KACLF 10-Q
Kairous Acquisition Corp. Ltd (KACLF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For
the quarter ended
For the transition period from to
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
| n/a | ||
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
Tel:
(Issuer’s telephone number)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging Growth Company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| entitling the holder to receive one-tenth of an ordinary share | The Stock Market LLC | |||
| The Stock Market LLC | ||||
| The
| ||||
| The
|
As of May 15, 2023, ordinary shares, par value $0.0001 per share, were issued and outstanding.
Kairous Acquisition Corp. Limited
FORM 10-Q FOR QUARTER ENDED MARCH 31, 2022
TABLE OF CONTENTS
| 2 |
PART I – FINANCIAL STATEMENTS
KAIROUS ACQUISITION CORP. LIMITED
CONDENSED BALANCE SHEETS
| March 31, 2023 | June 30, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other assets | ||||||||
| Total Current Assets | ||||||||
| Investments held in the Trust Account | ||||||||
| Prepaid expenses – non-current | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued offering costs | ||||||||
| Extension loans | ||||||||
| Working capital note - sponsor | ||||||||
| Total Current Liabilities | ||||||||
| Deferred underwriting commission | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 6) | ||||||||
| Ordinary shares subject to possible redemption, $ par value; and outstanding at March 31, 2023 and June 30, 2022, respectively (at redemption value) | ||||||||
| Shareholders’ Deficit: | ||||||||
| Ordinary shares, $ par value, shares authorized, shares issued and outstanding at March 31, 2023 and June 30, 2022, (excluding and shares subject to possible redemption at March 31, 2023 and June 30, 2022, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities, Ordinary Shares Subject to Possible Redemption and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
| F-1 |
KAIROUS ACQUISITION CORP. LIMITED
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Expenses | ||||||||||||||||
| Administration fee - related party | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Interest income | ||||||||||||||||
| Income earned on investments held in Trust Account | ||||||||||||||||
| Total other income | ||||||||||||||||
| Net income (loss) attributable to ordinary shares | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average shares ordinary shares outstanding, basic and diluted | ||||||||||||||||
| Basic and diluted net income (loss) per ordinary share | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements
| F-2 |
KAIROUS ACQUISITION CORP. LIMITED
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(UNAUDITED)
For the Three and Nine Months Ended March 31, 2023
| Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Current period remeasurement adjustment of ordinary shares to redemption value | — | ( | ) | ( | ) | |||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Current period remeasurement adjustment of ordinary shares to redemption value | — | ( | ) | ( | ) | |||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Current period remeasurement adjustment of ordinary shares to redemption value | — | ( | ) | ( | ) | |||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
For the Three and Nine Months Ended March 31, 2022
| Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | — | ( | ) | ( | ) | |||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Allocated fair value of public rights and warrants, net of allocated offering costs | — | |||||||||||||||||||
| Sale of private placement units, net of allocated offering costs | ||||||||||||||||||||
| Shares issued to representative | ||||||||||||||||||||
| Initial remeasurement adjustment of ordinary shares to redemption value | — | ( | ) | ( | ) | ( | ) | |||||||||||||
| Net income | — | ( | ) | ( | ) | |||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Current period remeasurement adjustment of ordinary shares to redemption value | — | ( | ) | ( | ) | |||||||||||||||
| Net income | — | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements
| F-3 |
KAIROUS ACQUISITION CORP. LIMITED
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Investment income earned on investments held in the Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash deposited into Trust Account | ( | ) | ( | ) | ||||
| Cash withdrawn from Trust Account in connection with redemption | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from sale of Units in Public Offering, net of underwriting fee | ||||||||
| Proceeds from sale of Private Placement Warrants | ||||||||
| Redemption of ordinary shares | ( | ) | ||||||
| Proceeds from sponsor for extension loans | ||||||||
| Proceeds from sponsor for working capital note | ||||||||
| Payment of offering costs | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Current period remeasurement adjustment of ordinary shares to redemption value | $ | $ | ||||||
| Deferred underwriters’ commission charged to temporary equity in connection with the Public Offering | $ | $ | ||||||
| Remeasurement adjustment of ordinary shares to redemption value | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements
| F-4 |
KAIROUS ACQUISITION CORP. LIMITED
Notes to the CONDENSED financial statements
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Kairous Acquisition Corp. Limited (the “Company”) was incorporated in the Cayman Islands on March 24, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of March 31, 2023, the Company had not commenced any operations. All activity for the period from March 24, 2021 (inception) through March 31, 2023 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and negotiation and consummation of an initial Business Combination. The Company will not generate any operating revenues until after the completion an initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected June 30 as its fiscal year end.
The
registration statement for the Company’s Initial Public Offering was declared effective on December 13, 2021. On December 16, 2021,
the Company consummated the Initial Public Offering of units (“Units” and, with respect to the ordinary shares
included in the Units being offered, the “Public Shares”), generating gross proceeds of $
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an
aggregate of Units (the “Private Placement Units”) to Kairous Asia Limited (the “Sponsor”) at a purchase
price of $ per Private Placement Units, generating gross proceeds to the Company in the amount of $
As
of December 16, 2021, transaction costs amounted to $
Following
the closing of the Initial Public Offering on December 16, 2021, an amount of $
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 Placement Units, although substantially all of the net proceeds are intended to be applied generally toward
consummating a Business Combination. The stock exchange listing rules require that the Business Combination must be with one or more
operating businesses or assets with a fair market value equal to at least
| F-5 |
The Company will provide the holders of the outstanding Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares 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 the Business Combination. 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. 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 $ per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). The Public Shares subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
All of the Public Shares contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company’s liquidation, if there is a shareholder vote or tender offer in connection with the Company’s Business Combination and in connection with certain amendments to the Company’s amended and restated certificate of incorporation (the “Certificate of Incorporation”). In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”) and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require ordinary shares subject to possible redemption to be classified outside of permanent equity. Given that the Public Shares will be issued with other freestanding instruments (i.e., public warrants), the initial carrying value of the ordinary shares classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. The ordinary shares are subject to ASC 480-10-S99. If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected to recognize the changes immediately. The Public Shares are redeemable and will be classified as such on the condensed balance sheet until such date that a redemption event takes place. Redemptions of the Company’s Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to the Company’s Business Combination.
If the Company seeks shareholder approval of the Business Combination, the Company will proceed with a Business Combination only if the Company receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company, or such other vote as required by law or stock exchange rule. If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (the “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. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
| F-6 |
Notwithstanding the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, 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 % of the Public Shares without the Company’s prior written consent.
The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (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 % of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to shareholders’ rights or pre-initial business combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment.
If
the Company has not completed a Business Combination within
On
December 14, 2022, the Company issued an unsecured promissory note, in an amount of $
The Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares it will receive if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) 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) $ per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $ per Public Share, due to reductions in the value of trust assets, in each case net of the interest that may be withdrawn to pay taxes. This liability will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavouring to have all vendors, service providers (other than the Company’s independent registered public 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.
| F-7 |
Going Concern Considerations, Liquidity and Capital Resources
As
of March 31, 2023, the Company had insufficient liquidity to meet its future obligations. As of March 31, 2023, the Company had working
capital deficit of $
In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standard Update (“ASU”) No. 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that its history of losses and insufficient liquidity raise substantial doubt about the ability to continue as a going concern. In addition to if the Company is unsuccessful in consummating an initial business combination within 24 months from the closing of the IPO (less than 12 months within filing of these condensed financial statements), the Company is required to cease all operations, redeem the public shares and thereafter liquidate and dissolve. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company intends to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding the deferred underwriting commissions, to complete an initial business combination. To the extent that capital stock or debt is used, in whole or in part, as consideration to complete an initial 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 growth strategies. If an initial business combination agreement requires the Company to use a portion of the cash in the Trust Account to pay the purchase price or requires the Company to have a minimum amount of cash at closing, the Company will need to reserve a portion of the cash in the Trust Account to meet such requirements or arrange for third-party financing.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, close of the Initial Public Offering and/or search for a target company, the specific impact is not readily determinable as of the date of these condensed financial statements.
Additionally, as a result of the military action commenced in February 2022 by the Russian Federation and Belarus in the country of Ukraine and related economic sanctions, the Company’s ability to consummate a Business Combination, or the operations of a target business with which the Company ultimately consummates a Business Combination, may be materially and adversely affected. In addition, the Company’s ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these events, including as a result of increased market volatility, or decreased market liquidity in third-party financing being unavailable on terms acceptable to the Company or at all. The impact of this action and related sanctions on the world economy and the specific impact on the Company’s financial position, results of operations and/or ability to consummate a Business Combination are not yet determinable.
The condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC.
Certain information and note disclosures normally included in the financial statements prepared in accordance with US GAAP have been condensed. As such, the information included in these financial statements should be read in conjunction with the audited financial statements as of June 30, 2022 filed with the SEC on Form 10-K. In the opinion of the Company’s management, these condensed financial statements include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the Company’s financial position as of March 31, 2023 and the Company’s results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year ending June 30, 2023.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s 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.
| F-8 |
Use of Estimates
The preparation of condensed financial statements in conformity with US 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 condensed 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 condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had cash of $
Investments held in Trust Account
As
of March 31, 2023 and June 30, 2022, the Company had approximately $
Offering Costs associated with the Initial Public Offering
The
Company complies with the requirements of the Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1 and SEC Staff
Accounting Bulletin (“SAB”) Topic 5A, “Expenses of Offering.” Offering costs of $
Ordinary shares subject to possible redemption
The
Company accounts for its ordinary shares subject to possible redemption in accordance with the guidance enumerated in ASC 480 “Distinguishing
Liabilities from Equity”. Ordinary shares subject to mandatory redemption is classified as a liability instrument and is measured
at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)
are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s
ordinary shares feature certain redemption rights that are considered by the Company to be outside of the Company’s control and
subject to the occurrence of uncertain future events. During the nine months ended March 31, 2023, shareholders elected to redeem
ordinary shares for a total redemption amount of $
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized a measurement adjustment from initial book value to redemption amount value. The change in the carrying value of redeemable ordinary shares resulted in charges against additional paid-in capital and accumulated deficit.
| F-9 |
As of March 31, 2023, the ordinary shares reflected on the condensed balance sheets is reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Transaction costs allocated to ordinary shares | ( | ) | ||
| Proceeds allocated to Public Rights and Warrants | ( | ) | ||
| ( | ) | |||
| Plus: | ||||
| Remeasurement adjustment of carrying value to redemption value | ||||
| Current period measurement adjustment of ordinary shares to redemption value | ||||
| Ordinary shares subject to possible redemption – June 30, 2022 | $ | |||
| Redemption of ordinary shares | ( | ) | ||
| Current period measurement adjustment of ordinary shares to redemption value | ||||
| Ordinary shares subject to possible redemption – March 31, 2023 | $ |
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in 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 and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. The Company determined that upon further review of the warrant agreements, the Company concluded that its warrants qualify for equity accounting treatment.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. There were
The Company may be subject to potential examination by foreign taxing authorities in the area of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with foreign tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
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 other tax jurisdictions. Consequently, income taxes are not reflected in the Company’s condensed financial statements.
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. As of March 31, 2023 and June 30, 2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the period presented.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $
| F-10 |
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the condensed balance sheet, primarily due to their short-term nature. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 Inputs: Unadjusted quoted prices for identical assets or instruments in active markets.
Level 2 Inputs: Quoted prices for similar instruments in active markets and quoted prices for identical or similar instruments in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs: Significant inputs into the valuation model are unobservable.
The Company does not have any recurring Level 2 or Level 3 assets or liabilities. The carrying value of the Company’s financial instruments including its cash and accrued liabilities approximate their fair values principally because of their short-term nature.
The Company accounts for share-based compensation in accordance with ASC Topic 718, “Compensation—Stock Compensation” (“ASC 718”), which establishes financial accounting and reporting standards for share-based employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument.
The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.
Share-based compensation expenses are included in general and administrative expenses in the condensed statements of operations. Share-based payments issued to placement agents are classified as a direct cost of a share offering and are recorded as a reduction in additional paid in capital.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold Units at a purchase price of $ per Unit generating gross proceeds to
the Company in the amount of $
NOTE 4 — PRIVATE PLACEMENTS
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an
aggregate of Units (the “Private Placement Units”) at a purchase price of $ per Private Placement Unit, generating
gross proceeds to the Company in the amount of $
A portion of the proceeds from the Private Placement Units was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Units held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law). The Private Placement Units will not be transferable, assignable or saleable until 30 days after the completion of an Initial Business Combination, subject to certain exceptions.
| F-11 |
NOTE 5 — RELATED PARTIES
Founder Shares
On May 13 and October 21, 2021, the Sponsor received an aggregate of of the Company’s ordinary shares (the “Founder Shares”) in exchange for a capital contribution of $ that was paid by the Sponsor for deferred offering costs. All share amounts have been retroactively restated to reflect this number of Founder Shares. The Founder Shares included an aggregate of up to shares subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately % of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. Due to the partial exercise of the over-allotment option by the underwriters, these shares are no longer subject to forfeiture.
The
Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur
of: (A) six months after the completion of a Business Combination or (B) the date of the consummation of our initial business combination,
and subsequently, we consummate a liquidation, merger, stock 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 or (C) after 150 calendar days after the date
of the consummation of our initial business combination, and subsequently, the closing price of our ordinary shares equals or exceeds
$ per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any
General and Administrative Services
Commencing
on the date the Units are first listed on the Nasdaq, the Company has agreed to pay the Sponsor a total of $
Working Capital Note
On
April 23, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Working Capital Note”), pursuant to which
the Company may borrow up to an aggregate principal amount of $
Advances from Related Party
The
Sponsor paid certain administrative expenses and offering costs on behalf of the Company. These advances are due on demand and are non-interest
bearing. For the year ended June 30, 2022, the related party paid $
| F-12 |
Extension Loans
In
order to finance transaction costs in connection with extending time to complete 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, loan the Company funds as
may be required (“Extension Loans”). Such Extension Loans would be evidenced by promissory notes. The notes will be
converted upon completion of a Business Combination into ordinary shares at a price of $
per share. On
December 14, 2022, the Company issued a non-interest bearing unsecured promissory note, in an amount of $
The Extension Loans was amended on May 10, 2023 to provide that the Extension Loans will be converted upon completion of a Business Combination into ordinary shares at a price of $ per share. In the event that a Business Combination does not close by June 16, 2023, or up to December 16, 2023 (24 months after the consummation of the IPO, if the time period is further extended, as described herein), the Extension Loans shall be deemed to be terminated and no amounts will thereafter be due thereon.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the founder shares, Private Placement Units, shares being issued to the underwriters of the Initial Public Offering, and units that may be issued on conversion of Working Capital Note (and in each case holders of their component securities, as applicable) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale. 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 have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The
Company granted the underwriters a 45-day option from the date of Initial Public Offering to purchase up to additional Units
to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts. On December 16, 2021, the underwriters
partially exercised the over-allotment option by purchasing additional units, generating $
The
underwriters were paid to a cash underwriting discount of $
The
underwriters were also issued Ordinary shares as representative shares, in connection with the IPO. Upon close of the Initial
Public Offering, the Company recorded additional issuance costs of $
Advisory Agreement
On March 9, 2022, the Company entered into a letter agreement with Chardan Capital Markets, LLC (“Chardan”) in which the company retains Chardan to provide strategic and capital markets advisory services. As compensation for such services, the Company is to pay Chardan advisory fees as defined in the agreement which become payable upon the consummation of the business combination.
Business Combination Agreement
On December 9, 2022, the Company entered into that certain Agreement and Plan of Merger (as may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and between the Company, KAC Merger Sub 1, a Cayman Islands exempted company and wholly owned subsidiary of the Company (“Purchaser”), KAC Merger Sub 2, a Cayman Islands exempted company and wholly owned subsidiary of Purchaser (“Merger Sub”), Wellous Group Limited, a Cayman Islands exempted company (the “Target”), the shareholders of the Target (each, a “Shareholder” and collectively, the “Shareholders”), and the principal beneficial owners of the Target (the “Principal Owners”), pursuant to which (a) the Company will be merged with and into Purchaser (the “Reincorporation Merger”), with Purchaser surviving the Reincorporation Merger, and (b) Merger Sub will be merged with and into the Target (the “Acquisition Merger”), with the Target surviving the Acquisition Merger as a direct wholly owned subsidiary of Purchaser (collectively, the “Business Combination”). Following the Business Combination, Purchaser will be a publicly traded company.
Consideration
Pursuant
to the Merger Agreement, Purchaser will issue ordinary shares with a deemed price per share $ for a total value of $
The Earnout
Up to an additional ordinary shares may be issued to the Shareholders as contingent post-closing earnout consideration. The earnout milestones are in three tiers, and are based on Purchaser’s performance during the years 2023 through 2027, with specific targets tied to the trading price of Purchaser’s ordinary shares, Purchaser’s market capitalization and Purchaser’s net profit after tax.
| F-13 |
The Closing
The Company and the Target have agreed that the closing of the Business Combination (the “Closing”) shall occur no later than September 30, 2023 (the “Outside Date”). The Outside Date may be extended upon the written agreement of Company and the Target.
Minimum Cash at Closing
The
Company has agreed that as of the date of the Closing, the Company will have minimum cash equal to no less than $
NOTE 7 — SHAREHOLDERS’ EQUITY
Ordinary
Shares — The Company is authorized to issue ordinary shares with a par value of $ per share. Holders
of ordinary shares are entitled to one vote for each share. As of March 31, 2023 and June 30, 2022, there were ordinary shares
issued and outstanding in shareholders’ equity. As of March 31, 2023 and June 30, 2022, there were an additional and
ordinary shares included in temporary equity on the condensed balance sheets, respectively. During the nine months ended March
31, 2023, shareholders elected to redeem ordinary shares for a total redemption amount of $
Holders of ordinary shares will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a shareholders agreement or other arrangements with the shareholders of the target or other investors to provide or voting or other corporate governance arrangements that differ from those in effect upon completion of the IPO.
Rights — Except in cases where the Company is not the surviving company in a business combination, each holder of a right will automatically receive one-tenth (1/10) of one ordinary share upon consummation of the initial business combination. The Company will not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of Cayman law.
Warrants
—Each whole warrant entitles the registered holder to purchase one share of ordinary share at a price of $
The private warrants, as well as any warrants underlying additional units the Company issued to the Sponsor, officers, directors, initial shareholders or their affiliates in payment of working capital loans made to the Company, will be identical to the warrants underlying the units being offered.
The
Company may call the warrants for redemption, in whole and not in part, at a price of $
| ● | at any time after the warrants become exercisable, | |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder, | |
| ● | and | |
| ● | if, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants. |
The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.
The redemption criteria for our warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then- prevailing share price and the warrant exercise price so that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
| F-14 |
If the Company calls the warrants for redemption as described above, management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
The warrants will be 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 this Form 10-K, 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, but requires the approval, by written consent or vote, of 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.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of ordinary shares and any voting rights until they exercise their warrants and receive ordinary shares. After the issuance of ordinary shares upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by shareholders.
Warrant holders may elect to be subject to a restriction on the exercise of their warrants such that an electing warrant holder would not be able to exercise their warrants to the extent that, after giving effect to such exercise, such holder would beneficially own in excess of % of the ordinary shares outstanding.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round up to the nearest whole number the number of ordinary shares to be issued to the warrant holder.
NOTE 8 — SUBSEQUENT EVENTS
On May 10, 2023, both the Working Capital Note and the Extension Loans were amended. See Note 5 – Related Parties for details.
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through May 15, 2023, the date that the financial statements were issued. Based upon this review, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.
| F-15 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Kairous Acquisition Corp. Limited. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Kairous Asia Limited. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering (as defined below) filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company, incorporated on March 24, 2021, as a Cayman Islands exempted company. We were incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this Quarterly Report as our “initial business combination”. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering (the “Initial Public Offering”) and the private placement of the Private Placement Units (as defined below), the sale of certain forward purchase securities, our shares (other backstop agreements we may enter into following the consummation of the Initial Public Offering or otherwise), securities, debt or a combination of cash, equity and debt.
We held our annual meeting of shareholders on December 2, 2022 (the “2022 Annual Meeting”). During the 2022 Annual Meeting, shareholders approved, among other things, (x) the Amended and Restated Memorandum and Articles of Association to extend the date by which the Company has the right to extend the time to complete a business combination eight (8) times, as follows: (i) two (2) times for an additional three (3) months each time from December 16, 2022 to June 16, 2023 for each three-month extension, followed by (ii) six (6) times for an additional one (1) month each time from June 16, 2023 to December 16, 2023 for each one-month extension; (y) an amendment to the Company’s investment management trust agreement, dated December 13, 2021, by and between the Company and Continental Stock Transfer & Trust Company to extend the time to complete a business combination eight (8) times, as follows: (i) two (2) times for an additional three (3) months each time from December 16, 2022 to June 16, 2023 by depositing $360,000 to the trust account for each three-month extension, followed by (ii) six (6) times for an additional one (1) month each time from June 16, 2023 to December 16, 2023 by depositing $120,000 to the trust account for each one-month extension; and (z) elected all of the six nominees for directors to serve until the next annual meeting of shareholders approved.
On December 14, 2022, we issued an unsecured promissory note, in an amount of $360,000 (the “Extension Note No.1”) to Kairous Asia Limited, the Company’s initial public offering sponsor (“Sponsor”) in exchange for Sponsor depositing such amount into the Company’s trust account in order to extend the amount of time it has available to complete a business combination until March 16, 2023. On March 10, 2023, we issued an unsecured promissory note, in an amount of $360,000 to the Sponsor (the “Extension Note No.2”, together with Extension Note No.1, the “Extension Notes”) in exchange for Sponsor depositing such amount into the Company’s trust account in order to further extend the amount of time it has available to complete a business combination until June 16, 2023. The March Note may be converted, at the lender’s discretion, into additional ordinary shares. The Extension Notes were amended on May 10, 2023 to provide that the each of the Extension Notes will be converted upon completion of a Business Combination into the Company’s ordinary shares at a price of $10.10 per share. In the event that a Business Combination does not close by June 16, 2023, as such deadline may be further extended, the Extension Notes shall be deemed to be terminated and no amounts will thereafter be due thereon.
| 3 |
Business Combination Agreement
On December 9, 2022, the Company entered into that certain Agreement and Plan of Merger (as may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and between the Company, KAC Merger Sub 1, a Cayman Islands exempted company and wholly owned subsidiary of the Company (“Purchaser”), KAC Merger Sub 2, a Cayman Islands exempted company and wholly owned subsidiary of Purchaser (“Merger Sub”), Wellous Group Limited, a Cayman Islands exempted company (the “Target”), the shareholders of the Target (each, a “Shareholder” and collectively, the “Shareholders”), and the principal beneficial owners of the Target (the “Principal Owners”), pursuant to which (a) the Company will be merged with and into Purchaser (the “Reincorporation Merger”), with Purchaser surviving the Reincorporation Merger, and (b) Merger Sub will be merged with and into the Target (the “Acquisition Merger”), with the Target surviving the Acquisition Merger as a direct wholly owned subsidiary of Purchaser (collectively, the “Business Combination”). Following the Business Combination, Purchaser will be a publicly traded company.
Consideration
Pursuant to the Merger Agreement, Purchaser will issue 26,732,672 ordinary shares with a deemed price per share US$10.10 for a total value of $270,000,000 (“Aggregate Stock Consideration”) to the Shareholders, among which, 26,465,345 ordinary shares (the “Closing Payment Shares”) will be delivered to the Shareholders at the closing and 267,327 ordinary shares will be held back by Purchaser for one year after the closing as security for indemnification obligation of the representations and warranties of the Company, the Shareholders and the Principal Owners as set forth in the Merger Agreement (the “Holdback Shares”).
The Earnout
Up to an additional 5,400,000 ordinary shares may be issued to the Shareholders as contingent post-closing earnout consideration. The earnout milestones are in three tiers, and are based on Purchaser’s performance during the years 2023 through 2027, with specific targets tied to the trading price of Purchaser’s ordinary shares, Purchaser’s market capitalization and Purchaser’s net profit after tax.
The Closing
The Company and the Target have agreed that the closing of the Business Combination (the “Closing”) shall occur no later than September 30, 2023 (the “Outside Date”). The Outside Date may be extended upon the written agreement of Company and the Target.
Minimum Cash at Closing
The Company has agreed that as of the date of the Closing, the Company will have minimum cash equal to no less than $5,600,000 (“Minimum Cash”). To the extent that the Company has less than the Minimum Cash amount as of the Closing, then the Shareholders and/or the Principal Owners shall make up the difference in cash. To the extent that the Company has more than the Minimum Cash amount as of the Closing, then Purchaser shall pay the difference by issuing additional Purchaser ordinary shares to the Shareholders at a value of $10.10 per share.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. Our only activities for the period from March 24, 2021 (inception) through March 31, 2023 have been organizational activities and those necessary to prepare for the Initial Public Offering and, after the Initial Public Offering, identifying a target company for a business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents 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 three months ended March 31, 2023, we had net income of $17,134, which resulted from interest income on the operating account and the investments held in a trust account (the “Trust Account”) in the amount of $230,910, offset by operating costs of $213,776.
For the three months ended March 31, 2022, we had a net loss of $62,218, which resulted from operating costs of $70,138 partially offset by interest income on the operating account and investments held in Trust Account in the amount of $7,920.
For the nine months ended March 31, 2023, we had net income of $288,612, which resulted from interest income on the operating account and the investments held in Trust Account in the amount of $1,112,587, offset by operating costs of $823,975.
For the nine months ended March 31, 2022, we had a net loss of $83,156, which resulted from operating costs of $91,308 partially offset by interest income on the operating account and investments held in Trust Account in the amount of $8,152.
| 4 |
Liquidity and Capital Resources
On December 16, 2021, we consummated an Initial Public Offering of 7,800,000 Units (the “Units”) generating gross proceeds to the Company of $78,000,000. Simultaneously with the closing of the Initial Public Offering, the Company consummated the private sale (the “Private Placement”) of an aggregate of 357,143 Units (the “Private Placement Units”) to Kairous Asia Limited (the “Sponsor”) at a purchase price of $10.00 per Private Placement Units, generating gross proceeds to the Company in the amount of $3,571,430.
For the nine months ended March 31, 2023, net cash used in operating activities was $659,638, which was due to net income of $288,612 and interest income on investments held in the Trust Account of $1,112,564, partially offset by changes in operating assets and liabilities of $164,314.
As of March 31, 2023, we had cash of $123,327 held outside the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.
As of March 31, 2023, the Company had insufficient liquidity to meet its future obligations. As of March 31, 2023, the Company had working capital deficit of $1,046,758 and cash of $123,327. Though the Company made net income for the three and nine months ended March 31, 2023, the income was primarily contributed by income earned on investments held in Trust Account. The Company has a history of losses, an accumulated deficit and has not generated cash from operations to support its ongoing business plan. The Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans and will not generate any operating revenues until after the completion of its initial business combination. In addition, the Company expects to have negative cash flows from operations as it pursues an initial business combination target.
In connection with the Company’s assessment of going concern considerations in accordance with Accounting Standard Update (“ASU”) No. 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that its history of losses and insufficient liquidity raise substantial doubt about the ability to continue as a going concern. In addition to if the Company is unsuccessful in consummating an initial business combination within 24 months from the closing of the IPO (less than 12 months within filing of these condensed financial statements), the Company is required to cease all operations, redeem the public shares and thereafter liquidate and dissolve. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company intends to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, excluding the deferred underwriting commissions, to complete an initial business combination. To the extent that capital stock or debt is used, in whole or in part, as consideration to complete an initial 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 growth strategies. If an initial business combination agreement requires the Company to use a portion of the cash in the Trust Account to pay the purchase price or requires the Company to have a minimum amount of cash at closing, the Company will need to reserve a portion of the cash in the Trust Account to meet such requirements or arrange for third-party financing.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2023.
Contractual Obligations
Registration Rights
The holders of the founder shares, Private Placement Units, shares being issued to the underwriters of the Initial Public Offering, and ordinary shares that may be issued on conversion of working capital loans (and in each case holders of their component securities, as applicable) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of Initial Public Offering requiring the Company to register such securities for resale. 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 have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
| 5 |
Underwriting Agreement
The Company granted the underwriter a 45-day option to purchase up to 1,125,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less the underwriting discounts and commissions, which the underwriter partially exercised in full, and the additional Units were issued on December 16, 2021.
The underwriter was paid a cash underwriting discount of $0.20 per Unit, or $1,559,900 in the aggregate. In addition, the underwriter is entitled to a deferred fee of $0.35 per Unit, or $2,730,000 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a business combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Ordinary Shares Subject to Possible Redemption
All of the 7,800,000 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 shareholder vote or tender offer in connection with a business combination and in connection with certain amendments to the Company’s Amended and Restated Certificate of Incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. Therefore, all ordinary shares have been classified outside of permanent equity.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable ordinary shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
Net Income (Loss) Per Ordinary Share
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares subject to forfeiture. As of March 31, 2023 and 2022, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into ordinary shares and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the period presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of March 31, 2023, we were not subject to any market or interest rate risk.
ITEM 4. 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 Securities Exchange Act of 1934, as amended (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 our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
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 March 31, 2023. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective as of such date.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to make disclosures under this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On December 16, 2021, the Company consummated its initial public offering (“IPO”) of 7,800,000 units (the “Units”) (including the issuance of 300,000 Units as a result of the underwriter’s partial exercise of the over-allotment option). Each Unit consists of one ordinary share (“Ordinary Share”), one-half of one warrant (“Warrant”) entitling its holder to purchase one Ordinary Share at a price of $11.50 per whole share, and one right to receive one-tenth (1/10) of an Ordinary Share upon the consummation of an initial business combination. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $78,000,000. Simultaneously with the closing of the IPO, the Company consummated a private placement (“Private Placement”) of 357,143 units (the “Private Units”) at a price of $10.00 per Private Unit, generating total proceeds of $3,571,430. A total of $78,780,000 of the net proceeds from the sale of Units in the IPO (including the over-allotment option units) and the Private Placements on December 16, 2021, were placed in a trust account established for the benefit of the Company’s public shareholders.
The Private Units are identical to the units sold in the IPO except with respect to certain registration rights and transfer restrictions. The holders of the Private Units have agreed (A) to vote the private shares underlying the Private Units (the “Private Shares”) and any public shares acquired by them in favor of any proposed business combination, (B) not to propose, or vote in favor of, an amendment to the Company’s Amended and Restated Memorandum and Articles of Association with respect to the Company’s pre-business combination activities prior to the consummation of a business combination unless the Company offers holders of IPO shares the right to receive their pro rata portion of the funds then held in the trust account, (C) not to convert any Private Shares for cash from the trust account in connection with a shareholder vote to approve our proposed initial business combination or a vote to amend the provisions of our amended and restated memorandum and articles of association relating to shareholders’ rights or pre-business combination activity and (D) that the Private Shares shall not participate in any liquidating distribution upon winding up if a business combination is not consummated. Our sponsor has also agreed not to transfer, assign or sell any of the Private Units or underlying securities (except to the same permitted transferees as the insider shares and provided the transferees agree to the same terms and restrictions as the permitted transferees of the insider shares must agree to, each as described above) until the completion of our initial business combination.
We paid a total of $1,560,000, in underwriting discounts and commissions (not including the 3.5% deferred underwriting commission payable at the consummation of initial business combination) and $552,288 for other costs and expenses related to our formation and the IPO.
On December 14, 2022, we issued an unsecured promissory note, in an amount of $360,000 to Kairous Asia Limited, the Company’s initial public offering sponsor (“Sponsor”) in exchange for Sponsor depositing such amount into the Company’s trust account in order to extend the amount of time it has available to complete a business combination until March 16, 2023. On March 10, 2023, we issued an unsecured promissory note, in an amount of $360,000 to the Sponsor in exchange for Sponsor depositing such amount into the Company’s trust account in order to further extend the amount of time it has available to complete a business combination until June 16, 2023. The promissory note may be converted, at the lender’s discretion, into additional ordinary shares.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 15, 2023
| Kairous Acquisition Corp. Limited | ||
| By: | /s/ Joseph Lee Moh Hon | |
| Joseph Lee Moh Hon | ||
| Chief Executive Officer | ||
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