EMCGF 10-Q
Embrace Change Acquisition Corp. (EMCGF)
10-Q
2022-11-08
For: 2022-09-30
View Original
Added on
April 06, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
(Exact Name of Registrant as Specified in Charter)
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(858 ) 688-4965
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
As of 9,688,748 ordinary shares, $0.0001 par value issued and outstanding.
November
2022, there were 8
,Table of Contents
1 |
||||
1 |
||||
1 |
||||
2 |
||||
3 |
||||
4 |
||||
5 |
||||
14 |
||||
16 |
||||
16 |
||||
17 |
||||
17 |
||||
17 |
||||
17 |
||||
17 |
||||
17 |
||||
17 |
||||
18 |
||||
19 |
||||
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Embrace Change Acquisition Corp.
BALANCE SHEETS
September 30, 2022 |
December 31, 2021 |
|||||||
(Unaudited) |
(Audited) |
|||||||
| ASSETS |
||||||||
| C ash |
$ | $ | ||||||
| Deferred offering costs |
— | |||||||
| |
|
|
|
|||||
| Total Current Assets |
||||||||
| Marketable securities held in Trust Account |
— | |||||||
| Total Assets |
$ |
$ |
||||||
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
||||||||
| Current Liabilities |
||||||||
| Promissory note – related party |
$ | — | $ | |||||
| Accrued expenses |
— | |||||||
| |
|
|
|
|||||
| Total Current Liabilities |
||||||||
| Deferred underwriter fee payable |
— | |||||||
| |
|
|
|
|||||
| Total Liabilities |
||||||||
| |
|
|
|
|||||
| Commitments and Contingencies (Note 6 ) |
||||||||
| Ordinary shares subject to possible redemption, per share at September 30, 2022 and 1 |
— | |||||||
| |
|
|
|
|||||
| Stockholders’ Equity (Deficit) |
||||||||
| Ordinary Shares, par value $ subject to redemption) and |
||||||||
| Additional paid-in capital |
— | |||||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total Stockholders’ Equity (Deficit) |
( |
) | ||||||
| |
|
|
|
|||||
| Total Liabilities and Stockholders’ Equity (Deficit) |
$ |
$ |
||||||
| |
|
|
|
|||||
The accompanying notes are an integral part of these unaudited financial statements
1
Embrace Change Acquisition Corp.
STATEMENTS OF OPERATIONS
For the |
||||||||||||||||
Period from |
||||||||||||||||
March 3, |
||||||||||||||||
For the Three |
For the Three |
For the Nine |
2021 |
|||||||||||||
months |
months |
months |
(inception) |
|||||||||||||
ended |
ended |
ended |
through |
|||||||||||||
September 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||||||||||
| Formation and operating costs |
$ | ( |
) | $ | — | $ | ( |
) | $ | ( |
) | |||||
| |
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
( |
) | — | ( |
) | ( |
) | |||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Other income and expense: |
||||||||||||||||
| Investment income earned on investments held in Trust Account |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net Loss |
$ |
( |
) | $ |
— | $ |
( |
) |
$ |
( |
) | |||||
| |
|
|
|
|
|
|
|
|||||||||
| Weighted average shares outstanding, basic and diluted |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Basic and diluted net loss per ordinary share |
$ |
( |
) | $ |
( |
) | $ |
( |
) | $ |
( |
) | ||||
| |
|
|
|
|
|
|
|
|||||||||
The accompanying notes are an integral part
of
these unaudited financial statements 2
Embrace Change Acquisition Corp.
STATEMENTS OF CHANGES STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022
Ordinary Shares |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Equity (Deficit) |
|||||||||||||||||
Shares |
Amount |
|||||||||||||||||||
| Balance – December 31, 2021 (Audited) |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||
| Net loss |
— | — | — | — | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance – March 31, 2022 (Unaudited) |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||
| Net loss |
— | — | — | — | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance – June 30, 2022 (Unaudited) |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||
| Sale of IPO Unit |
— | |||||||||||||||||||
| Sale of Private Placement Units |
— | |||||||||||||||||||
| Offering and Underwriting costs |
— | — | ( |
) | — | ( |
) | |||||||||||||
| Ordinary shares subject to possible redemption |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
| Issuance of representative share s |
( |
) | — | — | ||||||||||||||||
| Accretion APIC to deficit |
— | — | ( |
) | — | |||||||||||||||
| Net loss |
— | — | ( |
) | ( |
) | ||||||||||||||
| Re-measurement of ordinary shares subject to redemption |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance – September 30, 2022 (Unaudited) |
$ |
$ |
$ |
( |
) | $ |
( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Embrace Change Acquisition Corp.
STATEMENTS OF CHANGES STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD FROM MARCH 3, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
Ordinary Shares |
Additional Paid-In Capital |
Accumulated Deficit |
Total Stockholders’ Equity (Deficit) |
|||||||||||||||||
Shares |
Amount |
|||||||||||||||||||
| Balance – March 3, 2021 (inception) |
$ | $ | $ | $ | ||||||||||||||||
| Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance – March 31, 2021 (Unaudited) |
( |
) | ( |
) | ||||||||||||||||
| Issuance of Ordinary shares to Sponsor (1) |
— | |||||||||||||||||||
| Balance – June 30, 2021 (Unaudited) |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| Net loss |
— | — | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance – September 30, 2021 (Unaudited) |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(1) |
Prior to the Initial Public Offering, the Company issued Over-Allotment Option, an aggregate of |
The accompanying notes are an integral part of these unaudited financial statements
3
Embrace Change Acquisition Corp.
STATEMENTS OF CASH FLOWS
For the |
||||||||
Period from |
||||||||
March 3, |
||||||||
For the Nine |
2021 |
|||||||
months |
(inception) |
|||||||
ended |
through |
|||||||
September 30, |
September 30, |
|||||||
2022 |
2021 |
|||||||
(Unaudited) |
(Unaudited) |
|||||||
| Cash flows from Operating Activities: |
||||||||
| Net Loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Investment income earned on investments held in Trust Account |
( |
) | — | |||||
| Changes in operating assets and liabilities: |
||||||||
| Accrued expenses |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash Flows from Investing Activities: |
||||||||
| Marketable securities held in Trust Account |
( |
) | — | |||||
| |
|
|
|
|||||
| Net cash used in investing activities |
( |
) | ||||||
| Cash Flows from Financing Activities: |
||||||||
| Proceeds from issuance of Ordinary shares to Sponsor |
— | |||||||
| Proceeds from sale of Units, net of underwriting discount paid |
— | |||||||
| Proceeds from sale of private placement units |
— | |||||||
| Proceeds from Promissory note |
— | |||||||
| Repayment of promissory note - related party |
( |
) | — | |||||
| Payment of offering costs |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash provided by (used in) financing activities |
||||||||
| |
|
|
|
|||||
| Net Change in Cash |
||||||||
| Cash – Beginning of period |
||||||||
| |
|
|
|
|||||
| Cash – Ending of period |
$ | $ | ||||||
| |
|
|
|
|||||
| Supplemental Disclosures of Noncash Financing Activities |
||||||||
| Deferred offering costs included in promissory note |
( |
) |
— | |||||
| Deferred offering costs included in accrued offering costs |
|
|
— |
|
|
|
|
|
| Deferred underwriting fee payable |
— | |||||||
| Initial Valuation of ordinary shares subject to possible redemption |
— | |||||||
| Re-measurement of ordinary shares subject to redemption (1) |
|
|
|
|
|
|
— |
|
(1) |
The value of ordinary share subject to redemption was re-measured with investment income earned on investments held in Trust Account. |
The accompanying notes are an integral part of these unaudited financial statements
4
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Embrace Change Acquisition Corp. (the “Company”) is a blank check company incorporated in the Cayman Islands on March 3, 2021. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or more businesses or entities (“Business Combination”). The Company may pursue a business combination target in any business or industry.
As of September 30, 2022, the Company had not yet commenced any operations. All activity through September 30, 2022 relates to the Company’s formation and the Initial Public Offering (as defined below). The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Proposed Offering. The Company has selected December 31 as its fiscal year end. 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.
The Company’s sponsor is Wuren Fubao Inc., a Cayman Islands exempted company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on August 9, 2022. On August 12, 2022, the Company consummated its Initial Public Offering of 7,392,855 units (the “Units”, and, with respect to the ordinary shares included in the Units being offered, the “Public Shares”), including the issuance of 892,855 Units as a result of the partial exercise by EF Hutton, division of Benchmark Investments, LLC (the “Representative”) of its over-allotment option (the “Over-Allotment Option”), at $10.00 per Unit, generating gross proceeds of $73,928,550 (the “Initial Public Offering”), and incurring offering costs of $3,898,030 , of which $2,587,499 was for deferred underwriting commissions (see Note 20,536
6
). As a result of the partial exercise of the Representative’s Over-Allotment Option, an aggregate of founder shares were forfeited to the Company of which was reflected retroactively.
Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) with the Sponsor of 373,750 units (the “Private Units”), generating total proceeds of $3,737,500 (see Note 4).
Following the closing of the Initial Public Offering on August 12, 2022, an amount of $75,776,764 ($10.25 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and a portion of the proceeds from the sale of the Private Units was placed in a trust account (the “Trust Account”) and may be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The Company will provide its shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek shareholder approval of a Business Combination at a meeting called for such purpose at which shareholders may seek to redeem their shares, regardless of whether they vote for or against a Business Combination. The Company will proceed with a business combination only if the Company have net tangible assets of at least $5,000,001 immediately prior to or upon such consummation and, solely if a vote is held to approve a business combination, an ordinary resolution under Cayman Islands law, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the company.
5
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
The shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.25 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per- share amount to be distributed to shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriter. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. These ordinary shares will be recorded at a redemption value and classified as temporary equity upon the completion of the Proposed Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Memorandum and Articles of Association, offer such redemption pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination.
The Sponsor has agreed (a) to vote its founder shares, the ordinary shares included in the Private Units (the “Private Shares”) and any Public Shares purchased during or after the Proposed Offering in favor of a Business Combination, (b) not to propose an amendment to the Company’s Memorandum and Articles of Association with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the Company provides dissenting public shareholders with the opportunity to redeem their Public Shares in conjunction with any such amendment; (c) not to redeem any shares (including the Ordinary shares) and Private Units (including underlying securities) into the right to receive cash from the Trust Account in connection with a shareholder vote to approve a Business Combination (or to sell any shares in a tender offer in connection with a Business Combination if the Company does not seek shareholder approval in connection therewith) or a vote to amend the provisions of the Memorandum and Articles of Association relating to shareholders’ rights of pre-Business Combination activity and (d) that the Ordinary shares and Private Units (including underlying securities) shall not participate in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Proposed Offering if the Company fails to complete its Business Combination.
The Company will have until 12 months from the closing of the Proposed Offering (or up to 18 months from the closing of this offering if the Company extend the period of time to consummate a business combination by the full amount of time) to consummate 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 no more than five business days thereafter, redeem 100 % of the outstanding Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned (net of taxes payable and less interest to pay dissolution expenses up to $50,000 ), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law. The underwriter has agreed to waive its rights to the deferred underwriting commission held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less 10.00 ).
than
the Proposed Offering price per Unit ($The Sponsor has agreed that it will be liable to the Company, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below $10.25 per share (whether or not the underwriters’ over-allotment option is exercised in full), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Proposed Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the company’s independent registered accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
6
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Liquidity and Capital Resources
As of September 30, 2022, the Company had $479,411 of cash in its operating bank account.
The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to cover for certain offering costs on the Company’s behalf in exchange for issuance of Founder Shares (as defined in Note 5), and loan from the Sponsor of $159,478 no amounts outstanding under any Working Capital Loan.
under the Note (as defined in Note 5). Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 5). As
of September 30, 2022, there were Going Concern Consideration
The Company expects to incur significant costs in pursuit of its financing and acquisition plans. In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that if the Company is unsuccessful in consummating an Initial Business Combination within the prescribed period of time from the closing of the Initial Public Offering, the requirement that the Company cease all operations, redeem the Public Shares and thereafter liquidate and dissolve raises substantial doubt about the ability to continue as a going concern. The balance sheet does not include any adjustments that might result from the outcome of this uncertainty. Management has determined that the Company has funds
that are sufficient to fund the working capital needs of the Company until the consummation of an Initial Business Combination or the winding up of the Company as stipulated in the Company’s Amended and Restated Certificate of Incorporation. The accompanying financial statement has been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in U.S. Dollars and conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company 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.
7
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $479,411 no
in cash as of September 30, 2022 outside of trust account. The Company had $4,602 in cash as of December 31, 2021 outside of trust account. The Company had
cash equivalents as of September 30, 2022 and December 31, 2021.
Investments Held in Trust Account
As of September 30, 2022, substantially all of the assets held in the Trust Account were held in U.S. Treasury Securities Money Market Funds. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in investment income earned on investments held in Trust in the accompanying statement of operations. The estimated fair values of investments held in Trust Account are determined using available market information. As of September 30, 2022, the estimated fair values of investments held in Trust Account was $75,900,354 . And as of December 31, 2021, the Company had $0 investments held in Trust Account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. With the partial exercise of the over-allotment, offering cost amounted to $3,898,030 consisting of $739,286 of up-front underwriting fees and a deferred discount of
and $571,245 of other costs, were charged to additional paid-in capital upon completion of the Public Offering.
Ordinary Shares Subject to Possible Redemption
As discussed in Note 3, all of the 7,392,855 ordinary shares sold as part of the Units in the Initial Public Offering contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation. In accordance with ASC 480, conditionally redeemable ordinary shares (including s 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. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that currently, the Company will not redeem its Public Shares in an amount that would cause its net tangible assets (stockholders’ equity) to be less than $5,000,001 . However, the threshold in its charter would not change the nature of the underlying shares as redeemable and thus Public Shares would be required to be disclosed outside of permanent equity. Accordingly, on September 30, 2022, 7,392,855 ordinary shares subject to possible redemption at the redemption amount were presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheet.
8
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were no unrecognized tax benefits as of September 30, 2022 and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was zero from inception to September 30, 2022.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company adopted as of inception of the Company. Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage of $250,000 .
On September 30, 2022 and December 31, 2021, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Net Loss Per Share
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. The calculation of diluted income (loss) per share does not consider the effect of the warrants issued in connection with the Initial Public Offering and warrants issued as components of the Private Placement Units (the “Private Warrants”) since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The following table reflects the calculation of basic and diluted net loss per ordinary share:
Schedule of Basic and Diluted Net Loss Per Share
For the Three Months Ended September 30, 2022 |
For the Three Months Ended September 30, 2021 |
For the Nine Months Ended September 30, 2022 |
For The Period from March 3, 2021 (inception) through September 30, 2021 |
|||||||||||||
Net loss |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
( |
) | ||||||
Denominator: weighted average number of ordinary shares |
||||||||||||||||
Basic and diluted net loss per share |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
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, close of the Offering, 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.
9
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 3. INITIAL PUBLIC OFFERING
On August 12, 2022, the Company consummated its Initial Public Offering of 7,392,855 Units (including the issuance of 892,855 Units as a result of the underwriter’s partial exercise of its over-allotment option), at $10.00 per Unit, generating gross proceeds of $73,928,550 .
Each Unit consists of one ordinary share, one warrant and one right. Each whole warrant entitles the holder thereof to purchase one ordinary share at a price of $11.50 per share, subject to adjustment as described in the prospectus. Each right entitles the holder thereof to acquire one-eighth of one ordinary share (see Note 7).
As of August 12, 2022, the Company incurred offering costs of approximately $3,898,030 , of which $2,587,499 was for deferred underwriting commissions.
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) with the Sponsor of 373,750 units (the “Private Units”), generating total proceeds of $3,737,500 .
The proceeds from the sale of the Private Units were added to the net proceeds from the Offering held in the Trust Account. The Private Units are identical to the Units sold in the Initial Public Offering, except there will be no redemption rights or liquidating distributions from the Company’s trust account with respect to the private shares, which will expire worthless if the Company does not consummate a business combination. With respect to the private warrants (“Private Warrants”), as described in Note 7, the warrant agent shall not register any transfer of private warrants until after the consummation of an initial business. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
During the period ended December 31, 2021, the Company issued an aggregate of 2,156,250 shares of Ordinary shares to the Sponsor for an aggregate purchase price of $25,000 in cash. On July 1, 2022, the sponsor surrendered an aggregate of 287,500 founder shares for no consideration, which surrender was effective retroactively, resulting in 1,868,750 shares being outstanding. On August 12, 2022, as a result of the partial exercise of the Representative’s Over-Allotment Option, an aggregate of 20,536 founder shares were further forfeited to the Company, which surrender was effective retroactively and resulting in 1,848,214 shares being outstanding, so that the Sponsor will collectively own 20 % of the Company’s issued and outstanding shares after IPO (assuming the initial shareholders do not purchase any Public Shares in the Proposed Offering and excluding the Private Units and underlying securities).
Subject to certain limited exceptions, the initial shareholders have agreed not to transfer, assign or sell their founder shares until six months after the date of the consummation of our initial business combination or earlier if, subsequent to initial business combination, the Company consummate a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the shareholders having the right to exchange their ordinary shares for cash, securities or other property.
Promissory Note — Related Party
On April 20, 2021, the Sponsor issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $200,000 , to be used for payment of costs related to the Proposed Offering. The note is non-interest bearing and payable on the earlier the consummation of this offering or the abandonment of this offering. As of September 30, 2022, the Company had borrowed $159,478 under the promissory note with our sponsor. On August 15, 2022, the Company has repaid $159,478
under the promissory note in full with the sponsor and this promissory note was terminated.
10
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
Administrative Services Arrangement
ARC Group Limited, the financial advisor of the Company’s Sponsor, has agreed, commencing from the date that the Company’s securities are first listed on NASDAQ through the earlier of the Company’s consummation of a Business Combination and its liquidation, to make available to the Company certain general and administrative services, including utilities and secretarial and administrative support as may be reasonably required by the Company. The Company has agreed to pay ARC Group Limited $10,000 per month for these services. As of September 30, 2022, the Company has paid $20,000 for the service provided by ARC Group Ltd. under this agreement.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $500,000 of notes may be converted upon consummation of a Business Combination into additional Private Units at a price of $10.00 per Unit. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 30, 2022, the Company has no t borrowed any amount under such loans.
Representative Shares
In connection with the IPO, the Company issued the Representative 73,929 shares upon partial exercise of the Over-allotment Option (the “Representative Shares”). The holders of the representative shares have agreed not to transfer, assign or sell any such shares without our prior consent until the completion of our initial business combination. In addition, the holders of the representative shares have agreed (i) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (ii) to waive their rights to liquidating distributions from the trust account with respect to such shares if we fail to complete our initial business combination within 12 months from the closing of this offering (or up to a total of 18 months at the election of the Company in up to one-month extensions subject to satisfaction of certain conditions, including the deposit of $369,643 as the underwriters’ over-allotment option is partially exercised ($0.05
The representative shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of the registration statement of which this prospectus forms a part pursuant to Rule 5110(e)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(e)(1), these securities will not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement of which this prospectus forms a part or commencement of sales of the public offering, except to any underwriter and selected dealer participating in the offering and their officers, partners, registered persons or affiliates, provided that all securities so transferred remain subject to the lockup restriction above for the remainder of the time period.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
The initial shareholders and their permitted transferees can demand that the Company register the founder shares, the private units and the underlying private shares and private warrants, and the units issuable upon conversion of working capital loans and the underlying ordinary shares, warrants and rights, pursuant to an agreement to be signed prior to or on the date of this prospectus. The holders of such securities are entitled to demand that the Company register these securities at any time after consummation of an initial business combination. Notwithstanding anything to the contrary, any holder that is affiliated with an underwriter participating in this offering may only make a demand on one occasion and only during the five-year period beginning on the effective date of the registration statement. In addition, the holders have certain “piggy-back” registration rights on registration statements filed after our consummation of a business combination; provided that any holder that is affiliated with an underwriter participating in this offering may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the registration statement.
11
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
The underwriters purchased the 892,855 of additional Units to cover over-allotments, less the underwriting discounts and commissions.
The underwriters were entitled to a cash underwriting discount of one percent (1.00 %) of the gross proceeds of the Offering, or $739,286 as the underwriters’ over-allotment is partially exercised. The underwriters are also entitled to a deferred fee of three point five percent (3.50 %) of the gross proceeds of the Offering, or $2,587,499 as the underwriters’ over-allotment is partially exercised upon closing of the Business Combination. The deferred fee will be paid in cash upon the closing of a Business Combination from the amounts held in the Trust Account, subject to the terms of the underwriting agreement. In addition, the Company paid the representative of the underwriters, at closing of the Initial Public Offering, 1.00 % of the of the IPO shares in the Company’s ordinary shares or 73,929 ordinary shares as the underwriters’ over-allotment is partially exercised.
Right of First Refusal
For a period beginning on the closing of this offering and ending 6 months from the closing of a business combination, the Company have granted EF Hutton, division of Benchmark Investments, LLC a right of first refusal to act as sole investment banker, sole book running manager and/or sole placement agent for any and all future private or public equity, equity-linked, convertible and debt offerings during such period. In accordance with FINRA Rule 5110(g)(6)(A), such right of first refusal shall not have a duration of more than three years from the commencement of sales in this offering.
NOTE 7. STOCKHOLDERS’ EQUITY (DEFICIT)
Ordinary Shares
Prior to the offering, the Company issued 1,437,500 ordinary shares to our initial shareholders. On October 24, 2021, the Company declared a share dividend of 0.50 shares for each outstanding share, resulting in an aggregate of 2,156,250 founder shares being issued. The aggregate purchase price for the founder shares was $25,000 .
On July 1, 2022, the sponsor surrendered an aggregate of 287,500 founder shares for no consideration, which surrender was effective retroactively, resulting in 1,868,750 shares being outstanding. On August 12, 2022, as a result of the partial exercise of the Representative’s Over-Allotment Option, an aggregate of 20,536 founder shares were further forfeited to the Company, which surrender was effective retroactively and resulting in 1,848,214 shares being outstanding and held by
Sponsor. As of December 31, 2021, there were 1,848,214
As of September 30, 2022, as a result of closing of the IPO and the partial exercise of the Representative’s Over-Allotment Option on August 12, 2022, there were 2,295,893 7,392,855 ordinary shares subject to possible redemption.
Warrants
The Company may call the Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant:
| • | at any time while the Warrants are exercisable, |
| • | upon not less than |
| • | if, and only if, the reported last sale price of the ordinary share equals or exceeds $ |
| • | if, and only if, there is a current registration statement in effect with respect to the ordinary share underlying such warrants at the time of redemption and for the entire |
12
EMBRACE CHANGE ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
The private warrants (including the ordinary shares issuable upon exercise of the private warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination and they will not be redeemable by the Company so long as they are held by the initial shareholders or their permitted transferees. The initial shareholders, or their permitted transferees, have the option to exercise the private warrants on a cashless basis.
If the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary share issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation. However, the warrants will not be adjusted for issuances of ordinary share at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
The Company accounts for 7,766,605 warrants issued in connection with the Initial Public Offering (comprised of 7,392,855 Public Warrants and 373,750 Private Warrants) (the “Warrants”) in accordance with the guidance contained in ASC 815-40 Derivatives and Hedging - Contracts in Entity’s Own Equity (“ASC 815”) under which the Warrants meet the criteria for equity treatment and was recorded as a component of additional paid-in capital at the time of issuance.
Rights
Additionally, in no event will the Company be required to net cash settle the rights. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such rights. Accordingly, the rights may expire worthless.
NOTE 8. SUBSEQUENT EVENTS
In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred through the date the unaudited financial statements were available to issue. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “Embrace Change,” “our,” “us” or “we” refer to Embrace change Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward- looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings.
Overview
We are a blank check company incorporated in the Cayman Islands for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of the initial public offering (the “IPO”) and the private placement of the private placement units, the proceeds of the sale of our securities in connection with our initial business combination, our shares, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results
of
Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for our IPO. Following our IPO, we will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents after our IPO. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with completing a business combination.
For the period from January 1, 2022 through September 30, 2022, we had a net loss of $30,657, which consists of Investment income earned on investments held in trust account of $123,590 and operating costs of $154,247. For the three months ended September 30, 2022, we had a net loss of $30,657, which consists of Investment income earned on investments held in trust account of $123,590 and operating costs of $154,247. For the period from March 3, 2021 (inception) through September 30, 2021, we had a net loss of $3,230, which was the formation cost. For the three months ended September 30, 2021, we had a net loss of $0.
Liquidity and
Capital
Resou
r
ces
On August 12, 2022, the Company consummated its Initial Public Offering of 7,392,855 units (the “Units”, and, with respect to the ordinary shares included in the Units being offered, the “Public Shares”), including the issuance of 892,855 Units as a result of the partial exercise by EF Hutton, division of Benchmark Investments, LLC (the “Representative”) of its over-allotment option (the “Over-Allotment Option”), at $10.00 per Unit, generating gross proceeds of $73,928,550 (the “Initial Public Offering”).
Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) with the Sponsor of 373,750 units (the “Private Units”), generating total proceeds of $3,737,500.
Following the closing of the Initial Public Offering on August 12, 2022, an amount of $75,776,764 ($10.25 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and a portion of the proceeds from the sale of the Private Units was placed in a trust account (the “Trust Account”).
Transaction costs of the Initial Public Offering with the exercise of the over-allotment amounted to $3,898,030 consisting of $739,286 of up-front underwriting fees and a deferred discount of $2,587,499 and $571,245 of other costs. As of closing, $760,003 of the proceeds from the IPO was held outside of the Trust Account and is available for working capital purposes.
14
As of September 30, 2022, we had available to us $479,411 of cash on our balance sheet and a working capital of $464,061. We intend to use the funds held outside of the Trust Account for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination. The interest income earned on the investments in the Trust Account are unavailable to fund operating expenses.
We expect our primary liquidity requirements for operating our business prior to our initial business combination to include approximately $500,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations:
| • | $70,000 of expenses for the legal, accounting and other third-party expenses in connection with initial business combination; |
| • | $100,000 of expenses for the search for target businesses, due diligence investigations, structuring and negotiating of our initial business combination; |
| • | $50,000 of expenses relating to our SEC filing obligations and other legal and accounting fees related to regulatory reporting obligations; |
| • | $180,000 of expenses for the payment for utilities and secretarial and administrative support; and |
| • | $100,000 for general working capital that will be used for miscellaneous expenses. |
If our estimates of the costs of undertaking in-depth due diligence and negotiating our initial business combination is less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business combination. Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
In order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor or an affiliate of the Sponsor, or the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $500,000 of notes may be converted upon consummation of a Business Combination into additional Private Units at a price of $10.00 per Unit. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 30, 2022, the Company has not borrowed any amount under such loans.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results
As of the date of this report, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations. No unaudited quarterly operating data is included in this report as we have conducted no operations to date.
15
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company we are not required to make disclosures under this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the fiscal quarter ended September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended September 30, 2022, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
16
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in the registration statements on Form S-1 (File Nos. 333-258221 and 333-265184) for our IPO filed with the SEC. As of the date of this Quarterly Report, there have been no material changes to the previously disclosed risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
We issued an aggregate of 1,437,500 ordinary shares to certain of our initial shareholders on April 20, 2021. We subsequently declared a share dividend of 0.50 shares for each outstanding share, resulting in 2,156,250 founder shares being outstanding. On July 1, 2022, the sponsor surrendered an aggregate of 287,500 founder shares for no consideration, which surrender was effective retroactively, resulting in 1,868,750 shares being outstanding. As a result of the partial exercise of the representative’s over-allotment option, an aggregate of 20,536 founder shares were forfeited to us, which surrender was effective retroactively and resulting in an aggregate of 1,848,214 founder shares issued and outstanding. The foregoing issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (“Securities Act”).
On August 12, 2022, we consummated our IPO of units (the “Units”), including the issuance of 892,855 Units as a result of the partial exercise of the representative’s over-allotment option. The Units issued in the IPO were sold at an offering price of $10.00 per Unit, generating total gross proceeds of $73,928,550. EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), acted as the sole book-running manager for the IPO. US Tiger Securities, Inc. acted as the co-manager for the IPO. The securities in the IPO were registered under the Securities Act on two registration statements on Form S-1 (File Nos. 333-258221 and 333-265184) (as amended, the “Registration Statement”). The Securities and Exchange Commission declared the registration statements effective on May 16, 2022 and August 9, 2022, respectively.
Simultaneous with the consummation of the IPO, we consummated the private placement (“Private Placement”) with the sponsor of 373,750 units (the “Private Units”), generating total proceeds of $3,737,500. The Private Units are identical to the Units sold in the IPO except that the holder has agreed not to transfer, assign, or sell any of the Private Units or underlying securities (except in limited circumstances, as described in the Registration Statement) until the completion of the Company’s initial business combination. In addition, the warrants included in the Private Units are not redeemable if held by them or a permitted transferee. The sponsor was granted certain demand and piggy-back registration rights in connection with the purchase of the Private Units. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
On August 12, 2022, a total of $75,776,764 of the net proceeds from the IPO and the Private Placement were deposited in a trust account established for the benefit of the public shareholders. This includes $72,039,264 of the net proceeds from the IPO (which amount includes $2,587,499 of the underwriters’ deferred discount) and $3,737,500 from the Private Placement.
Transaction costs of the Initial Public Offering with the exercise of the over-allotment amounted to $3,898,030 consisting of $739,286 of up-front underwriting fees and a deferred discount of $2,587,499 and $571,245 of other costs.
For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
17
Item 6. Exhibits.
| * | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: November 8, 2022 | EMBRACE CHANGE ACQUISITION CORP. | |||||
| By: | /s/ Zheng Yuan | |||||
| Name: | Zheng Yuan | |||||
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |||||
19