fair value of Private Warrants | - | - | ||||||||||||||||||||||||||
| Change in fair value of over-allotment liability | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
F-5
OXUS ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
| For the Year Ended December 31, 2022 | For the Period from February 3, 2021 (Inception) through December 31, 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Dividend income | ( | ) | ( | ) | ||||
| Foreign exchange gain | ( | ) | ||||||
| Change in fair value of over-allotment liability | ( | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accrued offering costs and expenses | ||||||||
| Prepaid expenses, current | ( | ) | ||||||
| Prepaid expenses, non-current | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from Investing Activities: | ||||||||
| Investment of marketable securities held in Trust Account | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from Financing Activities: | ||||||||
| Proceeds from issuance of Class B ordinary shares to Sponsor | ||||||||
| Proceeds from issuance of Class A ordinary shares to underwriters | ||||||||
| Proceeds from sale of Units | ||||||||
| Proceeds from sale of Private Warrants | ||||||||
| Proceeds from Promissory Note – related party | ||||||||
| Repayment of Promissory Note – related party | ( | ) | ||||||
| Payment of offering costs | ( | ) | ||||||
| Proceeds from related party | - | |||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash: | ( | ) | ||||||
| Cash - Beginning | ||||||||
| Cash - Ending | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Deferred offering costs in accrued offering costs and expenses | $ | $ | ||||||
| Issuance of Underwriter Founder Shares | $ | $ | ||||||
| Remeasurement for Class A ordinary shares subject to redemption | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
F-6
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS OPERATIONS
Oxus Acquisition Corp. (the “Company”) is a blank check company incorporated in the Cayman Islands on February 3, 2021. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or other similar business combination (a “Business Combination”) with one or more businesses. The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination.
Although the Company is not limited to a particular industry or geographic region for purposes of completing a Business Combination, the Company intends to focus its search on targets in energy transition technologies, such as battery materials, energy storage, electric vehicle (“EV”) infrastructure and advanced recycling in emerging/frontier countries including the Commonwealth of Independent States (“CIS”), South and South-East Asia and Middle East and North Africa (“MENA”) regions. 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 December 31, 2022, the Company had not commenced any operations. All activity for the period from February 3, 2021 (inception) through December 31, 2022, relates to the Company’s formation and the Initial Public Offering, which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income or dividend income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
On
September 8, 2021, the Company closed its Initial Public Offering of
Transaction costs amounted
to $
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private
Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business
Combination with one or more operating businesses or assets that together have an aggregate fair market value equal to at least
F-7
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS OPERATIONS (Continued)
Upon the closing of the
Initial Public Offering on September 8, 2021, the Company deposited $
On September 13, 2021, the
underwriters exercised their over-allotment option in full (see Note 4), according to which the Company consummated the sale of an additional
The Company will provide
its holders of the outstanding Public Shares (the “public shareholders”) with the opportunity to redeem all or a portion of
their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of
a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public shareholders will be
entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $
The Company will only proceed
with a Business Combination if the Company has net tangible assets of at least $
F-8
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS OPERATIONS (Continued)
Notwithstanding the above,
if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules,
the Certificate of Incorporation provides that a public shareholder, together with any affiliate of such shareholder or any other person
with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate
of
The Sponsor has agreed (a)
to waive its redemption rights with respect to its Founder Shares (as defined at Note 5) and Public Shares held by it in connection with
the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance
or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or
to redeem
The Company will have until
18 months from the closing of the Initial Public Offering to complete a Business Combination (the “Combination Period”). 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 income earned
on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares (as defined at Note 5) if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, 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.
F-9
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS OPERATIONS (Continued)
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 third party 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 the lesser of (1) $
Going Concern
In connection with the Company’s assessment of going concern considerations in accordance with ASC Topic 205-40 Presentation of Financial Statements – Going Concern, the Company intends to extend the liquidation date from March 8, 2023 to December 8, 2023 in order to consummate a Business Combination, it is uncertain that the Company will be able to consummate a Business Combination on time. Management has determined that the liquidity condition, coupled with the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after December 8, 2023.
As of December 31, 2022,
the Company had $
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
F-10
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS OPERATIONS (Continued)
Going Concern (Continued)
The Company will need to raise additional capital through loans or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. 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.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Various social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, including rising trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the U.S. and foreign, trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties or deterioration in the U.S. and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility could adversely affect the Company’s ability to complete a Business Combination. In response to the conflict between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company’s ability to complete a Business Combination and the value of the Company’s securities.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
F-11
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as amended by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, 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 an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of 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 statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Estimates made in preparing these financial statements include, among other things, the fair value measurement of shares transferred by the Sponsor to independent director nominees. Actual results could differ from those estimates.
F-12
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
The Company had $
Marketable Securities Held in Trust Account
The Company’s marketable securities held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets 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 dividend income in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
On December 31, 2022, and
December 31, 2021, the Company had $
Ordinary Shares Subject to Possible Redemption
All of the
As of December 31, 2022 and December 31, 2021, the Class A ordinary shares subject to possible redemption reflected on the balance sheets are reconciled in the following table:
| December 31, 2022 | December 31, 2021 | |||||||
| Gross proceeds | $ | $ | ||||||
| Less: | ||||||||
| Proceeds allocated to public warrants | ( | ) | ||||||
| Ordinary shares issuance costs | ( | ) | ||||||
| Sub-total | ( | ) | ||||||
| Plus: | ||||||||
| Remeasurement of Class A ordinary shares to initial redemption amount | ||||||||
| Remeasurement of carrying value to redemption value | ||||||||
| Class A ordinary shares subject to possible redemption | $ | $ | ||||||
F-13
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Offering Costs Associated with the Initial Public Offering
The Company complies with
the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”.
Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that are directly
related to the Initial Public Offering. The Company recorded $
Net Loss Per Ordinary Share
The Company applies the two-class
method in calculating earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value.
The Class feature to redeem at fair value means that there is effectively only one class of share. Changes in fair value are not considered
a dividend of the purposes of the numerator in the earnings per share calculation. Net loss per ordinary share is computed by dividing
the pro rata net loss between the Class A ordinary share and the Class B ordinary share by the weighted average number of ordinary share
outstanding for each of the periods. Weighted average shares were reduced for the effect of an aggregate of
| For the Year Ended December 31, 2022 | For the Period from February 3, 2021 (Inception) through December 31, 2021 | |||||||
| Ordinary shares subject to possible redemption | ||||||||
| Numerator: | ||||||||
| Net loss allocable to Class A ordinary shares subject to possible redemption | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Non-redeemable ordinary shares | ||||||||
| Numerator: | ||||||||
| Net loss allocable to non-redeemable ordinary shares | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| $ | ( | ) | $ | ( | ) | |||
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may
exceed the federal depository insurance coverage corporation limit of $
F-14
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain
tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) it determines whether it is more likely than not
that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet
the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction. The company is not presently subject to income taxes or income tax filing requirements in the Cayman Islands. As such, the company’s income tax provision was zero for the period ending December 31, 2022.
Warrants
The Company accounts for its Public and Private warrants as equity-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, 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, 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.
F-15
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Warrants (Continued)
In addition to the
Foreign Currency Transactions
Certain transactions are denominated in a currency other than the Company’s functional currency of the U.S. dollar, and the Company generates assets and liabilities that are fixed in terms of the amount of foreign currency that will be received or paid. At each balance sheet date, the Company adjusts the assets and liabilities to reflect the current exchange rate, resulting in a translation gain or loss. Transaction gains and losses are also realized upon a settlement of a foreign currency transaction in determining net loss for the period in which the transaction is settled.
Recent Accounting Pronouncements
In August 2020, FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.
The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.
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.
F-16
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company offered for sale up to
On September 13, 2021, the
underwriters fully exercised their over-allotment option and purchased an additional
In connection with the Initial
Public Offering, the Company granted the underwriters an option to purchase
NOTE 4. PRIVATE WARRANTS
Concurrently with the closing
of the Initial Public Offering, the Sponsor and the underwriters purchased an aggregate of
As a result of the underwriters’
election to fully exercise their over-allotment option on September 13, 2021, the Sponsor and the underwriters and its designees purchased
an additional
If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
During the period from February
3, 2021 (inception) through March 22, 2021, the Sponsor paid $
The Founder Shares include an aggregate of up to 1,125,000 Class B ordinary shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the number of Founder Shares will collectively represent 20% of the Company’s issued and outstanding shares upon the completion of the Initial Public Offering.
F-17
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 5. RELATED PARTY TRANSACTIONS (Continued)
Founder Shares (Continued)
The allocation of the
Founder Shares to the director nominees is in the scope of FASB ASC Topic 718, “Compensation-Stock Compensation”
(“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value
upon the grant date. The fair value of the
On May 31, 2022, Mr. Sergei Ivashkovsky resigned from his position
as independent director within the Company and returned
As of December 31, 2022, the Company determined the performance conditions had not been met, and, therefore, no stock-based compensation expense has been recognized. Stock-based compensation would be recognized at the date the performance conditions are met (i.e., upon consummation of a Business Combination) in an amount equal to the number of Founder Shares vested times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founder Shares.
Through July 2021, the Sponsor
surrendered an aggregate
As of December 31, 2022, no Class B ordinary share was available for forfeiture as a result of the underwriters’ full exercise of the over-allotment option.
Founder Shares are subject
to lock-up until (i) with respect to
Underwriter Founder Shares
On March 23, 2021, the Company
had issued to its underwriters and/or its designees, an aggregate of
F-18
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 5. RELATED PARTY TRANSACTIONS (Continued)
Underwriter Founder Shares (continued)
In September 2021, subscription
receivable of $
Promissory Note — Related Party
On March 22, 2021, the Sponsor
issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to
an aggregate principal amount of $
On June 25, 2021, the terms of the Promissory Note were revised to be payable on the earlier of December 31, 2022, or the consummation of the Proposed Public Offering.
On September 8, 2021, the
outstanding balance of $
Related Party Loans
In addition, in order to
finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s
officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital
Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust
Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s
discretion, up to $
On September 8, 2022,
the Company issued a promissory note for up to approximately $
F-19
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 6. COMMITMENTS AND CONTINGENCIES
Related Party Payable
At close of the Initial
Public Offering, the operating bank account of the Company held an excess of $
Administrative Support Agreement
The Company has agreed to
pay the Sponsor a total of up to $
For the year ended December
31, 2022, the Company incurred $
For the period from
February 3, 2021 through December 31, 2021, the Company accrued $
Registration Rights
Pursuant to a registration rights agreement entered into on September 2, 2021, the holders of the Founder Shares, Private Warrants, and warrants that may be issued upon conversion of Working Capital Loans (and any ordinary shares issuable upon the exercise of the Private Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A ordinary shares). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. 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.
Business Combination Marketing Agreement
On September 2, 2021, the
Company has engaged EarlyBirdCapital, lnc. (“EarlyBirdCapital”) and Sova Capital Limited (“Sova Capital”) as advisors
in connection with a Business Combination to assist the Company in holding meetings with its shareholders to discuss the potential Business
Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing
the Company’s securities in connection with a Business Combination, assist the Company in obtaining shareholder approval for the
Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination.
Legal Success Fee
As a contingent
arrangement, an additional fee up to $
F-20
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 7. SHAREHOLDERS’ EQUITY
Preferred Shares
The Company is authorized
to issue
Class A Ordinary Shares
The Company is authorized
to issue up to
Class B Ordinary Shares
The Company is authorized
to issue
Holders of Class A ordinary
shares and holders of Class B ordinary shares, voting together as a single class, shall have the exclusive right to vote for the election
of directors and on all other matters submitted to a vote of the Company’s shareholder except as otherwise required by law. The
shares of Class B ordinary shares will automatically convert into shares of Class A ordinary shares on a one-for-one basis (A) at any
time and from time to time at the option of the holder thereof and (B) automatically on the business day following the closing of the
Business Combination, subject to adjustment. In the case that additional shares of Class A ordinary shares, or equity-linked securities,
are issued or deemed issued in excess of the amounts offered in the closing of a Business Combination, the ratio at which shares of Class
B ordinary shares shall convert into shares of Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding
shares of Class B ordinary shares agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number
of shares of Class A ordinary shares issuable upon conversion of all shares of Class B ordinary shares will equal, in the aggregate, on
an as-converted basis,
F-21
OXUS ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 7. SHAREHOLDERS’ EQUITY (Continued)
Warrants
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering.
Redemption of Warrants When the Price per Share of Class A Ordinary shares Equals or Exceeds $18.00 —once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per Public Warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the last reported sale price of the Class A ordinary shares for any 20 trading days within a 30 trading day period ending three business days before sending the notice of redemption to warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like). |
In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of our initial Business Combination at an issue price or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to our Sponsor or its affiliates, without taking into account any, Founder Shares held by our Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds and interest thereon, available for the funding of the Company’s initial Business Combination on the date of the consummation of the Company’s initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above in this section will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
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 the Company’s assessment of the assumptions that market participants would use in pricing the asset or liability. |
F-22
OXUS
ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENT
NOTE 8. FAIR VALUE MEASUREMENTS (Continued)
The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of December 31, 2022, by level within the fair value hierarchy:
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Asset: | ||||||||||||
| Marketable securities held in Trust Account | $ | $ | $ | |||||||||
| $ | $ | $ | ||||||||||
The following table presents information about the Company’s financial assets that are measured at fair value on a recurring basis as of December 31, 2021, by level within the fair value hierarchy:
| Description | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Asset: | ||||||||||||
| Marketable securities held in Trust Account | $ | $ | $ | |||||||||
| $ | $ | $ | ||||||||||
Over-Allotment Liability
The Company used a Black-Scholes
option pricing model to estimate the fair value of the over-allotment liability of $
The change in the fair value of the over-allotment liability for the period from February 3, 2021 (inception) through December 31, 2021 is summarized as follows:
| February 3, 2021 (inception date) | $ | |||
| Initial measurement of over-allotment option at September 8, 2021 | ||||
| Change in fair value of over-allotment option transfer to statement of operations | ( | ) | ||
| Transfer to additional paid-in capital upon exercise of over-allotment option | ( | ) | ||
| Over-allotment option at December 31, 2021 | $ |
F-23
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events, other than already disclosed, that would have required adjustment or disclosure in the financial statements.
On January 13, 2023, $
On February 23, 2023, the
Company entered into a business combination agreement by and among the Company, 1000397116 Ontario Inc., a corporation incorporated under
the laws of the province of Ontario, Canada (“Newco”) and a wholly-owned subsidiary of the Company, and Borealis (as may be
amended and/or restated from time to time, the “Business Combination Agreement”). Pursuant to the Business Combination Agreement,
among other things: (a) the Company will domesticate and continue as a corporation existing under the laws of the province of Ontario,
Canada (the “Continuance” and, the Company as the continuing entity, “New Oxus”); (b) on the closing date, Newco
and Borealis will amalgamate in accordance with the terms of the plan of arrangement (the “Borealis Amalgamation” and Newco
and Borealis as amalgamated, “Amalco”), with Amalco surviving the Borealis Amalgamation as a wholly-owned subsidiary of New
Oxus; and (c) on the closing date, immediately following the Borealis Amalgamation, Amalco and New Oxus will amalgamate (the “New
Oxus Amalgamation,” and together with the Continuance, the Borealis Amalgamation and other transactions contemplated by the Business
Combination, the plan of arrangement and the ancillary agreements, the “Proposed Transaction”), with New Oxus surviving the
New Oxus Amalgamation.
On February 28, 2023, the Note was amended to increase its principal amount
to $
On March 2, 2023, the Company’s
shareholders approved at the extraordinary general meeting (1) a special resolution (the “Extension Proposal”) to amend the
Charter to extend the date that the Company has to consummate a Business Combination from March 8, 2023 to the Extended Date and (2) a
special resolution (the “Founder Share Amendment Proposal”) to amend the Charter to provide for the right of a holder of the
Class B ordinary shares to convert into the Class A ordinary shares on a one-for-one basis prior to the closing of a Business Combination
at the election of such holder. In connection with the votes to approve the Extension Proposal and the Founder Share Amendment Proposal,
the holders of
The Sponsor has agreed to loan the Company (
On March 15, 2023, the Sponsor funded an additional $
F-24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Oxus Acquisition Corp. | ||
| Dated: March 31, 2023 | By: | /s/ Kanat Mynzhanov |
| Kanat Mynzhanov | ||
| Chief Executive Officer | ||
| Dated: March 31, 2023 | By: | /s/ Askar Mametov |
| Askar Mametov | ||
| Chief Financial Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 31, 2023.
| Signatures | Capacity in Which Signed | |
| /s/ Kenges Rakishev | Non-executive Chairman and Director | |
| Kenges Rakishev | ||
| /s/ Kanat Mynzhanov | Chief Executive Officer | |
| Kanat Mynzhanov | (Principal Executive Officer) | |
| /s/ Askar Mametov | Chief Financial Officer | |
| Askar Mametov | (Principal Financial and Accounting Officer) | |
| /s/ Christophe Charlier | Director | |
| Christophe Charlier | ||
| /s/ Karim Zahmoul | Director | |
| Karim Zahmoul | ||
| /s/ Shiv Vikram Khemka | Director | |
| Shiv Vikram Khemka |
58
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kanat Mynzhanov, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Oxus Acquisition Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 31, 2023 | /s/ Kanat Mynzhanov |
| Kanat Mynzhanov | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Askar Mametov, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Oxus Acquisition Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: March 31, 2023 | /s/ Askar Mametov |
| Askar Mametov | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Oxus Acquisition Corp. (the “Company”) on Form 10-K for the period ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Kanat Mynzhanov, Chief Executive Officer of the Company, and Askar Mametov, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report. |
Dated: March 31, 2023
| /s/ Kanat Mynzhanov | |
| Kanat Mynzhanov | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
| /s/ Askar Mametov | |
| Askar Mametov | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |