Valuence Merger Corp. I 10-K for FY2023
Valuence Merger Corp. I (VMCAF)
About this 10-K
Valuence Merger Corp. I filed this 10-K on March 29, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $4.77M
- up 656.7% from net income of $630.6K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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 Number) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||
| The Stock Market LLC | ||||
| The Stock Market LLC | ||||
| The Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant (1) has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)
and has been subject to such filing requirements for the past 90 days.
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. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer as of June 30, 2023, the last
business day of the Company’s most recently completed second fiscal quarter was $
As of March 28, 2024 the Registrant had of its Class A ordinary shares, $0.0001 par value per share, and of its Class B ordinary shares, $0.0001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS and risk factor summary
Certain statements in this Annual Report on Form 10-K (this “Annual Report”) may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Annual Report may include, for example, statements about:
| ● | our ability to select an appropriate target business or businesses; |
| ● | our ability to complete our initial Business Combination; |
| ● | our expectations around the performance of any prospective target business or businesses; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial Business Combination; |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial Business Combination; |
| ● | our potential ability to obtain additional financing to complete our initial Business Combination; |
| ● | our pool of prospective target businesses; |
| ● | the ability of our officers and directors to generate a number of potential acquisition opportunities; |
| ● | our public securities’ potential liquidity and trading; |
| ● | the lack of a market for our securities; |
| ● | the use of proceeds not held in the Trust Account (as defined below) or available to us from interest income on the Trust Account balance; |
| ● | the Trust Account not being subject to claims of third parties; or |
| ● | our financial performance. |
The forward-looking statements contained in this Annual Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in this Annual Report. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Summary of Risk Factors
An investment in our securities involves a high degree of risk. The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include, but are not limited to:
| ● | We are a recently incorporated company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective. |
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| ● | Our Public Shareholders may not be afforded an opportunity to vote on our proposed Business Combination, which means we may complete our initial Business Combination even though a majority of our Public Shareholders do not support such a combination. |
| ● | Your only opportunity to affect the investment decision regarding a potential Business Combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek shareholder approval of the Business Combination. |
| ● | If we seek shareholder approval of our initial Business Combination, our initial shareholders, officers and directors have agreed to vote in favor of such initial Business Combination, regardless of how our Public Shareholders vote. In addition, our initial shareholders hold substantial interest in us and, as a result, may exert a substantial influence on actions requiring shareholder vote, potentially in a manner that you do not support. |
| ● | The ability of our Public Shareholders to redeem their shares for cash may make our financial condition unattractive to potential Business Combination targets, which may make it difficult for us to enter into a Business Combination with a target. |
| ● | The ability of our Public Shareholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable Business Combination or optimize our capital structure. |
| ● | The requirement that we complete our initial Business Combination within the prescribed time frame under our amended and restated memorandum and articles of association may give potential target businesses leverage over us in negotiating a Business Combination and may decrease our ability to conduct due diligence on potential Business Combination targets as we approach our dissolution deadline, which could undermine our ability to complete our initial Business Combination on terms that would produce value for our shareholders. |
| ● | We may not be able to complete our initial Business Combination within the prescribed time frame and/or we may not elect to further extend our Combination Period, in which case we would cease all operations except for the purpose of winding up and we would redeem our Public Shares and liquidate, in which case our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share, or less than such amount in certain circumstances, and there will be no liquidating distributions with respect to our warrants. |
| ● | Our search for a Business Combination, and any target business with which we may ultimately consummate a Business Combination, may be materially adversely affected by the geopolitical conditions resulting from the ongoing Russia-Ukraine conflict and the recent escalation of the Israel-Hamas conflict. |
| ● | If we seek shareholder approval of our initial Business Combination, our Sponsor, directors and officers and their affiliates may elect to purchase Public Shares or Public Warrants from shareholders, which may reduce the public “float” of the Class A ordinary shares and Public Warrants. |
| ● | If a shareholder fails to receive notice of our offer to redeem its Public Shares in connection with our initial Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed. |
| ● | You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your Public Shares or Public Warrants, potentially at a loss. |
| ● | Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. |
| ● | You will not be entitled to protections normally afforded to investors of many other blank check companies. |
| ● | Because of our limited resources and the significant competition for Business Combination opportunities due to the number of special purpose acquisition companies evaluating targets increasing, it may increase the cost of our initial Business Combination or could even result in our inability to consummate our initial Business Combination. If we are unable to complete our initial Business Combination within the Combination Period under our amended and restated memorandum and articles of association, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share, or less in certain circumstances, in connection with the liquidation of our Trust Account, and there will be no liquidating distributions with respect to our warrants. |
| ● | Past performance by our management team and their respective affiliates may not be indicative of future performance of an investment in us. |
| ● | We may reincorporate in another jurisdiction in connection with our initial Business Combination and such reincorporation may result in taxes imposed on shareholders. |
| 4 |
| ● | If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial Business Combination or force us to abandon our efforts to complete an initial Business Combination. |
| ● | We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement if we do not complete our initial Business Combination by the Combination Period. As such, there is a risk that we will be unable to continue as a going concern if liquidity needs arise or if we do not consummate an initial Business Combination by the applicable deadline. If we are unable to effect our initial Business Combination by the deadline, we will be forced to liquidate. |
PART I
References in this Annual Report to “we,” “us” or the “Company” refer to Valuence Merger Corp. I. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to VMCA Sponsor, LLC, a Cayman Islands limited liability company. References to our “initial shareholders” refer to the holders of founder shares.
ITEM 1. BUSINESS.
Introduction
The Company is a blank check company incorporated as a Cayman Islands exempted company on August 27, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (a “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. However, the Company intends to concentrate its efforts in identifying a potential Business Combination target that is based in Asia (excluding China, Hong Kong and Macau) and who is developing breakthrough technology in life sciences and/or advancing a platform for sustainable technology. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2023, the Company had not commenced any operations. All activity for the period from August 27, 2021 (inception) through December 31, 2023 relates to the Company’s formation, the initial public offering (“Initial Public Offering” or “IPO”), and subsequent to the Initial Public Offering, identifying a target company for a Business Combination, which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on February 28, 2022. On March 3, 2022, the Company consummated the Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units, the “Public Shares”). Each Unit consists of one of the Company’s Class A ordinary shares, par value $0.001 per share (the “Class A ordinary shares”) and one-half of one redeemable warrant (the “Public Warrants”), with each Public Warrant entitling the holder thereof to purchase one Class A ordinary share for an initial exercise price of $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds of $200,000,000.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of an aggregate of 6,666,667 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement, consisting of 2,666,667 Private Placement Warrants sold to the Sponsor and 4,000,000 Private Placement Warrants sold to Valuence Partners LP, an investment fund affiliated with our Sponsor, generating gross proceeds of $10,000,000.
Following the closing of the Initial Public Offering on March 3, 2022, an amount of $206,000,000 ($10.30 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), and was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act of 1940, 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. As further described below, on March 1, 2024, pursuant to the IMTA Amendment (as defined below), the Company instructed Continental Stock Transfer and Trust Company to hold the Trust Account an interest-bearing bank deposit account. As a result, the remaining proceeds from the IPO and sale of Private Placement Warrants are no longer invested in U.S. government securities or money market funds.
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On March 8, 2022, the underwriters partially exercised their over-allotment option, resulting in an additional 2,009,963 Units issued for an aggregate amount of $20,099,630. In connection with the underwriters’ partial exercise of their over-allotment option, the Company also consummated the sale of an additional 267,995 Private Placement Warrants at $1.50 per Private Placement Warrant, generating total proceeds of $401,993. A total of $20,702,619 ($10.30 per Unit) was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $226,702,619.
Transaction costs amounted to $10,718,994, consisting of $4,000,000 of underwriting fees, net of $2,200,996 reimbursed from the underwriters, $8,105,480 of deferred underwriting fees and $814,510 of other offering costs.
Prior to the consummation of the Initial Public Offering, on October 4, 2021, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration for 5,750,000 Class B ordinary shares, par value $0.0001 per share (the “Class B ordinary shares” or the “founder shares”). The founder shares included an aggregate of up to 750,000 shares that were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option was exercised, so that the number of founder shares would equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering (assuming each of the Sponsor and Valuence Partners LP did not purchase any Public Shares in the Initial Public Offering). Simultaneously with the closing of the Initial Public Offering, the Sponsor transferred 1,200,000 founder shares to Valuence Partners LP, an investment fund affiliated with the Sponsor. As a result of the underwriters’ election to partially exercise their over-allotment option 247,510 Class B ordinary shares were forfeited, resulting in the Sponsor and Valuence Partners LP holding an aggregate of 5,502,490 founder shares.
The Company will provide the holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the Business Combination, either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares, for a per share redemption price payable in cash equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares. The per-share amount to be distributed to the Public Shareholders who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters. There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
On May 25, 2023, the Company held an extraordinary general meeting of shareholders (the “EGM”), where shareholders approved, among other things, an amendment to the Company’s memorandum and articles of association to extend the date by which the Company must consummate a Business Combination from June 3, 2023 (the “Initial Combination Period”) to September 3, 2023 (the “Extended Date”) and to allow the Company, without another shareholder vote, by resolution of the Board of Directors of the Company (the “Board of Directors”), to elect to further extend the Extended Date in one-month increments up to eighteen (18) additional times, or a total of up to thirty-six (36) months (each, an “Additional Extended Date”) after the IPO, until up to March 3, 2025 (the “Combination Period”). The Company’s shareholders also approved a proposal to amend the Company’s memorandum and articles of association to eliminate (i) the limitation that the Company may not redeem Public Shares in an amount that would cause the Company’s net tangible assets to be less than $5,000,001 and (ii) the limitation that the Company shall not consummate a Business Combination unless the Company has net tangible assets of at least $5,000,001 immediately prior to, or upon consummation of, or any greater net tangible asset or cash requirement that may be contained in the agreement relating to, such Business Combination. The Company’s shareholders also approved a proposal to provide for the right of a holder of the Company’s Class B ordinary shares to convert such shares into Class A ordinary shares on a one-for-one basis at any time and from time to time prior to the closing of a Business Combination at the election of the holder.
In connection with the approval of an amendment to the Company’s memorandum and articles of association to extend the Initial Business Combination Period, the Sponsor or its designees is required deposit into the Trust Account as a loan (a “Contribution” and the Sponsor or its designee making such Contribution, a “Contributor”), with respect to the initial extension to the Extended Date, $420,000, and with respect to each subsequent extension to an Additional Extended Date, one business day following the public announcement by the Company disclosing that the Board of Directors has determined to extend the date by which the Company must consummate a Business Combination for an additional month, with respect to the extension to each such Additional Extended Date, an amount equal to $140,000 in accordance with the Combination Period (each date on which a Contribution is to be deposited into the Trust Account, a “Contribution Date”). The maximum aggregate amount of Contributions will be $2,940,000. The Contributions were evidenced by the Sponsor Convertible Promissory Note (as defined below) and VP Convertible Promissory Note (as defined below) to the Contributors (together the “Contribution Notes”) and will be repayable by the Company upon the earlier of (i) the consummation of a Business Combination and (ii) the date of the liquidation of the Company. Such loans may be converted into warrants of the post-Business Combination entity, which shall have terms identical to the Private Placement Warrants, at the option of the Contributors. If the Company does not consummate a Business Combination by the Combination Period, the Contribution Notes will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven.
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As of the date of this Annual Report, the Company, with the approval by the Board of Directors, extended the Initial Combination Period to April 3, 2024 and caused to be deposited an additional $980,000 into our Trust Account.
On June 5, 2023, the Company issued a promissory note (the “Sponsor Convertible Promissory Note”) in the principal amount of up to $613,207 to the Sponsor for working capital requirements and payment of certain expenses in connection the Company’s Business Combination. The Sponsor Convertible Promissory Note is non-interest bearing and payable on the earlier of (i) the date of the Business Combination or (ii) the winding up of the Company. At any time prior to payment in full of the principal balance of the Sponsor Convertible Promissory Note, the Sponsor may elect to convert all or any portion of the unpaid principal balance into that number of warrants, each exercisable for one Class A Share of the Company (the “Conversion Warrants”), equal to (x) the portion of the principal amount of the Sponsor Convertible Promissory Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. As of December 31, 2023, $613,207 is outstanding under the Sponsor Convertible Promissory Note.
Also on June 5, 2023, the Company issued an unsecured convertible promissory note to Valuence Partners LP, an affiliate of the Sponsor (the “VP Convertible Promissory Note”), pursuant to which the Company may borrow up to an aggregate maximum amount of $1,650,943. The VP Convertible Promissory Note is non-interest bearing and payable on the earlier of (i) the date of the Business Combination or (ii) the winding up of the Company. At any time prior to payment in full of the principal balance of the VP Convertible Promissory Note, Valuence Partners LP may elect to convert all or any portion of the unpaid principal balance into that number of warrants, each exercisable for one Class A Share of the Company, equal to (x) the portion of the principal amount of the VP Convertible Promissory Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The aggregate amount convertible into Conversion Warrants pursuant to the Sponsor Convertible Promissory Note and the VP Convertible Promissory Note shall not exceed $1,500,000. As of December 31, 2023, $1,650,941 has been borrowed against VP Convertible Promissory Note.
On June 14, 2023, the Staff of the Listing Qualifications Department of The Nasdaq Stock Market, LLC (“Nasdaq”) notified the Company that the Company was not in compliance with Nasdaq’s minimum $1,000,000 aggregate market value of warrants requirement set forth in Listing Rule 5452(b)(C). Based on Nasdaq’s further review and materials submitted by the Company to Nasdaq on July 19, 2023 and August 23, 2023, Nasdaq granted the Company an extension to December 11, 2023 to regain compliance with Listing Rule 5452(b)(C). For more information, see “Item 1A. Risk Factors – Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions” elsewhere in this Annual Report.
On March 1, 2024, the Company entered into amendment no. 1 (the “IMTA Amendment”) to the Investment Management Trust Agreement (the “IMTA”) with Continental Stock Transfer & Trust Company, as trustee. Pursuant to the IMTA Amendment, Section 1(c) of the IMTA was amended to provide that the trustee may, at the direction of the Company (i) hold funds uninvested, (ii) hold funds in an interest-bearing or non-interest bearing bank demand deposit account at a U.S. chartered commercial bank with consolidated assets of $100 billion or more selected by the trustee that is reasonably satisfactory to the Company, or (iii) invest and reinvest the Property (as defined in the IMTA) in solely United States government securities within the meaning of Section 2(a)(16) of the Investment Company Act, having a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 promulgated under the Investment Company Act (or any successor rule), which invest only in direct U.S. government treasury obligations, as determined by the Company. On the same day, pursuant to the IMTA Amendment, the Company instructed Continental Stock Transfer and Trust Company to hold the Trust Account in an interest-bearing bank deposit account. As a result, the remaining proceeds from the IPO and sale of Private Placement Warrants are no longer invested in U.S. government securities or money market funds.
Management Team
Our management team is led by Sung Yoon Woo, Chief Executive Officer and Director; Sungwoo (Andrew) Hyung, Chief Financial Officer and Director; Sungsik (Sung) Lee, President; and Dr. Gene Young Cho, Chief Operating Officer.
Sung Yoon Woo, Chief Executive Officer and Director, is an investor with a track record and experience in strategic acquisitions, corporate divestitures, recapitalizations, and growth equity. Mr. Woo is the Founder and CEO of Credian Partners, a private equity firm based in South Korea. During his nearly 20 year investment career, Mr. Woo has led over $4 billion in transactions and invested over $3 billion. Prior to founding Credian Partners, Mr. Woo was at Russell Investments, where he advised the National Pension Service of Korea, the third-largest pension fund in the world by total assets, the Bank of Korea, and Korea Investment Corporation, a sovereign wealth fund, among other clients on their global portfolio. Prior to Russell Investments, Mr. Woo was a team head of the private equity arm of Mirae Asset Global Investments, one of the largest asset management funds in South Korea, where he led various domestic and cross-border transactions. While at Mirae Asset Financial Group (“Mirae Asset”), Mr. Woo led the acquisition of Acushnet Company, the parent company of Titleist and FootJoy, for $1.2 billion, representing an internal rate of return of approximately 12.5%. Not only has this transaction won awards in South Korea, but it is also notable as a key transaction that helped pave the way for the proliferation of private equity transactions in the country. Prior to Mirae Asset, Mr. Woo was in the investment banking department of KB Kookmin Bank, the largest retail bank in Korea, where he led multiple transactions with large Korean conglomerates. Mr. Woo received his LL.B. from Yonsei University where he was awarded the Buphyun Scholarship and M.B.A. from Cornell University.
Sungwoo (Andrew) Hyung, Chief Financial Officer and Director, has significant experience sourcing, structuring, and executing complex transactions across the sustainability and technology value chain. Most recently, Mr. Hyung was at Nomura Greentech, a sustainable technology and infrastructure investment bank, responsible for executing multiple M&A transactions and origination efforts within the energy transition and clean technology sectors. He executed multiple de-SPAC transactions and was part of the SPAC coverage team that was responsible for completing more than ten sustainability-related SPAC business combinations and de-SPAC transactions. Prior to Nomura Greentech, Mr. Hyung was at Deutsche Bank, where he focused on origination and execution of M&A, debt and equity financing across the technology, media, and telecommunications sectors. Mr. Hyung received his B.A. from University of Toronto and M.B.A. from Cornell University.
Sungsik (Sung) Lee, President, brings extensive experience in investment banking, venture capital, and corporate development, with a proven track record of sourcing and executing M&A, strategic investment, and financing transactions. Most recently, Mr. Lee led cross-border M&A and strategic investments across the broad sustainability-focused areas at the Global Development Group of SK Group, the third-largest conglomerate in Korea with more than 100 affiliates over diverse sectors including energy, ICT, and life sciences. Prior to SK, Mr. Lee was at SunTrust Robinson Humphrey, where he advised many publicly traded industrial companies on M&A and capital market transactions. Before joining SunTrust, Mr. Lee was at Progress Partners, a media and technology-focused investment banking firm, where he executed M&A and financing projects for early-to-mid-stage clients and managed three investment funds at Progress Ventures, its affiliated venture capital arm. Mr. Lee received his B.A. from Hanyang University and M.B.A. from Cornell University.
Dr. Gene Young Cho, Chief Operating Officer, brings leadership and experience in business operations and life sciences. Currently, Dr. Cho is the Executive Director of CG Pharmaceuticals, Inc., the U.S. subsidiary of CrystalGenomics. In this role, Dr. Cho is focused on developing growth strategies as well as providing strategic planning and management of the operations and expansion of CG Pharmaceuticals. Additionally, Dr. Cho supports U.S. clinical trial management. Previously, Dr. Cho worked as a life sciences consultant at L.E.K. Consulting, working with clients in biopharmaceuticals, contract services, medical devices, healthcare services, HCIT, digital health, and AI. Some of his specific experiences include working on large-scale M&A transactions of leading biopharmaceuticals or healthcare service companies, supporting target identification for acquisition, implementing pipeline development strategies, and optimizing governance structures of fast-growing biotech companies. He also brings strong experience in the Asian markets through his professional network focused around supporting emerging technologies and startups. Dr. Cho received his B.S. in bioengineering at U.C. Berkeley and Ph.D. from the NYU School of Medicine in biomedical imaging; he also completed his post-doctorate at Memorial Sloan Kettering focusing on breast cancer imaging. Dr. Cho is also the author of over 10 publications in journals and several conference abstracts during his time as a researcher.
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With respect to the above, past experience or performance of our management team and the businesses with which they have been associated is not a guarantee of either (i) our ability to successfully identify and consummate a Business Combination or (ii) success with respect to any Business Combination that we may consummate. You should not rely on the historical record of our management team or the businesses with which they have been associated as indicative of our future performance. No member of our management team has any experience in operating special purpose acquisition companies.
Business Strategy
Our business strategy is to identify, acquire, and maximize the value of a target operating in Asia, excluding China, Hong Kong and Macau, with a focus on either life sciences or sustainable technology – a target who can benefit from (i) our geographic understanding of both Asia and North America, (ii) the financial and operational experience of our management team and the Board of Directors, (iii) additional capital to fund its strategic objectives, and (iv) access to public securities markets.
Our target selection process is expected to leverage our management team’s network of potential transaction sources, ranging from owners and directors of private and public companies, private equity funds, investment bankers, lenders, attorneys, accountants, and other trusted advisors across various sectors. Over the course of their careers, the members of our management team and Board of Directors have developed a broad network of contacts and corporate relationships that we believe will serve as a useful source of merger opportunities. We plan to utilize the network and industry experience of our management team and Board of Directors in seeking an initial Business Combination and employing our strategy.
Geographic and Sector Focus
Our objective is to identify and merge with a target that is based in Asia, excluding China, Hong Kong and Macau, and who is advancing a platform for developing breakthrough technology in life sciences and/or advancing a platform for sustainable technology. We will not pursue or consummate our initial Business Combination with any entity with its principal business operations in China, Hong Kong or Macau.
Opportunities in Asia (Excluding China, Hong Kong and Macau)
Asia remains a largely underdeveloped market with high potential and untiring endeavor of innovation, but with limited access to global capital today. We believe that there are enormous opportunities to bring privately held companies in Asia (excluding China, Hong Kong and Macau) to the U.S. capital markets and accelerate the growth of the businesses, particularly in the aforementioned areas, which we aim to capture and realize through a Business Combination. According to the International Monetary Fund, Asia accounted for 30.6% of global GDP in terms of purchasing parity in 2000, and reached 44.6% in 2020, and according to McKinsey, as of the time of our IPO it was on track to exceed 50% by 2040. This growth is driven by rapid technology innovation and digital transformation, infrastructure development, population growth with greater literacy, and new consumer profiles with an ever-expanding middle-class, among others.
Asian businesses have risen rapidly to have global prominence over the past few decades. At the time of our IPO, the region comprised 43% of the world’s 5,000 largest companies by revenue according to McKinsey and 36% of global unicorns by valuation according to PitchBook. However, both private and public investments have not been allocated accordingly with Asia lagging far behind their overseas peers. As of December 31, 2020, all public companies listed on the Asian exchanges collectively constituted 34.7% of the global market capitalization, whereas the U.S. exchanges alone represented 43.5%. In addition, despite its broader index underperforming, public companies in emerging Asia Pacific markets (“EM”) in our core sectors have outperformed that of their peers in the global developed markets (“DM”), as evidenced by the 12-month average return of FTSE indices exhibiting Asia Pacific EM’s outperformance over Global DM for the 17 consecutive months prior to our IPO in the Pharmaceuticals and Biotechnology sector and for the 4 consecutive months prior to the IPO in the Alternative Energy sector.
We believe listing an Asian (excluding China, Hong Kong and Macau) company on a major U.S. exchange could lead to even greater performance than listing on an Asian exchange, potentially due to access to a global investor base, brand awareness to global partners and customers, and potential opportunities for global expansion of the post-merger operations. Most importantly, we believe that our management team and board members have the in-house capabilities and connectivity in Asia that will enable us to engage with a target in a culturally sensitive manner, establish a trusted dialogue, cooperate throughout the de-SPAC process, and provide continued support beyond the Business Combination. Additionally, as of the time of our IPO, we were one of three SPACs with explicit focus on a potential target domiciled in Asia (excluding China, Hong Kong, and Macau), and we believe we are the only SPAC with our explicit geographical and industry focus. We will not pursue or consummate our initial Business Combination with any entity with its principal business operations in China, Hong Kong or Macau.
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In Asia, businesses have been growing rapidly in the broad sustainable technology market including renewable energy, advanced transportation, digital transformation, clean industrial process, new materials, and advanced healthcare, along with significant growth in clean technology adoption. For example, South Korean entities issued an aggregate of $50.8 billion in ESG bonds in 2020, and Japan’s total sustainable investment increased to $2.9 trillion in 2020, a 32% growth since 2018. We believe the accelerating momentum of sustainability in Asia will likely reshape the startup ecosystems, preparing many privately held companies for the natural path to becoming a scalable, publicly traded company.
Breakthrough technology in life sciences
There is an increasing focus on the importance of healthcare innovation including the development of novel therapeutics and health technologies in many developed countries due to a growing aging population. This was further exacerbated by the COVID-19 pandemic. Several Asian countries are experiencing significant aging populations (e.g., South Korea, Japan, Singapore, Indonesia, and Malaysia) and have begun to address the challenges of an aging society through investments in research and development (“R&D”), especially around healthcare and medicine. Moreover, we observed prior to our IPO that governments such as South Korea, Japan, and Singapore are driving growth and accelerating R&D in technologies focused on pharmaceuticals, medical devices, and AI tools to support healthcare. Overall, we believe these trends are driving the emergence of many attractive opportunities for investment in the space.
Within biopharmaceuticals, the therapeutic areas of oncology, cardiology, infectious disease, immunology, and chronic disease such as obesity and diabetes, continue to lead the market in terms of drug sales. We aim to examine these therapeutic areas as well as other areas of high growth potential due to the significant aging population, especially in Alzheimer’s and other chronic diseases (e.g., fatty liver disease, chronic kidney disease, idiopathic pulmonary fibrosis, etc.). In oncology, we believe that there are numerous attractive opportunities around antibody drug conjugates, novel mechanisms and targets around protein degradation, and immunotherapies including cancer vaccines, particularly with the success of mRNA vaccines for COVID-19 validating their potential for safety and efficacy. However, we also believe that there are other potential attractive targets in oncology - one such example includes the growing areas of development around fatty acid synthase (FASN) inhibitors and epigenetic regulators (e.g., PRMT5, METTL3, HDACs).
Precision medicine is another area of continued growth with the advance of NGS testing, liquid biopsy, automation, and rapid testing as evidenced during the COVID-19 pandemic. As “omics”-level research continues to advance, many attractive precision medicine companies have emerged including those harnessing AI technology to better identify patients and predict outcomes across different indications, such as cancer. Additionally, with the aging population, advancements in diagnostics (e.g., genetic screening) are providing actionable genetic insights, enabling patients to identify potential disease risks and focus on preventative health treatments.
In healthcare, the rapid uptake of digital and mobile health technology was catalyzed by the COVID-19 pandemic, and we believe the adoption of these technologies will continue to grow. Furthermore, there is a greater need to closely monitor older patients through digital health innovations to protect them from incidents and collect valuable health data that can be used to improve care and reduce costs. There are several attractive companies that are making advances in telehealth, wearable technology, and remote monitoring through better software, AI technology, and optimization of treatment workflows.
Advancing a platform for sustainable technology
The 2021 Intergovernmental Panel on Climate Change (IPCC) report on the scientific assessment of climate change, which was signed off by 195 member governments spells out the stakes we are up against and why we have no time to waste in taking drastic steps to build a green economy. According to the IPCC report, global temperatures will increase to 1.5 degrees Celsius above pre-industrial level climates by 2040. Staying below this critical 1.5 degrees Celsius threshold would reduce the odds of initiating the most dangerous and irreversible effects of climate change. This alarming forecast has made it critical to focus on ambitious mitigation to limit warming to below 1.5 degrees Celsius by 2040 through commitments from corporations and investors. Based on the additional data gathered since the prior assessment in 2013, the report has established an ‘unequivocal’ link between human activity and global warming. The report also flags changes in the ocean, ice sheets and global sea level, due to past and future greenhouse gas emissions are “irreversible for centuries to millennia.” We believe that this problem is big enough for multiple innovations and technologies to co-exist. Decarbonizing the global economy and shifting to clean energy is not an easy task, but our management team believes that there will be an increasing number of companies focused on technology aimed at accelerating the sustainable transition, as well as larger funding to fight the climate crisis.
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Our goals around sustainable technology focus on businesses that are developing and advancing a platform for clean technology, including, but not limited to, advanced transportation, industrial Internet of Things (“IoT”) and software, energy efficiency, sustainable agriculture and materials, renewable energy, and environmental services and technologies that are poised to play a significant role in decarbonization and sustainable transition.
Finally, at the intersection of life sciences and sustainable technology are areas around synthetic biology. This emerging area will continue to pave the future of many sectors including biopharmaceutical manufacturing, agriculture/food technologies, as well as energy / renewable fuels. Attractive opportunities exist in companies that can truly understand and harness the capabilities of cells and bioprocesses to optimize and make efficient production processes across these sectors.
Our team believes that we have the right in-house capabilities, sector expertise, and connectivity to identify and consummate a potential Business Combination in our target geography within the aforementioned sectors.
Collaborative Sourcing and Diligence Process
Our sourcing process is expected to be enhanced by our collaboration with CrystalBioSciences Co., Ltd, a South Korean venture capital firm (“CBS”), Credian Partners Inc., a private equity firm based in South Korea (“Credian”), and Quantum Leaps Corporation, a Japan-based consulting firm (“Quantum Leaps”). We will make the best use of the unique sourcing and analytics capabilities of CBS, Credian, and Quantum Leaps, leveraging a team of 12 professionals to support us in the identification and diligence of potential targets for our initial Business Combination.
CBS and its management team has participated in 15 strategic investments, including transactions completed through its parent CrystalGenomics, Inc., a South Korean commercial-stage biopharmaceutical company (“CrystalGenomics”), and CBS has a deep bench of professionals that has the ability to scope promising and scalable technologies. Credian also brings extensive sourcing capabilities that has led to a strong track record with 21.5% cumulative IRR since inception to the consummation of the IPO.
Furthermore, we will leverage Quantum Leaps to extend our sourcing and due diligence capabilities by working closely with them to strengthen our connectivity within Japan and its current network.
In addition to our internal proprietary sourcing process, collaboration with CBS, Credian, and Quantum Leaps, our sourcing efforts are expected to be further supported by our board members.
Extensive Diligence and Evaluation
Our selection and diligence process will be supplemented by the management team’s M&A track record. After examining the quality of a potential target’s management team and conducting extensive primary research into such target’s competitive differentiation, market opportunities, product development roadmap, customer traction, sales strategy, and operating model, we expect to produce a range of scenarios with a high level of quantitative rigor and attach strong supporting evidence for the assumptions driving each scenario. We believe this deeper understanding of how the story is quantified into future growth and profitability is expected to help a potential target to achieve a successful public listing, make better strategic decisions over time, and enable such target to better understand the elements required to deliver strong shareholder returns.
Experienced Team and Board of Directors
We believe our Board of Directors and management team bring diverse added value to potential targets in growth disciplines, such as talent recruiting, international expansion, capital formation, public offering preparation, and other topics that drive growth and expansion. We have assembled a diverse Board of Directors with our potential future target in mind, with the expectation that such target may require us for different types of advice and assistance during our tenure as their investor and Business Combination partner.
For example, when Mr. Woo, our Chief Executive Officer and Director, led the acquisition of Acushnet Company in 2011, he oversaw the formation of the board of directors and the management team, and the post-merger integration, which led to 2x growth in the value of the company in four years. In addition, when Credian acquired WiseUXGlobal, Mr. Woo sourced talents to strengthen its management team, including the Chief Executive Officer, which supported WiseUXGlobal to expand distribution channels and logistics centers every year since the acquisition in 2017.
We expect to remain involved in the post-merger entity and to collaborate with the target management team to strengthen the business’s compounding growth. Our proven track record of delivering tangible value to portfolio companies includes recruiting senior leadership talent, delivering M&A support, identifying and helping to execute international expansion, and providing business intelligence.
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Our Investment Criteria
We believe our aforementioned geography and target sectors will thrive regardless of the business cycle. Within these sectors, we intend to focus on late stage, public market ready companies that have the potential to scale globally in the near-term. We have identified the following attributes and guidelines to evaluate prospective targets. We may decide, however, to enter into our initial Business Combination with one or more target businesses that do not meet these criteria and guidelines, including the geographical location. We intend to pursue an initial Business Combination with companies whose principal business operations are based in Asia (excluding China, Hong Kong and Macau) and have the following characteristics:
| ● | Differentiated Technology: We favor businesses that have a clear comparative advantage and deep competitive moats. Often innovation results in category creation or exposing consumer demand or use cases that were previously unrecognized. In other cases, technology and process improvements can lead to better, faster, more efficient, or more powerful results. The ability to continuously innovate is key to successful product development, growth, profitability, and continual extension of the competitive moat. |
| ● | Large and Attractive Addressable Market: Large and growing addressable markets, ideally in segments which have growth and profitability dynamics that are not limited to specific geography, are most attractive to us. We favor businesses which already have a strong position in at least one initial geography or market segment with a clear expansion path for the global market. |
| ● | Scalable and Sustainable Growth: We view long term growth potential as an essential component of value creation. We prefer category leaders with proven business models, an established or near-term leadership position, a strong value proposition, and the proven ability to consistently execute strategic objectives to drive accelerated growth and achieve even more significant degrees of scale. |
| ● | Path to Near-term Profitability: We believe capital efficient growth, attractive margin structure, and a path to sustainable profitability and positive cash flow are the fundamental drivers of long-term investment returns. We place a great deal of emphasis on disciplined cost structure as a precursor to a profitable business model at scale. |
| ● | Experienced Team: We believe strong management teams with strong board governance and controls are critical to long-term success. We expect to partner with a strong leadership team capable of scaling its business globally, achieving sustainable profitability, maintaining a dynamic, inclusive and diverse culture, and adapting to new opportunities and challenges over time. |
| ● | Attractive Valuation: We expect to acquire a business with an aggregate enterprise value between $200 million and $1 billion, determined at the discretion of our management and directors. |
| ● | Clear Benefit as a Public Company: We intend to acquire one or more businesses expected to benefit from being publicly traded and can effectively utilize the broader access to capital and public profile that are associated with being a publicly traded company. These benefits may include increased brand awareness, access to capital markets, and the ability to attract a diverse investor base. |
| ● | Path to Near-term Profitability: We believe capital efficient growth, attractive margin structure, and a path to sustainable profitability and positive cash flow are the fundamental drivers of long-term investment returns: We place a great deal of emphasis on disciplined cost structure as a precursor to a profitable business model at scale. |
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These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial Business Combination may be based, to the extent relevant, on these general guidelines as well as on other considerations, factors and criteria that our management may deem relevant. In the event that we decide to enter into our initial Business Combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria in our shareholder communications related to our initial Business Combination, which, as discussed in this Annual Report, would be in the form of tender offer documents or proxy solicitation materials that we would file with the SEC.
Investors should note with respect to the foregoing examples that past performance of our Sponsor, management team and board members is not a guarantee either (i) of success with respect to any Business Combination we may consummate or (ii) that we will be able to identify a suitable candidate for our initial Business Combination. You should not rely on the historical record of our affiliates of our Sponsor’s, management’s or Board of Director’s performance as indicative of our future performance.
Initial Business Combination
Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable) at the time of our signing a definitive agreement in connection with our initial Business Combination. We refer to this as the 80% of net assets test. If our Board of Directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm or another independent firm that commonly renders valuation opinions for the type of company we are seeking to acquire or an independent accounting firm. Additionally, pursuant to Nasdaq rules, any initial Business Combination must be approved by a majority of our independent directors. Our amended and restated memorandum and articles of association also provides that any initial Business Combination must be approved by at least 75% of our Board of Directors. We will have until up to March 3, 2025, the end of the Combination Period, to consummate an initial Business Combination or a total of up to thirty-six (36) months after the IPO; provided that we cause to be deposited the Contribution in connection with each Additional Extended Date.
We anticipate structuring our initial Business Combination so that the post-transaction company in which our Public Shareholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial Business Combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons. However, we will only complete such Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our shareholders prior to the Business Combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the Business Combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock, shares or other equity interests of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our shareholders immediately prior to our initial Business Combination could own less than a majority of our outstanding shares subsequent to our initial Business Combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If our initial Business Combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial Business Combination. If our securities are de-listed from Nasdaq prior to our initial Business Combination, we would not be required to satisfy the 80% requirement. However, we intend to satisfy the 80% requirement even if our securities are not listed on Nasdaq at the time of our initial Business Combination.
Emerging Growth Company; Smaller Reporting Company
We are an “emerging growth company,” as defined in the JOBS Act. Emerging growth companies may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act. Additionally, emerging growth companies are not required to comply with new or revised financial accounting standards until private companies are required to comply. This may make comparability of our financial statements with other public companies impossible. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
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Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and no public float or the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30.
Financial Position
As of December 31, 2023, we had funds available for a Business Combination in the amount of $69,402,338, following the redemptions in connection with the extension of the date by which the Company must consummate a Business Combination and 4 months of Contributions, and before payment of $8,105,480 of deferred underwriting fees and other fees and expenses associated with our initial Business Combination. Accordingly, we may be able to complete our initial Business Combination using our cash, or we may use our debt or equity securities, or a combination of the foregoing. We have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.
Effecting Our Initial Business Combination
General
We are not presently engaged in, and we will not engage in, any operations prior to the completion of our initial Business Combination. We intend to effectuate our initial Business Combination using cash from the proceeds of our Initial Public Offering and the Private Placement Warrants, our shares, debt or a combination of these as the consideration to be paid in our initial Business Combination.
If we pay for our initial Business Combination using equity or debt securities, or we do not use all of the funds released from the Trust Account for payment of the purchase price in connection with our Business Combination or for redemptions or purchases of our ordinary shares, we may apply the balance of the cash released to us from the Trust Account for general corporate purposes of the post-combination company, including for maintenance or expansion of operations of acquired businesses, the payment of principal or interest due on indebtedness incurred in consummating our initial Business Combination, to fund the purchase of other companies, or for working capital.
We have not identified any acquisition target. Accordingly, there is no current basis for investors to evaluate the possible merits or risks of the target business with which we may ultimately complete our initial Business Combination. Although our management will assess the risks inherent in a particular target business with which we may combine, we cannot assure you that this assessment will result in our identifying all risks that a target business may encounter. Furthermore, some of those risks may be outside of our control, meaning that we can do nothing to control or reduce the chances that those risks will adversely impact a target business.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial Business Combination and we may effectuate an initial Business Combination using the proceeds of such offering rather than using the amounts held in the Trust Account. Subject to compliance with applicable securities laws, we would consummate such financing only simultaneously with the consummation of our Business Combination. In the case of an initial Business Combination funded with assets other than the Trust Account assets, our tender offer documents or proxy materials disclosing the Business Combination would disclose the terms of the financing and, only if required by applicable law or Nasdaq, we would seek shareholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with our initial Business Combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.
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Sources of Target Businesses
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers and private investment funds. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read this Annual Report and know what types of businesses we are targeting. Our officers and directors, as well as their affiliates CBC, Credian and Quantum Leaps, may also bring to our attention target business candidates of which they become aware through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the track record and business relationships of our officers and directors. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of a finder’s fee is customarily tied to completion of a transaction. In no event, however, will our Sponsor or any of our existing officers or directors, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation by the Company prior to, or for any services they render in order to effectuate, the completion of our initial Business Combination (regardless of the type of transaction that it is). We may also elect to make payment of customary fees to members of our Board of Directors for director service. Any such payments prior to our initial Business Combination will be made from funds held outside the Trust Account. Other than the foregoing, there will be no finder’s fees, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation paid by us to our Sponsor, officers or directors, or any affiliate of our Sponsor or officers prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial Business Combination (regardless of the type of transaction that it is).
We are not prohibited from pursuing an initial Business Combination with a target that is affiliated with our Sponsor, officers or directors, or from completing the Business Combination through a joint venture or other form of shared ownership with our Sponsor, officers or directors. In the event we seek to complete our initial Business Combination with a target that is affiliated with our Sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA or a valuation or appraisal firm, that such an initial Business Combination is fair to our Company from a financial point of view. We are not required to obtain such an opinion in any other context. Our amended and restated memorandum and articles of association provides that a target will not be deemed an affiliate solely by virtue of ownership by our Sponsor or its affiliates, or any of their or our executive officers or directors, of less than 10% of its ordinary shares, individually or in the aggregate.
Evaluation of a Target Business and Structuring of Our Initial Business Combination
In evaluating a prospective target business, we expect to conduct a due diligence review which may encompass, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as applicable, as well as a review of financial, operational, legal and other information which will be made available to us. If we determine to move forward with a particular target, we will proceed to structure and negotiate the terms of the Business Combination transaction.
The time required to select and evaluate a target business and to structure and complete our initial Business Combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of, and negotiation with, a prospective target business with which our initial Business Combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another Business Combination. The Company will not pay any consulting fees to members of our management team, or any of their respective affiliates, for services rendered to or in connection with our initial Business Combination.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial Business Combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. By completing our initial Business Combination with only a single entity, our lack of diversification may:
| ● | subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial Business Combination, and |
| ● | cause us to depend on the marketing and sale of a single product or limited number of products or services. |
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Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial Business Combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial Business Combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial Business Combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial Business Combination.
Following a Business Combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that such additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
Shareholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a shareholder vote pursuant to the tender offer rules of the SEC subject to the provisions of our amended and restated memorandum and articles of association. However, we will seek shareholder approval if it is required by applicable law or stock exchange rule, or we may decide to seek shareholder approval for business or other legal reasons. Under the Nasdaq listing rules, shareholder approval would be required for our initial Business Combination if, for example:
| ● | we issue Class A ordinary shares that will be equal to or in excess of 20% of the number of Class A ordinary shares then outstanding; |
| ● | any of our directors, officers or substantial security holders (as defined by Nasdaq rules) has a 5% or greater interest, directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of Class A ordinary shares could result in an increase in outstanding Class A ordinary shares or voting power of 5% or more; or |
| ● | the issuance or potential issuance of ordinary shares will result in our undergoing a change of control. |
Permitted Purchases of Our Securities
In the event we seek shareholder approval of our initial Business Combination and we do not conduct redemptions in connection with our initial Business Combination pursuant to the tender offer rules, our initial shareholders, directors, officers or advisors, or their respective affiliates, may purchase Public Shares or Public Warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial Business Combination. There is no limit on the number of Public Shares or Public Warrants such persons may purchase. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase shares in such transactions. Further, our initial shareholders, directors, officers or advisors, or their respective affiliates will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such shareholder, although still the record holder of our Public Shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. We will adopt an insider trading policy which will require insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material non-public information and (ii) to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.
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In the event that our initial shareholders, directors, officers or advisors, or their respective affiliates purchase Public Shares in privately negotiated transactions from Public Shareholders who have already elected to exercise their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their Public Shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. Further, to the extent any Public Shares are so purchased by our Sponsor, initial shareholders, directors, officers, advisors or their affiliates, such shares must (a) be purchased at a price no higher than the redemption price paid for our Public Shares, which as of December 31, 2023 was estimated to be $11.17 per share and (b) not be (i) voted by such holders or their respective affiliates in favor of approving the initial Business Combination, or (ii) redeemable by such holders or their respective affiliates. See the risk factor entitled “If we seek shareholder approval of our initial Business Combination, our Sponsor, directors and officers and their affiliates may elect to purchase Public Shares or Public Warrants from shareholders, which may reduce the public “float” of our Class A ordinary shares or Public Warrants” in Item 1A. Risk Factors for additional information.
The purpose of any such purchases of Public Shares could be to satisfy a closing condition in an agreement with a target, such as a business combination agreement, that requires us to have a certain amount of cash at the closing of our initial Business Combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of Public Warrants could be to reduce the number of Public Warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial Business Combination. Any such purchases of our securities may result in the completion of our initial Business Combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our Class A ordinary shares or Public Warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Any purchases by our initial shareholders, directors, officers or advisors, or their respective affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our initial shareholders, directors, officers or advisors, or their respective affiliates, will not make purchases of ordinary shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act.
Redemption Rights for Public Shareholders upon Completion of Our Initial Business Combination
We will provide our Public Shareholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of our initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding Public Shares, subject to the limitations described herein. The per-share amount we will distribute to investors who properly redeem their Public Shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters of our IPO. The redemption rights include the requirement that a beneficial holder must identify itself in order to validly redeem its Public Shares. Our initial shareholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any Public Shares they may hold in connection with the completion of our initial Business Combination.
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Limitations on Redemptions
Our proposed initial Business Combination may impose a minimum cash requirement for (i) cash consideration to be paid to the target or its owners, (ii) cash for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions. In the event the aggregate cash consideration we would be required to pay for all Class A ordinary shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial Business Combination exceed the aggregate amount of cash available to us, we will not complete the initial Business Combination or redeem any shares, and all Class A ordinary shares submitted for redemption will be returned to the holders thereof. Although we have no current plans, we may, however, raise funds through the issuance of equity-linked securities or through loans, advances or other indebtedness in connection with our initial Business Combination, including pursuant to forward purchase agreements or backstop arrangements we may enter into following the closing of the IPO, in order to, among other reasons, satisfy such net tangible assets or minimum cash requirements.
Further, if we seek shareholder approval of our initial Business Combination and we do not conduct redemptions in connection with our initial Business Combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its Public Shares with respect to more than an aggregate of 15% of the shares sold in the Initial Public Offering (the “Excess Shares”). We believe the restriction described above will discourage shareholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a Public Shareholder holding more than an aggregate of 15% of the shares sold in the Initial Public Offering could threaten to exercise its redemption rights against a Business Combination if such holder’s shares are not purchased by us, our Sponsor or our management at a premium to the then-current market price or on other undesirable terms. By limiting our shareholders’ ability to redeem to no more than 15% of the shares sold in the Initial Public Offering, we believe we will limit the ability of a small group of shareholders to unreasonably attempt to block our ability to complete our initial Business Combination, particularly in connection with a Business Combination with a target that requires as a closing condition that we have a certain amount of cash. However, we would not be restricting our shareholders’ ability to vote all of their shares (including all shares held by those shareholders that hold more than 15% of the shares sold in the Initial Public Offering) for or against our initial Business Combination.
Manner of Conducting Redemptions
We will provide our Public Shareholders with the opportunity to redeem all or a portion of their Class A ordinary shares upon the completion of our initial Business Combination either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether we will seek shareholder approval of a Business Combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek shareholder approval under Cayman Islands law or stock exchange listing requirement. Under Nasdaq rules, asset acquisitions and stock or capital stock or share purchases would not typically require shareholder approval while direct mergers with our Company where we do not survive and any transactions where we issue more than 20% of our outstanding ordinary shares or seek to amend our amended and restated memorandum and articles of association would require shareholder approval. We intend to conduct redemptions without a shareholder vote pursuant to the tender offer rules of the SEC unless shareholder approval is required by applicable law or stock exchange listing requirement or we choose to seek shareholder approval for business or other legal reasons. So long as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with Nasdaq rules.
If a shareholder vote is not required and we do not decide to hold a shareholder vote for business or other legal reasons, we will, pursuant to our amended and restated memorandum and articles of association:
| ● | conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and |
| ● | file tender offer documents with the SEC prior to completing our initial Business Combination which contain substantially the same financial and other information about the initial Business Combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. |
Upon the public announcement of our initial Business Combination, we or our initial shareholders will terminate any plan established in accordance with Rule 10b5-1 to purchase our Class A ordinary shares in the open market if we elect to redeem our Public Shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial Business Combination until the expiration of the tender offer period. If Public Shareholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial Business Combination.
If, however, shareholder approval of the transaction is required by applicable law or stock exchange listing requirement, or we decide to obtain shareholder approval for business or other legal reasons, we will, pursuant to our amended and restated memorandum and articles of association:
| ● | conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and |
| ● | file proxy materials with the SEC. |
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We expect that a final proxy statement would be mailed to Public Shareholders at least 20 days prior to the shareholder vote. However, we expect that a draft proxy statement would be made available to such shareholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Although we are not required to do so, we currently intend to comply with the substantive and procedural requirements of Regulation 14A in connection with any shareholder vote even if we are not able to maintain our Nasdaq listing or Exchange Act registration.
In the event that we seek shareholder approval of our initial Business Combination, we will distribute proxy materials and, in connection therewith, provide our Public Shareholders with the redemption rights described above upon completion of the initial Business Combination.
If we seek shareholder approval, we will complete our initial Business Combination only if we obtain the approval of an ordinary resolution under Cayman Islands law, being the affirmative vote of a majority of the ordinary shares represented in person or by proxy and entitled to vote thereon and who vote at a general meeting in favor of the Business Combination. In such case, pursuant to the terms of a letter agreement entered into with us, our initial shareholders, officers and directors have agreed (and their permitted transferees will agree) to vote any founder shares held by them and any Public Shares purchased during or after the IPO in favor of our initial Business Combination. We expect that at the time of any shareholder vote relating to our initial Business Combination, our initial shareholders and their permitted transferees will own at least 47% of our issued and outstanding ordinary shares entitled to vote thereon, which is the percentage owned by our Sponsor and its affiliates as of December 31, 2023. Each Public Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. Our initial shareholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and Public Shares in connection with the completion of a Business Combination.
Redemptions of our Public Shares may be subject to a net tangible asset test or cash requirement pursuant to an agreement relating to our initial Business Combination. For example, the Business Combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed Business Combination. In the event the aggregate cash consideration we would be required to pay for all Class A ordinary shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed Business Combination exceed the aggregate amount of cash available to us, we will not complete the Business Combination or redeem any shares, and all Class A ordinary shares submitted for redemption will be returned to the holders thereof.
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Redemption of Public Shares and Liquidation If No Initial Business Combination
Our amended and restated memorandum and articles of association initially provided that we would have only 15 months (or up to 18 months or 21 months, as applicable) following the effectiveness of the IPO to consummate our initial Business Combination. However, on May 25, 2023, we held the EGM, where shareholders approved, among other things, an amendment to our amended and restated memorandum and articles of association to extend the date by which the Company must consummate our initial Business Combination from June 3, 2023 to the Extended Date and to allow us, without another shareholder vote, by resolution of the Board of Directors, to elect to further extend the Extended Date with each Additional Extended Date, until up to March 3, 2025, the end of the Combination Period. Our Public Shareholders will not be entitled to vote on, or redeem their shares in connection with, any such Additional Extended Date. In connection with each extension to the Extended Date and any Additional Extended Date, the Sponsor or its designees is required deposit into the Trust Account a Contribution. As of the date of this Annual Report, the Contributors have made an aggregate of $980,000 of Contributions. The maximum aggregate amount of Contributions will be $2,940,000.
If we are unable to complete our initial Business Combination within the Combination Period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable) divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our Board of Directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants if we fail to complete our initial Business Combination within the Combination Period.
Our initial shareholders, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their founder shares if we fail to complete our initial Business Combination within the Combination Period. However, if our initial shareholders acquire Public Shares after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if we fail to complete our initial Business Combination within the Combination Period.
Our initial shareholders, officers and directors have agreed, pursuant to a written letter agreement with us, that they will not propose any amendment to our amended and restated memorandum and articles of association (i) that would modify the substance or timing of our obligation to provide for the redemption of our Public Shares in connection with an initial Business Combination or to redeem 100% of our Public Shares if we do not complete our initial Business Combination within the Combination Period or (ii) with respect to the other material provision relating to the rights of holders of Public Shares, unless we provide our Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding Public Shares.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the proceeds of our IPO and private placement held outside the Trust Account, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the Trust Account not required to pay taxes, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of the IPO and the sale of the Private Placement Warrants, other than the proceeds deposited in the Trust Account, and without taking into account interest, if any, earned on the Trust Account, the per-share redemption amount received by shareholders upon our dissolution was initially estimated at approximately $10.30. As of December 31, 2023, the per share amount held in our Trust Account is estimated to be approximately $11.17. The proceeds deposited in the Trust Account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our Public Shareholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims. Accordingly, we cannot assure you that the actual per-share redemption amount received by shareholders will not be substantially less than $11.17.
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Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our Public Shareholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the Trust Account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third-party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our Public Shares, if we are unable to complete our initial Business Combination within the prescribed time frame, or upon the exercise of a redemption right in connection with our initial Business Combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have entered into a letter of intent, confidentiality, or other similar agreement for a Business Combination, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and will not apply as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only third parties we currently expect to engage would be vendors such as lawyers, investment bankers, computer or information and technical services providers or prospective target businesses. In the event that an executed waiver is deemed to be unenforceable against a third party, then our Sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our Company. None of our directors or officers, nor any of the shareholders, members or managers of the Sponsor, will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the Trust Account are reduced below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be substantially less than $10.00 per share.
Our Sponsor will also not be liable as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, shareholders who received funds from our Trust Account could be liable for claims made by creditors.
If we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy or insolvency law, and may be included in our bankruptcy or insolvency estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy or insolvency claims deplete the Trust Account, we cannot assure you we will be able to return the current estimated $11.17 per Public Share to our Public Shareholders. Additionally, if we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws and/or insolvency laws as a “preferential transfer”, a “fraudulent conveyance”, a “fraud in anticipation of winding up”, a “transaction in fraud of creditors” or a “misconduct in the course of winding up.” As a result, a bankruptcy or insolvency court could seek to recover all amounts received by our shareholders. Furthermore, our Board of Directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our Company to claims of punitive damages, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
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Our Public Shareholders will be entitled to receive funds from the Trust Account only upon the earlier of (i) the redemption of any Public Shares properly tendered in connection with the completion of our initial Business Combination, (ii) the redemption of any Public Shares properly tendered in connection with a shareholder vote to amend our amended and restated memorandum and articles of association to (A) modify the substance or timing of our obligation to provide for the redemption of our Public Shares in connection with an initial Business Combination or to redeem 100% of our Public Shares if we do not complete our initial Business Combination within the Combination Period or (B) with respect to any other material provision relating to the rights of Public Shareholders and (iii) the redemption of all of our Public Shares if we are unable to complete our initial Business Combination within the Combination Period, subject to applicable law. In no other circumstances will a shareholder have any right or interest of any kind to or in the Trust Account. In the event we seek shareholder approval in connection with our initial Business Combination, a shareholder’s voting in connection with the Business Combination alone will not result in a shareholder’s redeeming its shares to us for an applicable pro rata share of the Trust Account. Such shareholder must have also exercised its redemption rights described above.
Competition
In identifying, evaluating and selecting a target business for our initial Business Combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our Public Shareholders who exercise their redemption rights may reduce the resources available to us for our initial Business Combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial Business Combination.
Employees
We currently have four officers: Sung Yoon Woo, Sungwoo (Andrew) Hyung, Sunsik (Sung) Lee and Dr. Gene Young Cho. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial Business Combination. The amount of time that our officers or any other members of our management team will devote in any time period will vary based on whether a target business has been selected for our initial Business Combination and the current stage of the business combination process. We do not intend to have any full time employees prior to the completion of our Business Combination.
Available Information
We are required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and are required to disclose certain material events (e.g., changes in corporate control, acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business and bankruptcy) in a Current Report on Form 8-K. The SEC maintains an internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s internet website is located at http://www.sec.gov. In addition, the Company will provide copies of these documents without charge upon request from us in writing 4 Orinda Way, Suite 100D, Orinda, CA 94563 or by telephone at (415) 340-0222 or on our Internet website https://www.valuence cap.com.
ITEM 1A. RISK FACTORS.
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Annual Report before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected.
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RISKS RELATING TO OUR SEARCH FOR, CONSUMMATION OF, OR INABILITY TO CONSUMMATE, A BUSINESS COMBINATION AND POST-BUSINESS COMBINATION RISKS
We are a recently incorporated company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a recently incorporated exempted company incorporated under the laws of the Cayman Islands with no operating results, and we will not commence operations until we complete our initial Business Combination. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial Business Combination with one or more target businesses. If we fail to complete our initial Business Combination, we will never generate any operating revenues.
Our Public Shareholders may not be afforded an opportunity to vote on our proposed Business Combination, which means we may complete our initial Business Combination even though a majority of our Public Shareholders do not support such a combination.
We may not hold a shareholder vote to approve our initial Business Combination unless the Business Combination would require shareholder approval under applicable Cayman Islands law or the rules of Nasdaq or if we decide to hold a shareholder vote for business or other reasons. Examples of transactions that would not ordinarily require shareholder approval under Cayman Islands law or the rules of Nasdaq include asset acquisitions and capital stock or share purchases, while transactions such as direct mergers with our Company or transactions where we issue more than 20% of our outstanding shares would require shareholder approval. For instance, Nasdaq rules currently allow us to engage in a tender offer in lieu of a general meeting but would still require us to obtain shareholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any Business Combination. Therefore, if we were structuring a Business Combination that required us to issue more than 20% of our outstanding shares, we would seek shareholder approval of such Business Combination. Except as required by applicable law or Nasdaq rules, the decision as to whether we will seek shareholder approval of a proposed Business Combination or will allow shareholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek shareholder approval. Accordingly, we may consummate our initial Business Combination even if holders of a majority of the issued and outstanding ordinary shares do not approve of the Business Combination we consummate.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial Business Combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial Business Combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial Business Combination will not have all of these positive attributes. If we complete our initial Business Combination with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective Business Combination with a target that does not meet our general criteria and guidelines, a greater number of shareholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a certain amount of cash. If we are unable to complete our initial Business Combination, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share, which is based on estimates as of December 31, 2023, on the liquidation of our Trust Account. There will be no redemption rights or liquidating distributions with respect to our warrants.
Your only opportunity to affect the investment decision regarding a potential Business Combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek shareholder approval of the Business Combination.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of one or more target businesses. Since our Board of Directors may complete a Business Combination without seeking shareholder approval, Public Shareholders may not have the right or opportunity to vote on the Business Combination, unless we seek such shareholder approval. Accordingly, if we do not seek shareholder approval, your only opportunity to affect the investment decision regarding a potential Business Combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our Public Shareholders in which we describe our initial Business Combination.
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Because of our limited resources and the significant competition for business combination opportunities due to the number of special purpose acquisition companies evaluating targets increasing, it may increase the cost of our initial Business Combination or could even result in our inability to consummate our initial Business Combination. If we are unable to complete our initial Business Combination within the Combination Period under our amended and restated memorandum and articles of association, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share, or less in certain circumstances, in connection with the liquidation of our Trust Account, and there will be no liquidating distributions with respect to our warrants.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net proceeds of the IPO and the sale of the Private Placement Warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, if we are obligated to pay cash for the Class A ordinary shares redeemed and, in the event we seek shareholder approval of our initial Business Combination, we make purchases of our Class A ordinary shares, the resources available to us for our initial Business Combination may be reduced. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a Business Combination. If we are unable to complete our initial Business Combination, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share (or less in certain circumstances) on the liquidation of our Trust Account. There will be no redemption rights or liquidating distributions with respect to our warrants. In certain circumstances, our Public Shareholders may receive, based on estimates as of December 31, 2023, less than $11.17 per share on the redemption of their shares. See “- If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $11.17 per share, which is the estimated per share amount held in our Trust Account as of December 31, 2023” and other risk factors herein.
In recent years, the number of special purpose acquisition companies (“SPACs”) that have been formed has increased substantially. Many potential targets for SPACs have already entered into an initial business combination, and there are still many SPACs seeking targets for their initial business combination, as well as many such companies currently in registration. As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an initial Business Combination.
In addition, because there are more SPACs seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals or business models may increase, which could cause targets companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an initial Business Combination, and may result in our inability to consummate an initial Business Combination on terms favorable to our investors altogether.
The ability of our Public Shareholders to redeem their shares for cash may make our financial condition unattractive to potential Business Combination targets, which may make it difficult for us to enter into a Business Combination with a target.
We may seek to enter into a Business Combination transaction agreement with a prospective target that requires as a closing condition that we have a certain amount of cash. If too many Public Shareholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the Business Combination and may instead search for an alternate Business Combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a Business Combination transaction with us.
The ability of our Public Shareholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable Business Combination or optimize our capital structure.
At the time we enter into an agreement for our initial Business Combination, we will not know how many shareholders may exercise their redemption rights, and therefore we will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial Business Combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the Trust Account to meet such requirements, or arrange for third party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account or arrange for third party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. Furthermore, this dilution would increase to the extent that the anti-dilution provisions of the Class B ordinary shares result in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B shares at the time of the initial Business Combination. The above considerations may limit our ability to complete the most desirable Business Combination available to us or optimize our capital structure.
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The ability of our Public Shareholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial Business Combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your shares.
If our initial business combination agreement requires us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial Business Combination would be unsuccessful is increased. If our initial Business Combination is unsuccessful, you would not receive your pro rata portion of the Trust Account until we liquidate the Trust Account. If you are in need of immediate liquidity, you could attempt to sell your shares in the open market; however, at such time our shares may trade at a discount to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your shares in the open market.
The requirement that we complete our initial Business Combination within the prescribed time frame under our amended and restated memorandum and articles of association may give potential target businesses leverage over us in negotiating a Business Combination and may decrease our ability to conduct due diligence on potential Business Combination targets as we approach our dissolution deadline, which could undermine our ability to complete our initial Business Combination on terms that would produce value for our shareholders.
Any potential target business with which we enter into negotiations concerning a Business Combination will be aware that we must complete our initial Business Combination within the Combination Period. Consequently, such target business may obtain leverage over us in negotiating a Business Combination, knowing that if we do not complete our initial Business Combination with that particular target business, we may be unable to complete our initial Business Combination with any target business. This risk will increase as we get closer to the end of the Combination Period. In addition, we may have limited time to conduct due diligence and may enter into our initial Business Combination on terms that we would have rejected upon a more comprehensive investigation.
We may not be able to complete our initial Business Combination within the prescribed time frame and/or we may not elect to further extend our Combination Period, in which case we would cease all operations except for the purpose of winding up and we would redeem our Public Shares and liquidate, in which case our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share, or less than such amount in certain circumstances, and there will be no liquidating distributions with respect to our warrants.
Our initial shareholders, officers and directors have agreed that we must complete our initial Business Combination within the Combination Period. We may not be able to find a suitable target business and complete our initial Business Combination within such time period. Our amended and restated memorandum and articles of association initially provided that we will have only 15 months (or up to 18 months or 21 months, as applicable) following the effectiveness of the IPO to consummate our initial Business Combination. However, on May 25, 2023, we held the EGM, where shareholders approved, among other things, an amendment to our amended and restated memorandum and articles of association to extend the date by which the Company must consummate our initial Business Combination from June 3, 2023 to the Extended Date and to allow us, without another shareholder vote, by resolution of the Board of Directors, to elect to further extend the Extended Date until up to March 3, 2025. The extension to the Extended Date required a $420,000 deposit into the Trust Account by the Contributors and the election to further extend the Extended Date requires us to (i) cause the deposit of $140,000 each month into the Trust Account and (ii) approve the extension by the resolution of the Board of Directors. Our Board of Directors has discretion to decide if we will not further extend the Combination Period.
If we have not completed our initial Business Combination within the Combination Period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our Board of Directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such case, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share. There will be no redemption rights or liquidating distributions with respect to our warrants. In certain circumstances, our Public Shareholders may receive less than $11.17 per share on the redemption of their shares. See “- If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $11.17 per share, which is the estimated per share amount held in our Trust Account as of December 31, 2023” and other risk factors herein.
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Our search for a Business Combination, and any target business with which we may ultimately consummate a Business Combination, may be materially adversely affected by the geopolitical conditions resulting from the ongoing Russia-Ukraine conflict and the recent escalation of the Israel-Hamas conflict.
The United States and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the recent invasion of Ukraine by Russia in February 2022. The invasion of Ukraine by Russia and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union and other countries have created global security concerns that could have a lasting impact on regional and global economies. Additionally, in response to Hamas’s attack on southern Israel on October 7, 2023, Israel has launched extensive air strikes against targets in the Gaza Strip and, on October 27, 2023, Israeli military forces launched an invasion of Gaza. The escalation of the Israel-Hamas conflict could cause disruptions to global economic conditions and effect the stability of the Middle East region.
Any such events may cause significant volatility and declines in the global markets, disproportionate impacts to certain industries or sectors, disruptions to commerce (including to economic activity, travel and supply chains), loss of life and property damage, and may adversely affect the global economy or capital markets, and the business of any potential target with which we may consummate a Business Combination could be materially and adversely affected. In addition, our ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by these and other events, including as a result of increased market volatility, decreased market liquidity in third-party financing being unavailable on terms acceptable to us or at all.
If we seek shareholder approval of our initial Business Combination, our Sponsor, directors and officers and their affiliates may elect to purchase Public Shares or Public Warrants from shareholders, which may reduce the public “float” of the Class A ordinary shares and Public Warrants.
If we seek shareholder approval of our initial Business Combination and we do not conduct redemptions in connection with our initial Business Combination pursuant to the tender offer rules, our Sponsor, directors and officers, and their affiliates may purchase Public Shares or Public Warrants in privately negotiated transactions or in the open market prior to the completion of an initial Business Combination, although they are under no obligation to do so. There is no limit on the number of Public Shares or Public Warrants our Sponsor, the directors and officers, and their affiliates may purchase in such transactions, subject to compliance with applicable law and the Nasdaq rules. Additionally, at any time at or prior to our initial Business Combination, subject to applicable securities laws (including with respect to material non-public information), our Sponsor, initial shareholders, directors, officers, advisors and their affiliates may enter into transactions with investors and others to provide them with incentives to acquire Public Shares, vote their Public Shares in favor of our initial Business Combination or not redeem their Public Shares. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase Public Shares or Public Warrants in such transactions. Such purchases may include a contractual acknowledgment that such shareholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights.
In the event that our Sponsor, directors and officers, and their affiliates purchase Public Shares in privately negotiated transactions from Public Shareholders who have already elected to exercise their redemption rights, such selling Public Shareholders would be required to revoke their prior elections to redeem their Public Shares. The purpose of any such purchases of shares could be to increase the amount of cash at the closing of an initial Business Combination. The purpose of any such purchases of Public Warrants could be to reduce the number of Public Warrants outstanding or to vote such Public Warrant on any matters submitted to the warrant holders for approval in connection with an initial Business Combination. Any such purchases of our securities may result in the completion of an initial Business Combination that may not otherwise have been possible. We expect any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of the Public Shares or Public Warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on a national securities exchange.
In the event our Sponsor, initial shareholders, directors, officers, advisors and their affiliates were to purchase public shares from Public Shareholders, such purchases would be structured in compliance with the requirements of Rule 14e-5 under the Exchange Act including, in pertinent part, through adherence to the following:
| ● | Our registration statement/proxy statement filed for our Business Combination transaction would disclose the possibility that our Sponsor, initial shareholders, directors, officers, advisors and their affiliates may purchase Public Shares from Public Shareholders outside the redemption process, along with the purpose of such purchases; | |
| ● | if our Sponsor, initial shareholders, directors, officers, advisors and their affiliates were to purchase Public Shares from Public Shareholders, they would do so at a price no higher than the price offered through our redemption process; | |
| ● | our registration statement/proxy statement filed for our Business Combination transaction would include a representation that any of our securities purchased by our Sponsor, initial shareholders, directors, officers, advisors and their affiliates would not be voted in favor of approving the Business Combination transaction; | |
| ● | our Sponsor, initial shareholders, directors, officers, advisors and their affiliates would not possess any redemption rights with respect to our securities or, if they do acquire and possess redemption rights, they would waive such rights; and | |
| ● | we would disclose in a Form 8-K, before our security holder meeting to approve the Business Combination transaction, the following material items: |
| ○ | the amount of our securities purchased outside of the redemption offer by our Sponsor, initial shareholders, directors, officers, advisors and their affiliates, along with the purchase price; | |
| ○ | the purpose of the purchases by our Sponsor, initial shareholders, directors, officers, advisors and their affiliates; | |
| ○ | the impact, if any, of the purchases by our Sponsor, initial shareholders, directors, officers, advisors and their affiliates on the likelihood that the Business Combination transaction will be approved; | |
| ○ | the identities of our security holders who sold to our Sponsor, initial shareholders, directors, officers, advisors and their affiliates (if not purchased on the open market) or the nature of our security holders (e.g., 5% security holders) who sold to our Sponsor, initial shareholders, directors, officers, advisors and their affiliates; and | |
| ○ | the number of our securities for which we have received redemption requests pursuant to our redemption offer. |
If a shareholder fails to receive notice of our offer to redeem its Public Shares in connection with our initial Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial Business Combination. Despite our compliance with these rules, if a shareholder fails to receive our tender offer or proxy materials, as applicable, such shareholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will furnish to holders of our Public Shares in connection with our initial Business Combination will describe the various procedures that must be complied with in order to validly tender or redeem Public Shares. In the event that a shareholder fails to comply with these procedures, its shares may not be redeemed.
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You will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your Public Shares or Public Warrants, potentially at a loss.
Our Public Shareholders will be entitled to receive funds from the Trust Account only upon the earlier to occur of: (i) the redemption of any Public Shares properly tendered in connection with the completion of our initial Business Combination, (ii) the redemption of any Public Shares properly tendered in connection with a shareholder vote to amend our amended and restated memorandum and articles of association (A) to modify the substance or timing of our obligation to provide for the redemption of our Public Shares in connection with an initial Business Combination or to redeem 100% of our Public Shares if we do not complete our initial Business Combination within the Combination Period, or (B) with respect to any other material provision relating to the rights of Public Shareholders and (iii) the redemption of all of our Public Shares if we are unable to complete our initial Business Combination within the Combination Period, subject to applicable law and as further described herein. In no other circumstances will a Public Shareholder have any right or interest of any kind in the Trust Account. Holders of Public Warrants will not have any right to the proceeds held in the Trust Account with respect to the Public Warrants. Accordingly, to liquidate your investment, you may be forced to sell your Public Shares or Public Warrants, potentially at a loss.
You will not be entitled to protections normally afforded to investors of many other blank check companies.
Since the net proceeds of the IPO and the sale of the Private Placement Warrants are intended to be used to complete an initial Business Combination with a target business that has not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419.
Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means we have a longer period of time to complete our initial Business Combination than do companies subject to Rule 419. Moreover, if the IPO were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the Trust Account to us unless and until the funds in the Trust Account were released to us in connection with our completion of an initial Business Combination.
If the net proceeds of the IPO and the sale of Private Placement Warrants not being held in the Trust Account are insufficient to allow us to operate for at least the Combination Period, we may be unable to complete our initial Business Combination.
As of December 31, 2023, $708,536 was available to us outside the Trust Account to fund our working capital requirements. While we believe that such funds, together with funds available from loans from our Sponsor, its affiliates, or our management team, will be sufficient to allow us to operate for at least the duration of the Combination Period, we cannot assure you that our estimate is accurate and our Sponsor, its affiliates or our management team are under no obligation to loan or advance funds to us. The funds available to us outside of the Trust Account may not be sufficient to allow us to operate for at least the Combination Period, assuming that our initial Business Combination is not completed during that time. We expect to incur significant costs in pursuit of our acquisition plans. Management’s plans to address this need for capital through the IPO and potential loans from certain of our affiliates are discussed in the section of this Annual Report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” However, our affiliates are not obligated to make loans to us in the future, and we may not be able to raise additional financing from unaffiliated parties necessary to fund our expenses. Any such event in the future may negatively impact the analysis regarding our ability to continue as a going concern at such time.
We believe we have access to capital that will be sufficient to allow us to operate for at least the Combination Period; however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent designed to keep target businesses from “shopping” around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed Business Combination, although we do not have any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to complete our initial Business Combination, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share (or less in certain circumstances) on the liquidation of our Trust Account. There will be no redemption rights or liquidating distributions with respect to our warrants. In certain circumstances, our Public Shareholders may receive less than $11.17 per share on the redemption of their shares.
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Subsequent to the completion of our initial Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our share price, which could cause you to lose some or all of your investment.
While we intend to conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any shareholders who choose to remain shareholders following the Business Combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value.
If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $11.17 per share, which is the estimated per share amount held in our Trust Account as of December 31, 2023.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent registered accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of our Public Shareholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption of our Public Shares, if we are unable to complete our initial Business Combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial Business Combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by Public Shareholders could be less than the $11.17 per share currently held in the Trust Account, estimated as of December 31, 2023, due to claims of such creditors.
Pursuant to the letter agreement which is filed as an exhibit to this Annual Report, our Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor (other than our independent registered accounting firm) for services rendered or products sold to us, or a prospective target business with which we have entered into a letter of intent, confidentiality, or other similar agreement for a Business Combination, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, 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 our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy their indemnity obligations and believe that our Sponsor’s only assets are securities of our Company. Our Sponsor may not have sufficient funds available to satisfy those obligations. We have not asked our Sponsor to reserve for such obligations, and therefore, no funds are currently set aside to cover any such obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for our initial Business Combination and redemptions could be reduced to less than $10.00 per Public Share. In such event, we may not be able to complete our initial Business Combination, and you would receive such lesser amount per share in connection with any redemption of your Public Shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
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Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our Public Shareholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our Public Shareholders may be reduced below $10.00 per share.
If, after we distribute the proceeds in the Trust Account to our Public Shareholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, a bankruptcy or insolvency court may seek to recover such proceeds, and the members of our Board of Directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our Board of Directors and us to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our Public Shareholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or bankruptcy or insolvency laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy or insolvency court could seek to recover all amounts received by our shareholders. In addition, our Board of Directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors.
If, before distributing the proceeds in the Trust Account to our Public Shareholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our Public Shareholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy or insolvency law, and may be included in our bankruptcy or insolvency estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy or insolvency claims deplete the Trust Account, the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.
Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
If we are forced to enter into an insolvent liquidation, any distributions received by shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, we were unable to pay our debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover some or all amounts received by our shareholders. Furthermore, our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, and thereby exposing themselves and our Company to claims, by paying Public Shareholders from the Trust Account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offence and may be liable to a fine of up to $18,292 and to imprisonment for five years in the Cayman Islands.
We may not hold an annual general meeting until after the consummation of our initial Business Combination. Our Public Shareholders will not have the right to appoint directors prior to the consummation of our initial Business Combination.
In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual general meeting until no later than one full year after our first fiscal year end following our listing on Nasdaq. There is no requirement under the Companies Act for us to hold annual or extraordinary general meetings in order to appoint directors. Until we hold an annual general meeting, Public Shareholders may not be afforded the opportunity to discuss Company affairs with management. Currently, our initial shareholders own 47% of our issued and outstanding ordinary shares. In addition, prior to our initial Business Combination, only holders of our founder shares, all of which are held by our initial shareholders, will have the right to vote on the appointment of our directors. Our initial shareholders have agreed that, subject to applicable law, neither of our initial shareholders will vote their founder shares to change the size of our Board of Directors or, without the others’ consent, with respect to appointment of directors. As holders of our Class A ordinary shares, our Public Shareholders will not have the right to vote on the appointment of directors prior to consummation of our initial Business Combination. These provisions of our amended and restated memorandum and articles of association may only be amended by a special resolution passed by at least 90% of our ordinary shares voting in a general meeting As a result, holders of Public Shares will not have any influence over the appointment of directors prior to our initial Business Combination.
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If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial Business Combination or force us to abandon our efforts to complete an initial Business Combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
| ● | restrictions on the nature of our investments; and | |
| ● | restrictions on the issuance of securities, each of which may make it difficult for us to complete our initial Business Combination. In addition, we may have imposed upon us burdensome requirements, including: |
| ● | registration as an investment company; | |
| ● | adoption of a specific form of corporate structure; and | |
| ● | reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations. |
In order not to be regulated as an investment company under the Investment Company Act, unless it can qualify for an exclusion, a company must ensure that it is engaged primarily in a business other than investing, reinvesting or trading of securities and that its activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
The SEC recently provided guidance that the determination of whether a special purpose acquisition company, like us, is an “investment company” under the Investment Company Act is a facts and circumstances determination requiring individualized analysis and depends on a variety of factors, including a SPAC’s duration, asset composition, business purpose and activities. When applying these factors to us we do not believe that our principal activities will subject us to the Investment Company Act. To this end, the Company was formed for the purpose of completing an initial Business Combination with one or more businesses. Since our inception, our business has been and will continue to be focused on identifying and completing an initial Business Combination, and thereafter, operating the post-transaction business for the long term. Further, we do not plan to buy businesses or assets with a view to resale or profit from their resale and we do not plan to buy unrelated businesses or assets or to be a passive investor. In addition, the proceeds held in the Trust Account were invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations from the consummation of our IPO until March 1, 2024, when, to mitigate the potential risk that we might be deemed to be an investment company for purposes of the Investment Company Act, the trustee, pursuant to the IMTA Amendment, liquidated such investments and moved the proceeds to an interest-bearing demand deposit account. As a result, the remaining proceeds from the IPO and sale of Private Placement Warrants are no longer invested in U.S. government securities or money market funds. Pursuant to the IMTA, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds in this manner, and by focusing our directors’ and officers’ time toward, and operating our business for the purpose of, acquiring and growing businesses for the long term (rather than buying and selling businesses in the manner of a merchant bank or private equity fund or investing in assets for the purpose of achieving investment returns on such assets), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. Further, investing in our securities is not intended for persons who are seeking a return on investments in government securities or investment securities. Instead, the Trust Account is intended as a holding place for funds pending the earliest to occur of either: (i) the completion of our initial Business Combination; (ii) the redemption of any Public Shares properly submitted in connection with a shareholder vote to amend our amended and restated memorandum and articles of association (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial Business Combination or to redeem 100% of our Public Shares if we do not complete our initial Business Combination within the Combination Period or (B) with respect to any other material provisions relating to the rights of Public Shareholders; or (iii) absent an initial Business Combination within the Combination Period, our return of the funds held in the Trust Account to our Public Shareholders as part of our redemption of the Public Shares. If we do not invest the proceeds as described above, we may be deemed to be subject to the Investment Company Act.
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If we were deemed to be an investment company for purposes of the Investment Company Act, we would need to register as such under the Investment Company Act and compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete a Business Combination. We may also be forced to abandon our efforts to complete an initial Business Combination and instead be required to liquidate the Trust Account. In which case, our investors would not be able to realize the benefits of owning shares in a successor operating business, including the potential appreciation in the value of our securities following such a transaction. For illustrative purposes, in connection with the liquidation of our Trust Account, our Public Shareholders may receive approximately $11.17 per Public Share, which is based on estimates as of December 31, 2023, or less in certain circumstances. There will be no liquidating distributions with respect to our warrants.
Because we are not limited to a particular industry or any specific target businesses with which to pursue our initial Business Combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
Although we expect to focus our search for a suitable initial Business Combination with companies that are either developing breakthrough technology in life sciences or advancing a platform for sustainable technology, we may pursue acquisition opportunities in any one of numerous industries, except that we will not, under our amended and restated memorandum and articles of association, be permitted to effectuate our Business Combination with another blank check company or similar company with nominal operations. Because we have not yet identified any specific target business with respect to a Business Combination, there is no basis to evaluate the possible merits or risks of any particular target business’ operations, results of operations, cash flows, liquidity, financial condition or prospects.
To the extent we complete our Business Combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or an early stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our securities will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a target. Accordingly, any shareholders who choose to remain shareholders following the Business Combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer materials or proxy statement relating to the Business Combination contained an actionable material misstatement or material omission.
We may seek acquisition opportunities in industries or sectors that may be outside of our management’s areas of expertise.
We will consider a Business Combination outside of our management’s areas of expertise if a Business Combination candidate is presented to us and we determine that such candidate offers an attractive acquisition opportunity for our Company. In the event we elect to pursue an acquisition outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or operation, and the information contained in this Annual Report regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly, any shareholders who choose to remain shareholders following our initial Business Combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value.
We may seek acquisition opportunities with a financially unstable business or an entity lacking an established record of revenue or earnings.
To the extent we complete our initial Business Combination with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
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We are not required to obtain an opinion from an independent investment banking or from an independent registered public accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our Company from a financial point of view.
Unless we complete our Business Combination with an affiliated entity, or our Board of Directors cannot independently determine the fair market value of the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm or another independent firm that commonly renders valuation opinions for the type of company we are seeking to acquire or from an independent accounting firm that the price we are paying for a target is fair to our Company from a financial point of view. If no opinion is obtained, our shareholders will be relying on the judgment of our Board of Directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to our initial Business Combination. However, if our Board of Directors is unable to determine the fair value of an entity with which we seek to complete an initial Business Combination based on such standards, we will be required to obtain an opinion as described above.
Because we must furnish our shareholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial Business Combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on a business combination meet certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or U.S. GAAP, or international financing reporting standards as issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial Business Combination within the prescribed time frame.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial Business Combination, require substantial financial and management resources, and increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report for the year ending December 31, 2023. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company with which we seek to complete our initial Business Combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a Business Combination with which a substantial majority of our shareholders do not agree.
Our amended and restated memorandum and articles of association does not provide a specified maximum redemption threshold. As a result, we may be able to complete our initial Business Combination even though a substantial majority of our Public Shareholders do not agree with the transaction and have redeemed their Public Shares or, if we seek shareholder approval of our initial Business Combination and do not conduct redemptions in connection with our initial Business Combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our initial shareholders, directors, officers or advisors, or their respective affiliates. In the event the aggregate cash consideration we would be required to pay for all ordinary shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed Business Combination exceed the aggregate amount of cash available to us, we will not complete the Business Combination or redeem any shares, all ordinary shares submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate Business Combination.
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In order to effectuate an initial Business Combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments. We cannot assure you that we will not seek to further amend our amended and restated memorandum and articles of association or governing instruments in a manner that will make it easier for us to complete our initial Business Combination that our shareholders may not support.
In order to effectuate a business combination, blank check companies have, in the past, amended various provisions of their charters and modified governing instruments. For example, blank check companies have amended the definition of business combination, increased redemption thresholds and extended the period of time in which it had to consummate a business combination. We cannot assure you that we will not seek to further amend our amended and restated memorandum and articles of association or governing instruments or to further extend the time in which we have to consummate a Business Combination through amending our amended and restated memorandum and articles of association, such actions will require at least a special resolution of our shareholders as a matter of Cayman Islands law, which requires the affirmative vote of a majority of at least two-thirds of the shareholders who attend and vote at a general meeting of the Company, and amending our warrant agreement will require a vote of holders of at least a majority of the number of the then outstanding Public Warrants and, solely with respect to any amendment to the terms of the Private Placement Warrants or any provision of the warrant agreement with respect to the Private Placement Warrants, a majority of the number of the then outstanding Private Placement Warrants (except for provisions of the warrant agreement enabling amendments without shareholder or warrant holder approval that are necessary in the good faith determination of our Board of Directors (taking into account then existing market precedents) to allow for the warrants to be classified as equity in our financial statements). In addition, our amended and restated memorandum and articles of association require us to provide our Public Shareholders with the opportunity to redeem their Public Shares for cash if we propose an amendment to our amended and restated memorandum and articles of association (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial Business Combination or to redeem 100% of our Public Shares if we do not complete an initial Business Combination within the Combination Period or any further extension or (B) with respect to any other material provisions relating to the rights of Public Shareholders.
We may reincorporate in another jurisdiction in connection with our initial Business Combination, and the laws of such jurisdiction may govern some or all of our future material agreements and we may not be able to enforce our legal rights.
In connection with our initial Business Combination, we may relocate the home jurisdiction of our business from the Cayman Islands to another jurisdiction. If we determine to do this, the laws of such jurisdiction may govern some or all of our future material agreements. The system of laws and the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital.
The provisions of our amended and restated memorandum and articles of association that relate to our pre-initial Business Combination activity (and corresponding provisions of the agreement governing the release of funds from our Trust Account), may be amended with the approval of holders of at least two-thirds of our ordinary shares who attend and vote in a general meeting, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated memorandum and articles of association and the IMTA to facilitate the completion of an initial Business Combination that some of our shareholders may not support.
Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s pre-initial business combination activity, without approval by a certain percentage of the company’s shareholders. In those companies, amendment of these provisions requires approval by between 90% and 100% of the company’s public shareholders. Our amended and restated memorandum and articles of association provides that any of its provisions, including those related to pre-initial Business Combination activity (including the requirement to deposit proceeds of the IPO and the Private Placement Warrants into the Trust Account and not release such amounts except in specified circumstances, and to provide redemption rights to Public Shareholders as described herein and in our amended and restated memorandum and articles of association or an amendment to permit us to withdraw funds from the Trust Account such that the per share amount investors will receive upon any redemption or liquidation is substantially reduced or eliminated), but excluding the provision of the memorandum and articles of association relating to the appointment of directors, may be amended if approved by holders of at least two-thirds of our ordinary shares who attend and vote in a general meeting, and corresponding provisions of the IMTA governing the release of funds from our Trust Account may be amended if approved by holders of 65% of our ordinary shares. As of the date of this Annual Report, our initial shareholders collectively beneficially own approximately 47% of our ordinary shares, and will participate in any such vote. Should our initial shareholders vote all their shares in favor of any such amendment at a meeting at which only the minimum quorum is present (and if the representative shares are voted in favor of the amendment), we would require approximately 2,111,095, or 18%, of the Public Shares issued in the IPO to be voted in favor of any such amendment for its approval. As a result, we may be able to amend the provisions of our amended and restated memorandum and articles of association which govern our pre-initial Business Combination behavior more easily than some other blank check companies, and this may increase our ability to complete a Business Combination with which you do not agree.
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We may be unable to obtain additional financing to complete our initial Business Combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular Business Combination.
Although we believe that the net proceeds of the IPO and the sale of the Private Placement Warrants will be sufficient to allow us to complete our initial Business Combination, because we have not yet identified any prospective target business we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of the IPO and the sale of the Private Placement Warrants prove to be insufficient, either because of the size of our initial Business Combination, the obligation to redeem for cash a significant number of shares from shareholders who elect redemption in connection with our initial Business Combination or the terms of negotiated transactions to purchase shares in connection with our initial Business Combination, we may be required to seek additional financing or to abandon the proposed Business Combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial Business Combination, we would be compelled to either restructure the transaction or abandon that particular Business Combination and seek an alternative target business candidate. In addition, even if we do not need additional financing to complete our initial Business Combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or shareholders is required to provide any financing to us in connection with or after our initial Business Combination. If we are unable to complete our initial Business Combination, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share on the liquidation of our Trust Account. There will be no liquidating distributions with respect to our warrants. In certain circumstances, our Public Shareholders may receive less than $11.17 per share on the redemption of their shares. See “- If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $11.17 per share, which is the estimated per share amount held in our Trust Account as of December 31, 2023” and other risk factors below.
Resources could be wasted in researching acquisitions that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial Business Combination, our Public Shareholders may, based on estimates as of December 31, 2023 receive approximately $11.17 per share, or less than such amount in certain circumstances, on the liquidation of our Trust Account and there will be no liquidating distributions with respect to our warrants.
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a specific initial Business Combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial Business Combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial Business Combination, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share on the liquidation of our Trust Account. There will be no liquidating distributions with respect to our warrants. See “- If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $11.17 per share, which is the estimated per share amount held in our Trust Account as of December 31, 2023” and other risk factors.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular Business Combination. These agreements may provide for them to receive compensation following our initial Business Combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the post-transaction company after the completion of our initial Business Combination only if they are able to negotiate employment or consulting agreements in connection with the Business Combination. Such negotiations would take place simultaneously with the negotiation of the Business Combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the Business Combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business, subject to his or her fiduciary duties under Cayman Islands law. However, we believe the ability of such individuals to remain with us after the completion of our initial Business Combination will not be the determining factor in our decision as to whether or not we will proceed with any potential Business Combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our initial Business Combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial Business Combination.
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We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial Business Combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.
When evaluating the desirability of effecting our initial Business Combination with a prospective target business, our ability to assess the target business’ management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any shareholders who choose to remain shareholders following the Business Combination could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value.
The officers and directors of an acquisition candidate may resign upon completion of our initial Business Combination. The departure of a target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidates’ key personnel upon the completion of our initial Business Combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial Business Combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
If we effect our initial Business Combination with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
If we effect our initial Business Combination with a company with operations or opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
| ● | costs and difficulties inherent in managing cross-border business operations; |
| ● | rules and regulations regarding currency redemption; |
| ● | complex corporate withholding taxes on individuals; |
| ● | laws governing the manner in which future business combinations may be effected; |
| ● | tariffs and trade barriers; |
| ● | regulations related to customs and import/export matters; |
| ● | longer payment cycles; |
| ● | tax issues, such as tax law changes and variations in tax laws as compared to the United States; |
| ● | currency fluctuations and exchange controls; |
| ● | rates of inflation; |
| ● | challenges in collecting accounts receivable; |
| ● | cultural and language differences; |
| ● | employment regulations; |
| ● | crime, strikes, riots, civil disturbances, terrorist attacks and wars; and |
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| ● | deterioration of political relations with the United States. |
We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a Business Combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our shareholders’ investment in us.
Although we have no commitments as of the date of this Annual Report to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our initial Business Combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the Trust Account. As such, no issuance of debt will affect the per-share amount available for redemption from the Trust Account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
| ● | default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| ● | acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| ● | our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| ● | our inability to pay dividends on our ordinary shares; |
| ● | using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| ● | limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| ● | increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
We may only be able to complete one Business Combination with the proceeds of the IPO and the sale of the Private Placement Warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.
Of the net proceeds from the IPO and the sale of the Private Placement Warrants, following redemptions made in connection with our extension, $69,402,338 will be available to complete our Business Combination and pay related fees and expenses (which includes $8,105,480 for the payment of deferred underwriting commissions).
We may effectuate our initial Business Combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our initial Business Combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial Business Combination with only a single entity our lack of diversification may subject us to numerous economic, competitive and regulatory risks. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
| ● | solely dependent upon the performance of a single business, property or asset; or |
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| ● | dependent upon the development or market acceptance of a single or limited number of products, processes or services. |
This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial Business Combination.
We may attempt to simultaneously complete Business Combinations with multiple prospective targets, which may hinder our ability to complete our initial Business Combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial Business Combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial Business Combination.
We may attempt to complete our initial Business Combination with a private company about which little information is available, which may result in a Business Combination with a company that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek to effectuate our initial Business Combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial Business Combination on the basis of limited information, which may result in a Business Combination with a company that is not as profitable as we suspected, if at all.
Because we intend to seek a Business Combination with a target business or businesses in the healthcare industry and whose principal business operations are based in Asia (excluding China, Hong Kong and Macau), we expect our future operations to be subject to risks associated with this industry.
While we may pursue an acquisition or a target in any business or industry or across any geography, we intend to focus our search for a target business in healthcare industry and with companies whose principal business operations are based in Asia (excluding China, Hong Kong and Macau).
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Life science related companies (e.g., healthcare, biopharmaceuticals, and digital health) are typically subject to greater governmental regulation than most other industries whether in the U.S. or global. Industries such as biopharmaceuticals are also the most research-intensive industries. Many of the risks mentioned associated with these industries involve regulation around research and development (R&D) of a product or technical risk factors. For example, a healthcare-related company must receive government approval before introducing new drugs and medical devices or procedures. Drug development and the probability of success through the stages of development are key concerns when considering pharmaceutical companies as most studies show that a drug development program’s probability of success from Phase I trials to U.S. FDA approval was only 9.6% as of the time of our IPO, based on a study from BIO. Any potential regulatory or policy changes can impact such success rates to even lower probabilities. Failure to obtain governmental approval of a key drug or device or other regulatory action could have a material adverse effect on the business of a target company. Such changes may impact the demand for or costs of certain products and services as changes may delay the introduction of these products and services to the marketplace, resulting in increased development costs, delayed cost recovery and loss of competitive advantage to the extent that rival companies have developed competing products or procedures, adversely affecting the company’s revenues and profitability. These types of risks are unique to each company but typically found across most life science focused companies. Other risks can involve other areas of regulatory compliance such as monitoring drug safety even after approval. Finally, expansion of facilities by healthcare related providers is subject to “determinations of need” by the appropriate government authorities. This process not only increases the time and cost involved in these expansions, but also makes expansion plans uncertain, limiting the revenue and profitability growth potential of healthcare related facilities operators There also exists potential regulatory risk due to changes to laws, regulations or interpretations that can cause compliance costs or cause disruptions to companies’ productivity as a business. Overall, these firms are exposed to greater financial risk than other industries and can also be sensitive to policy changes that could potentially affect industry-wide profitability. These risks are considered systematic as policy changes can impact industry-wide R&D spending or go-to-market strategies as well as impact cash flow and product sales. For instance, as of the time of our IPO, governmental budgets across developing countries came under pressure to reduce spending and control healthcare costs, which could both adversely affect regulatory processes and public funding available for healthcare products, services and facilities. These healthcare reforms may institute regulatory mandates and other measures designed to constrain medical costs, including coverage and reimbursement for healthcare services, drugs, or devices. Potential regulatory changes include drug price caps or access and healthcare cost transparency, all of which can potentially become a risk to profitability for these companies. The ultimate effects of healthcare reform or any future legislation, regulation, or healthcare initiatives, if any, on the healthcare sector, whether implemented at the federal or state level or internationally, cannot be predicted with certainty and such reform, legislation, regulation, or initiatives may adversely affect the performance of a potential Business Combination.
Technical expertise is also crucial in the life science industry as the products produced in these sectors are complex - it would take the average investor significant time to understand the factors that affect the product’s chances of success. Even large, well-established financial institutions typically have a poor track record when it comes to forecasting the performance of companies in the biopharmaceuticals or healthcare space. Therefore, technical expertise is crucial in these industries, especially at the management level of companies. There is risk with certain companies in this sector that may not have the right level of technical expertise at the management level or management is valuation-driven with stronger focus on profitability than having the technical expertise of understanding how research findings (e.g., regarding side effects or comparative benefits of one or more particular treatments, services or products) and technological innovation (together with patent expirations) may make any particular treatment, service or product less attractive if previously unknown or underappreciated risks are revealed, or if a more effective, less costly or less risky solution is or becomes available. Any such development could have an adverse effect on the companies that are target businesses for investment.
Finally, certain healthcare related companies depend on the exclusive rights or patents for the products they develop and distribute. Patents have a limited duration and, upon expiration, other companies may market substantially similar “generic” products that are typically sold at a lower price than the patented product, causing the original developer of the product to lose market share and/or reduce the price charged for the product, resulting in lower profits for the original developer. As a result, the expiration of patents may adversely affect the profitability of these companies. The profitability of healthcare related companies may also be affected, among other factors, by restrictions on government reimbursement for medical expenses, rising or falling costs of medical products and services, pricing pressure, an increased emphasis on outpatient services, a limited product offering, industry innovation, changes in technologies and other market developments. Finally, because the products and services of healthcare related companies affect the health and well-being of many individuals, these companies are especially susceptible to product liability lawsuits.
In addition, risks inherent in investments in the sustainability sector include, but are not limited to, the following:
| ● | difficulty in competing against established companies who may have greater financial resources and/or a more effective or established localized business presence and/or an ability to introduce and sell sustainable technology at minimal or negative operating margins for sustained periods of time; |
| ● | difficulty in establishing and implementing a commercial and operational approach adequate to address the specific needs of the markets we are pursuing; |
| ● | the speculative nature of and high degree of risk involved in investments in sustainability sector; |
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| ● | availability of key inputs, such as strategic consumables, raw materials and necessary equipment; |
| ● | changes in global supply and demand and prices for commodities; |
| ● | impact of energy conservation efforts; |
| ● | technological advances affecting energy production and consumption; |
| ● | denial or delay of receiving requisite regulatory approvals and/or permits; |
| ● | governmental or regulatory actions in any or all of our chosen markets, even if well intentioned from a climate perspective, could have an immediate and dramatic effect on our business operations and opportunities; |
| ● | difficulty in identifying effective local partners and developing any necessary partnerships with local businesses on commercially and environmentally acceptable terms; |
| ● | inability to comply with governmental regulations or obtain governmental approval for our products and/or business operations; |
| ● | difficulty in competing successfully with improved technologies introduced subsequent to our own; |
| ● | the possibility of applying an ineffective commercial approach to targeted markets, including product offerings that may not meet market needs with respect to their environmental or non-environmental attributes; |
| ● | inability to build strong brand identity, environmental credibility or reputation for exceptional customer satisfaction and service; |
| ● | difficulty in generating sufficient sales volumes at economically sustainable profitability levels; and |
| ● | difficulty in timely identifying, attracting, training, and retaining qualified sales, technical, and other personnel. |
We may seek acquisition opportunities with an early stage company, a financially unstable business or an entity lacking an established record of revenue or earnings, which could subject us to volatile revenues or earnings, intense competition and difficulties in obtaining and retaining key personnel.
To the extent we effect our initial Business Combination with a company or business that may be financially unstable or in its early stages of development or growth, we may be affected by numerous risks inherent in such company or business. These risks include investing in a business without a proven business model and with limited historical financial data, volatile revenues or earnings, intense competition and difficulties in obtaining and retaining key personnel. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We may seek Business Combination opportunities with a high degree of complexity that require significant operational improvements, which could delay or prevent us from achieving our desired results.
We may seek Business Combination opportunities with large, highly complex companies that we believe would benefit from operational improvements. While we intend to implement such improvements, to the extent that our efforts are delayed or we are unable to achieve the desired improvements, the Business Combination may not be as successful as we anticipate.
To the extent we complete our initial Business Combination with a large complex business or entity with a complex operating structure, we may also be affected by numerous risks inherent in the operations of the business with which we combine, which could delay or prevent us from implementing our strategy. Although our management team will endeavor to evaluate the risks inherent in a particular partner business and its operations, we may not be able to properly ascertain or assess all of the significant risk factors until we complete our Business Combination. If we are not able to achieve our desired operational improvements, or the improvements take longer to implement than anticipated, we may not achieve the gains that we anticipate. Furthermore, some of these risks and complexities may be outside of our control and leave us with no ability to control or reduce the chances that those risks and complexities will adversely impact a partner business. Such combination may not be as successful as a combination with a smaller, less complex organization.
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RISKS RELATING TO OUR SPONSOR AND MANAGEMENT TEAM
Our ability to successfully effect our initial Business Combination will be dependent upon the efforts of our key personnel, some of whom may join us following our initial Business Combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our initial Business Combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial Business Combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our initial Business Combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
We are dependent upon our officers and directors and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular, Sung Yoon Woo, our Chief Executive Officer; Sungwoo (Andrew) Hyung, our Chief Financial Officer; Sungsik (Sung) Lee, our President; Gene Young Cho, our Chief Operating Officer; and our directors. We believe that our success depends on the continued service of our officers and directors, at least until we have completed our initial Business Combination. In addition, our officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential Business Combinations and monitoring the related due diligence. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental effect on us.
Since our initial shareholders, executive officers and directors will lose their entire investment in us if our initial Business Combination is not completed, a conflict of interest may arise in determining whether a particular target is appropriate for our initial Business Combination.
The Sponsor and our Company’s officers and directors have interests that may be different from, or in addition to, the Public Shareholders’ interests. For example:
| ● | If we do not consummate a Business Combination and we liquidate, the 5,502,490 founder shares held by the Sponsor will be worthless, as the Sponsor has waived liquidation rights with respect to such shares, as will the 2,666,667 Private Placement Warrants held by the Sponsor. The Sponsor purchased the founder shares for an aggregate purchase price of $25,000, or approximately $0.00043 per share, and purchased the Private Placement Warrants for $1.50 per warrant, or $10,000,000 in the aggregate. | |
| ● | As of the date of this Annual Report, the Sponsor and its affiliate have invested an aggregate of $980,000 into our Trust Account as Contributions for monthly extensions. Such Contributions are evidenced by the Contribution Notes and will be repayable upon the consummation of our Business Combination or our earlier liquidation. However, if we do not consummate a Business Combination and we liquidate, any such promissory notes will be repaid only from funds held outside of the Trust Account or will be forfeited, eliminated or otherwise forgiven. | |
| ● | The Sponsor and the Company’s officers and directors and their respective affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them related to identifying, investigating, negotiating and completing a Business Combination. If we do not consummate a Business Combination, they will not have any claim against the Trust Account for reimbursement. As of the date of this Annual Report, there are no reimbursable out-of-pocket expenses outstanding. | |
| ● | All rights specified in the amended and restated memorandum and articles of association relating to the right of officers and directors to be indemnified by the Company, and of the Company’s officers and directors to be exculpated from monetary liability with respect to prior acts or omissions, will continue after a Business Combination. If the Company does not complete a Business Combination and liquidates, the Company will not be able to perform its obligations to its officers and directors under those provisions. | |
| ● | 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 our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have entered into a letter of intent, confidentiality, or other similar agreement for a Business Combination, reduce the amount of funds in the Trust Account to below (i) $10.00 per Public Share or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and will not apply as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. |
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Accordingly, if we do not consummate a Business Combination, the Sponsor may lose its entire investment in us, and the potential loss of this investment could incentivize the Sponsor and its affiliates to pursue a Business Combination on unfavorable terms in order to avoid a liquidation and a loss of its investment. In addition, the personal and financial interests of our executive officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination. This risk may become more acute as the Combination Period nears March 3, 2025, which is the deadline for our completion of an initial Business Combination.
Certain of our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial Business Combination.
Our officers and directors are not required to commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a Business Combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial Business Combination. Our officers are not obligated to contribute any specific number of hours per week to our affairs, and certain of our officers are engaged in other business endeavors for which they may be entitled to substantial compensation. Our independent directors also serve as officers and board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial Business Combination.
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
After the IPO and until we consummate our initial Business Combination, we intend to engage in the business of identifying and combining with one or more businesses. Our initial shareholders and officers and directors are, or may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in making and managing investments in a similar business.
Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties. As a result, they will have a duty to offer acquisition opportunities to certain clients or other entities. Accordingly, our officers and directors may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to other entities prior to its presentation to us, subject to his or her fiduciary duties under Cayman Islands law.
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Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into a Business Combination with a target business that is affiliated with our initial shareholders, our directors or officers. Nor do we have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.
We may engage in a Business Combination with one or more target businesses that have relationships with entities that may be affiliated with our initial shareholders, officers, directors or existing holders which may raise potential conflicts of interest.
In light of the involvement of our initial shareholders, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our initial shareholders, officers and directors. Our officers and directors also serve as officers and board members for other entities. Such entities may compete with us for Business Combination opportunities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for a Business Combination and such transaction was approved by a majority of our independent directors. Despite our agreement to obtain an opinion from an independent investment banking firm or another independent firm that commonly renders valuation opinions for the type of company we are seeking to acquire or an independent accounting firm, regarding the fairness to our Company from a financial point of view of a Business Combination with one or more domestic or international businesses affiliated with our initial shareholders, officers or directors, potential conflicts of interest still may exist and, as a result, the terms of the Business Combination may not be as advantageous to our Public Shareholders as they would be absent any conflicts of interest.
Our management may not be able to maintain control of a target business after our initial Business Combination. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure a Business Combination so that the post-transaction company in which our Public Shareholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our shareholders prior to the Business Combination may collectively own a minority interest in the post-Business Combination company, depending on valuations ascribed to the target and us in the Business Combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new ordinary shares in exchange for all of the issued and outstanding capital stock, shares or other equity interests of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new ordinary shares, our shareholders immediately prior to such transaction could own less than a majority of our issued and outstanding ordinary shares subsequent to such transaction. In addition, other minority shareholders may subsequently combine their holdings resulting in a single person or group obtaining a larger portion of the company’s shares than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business.
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We may not have sufficient funds to satisfy indemnification claims of our officers and directors.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the Trust Account and to not seek recourse against the Trust Account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the Trust Account or (ii) we consummate an initial Business Combination. Our obligation to indemnify our officers and directors may discourage shareholders from bringing a lawsuit against our officers and directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our shareholders. Furthermore, a shareholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
Any negative developments involving our management, directors and persons or companies with which they are currently or have been affiliated, including civil disputes, litigation, government or other investigations or other actual or alleged misconduct, unrelated to our business affairs could materially impact our ability to consummate an initial Business Combination.
Our members of our management team, our directors, and persons or companies with which they are affiliated have been, and in the future will continue to be, involved in a wide variety of business and other activities. As a result of such involvement, we may be exposed to the risk of negative developments relating to members of our management, directors and persons or companies with which they are affiliated, including civil disputes, litigation, governmental or other investigations or other actual or alleged misconduct relating to their affairs unrelated to our Company. Any such development, including any negative publicity related thereto, may be detrimental to our reputation, negatively affect our ability to identify and complete an initial Business Combination in a material manner and may have an adverse effect on the price of our securities.
RISKS RELATING TO OUR SECURITIES
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
We have our Units, Class A ordinary shares, and Public Warrants listed on Nasdaq. In order to continue listing our securities on Nasdaq prior to our initial Business Combination, we must maintain certain financial, distribution and share price levels. Generally, we must maintain a market value of our listed securities (generally $50,000,000) or an average market value of publicly held shares (generally $40,000,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally, in connection with our initial Business Combination, we will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, to list on the Nasdaq Global Market, our share price would generally be required to be at least $4.00 per share, our market value of our listed securities would generally be required to be at least $75 million, our market value of our unrestricted publicly held shares would generally be required to be at least $20 million, and we would be required to have a minimum of 400 round lot holders (with at least 50% of such round lot holders holding securities with a market value of at least $2,500) of our securities. We cannot assure you that we will be able to meet those initial listing requirements at that time. If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
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| ● | reduced liquidity for our securities; |
| ● | a determination that our Class A ordinary shares are a “penny stock” which will require brokers trading in our Class A ordinary shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
| ● | a limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
On June 14, 2023, the Staff of the Listing Qualifications Department of Nasdaq notified us that we were not in compliance with Nasdaq’s minimum $1,000,000 aggregate market value of warrants requirement set forth in Listing Rule 5452(b)(C). Based on Nasdaq’s further review and materials submitted by the Company to Nasdaq on July 19, 2023 and August 23, 2023, Nasdaq granted the Company an extension to December 11, 2023 to regain compliance with Listing Rule 5452(b)(C). There can be no assurances that we will regain compliance with Listing Rule 5452(b)(C).
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our Units, Class A ordinary shares and Public Warrants are listed on Nasdaq, such securities are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities, including in connection with our initial Business Combination.
If we seek shareholder approval of our initial Business Combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of shareholders are deemed to hold in excess of 15% of our Class A ordinary shares, you will lose the ability to redeem all such shares in excess of 15% of our Class A ordinary shares as issued in the IPO.
If we seek shareholder approval of our initial Business Combination and we do not conduct redemptions in connection with our initial Business Combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in the IPO, which we refer to as the “Excess Shares.” However, we would not be restricting our shareholders’ ability to vote all of their shares (including Excess Shares) for or against our initial Business Combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our initial Business Combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our initial Business Combination. As a result, you would continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your shares in open market transactions, potentially at a loss.
We may issue additional Class A ordinary shares or preference shares to complete our initial Business Combination or under an employee incentive plan after completion of our initial Business Combination. We may also issue Class A ordinary shares upon the conversion of the Class B ordinary shares at a ratio greater than one-to-one at the time of our initial Business Combination as a result of the anti-dilution provisions contained in our amended and restated memorandum and articles of association. Any such issuances would dilute the interest of our shareholders and likely present other risks.
Our amended and restated memorandum and articles of association authorize the issuance of up to 180,000,000 Class A ordinary shares, par value $0.0001 per share, 20,000,000 Class B ordinary shares, par value $0.0001 per share and 1,000,000 undesignated preference shares, par value $0.0001 per share Since the IPO, there are approximately 157,990,037 and 9,497,510 authorized but unissued Class A ordinary shares and Class B ordinary shares available, respectively, for issuance, which amount takes into account shares reserved for issuance upon exercise of outstanding warrants but not upon conversion of the Class B ordinary shares. Class B ordinary shares are convertible into Class A ordinary shares, initially at a one-for-one ratio but subject to adjustment as set forth herein and in our amended and restated memorandum and articles of association. Since the IPO, there is no preference shares issued and outstanding.
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We may issue a substantial number of additional ordinary shares, and may issue preference shares, in order to complete our initial Business Combination or under an employee incentive plan after completion of our initial Business Combination. We may also issue Class A ordinary shares upon conversion of the Class B ordinary shares at a ratio greater than one-to-one at the time of our initial Business Combination as a result of the anti-dilution provisions contained in our amended and restated memorandum and articles of association. However, our amended and restated memorandum and articles of association provide, among other things, that prior to our initial Business Combination, we may not issue additional ordinary shares that would entitle the holders thereof to (i) receive funds from the Trust Account or (ii) vote on any initial Business Combination. The issuance of additional ordinary shares or preference shares:
| ● | may significantly dilute the equity interest of investors in the IPO; |
| ● | may subordinate the rights of holders of ordinary shares if preference shares are issued with rights senior to those afforded our ordinary shares; |
| ● | could cause a change in control if a substantial number of ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and |
| ● | may adversely affect prevailing market prices for our Units, Class A ordinary shares and/or Public Warrants. |
We did not register the Class A ordinary shares issuable upon exercise of the warrants under federal or any state securities laws, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis and potentially causing such warrants to expire worthless.
We did not register the Class A ordinary shares issuable upon exercise of the warrants under any federal or state securities laws. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial Business Combination, we will use our best efforts to file, and within 60 business days following our initial Business Combination to have declared effective, a post-effective amendment to the registration statement for the IPO or a new registration statement covering such shares and maintain a current prospectus relating to the Class A ordinary shares issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available. Notwithstanding the foregoing, if a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective within a specified period following the consummation of our initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. We will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws and no exemption is available. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their Public Warrants as part of a purchase of Units will have paid the full Unit purchase price solely for the Class A ordinary shares included in the Units. If and when the Public Warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares under the blue sky laws of the state of residence in those states in which the warrants were offered by us in the IPO.
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The grant of registration rights to our initial shareholders and holders of our Private Placement Warrants may make it more difficult to complete our initial Business Combination, and the future exercise of such rights may adversely affect the market price of our Class A ordinary shares.
Our initial shareholders and their permitted transferees can demand that we register their founder shares, after those shares convert to our Class A ordinary shares at the time of our initial Business Combination. In addition, holders of our Private Placement Warrants and their permitted transferees can demand that we register the Private Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants, and holders of warrants that may be issued upon conversion of working capital loans, may demand that we register such warrants or the Class A ordinary shares issuable upon exercise of such warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A ordinary shares. In addition, the existence of the registration rights may make our initial Business Combination more costly or difficult to conclude. This is because the shareholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A ordinary shares that is expected when the ordinary shares owned by our initial shareholders, holders of our Private Placement Warrants or holders of our working capital loans or their respective permitted transferees are registered.
Provisions in our amended and restated memorandum and articles of association may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A ordinary shares and could entrench management.
Our amended and restated memorandum and articles of association contain provisions that may discourage unsolicited takeover proposals that shareholders may consider to be in their best interests. These provisions include the ability of the Board of Directors to designate the terms of and issue new series of preference shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
If we seek shareholder approval of our initial Business Combination, our initial shareholders, officers and directors have agreed to vote in favor of such initial Business Combination, regardless of how our Public Shareholders vote. In addition, our initial shareholders hold substantial interest in us and, as a result, may exert a substantial influence on actions requiring shareholder vote, potentially in a manner that you do not support.
Unlike other blank check companies in which the initial shareholders agree to vote their founder shares in accordance with the majority of the votes cast by the Public Shareholders in connection with an initial Business Combination, our initial shareholders, officers and directors have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote any founder shares held by them, as well as any Public Shares purchased during or after the IPO, in favor of our initial Business Combination. Based on the share ownership of our initial shareholders as of the date of this Annual Report, we expect that our initial shareholders and their permitted transferees will own at least 47% of our issued and outstanding ordinary shares at the time of any such shareholder vote. As a result, in addition to our initial shareholders’ founder shares, we would need only 2,111,095, or 18%, of the 6,210,718 Public Shares to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have our initial Business Combination approved. Accordingly, if we seek shareholder approval of our initial Business Combination, it is more likely that the necessary shareholder approval will be received than would be the case if such persons agreed to vote their founder shares in accordance with the majority of the votes cast by our Public Shareholders.
In addition, as a result of their substantial ownership in our Company, our initial shareholders may exert a substantial influence on other actions requiring a shareholder vote, potentially in a manner that you do not support, including amendments to our amended and restated memorandum and articles of association and approval of major corporate transactions. Accordingly, our initial shareholders will exert significant influence over actions requiring a shareholder vote at least until the completion of our initial Business Combination.
We have the right to extend the Combination Period, on a monthly basis, up to March 3, 2025 without providing our shareholders a corresponding vote or redemption right provided that our Sponsor or its designee deposits $140,000 each month into our Trust Account. If we choose not to extend the Combination Period on the month-to-month basis, we would cease all operations except for the purpose of winding up and we would redeem our Public Shares and liquidate, in which case our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share, or less than such amount in certain circumstances, and there will be no liquidating distributions with respect to our warrants.
We initially had until 15 months (or up to 18 months or 21 months, as applicable) following the effectiveness of the IPO to consummate an initial Business Combination. However, on May 25, 2023, we held the EGM, where shareholders approved, among other things, an amendment to our amended and restated memorandum and articles of association to extend the date by which the Company must consummate our initial Business Combination from June 3, 2023 to the Extended Date and to allow us, without another shareholder vote, by resolution of the Board of Directors, to elect to further extend the Extended Date until up to March 3, 2025. The extension to the Extended Date required a $420,000 deposit into the Trust Account by the Contributors and the election to further extend the Extended Date requires us to (i) cause the deposit of $140,000 each month into the Trust Account and (ii) approve the extension by the resolution of the Board of Directors. Our Board of Directors has discretion to decide if we will not further extend the Combination Period. We can provide no assurance that our Board of Directors will continue to extend the Combination Period.
If we have not completed our initial Business Combination within the Combination Period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our Board of Directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such case, our Public Shareholders may, based on estimates as of December 31, 2023, receive approximately $11.17 per share. There will be no liquidating distributions with respect to our warrants. In certain circumstances, our Public Shareholders may receive less than the currently estimated $11.17 per share on the redemption of their shares. See “- If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by shareholders may be less than $11.17 per share, which is the estimated per share amount held in our Trust Account as of December 31, 2023” and other risk factors herein. This feature is different from some other special purpose acquisition companies, in which any extension of the company’s period to consummate an initial business combination would require a vote of the company’s shareholders and in connection with such vote shareholders would have the right to redeem their Public Shares.
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A provision of our warrant agreement may make it more difficult for us to consummate an initial Business Combination.
If:
| (i) | we issue additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of our initial Business Combination at a Newly Issued Price of less than $9.20 per share; |
| (ii) | the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial Business Combination on the date of the consummation of our initial Business Combination (net of redemptions), and |
| (iii) | the Market Value is below $9.20 per share, |
then the exercise price of the Public Warrants will be adjusted to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price. This may make it more difficult for us to consummate an initial Business Combination with a target business.
Our warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our Company.
Our warrant agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
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Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope of the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our Company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management team.
We may amend certain agreements related to the IPO without shareholder approval. We may also amend the terms of the Public Warrants in a manner that may be adverse to holders of Public Warrants with the approval by the holders of at least 50% of the then outstanding Public Warrants.
Certain agreements, including the underwriting agreement relating to the IPO, the IMTA between us and Continental Stock Transfer & Trust Company, the letter agreement among us and our initial shareholders, officers, directors and director nominees, and the registration rights agreement among us and our initial shareholders, may be amended without shareholder approval. These agreements contain various provisions that our Public Shareholders might deem to be material. For example, the underwriting agreement related to the IPO contains a covenant that the target company that we acquire must have a fair market value equal to at least 80% of the balance in the Trust Account at the time of signing the definitive agreement for the transaction with such target business (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) so long as we obtain and maintain a listing for our securities on Nasdaq. While we do not expect our Board of Directors to approve any amendment to any of these agreements prior to our initial Business Combination, it may be possible that our Board of Directors, in exercising its business judgment and subject to its fiduciary duties, chooses to approve one or more amendments to any such agreement in connection with the consummation of our initial Business Combination. Any such amendment may have an adverse effect on the value of an investment in our securities.
Our Public Warrants have been 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 Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants. Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the Public Warrants with the consent of at least 50% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Public Warrants, shorten the exercise period or decrease the number of ordinary shares purchasable upon exercise of a warrant.
The Public Warrants may become exercisable and redeemable for a security other than the Class A ordinary shares, and you will not have any information regarding such other security at this time.
In certain situations, including if we are not the surviving entity in our initial Business Combination, the Public Warrants may become exercisable for a security other than the Class A ordinary shares. As a result, if the surviving company redeems your Public Warrants for securities pursuant to the warrant agreement, you may receive a security in a company of which you do not have information at this time. Pursuant to the warrant agreement, the surviving company will be required to use commercially reasonable efforts to register the issuance of the security underlying the Public Warrants within twenty business days of the closing of an initial Business Combination.
To the extent our warrants ever become exercisable, we may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless.
To the extent our warrants ever become exercisable, we have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per Public Warrant, provided that the last reported sales price of our Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the Public Warrant holders. If and when the Public Warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares upon exercise of the Public Warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares under the blue sky laws of the state of residence in those states in which the Public Warrants were offered by us in the IPO. Redemption of the outstanding Public Warrants could force you (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Public Warrants at the then-current market price when you might otherwise wish to hold your Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of your Public Warrants. None of the Private Placement Warrants will be redeemable by us.
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Our management’s ability to require holders of our Public Warrants to exercise such warrants on a cashless basis will cause holders to receive fewer Class A ordinary shares upon their exercise of the Public Warrants than they would have received had they been able to exercise their warrants for cash.
If we call our Public Warrants for redemption after the redemption criteria described elsewhere in this Annual Report have been satisfied, our management will have the option to require any holder that wishes to exercise his or her Public Warrants to do so on a “cashless basis.” If our management chooses to require holders to exercise their Public Warrants on a cashless basis, the number of Class A ordinary shares received by a holder upon exercise will be fewer than it would have been had such holder exercised his or her warrant for cash. This will have the effect of reducing the potential “upside” of the holder’s investment in our Company.
Our warrants and founder shares may have an adverse effect on the market price of our Class A ordinary shares and make it more difficult to effectuate our initial Business Combination.
We have issued Public Warrants to purchase 10,000,000 of our Class A ordinary shares, at a price of $11.50 per share, as part of the Units sold in our IPO and, simultaneously with the closing of the IPO, we issued in a private placement an aggregate of 6,666,667 Private Placement Warrants, each exercisable to purchase one Class A ordinary share at a price of $11.50 per share. Our initial shareholders own an aggregate of 5,502,490 founder shares., which are convertible into Class A ordinary shares on a one-for-one basis, subject to adjustment as set forth in our amended and restated memorandum and articles of association. In addition, if our initial shareholders make any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at the price of $1.50 per warrant at the option of the lender. The Sponsor and its affiliate have entered into the Contribution Notes in connection with required monthly Contributions into the Trust Account in connection with extensions of the Combination Period. The Contribution Notes have an aggregate principal amount of up to approximately $2,264,151, and up to $1.5 million of such amount may be converted into warrants at the option of the Contributors. To the extent we issue Class A ordinary shares to effectuate a Business Combination, the potential for the issuance of a substantial number of additional Class A ordinary shares upon exercise of these warrants or conversion rights could make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of issued and outstanding Class A ordinary shares and reduce the value of the Class A ordinary shares issued to complete the business transaction. Therefore, our warrants and founder shares may make it more difficult to effectuate a Business Combination or increase the cost of acquiring the target business.
If we are unable to consummate our initial Business Combination within the Combination Period, our Public Shareholders may be forced to wait beyond the Combination Period before redemption from our Trust Account.
If we are unable to consummate our initial Business Combination within the Combination Period, we will distribute the aggregate amount then on deposit in the Trust Account (less up to $100,000 of the interest earned thereon to pay dissolution expenses and net of taxes payable), pro rata to our Public Shareholders by way of redemption and cease all operations except for the purposes of winding up of our affairs, as further described herein. Any redemption of Public Shares from the Trust Account shall be effected automatically by function of our amended and restated memorandum and articles of association prior to any voluntary winding up. If we are required to wind up, liquidate the Trust Account and distribute such amount therein, pro rata, to our Public Shareholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the Companies Act. In that case, investors may be forced to wait beyond the Combination Period before the redemption proceeds of our Trust Account become available to them and they receive the return of their pro rata portion of the proceeds from our Trust Account. We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless we consummate our initial Business Combination prior thereto and only then in cases where investors have sought to redeem their ordinary shares. Only upon our redemption or any liquidation will Public Shareholders be entitled to distributions if we are unable to complete our initial Business Combination.
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GENERAL RISK FACTORS
Past performance by our management team and their respective affiliates may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, our management team and their affiliates is presented for informational purposes only. Past performance by our management team, including their affiliates’ past performance, is not a guarantee either (i) of success with respect to any Business Combination we may consummate or (ii) that we will be able to locate a suitable candidate for our initial Business Combination. You should not rely on the historical record of our management team and their affiliates as indicative of our future performance and you may lose all or part of your invested capital. Additionally, in the course of their respective careers, members of our management team have been involved in businesses and deals that were unsuccessful. Our officers and directors have not had management experience with blank check companies or special purpose acquisition companies in the past.
Cyber incidents or attacks directed at us or third parties could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early-stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We also lack sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have material adverse consequences on our business and lead to financial loss.
We may be a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors.
If we are a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our ordinary shares or warrants, the U.S. Holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. Our PFIC status for our current and subsequent taxable years may depend on whether we qualify for the PFIC start-up exception. Depending on the particular circumstances the application of the start-up exception may be subject to uncertainty, and there cannot be any assurance that we will qualify for the start-up exception. Accordingly, there can be no assurances with respect to our status as a PFIC for our current taxable year or any subsequent taxable year. Our actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. Moreover, if we determine we are a PFIC for any taxable year, we will endeavor to provide to a U.S. Holder such information as the Internal Revenue Service (“IRS”) may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a “qualified electing fund” election, but there can be no assurance that we will timely provide such required information, and such election would be unavailable with respect to our warrants in all cases. We urge U.S. Holders to consult their own tax advisors regarding the possible application of the PFIC rules to holders of our ordinary shares and warrants.
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We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A Shares held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates equals or exceeds $250 million as of the prior June 30th, and (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non- affiliates equals to or exceeds $700 million as of the prior June 30th. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
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Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. Federal courts may be limited.
We are an exempted company incorporated under the laws of the Cayman Islands. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or officers, or enforce judgments obtained in the United States courts against our directors or officers.
Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Act (as the same may be supplemented or amended from time to time) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from what they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United States, and certain states, such as Delaware, may have more fully developed and judicially interpreted bodies of corporate law. In addition, Cayman Islands companies may not have standing to initiate a shareholders derivative action in a Federal court of the United States.
We have been advised by Walkers (Hong Kong), our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
As a result of all of the above, Public Shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the Board of Directors or controlling shareholders than they would as public shareholders of a United States company.
We may seek acquisition opportunities in foreign countries that are subject to political, economic, and other uncertainties.
We may seek acquisitions opportunities that have operations outside the United States. As a result, we could face political and economic risks and other uncertainties with respect these potential international operations. These risks may include the following, among other things:
| ● | loss of revenue, property, and equipment or delays in operations as a result of hazards such as expropriation, war, piracy, acts of terrorism, insurrection, civil unrest, and other political risks, including tension and confrontations among political parties; |
| ● | transparency issues in general and, more specifically, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and other anti-corruption compliance laws and issues; |
| ● | increases in taxes and governmental royalties; |
| ● | unilateral renegotiation of contracts by governmental entities; |
| ● | redefinition of international boundaries or boundary disputes; |
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| ● | difficulties enforcing our rights against a governmental agency because of the doctrine of sovereign immunity and foreign sovereignty over international operations; |
| ● | difficulties enforcing our rights against a governmental agency in the absence of an appropriate and adequate dispute resolution mechanism to address contractual disputes, such as international arbitration; |
| ● | changes in laws and policies governing operations of foreign-based companies; |
| ● | foreign-exchange restrictions; and |
| ● | international monetary fluctuations and changes in the relative value of the U.S. dollar as compared to the currencies of other countries in which we conduct business. |
Outbreaks of civil and political unrest and acts of terrorism have occurred in countries in Europe, Africa, South America, and the Middle East, including countries close to or where we may seek an acquisition. Continued or escalated civil and political unrest and acts of terrorism in the countries in which we may operate could result in our curtailing operations or delays in project completions. In the event that countries in which we may operate experience civil or political unrest or acts of terrorism, especially in events where such unrest leads to an unseating of the established government, our operations could be materially impaired. Our potential international operations may also be adversely affected, directly or indirectly, by laws, policies, and regulations of the United States affecting foreign trade and taxation, including U.S. trade sanctions. Realization of any of the factors listed above could materially and adversely affect our financial condition, results of operations, or cash flows.
After our initial Business Combination, it is possible that a majority of our directors and officers will live outside the United States and all of our assets will be located outside the United States; therefore investors may not be able to enforce federal securities laws or their other legal rights.
It is possible that after our initial Business Combination, a majority of our directors and officers will reside outside of the United States and all of our assets will be located outside of the United States. As a result, it may be difficult, or in some cases not possible, for investors in the United States to enforce their legal rights, to effect service of process upon all of our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties on our directors and officers under United States laws.
Corporate governance standards in non-US countries may not be as strict or developed as in the United States and such weakness may hide issues and operational practices that are detrimental to a target business.
General corporate governance standards in non-US countries are weaker than those in the United States. This could result in unfavorable related party transactions, over-leveraging, improper accounting, family company interconnectivity and poor management. Local laws often do not go far enough to prevent improper business practices. Therefore, shareholders may not be treated impartially and equally as a result of poor management practices, asset shifting, conglomerate structures that result in preferential treatment to some parts of the overall company, and cronyism. The lack of transparency and ambiguity in the regulatory process also may result in inadequate credit evaluation and weakness that may precipitate or encourage financial crisis. In our evaluation of a Business Combination we will have to evaluate the corporate governance of a target and the business environment, and in accordance with United States laws for reporting companies take steps to implement practices that will cause compliance with all applicable rules and accounting practices. Notwithstanding these intended efforts, there may be endemic practices and local laws that could add risk to an investment we ultimately make and that result in an adverse effect on our operations and financial results.
If the government of the country in which we effect our initial Business Combination finds that the agreements we entered into to acquire control of a target business through contractual arrangements with one or more operating businesses do not comply with local governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to significant penalties or be forced to relinquish our interests in those operations.
Some countries in Asia currently prohibit and/or restrict foreign ownership in certain “important industries,” including technology, entertainment and others. There are uncertainties under certain regulations whether obtaining a majority interest through contractual arrangements will comply with regulations prohibiting or restricting foreign ownership in certain industries. In addition, there can be restrictions on the foreign ownership of businesses that are determined from time to time to be in “important industries” that may affect the national economic security or those having “famous brand names” or “well-established brand names.”
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If we or any of our potential future target businesses are found to be in violation of any existing or future local laws or regulations (for example, if we are deemed to be holding equity interests in certain of our affiliated entities in which direct foreign ownership is prohibited), the relevant regulatory authorities might have the discretion to:
| ● | revoke the business and operating licenses of the potential future target business; |
| ● | confiscate relevant income and impose fines and other penalties; |
| ● | discontinue or restrict the operations of the potential future target business; |
| ● | require us or the potential future target business to restructure the relevant ownership structure or operations; |
| ● | restrict or prohibit our use of the proceeds of the IPO to finance our businesses and operations in the relevant jurisdiction; or |
| ● | impose conditions or requirements with which we or the potential future target business may not be able to comply. |
If our management following our initial Business Combination is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with such laws, which could lead to various regulatory issues.
Following our initial Business Combination, any or all of our management team could resign from their positions as officers of our Company, and the management of the target business at the time of the Business Combination will remain in place. Management of the target business may not be familiar with United States securities laws. If new management is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
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After our initial Business Combination, substantially all of our assets may be located in a foreign country and substantially all of our revenue will be derived from our operations in such country. Accordingly, our results of operations and prospects will be subject, to a significant extent, to the economic, political and legal policies, developments and conditions in the country in which we operate.
The economic, political and social conditions, as well as government policies, of the country in which our operations are located could affect our business. We will not pursue or consummate our initial Business Combination with any entity with its principal business operations in China, Hong Kong or Macau. Economic growth could be uneven, both geographically and among various sectors of the economy and such growth may not be sustained in the future. If in the future such country’s economy experiences a downturn or grows at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in demand for spending in certain industries could materially and adversely affect our ability to find an attractive target business with which to consummate our initial Business Combination and if we effect our initial Business Combination, the ability of that target business to become profitable.
Exchange rate fluctuations and currency policies may cause a target business’ ability to succeed in the international markets to be diminished.
In the event we acquire a non-U.S. target, all revenues and income would likely be received in a foreign currency, and the dollar equivalent of our net assets and distributions, if any, could be adversely affected by reductions in the value of the local currency. The value of the currencies in our target regions fluctuate and are affected by, among other things, changes in political and economic conditions. Any change in the relative value of such currency against our reporting currency may affect the attractiveness of any target business or, following consummation of our initial Business Combination, our financial condition and results of operations. Additionally, if a currency appreciates in value against the dollar prior to the consummation of our initial Business Combination, the cost of a target business as measured in dollars will increase, which may make it less likely that we are able to consummate such transaction.
Changes to laws or regulations or in how such laws or regulations are interpreted or applied, or a failure to comply with any laws, regulations, interpretations or applications may adversely affect our business, including our ability to negotiate and complete our initial Business Combination.
We are subject to laws and regulations, and interpretations and applications of such laws and regulations, of national, regional, state and local governments and applicable non-U.S. jurisdictions. In particular, we are required to comply with certain SEC and potentially other legal and regulatory requirements, and our consummation of an Initial Business Combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications and any post-Business Combination company may be subject to additional laws, regulations, interpretations and applications. Compliance with, and monitoring of, the foregoing may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete an Initial Business Combination. A failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our Initial Business Combination.
On January 24, 2024, the SEC issued final rules (the “2024 SPAC Rules”), effective as of July 1, 2024, that formally adopted some of the SEC’s proposed rules for SPACs that were released on March 30, 2022. The 2024 SPAC Rules, among other items, impose additional disclosure requirements in initial public offerings by SPACs and business combination transactions involving SPACs and private operating companies; amend the financial statement requirements applicable to business combination transactions involving such companies; update and expand guidance regarding the general use of projections in SEC filings, as well as when projections are disclosed in connection with proposed business combination transactions; increase the potential liability of certain participants in proposed business combination transactions; and could impact the extent to which SPACs could become subject to regulation under the Investment Company Act. The 2024 SPAC Rules may materially adversely affect our business, including our ability to negotiate and complete, and the costs associated with, our initial Business Combination, and results of operations.
There may be tax consequences to our Business Combination that may adversely affect us.
While we expect to undertake any Business Combination transaction so as to minimize taxes to us, the target, the acquired business and/or assets, and the respective shareholders of our Company and target, such Business Combination might not meet the applicable statutory requirements of a tax-free reorganization in all applicable jurisdictions, or the parties might not obtain the intended tax-free treatment upon a transfer of shares or assets or other Business Combination transaction. A non-qualifying reorganization could result in the imposition of substantial taxes on us, the target, the acquired business and/or assets, and the respective shareholders of our Company and target.
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The new 1% U.S. federal excise tax on stock buybacks could be imposed on redemptions of our stock if we were to become a “covered corporation” in the future.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IR Act”), which, among other things, generally imposes a 1% U.S. federal excise tax (the “Excise Tax”) on certain repurchases of stock by “covered corporations” (which include publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign (i.e., non-U.S.) corporations) occurring on or after January 1, 2023. The Excise Tax is imposed on the repurchasing corporation itself, not its stockholders from which the stock is repurchased. The amount of the Excise Tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the Excise Tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the Excise Tax. The U.S. Department of the Treasury (the “Treasury”) has authority to provide regulations and other guidance to carry out, and prevent the abuse or avoidance of the Excise Tax. On December 27, 2022, the Treasury issued a notice that provides interim operating rules for the Excise Tax, including rules governing the calculation and reporting of the Excise Tax, on which taxpayers may rely until the forthcoming proposed Treasury regulations addressing the Excise Tax are published. Although such notice clarifies certain aspects of the Excise Tax, the interpretation and operation of other aspects of the Excise Tax remain unclear, and such interim operating rules are subject to change.
We are currently not a covered corporation for purposes of the Excise Tax. If we were to become a covered corporation in the future, whether in connection with the consummation of our Business Combination with a U.S. company (including if we were to redomicile as a U.S. corporation in connection therewith) or otherwise, whether and to what extent we would be subject to the Excise Tax on a redemption of our stock would depend on a number of factors, including (i) whether the redemption is treated as a repurchase of stock for purposes of the Excise Tax, (ii) the fair market value of the redemption treated as a repurchase of stock, (iii) the structure of our Business Combination, (iv) the nature and amount of any “PIPE” or other equity issuances (whether in connection with our Business Combination or otherwise) issued within the same taxable year of a redemption treated as a repurchase of stock and (v) the content of forthcoming regulations and other guidance from the Treasury. As noted above, the Excise Tax would be payable by the repurchasing corporation, and not by the redeeming holder, and only limited guidance on the mechanics of any required reporting and payment of the Excise Tax on which taxpayers may rely have been issued to date. If we were to become a covered corporation in the future, the per-share redemption amount payable from the Trust Account (including any interest earned on the funds held in the Trust Account) to our public stockholders in connection with a redemption of our stock is not expected to be reduced by any Excise Tax imposed on us. The imposition of the Excise Tax on us could, however, cause a reduction in the cash available on hand to complete our Business Combination and may affect our ability to complete our Business Combination or fund future operations.
We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We will have operations, agreements with third parties and make sales in Asia, which may experience corruption. Our proposed activities in Asia create the risk of unauthorized payments or offers of payments by one of the employees, consultants, or sales agents of our Company, because these parties are not always subject to our control. It will be our policy to implement safeguards to discourage these practices by our employees. Also, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, or sales agents of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.
Our ability to complete a Business Combination with a U.S. target company may be impacted if such Business Combination is subject to U.S. foreign investment regulations and review by a U.S. government entity, such as the Committee on Foreign Investment in the United States (“CFIUS”), and ultimately prohibited.
Our Business Combination may be subject to regulatory review and approval requirements by governmental entities, or ultimately prohibited. For example, CFIUS has authority to review certain direct or indirect foreign investments in U.S. companies. Among other things, CFIUS is empowered to require mandatory filings related to certain foreign investments, to charge filing fees related to such filings, and to self-initiate national security reviews of foreign direct and indirect investments in U.S. companies if the parties choose not to file voluntarily. If CFIUS determines that an investment subject to its jurisdiction threatens national security, CFIUS has the power to impose restrictions on the investment or recommend that the President prohibit it or order divestment. Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, the nationality of the parties, the level of beneficial ownership interest and the nature of any information or governance rights involved.
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We are organized in the Cayman Islands. Our Sponsor is a Cayman Islands-organized entity that is ultimately jointly owned and controlled by four individuals, three of whom are foreign nationals (one Canadian and two South Korean). As such, an initial business combination with a U.S. business or a foreign business with U.S. operations that we may wish to pursue may be subject to CFIUS review. If a particular proposed Business Combination with a U.S. business falls within CFIUS’s jurisdiction, the parties may determine that they are required to make a mandatory filing or that they will submit to CFIUS review on a voluntary basis, or to proceed with the transaction without notifying CFIUS and risk CFIUS intervention, before or after closing the transaction. In such circumstances, CFIUS may decide to delay the proposed Business Combination, require conditions to mitigate national security concerns with respect to such Business Combination or recommend that the President of the United States block the initial Business Combination or order us to divest all or a portion of the U.S. business of the combined company, which may limit the attractiveness of, or delay or prevent us from pursuing, certain target companies that we believe would otherwise be beneficial to us and our shareholders. In addition, certain types of U.S. businesses may be subject to rules or regulations that limit or impose requirements with respect to foreign ownership. As a result, the pool of potential targets with which the Company could complete an initial Business Combination may be impacted, and it may be adversely affected in terms of competing with other special purpose acquisition companies which do not have similar foreign ownership issues.
The process of government review, whether by CFIUS or otherwise, could be lengthy. Because we have only a limited time to complete our Business Combination, our failure to obtain any required approvals within the requisite time period may require us to liquidate. If we are unable to consummate our Business Combination by the Combination Period, including as a result of extended regulatory review, we will redeem the Public Shares for a pro rata portion of the funds held in the Trust Account and as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our Board of Directors, liquidate and dissolve, subject, in each case, to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such event, our shareholders will miss the opportunity to benefit from an investment in a target company and the potential appreciation in value of such investment. There will be no liquidating distributions from our Trust Account with respect to our warrants.
We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement if we do not complete our initial Business Combination by the Combination Period. As such, there is a risk that we will be unable to continue as a going concern if liquidity needs arise or if we do not consummate an initial Business Combination by the applicable deadline. If we are unable to effect our initial Business Combination by the deadline, we will be forced to liquidate.
We are a blank check company, and as we have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement, there is a risk that we will be unable to continue as a going concern if liquidity needs arise or if the Company is unable to complete our initial Business Combination within the Combination Period and does not further extend such date with the approval of its shareholders or raise additional funds to alleviate such liquidity needs. Although the Company plans to complete an initial Business Combination within the Combination Period, there can be no assurance that the Company will be able to consummate an initial Business Combination by such date. If a Business Combination is not consummated by up to March 3, 2025, there will be a mandatory liquidation and subsequent dissolution of the Company. The Company’s management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. Management believes that the Company will not have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this Annual Report. However, the Working Capital Loans, the Sponsor Convertible Promissory Note, and the VP Convertible Promissory Note will provide additional flexibility to continue our identification and pursuit of potential Business Combination targets. Over this time period, the Company will be using available funds, including those from the Working Capital Loans, for the purpose of paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
If the Company is unable to consummate an initial Business Combination by the end of the Combination Period, it will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account, less taxes payable up to $100,000 of interest to pay dissolution expenses, 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) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our Board of Directors, liquidate and dissolve, subject, in each case to our obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants if we fail to complete our initial Business Combination within the Combination Period.
ITEM IB. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
As a blank check company, we have no operations and therefore do not have any operations of our own that face cybersecurity threats. However, we do depend on the digital technologies of third parties, and as noted in “Item 1A. Risk Factors” of this Annual Report, any sophisticated and deliberate attacks on, or security breaches in, systems or infrastructure or the cloud that we utilize, including those of third parties, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. Because of our reliance on the technologies of third parties, we also depend upon the personnel and the processes of third parties to protect against cybersecurity threats, and we have no personnel or processes of our own for this purpose. Our Board of Directors oversees risk for our Company, and prior to approving our filings with the SEC, our Board of Directors reviews our risk factors, including the descriptions of the risks we face from cybersecurity threats, as described in “Item 1A. Risk Factors” of this Annual Report.
ITEM 2. PROPERTIES.
We currently maintain our executive offices at 4 Orinda Way, Suite 100D, Orinda, California 94563. We consider our current office space adequate for our current operations.
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ITEM 3. LEGAL PROCEEDINGS.
To the knowledge of our management, there was no material litigation, arbitration or governmental proceeding pending against us or any members of our management team in their capacity as such, and we and the members of our management team have not been subject to any such proceeding.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S ORDINARY EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
| (a) | Market Information |
Our Units, Class A ordinary shares and Public Warrants are listed on Nasdaq under the symbols “VMCAU,” “VMCA” and “VMCAW”, respectively.
| (b) | Holders |
As of December 31, 2023, there was one holder of record of our Units, one holder of record of our Class A ordinary shares, two holders of record of our Class B ordinary shares, and three holders of record of our warrants, including our Public Warrants and Private Placement Warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Units, Class A ordinary shares and Public Warrants are held of record by banks, brokers and other financial institutions.
| (c) | Dividends |
We have not paid any cash dividends on our ordinary shares to date and do not intend to pay cash dividends prior to the completion of a Business Combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial conditions subsequent to completion of an initial Business Combination. The payment of any cash dividends subsequent to an initial Business Combination will be within the discretion of our Board of Directors at such time. If we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
| (d) | Securities Authorized for Issuance Under Equity Compensation Plans |
None.
| (e) | Stock Performance Graph |
Not required for smaller reporting companies.
| (f) | Use of Proceeds |
On March 3, 2022, the Company consummated the sale of 20,000,000 Units in our IPO. On March 4, 2022 the underwriters of the IPO partially exercised their over-allotment option and, in connection therewith, on March 8, 2022 the Company consummated the issuance and sale of an additional 2,009,963 Units in our IPO. The Units were sold at a price of $10.00 per Unit, generating gross proceeds at the time of the IPO of $220,099,630. The securities sold in our IPO were registered under the Securities Act on a registration statement on Form S-1 (File No. 333-262246). The SEC declared the registration statement effective on February 28, 2022.
Offering costs for the IPO and the exercise of the underwriters’ over-allotment option amounted to $10,718,994, consisting of $4,000,000 of underwriting fees, net of $2,200,996 reimbursed from the underwriters, $8,105,480 of deferred underwriting fees payable (which are held in the Trust Account) and $814,510 of other costs. The $8,105,480 of deferred underwriting fee payable is contingent upon the consummation of a Business Combination, subject to the terms of the underwriting agreement.
On October 4, 2021, our Sponsor, purchased an aggregate of 5,750,000 founder shares, for an aggregate offering price of $25,000 at an average purchase price of approximately $0.0043 per share (up to 750,000 shares of which were subject to forfeiture depending on the extent to which the underwriters’ over-allotment option was exercised). The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the outstanding shares of ordinary shares upon completion of the IPO. Such securities were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Our Sponsor is an accredited investor for purposes of Rule 501 of Regulation D. As of April 14, 2022, the underwriters’ over-allotment option expired, and therefore, the 247,510 remaining Class B ordinary shares subject to forfeiture were forfeited, resulting in the Sponsor and Valuence Partners LP holding an aggregate of 5,502,490 founder shares.
In addition, our Sponsor, together with Valuence Partners LP, one of its affiliates, pursuant to a written agreement, purchased from us an aggregate of 6,666,667 Private Placement Warrants at a price of $1.50 per warrant. This purchase took place on a private placement basis simultaneously with the completion of our IPO. This issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
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No underwriting discounts or commissions were paid with respect to such sales of founder shares or Private Placement Warrants.
Following the closing of the IPO and sale of Private Placement Warrants, an aggregate of $226,702,619 ($10.30 per Unit) from the net proceeds of the sale of the Units in the IPO and the Private Placement Warrants was placed in the Trust Account.
ITEM 6. [RESERVED].
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary,” “Item 1A. Risk Factors” and elsewhere in this Annual Report.
Overview
Valuence Merger Corp. I was incorporated in the Cayman Islands on August 27, 2021. The Company was formed for the purpose of entering into a Business Combination.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
The Registration Statement for our IPO was declared effective on February 28, 2022. On March 3, 2022, we consummated the sale of 20,000,000 Units. On March 4, 2022 the underwriters of the IPO partially exercised their Over-Allotment Option and, in connection therewith, on March 8, 2022 we consummated the issuance and sale of an additional 2,009,963 Units. Each Unit consists of one Class A ordinary share, par value $0.0001 per share, and one-half of one Public Warrant. The Units were sold at a price of $10.00 per Unit, generating gross proceeds of $220,099,630.
Simultaneously with the closing of the IPO, we consummated the sale of 6,666,667 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant in a private placement, consisting of 2,666,667 Private Placement Warrants to our Sponsor and 4,000,000 Private Placement Warrants to Valuence Partners LP, generating gross proceeds of $10,000,000.
Simultaneously with the exercise of the over-allotment, we consummated the Private Placement of an additional 267,995 Private Placement Warrants to the Sponsor, generating gross proceeds of $401,993.
Offering costs for the IPO and the exercise of the underwriters’ over-allotment option amounted to $10,718,994, consisting of $4,000,000 of underwriting fees, net of $2,200,996 reimbursed from the underwriters, $8,105,480 of deferred underwriting fees payable (which are held in the Trust Account) and $814,510 of other costs. The $8,105,480 of deferred underwriting fee payable is contingent upon the consummation of a Business Combination, subject to the terms of the underwriting agreement.
Following the closing of the IPO and partial exercise of the over-allotment, $226,702,619 ($10.30 per Unit) from the net proceeds of the sale of the Units in the IPO and the Private Placement Warrants was placed in the Trust Account and was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of (i) the completion of a Business Combination and (ii) the distribution of the Trust Account.
In connection with the extension of the Combination Period, as described below, shareholders holding an aggregate of 15,799,245 Class A ordinary shares properly exercised their right to redeem their shares for $167,831,206. After the satisfaction of such redemptions, the balance in our Trust Account was approximately $65.7 million. As of December 31, 2023, the balance in our Trust Account was approximately $69 million.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
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On March 1, 2024, the Company entered into the IMTA Amendment. Pursuant to the IMTA Amendment, Section 1(c) of the IMTA was amended to provide that the trustee may, at the direction of the Company (i) hold funds uninvested, (ii) hold funds in an interest-bearing or non-interest bearing bank demand deposit account at a U.S. chartered commercial bank with consolidated assets of $100 billion or more selected by the trustee that is reasonably satisfactory to the Company, or (iii) invest and reinvest the Property (as defined in the IMTA) in solely United States government securities within the meaning of Section 2(a)(16) of the Investment Company Act, having a maturity of 185 days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 promulgated under the Investment Company Act (or any successor rule), which invest only in direct U.S. government treasury obligations, as determined by the Company. On the same day, pursuant to the IMTA Amendment, the Company instructed Continental Stock Transfer and Trust Company to hold the Trust Account in an interest-bearing bank deposit account. As a result, the remaining proceeds from the IPO and sale of Private Placement Warrants are no longer invested in U.S. government securities or money market funds. Investing in our securities is not intended for persons who are seeking a return on investments in government securities or investment securities.
Extraordinary General Meeting
On May 25, 2023, we held the EGM, pursuant to which our shareholders approved a proposal to amend our amended and restated memorandum and articles of association to extend the date by which we must consummate a Business Combination from the Initial Combination Period to the Extended Date and to allow us, without another shareholder vote, by resolution of our Board of Directors, to elect to further extend the Extended Date in one-month increments up to eighteen (18) additional times, or a total of up to thirty-six (36) months after the IPO, until up to March 3, 2025, the end of the Combination Period. Our shareholders also approved a proposal to amend our amended and restated memorandum and articles of association to eliminate (i) the limitation that we may not redeem Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 and (ii) the limitation that we shall not consummate a Business Combination unless we have net tangible assets of at least $5,000,001 immediately prior to, or upon consummation of, or any greater net tangible asset or cash requirement that may be contained in the agreement relating to, such Business Combination. Our shareholders also approved a proposal to provide for the right of a holder of our Class B ordinary shares, to convert such shares into Class A ordinary shares on a one-for-one basis at any time and from time to time prior to the closing of a Business Combination at the election of the holder. Under Cayman Islands law, the amendments to our amended and restated memorandum and articles of association took effect upon approval of the Combination Period. In connection with the EGM, shareholders holding an aggregate of 15,799,245 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.62 per share, for an aggregate amount of approximately $167,831,206.
On each of September 13, 2023, October 3, 2023, November 3, 2023 and December 1, 2023 we caused to be deposited an additional $140,000, for an aggregate total of $560,000, into our Trust Account in connection with the approval by the Board of Directors of an extension of the date by which we must consummate a Business Combination by an additional month, extending from September 3, 2023, to January 3, 2024, which comprises of 4 of the 18 potential one-month extensions available to us. As of the date of this Annual Report, the Company, with the approval by the Board of Directors, extended the Initial Combination Period to April 3, 2024 and caused to be deposited an aggregate of $980,000 into our Trust Account (including the $560,000 deposited through December 31, 2023), which comprises of 7 of the 18 potential one-month extensions available to the Company.
As previously disclosed, our amended and restated memorandum and articles of association, as amended, provides us the right to extend such date up to eighteen times for an additional one month each time to up to March 3, 2025, provided that we cause to be deposited the Contribution in connection with each Additional Extended Date.
Convertible Promissory Notes
On June 5, 2023, the Company issued the Sponsor Convertible Promissory Note in the principal amount of up to $613,207 to the Sponsor for working capital requirements and payment of certain expenses in connection the Company’s Business Combination. The Sponsor Convertible Promissory Note is non-interest bearing and payable on the earlier of (i) the date of the Business Combination or (ii) the liquidation of the Company. At any time prior to payment in full of the principal balance of the Sponsor Convertible Promissory Note, the Sponsor may elect to convert all or any portion of the unpaid principal balance into the Conversion Warrants, equal to (x) the portion of the principal amount of the Sponsor Convertible Promissory Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Sponsor Convertible Promissory Note was accounted for using the bifurcation method and was determined that the conversion feature had no value and was recorded at par value. As of December 31, 2023, $613,207 is outstanding under the Sponsor Convertible Promissory Note.
Also on June 5, 2023, the Company issued the VP Convertible Promissory Note to Valuence Partners LP, an affiliate of the Sponsor, pursuant to which the Company may borrow up to an aggregate maximum amount of $1,650,943. The VP Convertible Promissory Note is non-interest bearing and payable on the earlier of (i) the date of the Business Combination or (ii) the liquidation of the Company. At any time prior to payment in full of the principal balance of the VP Convertible Promissory Note, Valuence Partners LP may elect to convert all or any portion of the unpaid principal balance into that number of warrants, each exercisable for one Class A Share of the Company, equal to (x) the portion of the principal amount of the VP Convertible Promissory Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The aggregate amount convertible into Conversion Warrants pursuant to the Sponsor Convertible Promissory Note and the VP Convertible Promissory Note shall not exceed $1,500,000. The VP Convertible Promissory Note was accounted for using the bifurcation method, and was determined that the conversion feature had no value and was recorded at par value. As of December 31, 2023, $1,650,941 has been borrowed against VP Convertible Promissory Note.
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Results of Operations
As of December 31, 2023, we have not commenced any operations. All activity through December 31, 2023 relates to our formation and the IPO. We will not generate any operating revenues until after the completion of a Business Combination, at the earliest. We will generate non-operating income in the form of interest income from the proceeds derived from the IPO placed in the Trust Account.
For the year ended December 31, 2023, we had a net income of $4,771,471, which consisted of interest earned on investments held in the Trust Account of $6,163,554, offset by operating costs of $1,392,083.
For the year ended December 31, 2022, we had a net income of $630,602, which consisted of interest earned on investments held in the Trust Account of $3,247,370, offset by operating costs of $2,616,768.
Liquidity and Capital Resources; Going Concern Consideration
As of December 31, 2023, we had cash of $684,816 and a working capital deficit of $3,928,292.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until up to March 3, 2025 to consummate a Business Combination or liquidate, provided that we cause to be deposited the Contribution in connection with each Additional Extended Date. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 3, 2025, if we, with shareholder approval, elect to further extend such deadline. Based on the foregoing, management believes that the Company will not have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this Annual Report. However, the Working Capital Loans (as defined below), the Sponsor Convertible Promissory Note and the VP Convertible Promissory Note will provide additional flexibility to continue our identification and pursuit of potential Business Combination targets. Over this time period, the Company will be using available funds, including those from the Working Capital Loans, for the purpose of paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2023. We do not participate in transactions that create relationships with entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
Other than the Contribution Notes previously disclosed in this Annual Report, we do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. The underwriters are entitled to a deferred underwriting commissions of $0.35 per Unit, or $8,105,480 from the closing of the IPO. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely if we complete a Business Combination, subject to the terms of the underwriting agreement.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our financial statements may not be comparable to companies that comply with public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of executive compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.
Critical Accounting Estimates
The preparation of the financial statements in conformity with GAAP requires our 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.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance with the guidance in FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”). 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 our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ deficit section of our balance sheets of the financial statements contained elsewhere in this Annual Report.
Warrant Instruments
We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to a company’s common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of a 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 instruments are outstanding. Upon review of the warrant agreement, the Company’s management concluded that the Public Warrants and Private Placement Warrants issued pursuant to such warrant agreement qualify for equity accounting treatment.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
This information appears following Item 15 of this Annual Report and is included herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 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. Accordingly, management believes that the financial statements included in this Annual Report present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
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Management’s Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we maintained effective internal control over financial reporting as of December 31, 2023.
This Annual Report does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Our directors and executive officers are as follows:
Name |
Age |
Position | ||
| Sung Yoon Woo | 47 | Chief Executive Officer and Director | ||
| Sungwoo (Andrew)Hyung | 38 | Chief Financial Officer and Director | ||
| Sungsik (Sung) Lee | 47 | President | ||
| Dr. Gene Young Cho | 40 | Chief Operating Officer | ||
| Dr. Joong Myung Cho | 74 | Director | ||
| Nelson Gentiletti | 62 | Director | ||
| John Kim | 56 | Director | ||
| Young Min Kim | 65 | Director | ||
| Gary Wunderlich | 53 | Director | ||
| Zhe Zhang | 49 | Director |
Sung Yoon Woo has been our Chief Executive Officer and a member of our Board of Directors since our inception. Mr. Woo is an investor with a strong track record and experience in strategic acquisitions, corporate divestitures, recapitalizations, and growth equity. Mr. Woo is the Founder and CEO of Credian Partners, a private equity firm based in South Korea. During his 17-year investment career, Mr. Woo has led over $4 billion in transactions and invested over $3 billion. Prior to founding Credian Partners, Mr. Woo was at Russell Investments, where he advised the National Pension Service of Korea, the third-largest pension fund in the world by total assets, the Bank of Korea, and Korea Investment Corporation, a sovereign wealth fund, among other clients on their global portfolio. Prior to Russell Investments, Mr. Woo was a team head of the private equity arm of Mirae Asset Global Investments, one of the largest asset management funds in South Korea, where he led various domestic and cross-border transactions. While at Mirae Asset Financial Group (“Mirae Asset”), Mr. Woo led the acquisition of Acushnet Company, the parent company of Titleist and FootJoy, for $1.2 billion, representing an internal rate of return of approximately 12.5%. Not only has this transaction won awards in South Korea, but it is also notable as a key transaction that helped pave the way for the proliferation of private equity transactions in the country. Prior to Mirae Asset, Mr. Woo was in the investment banking department of KB Kookmin Bank, the largest retail bank in Korea, where he led multiple transactions with large Korean conglomerates. Mr. Woo received his LL.B. from Yonsei University where he was granted the Buphyun Scholarship and M.B.A. from Cornell University.
Sungwoo (Andrew) Hyung has been our Chief Financial Officer and a member of our Board of Directors since our inception. Mr. Hyung has significant experience sourcing, structuring, and executing complex transactions across the sustainability and technology value chain. Most recently, Mr. Hyung was at Nomura Greentech, a sustainable technology and infrastructure investment bank, responsible for executing multiple M&A transactions and origination efforts within the energy transition and clean technology sectors. He executed multiple de-SPAC transactions and was part of the SPAC coverage team that was responsible for completing approximately a quarter of all sustainability-related SPAC business combinations and de-SPAC transactions. Prior to Nomura Greentech, Mr. Hyung was at Deutsche Bank, where he focused on origination and execution of M&A, debt and equity financing across the technology, media, and telecommunications sectors. Mr. Hyung received his B.A. from University of Toronto and M.B.A. from Cornell University.
Sungsik (Sung) Lee has been our President since our inception. Mr. Lee brings extensive experience in investment banking, venture capital, and corporate development, with a proven track record of sourcing and executing M&A, strategic investment, and financing transactions. Most recently, Mr. Lee led cross-border M&A and strategic investments across the broad sustainability-focused areas at the Global Development Group of SK, the third-largest conglomerate in Korea with more than 100 affiliates over diverse sectors including energy, ICT, and life sciences. Prior to SK, Mr. Lee was at SunTrust Robinson Humphrey, where he advised many publicly traded industrial companies on M&A and capital market transactions. Before joining SunTrust, Mr. Lee was at Progress Partners, a media and technology-focused investment banking firm, where he executed M&A and financing projects for early-to-mid-stage clients and managed three investment funds at Progress Ventures, its affiliated venture capital arm. Mr. Lee received his B.A. from Hanyang University and M.B.A. from Cornell University.
Dr. Gene Young Cho has been our Chief Operating Officer since our inception. Dr. Gene Young Cho brings leadership and experience in business operations and life sciences. Currently, he is the Executive Director of CG Pharmaceuticals, Inc., the U.S. subsidiary of CrystalGenomics. In this role, Dr. Cho is focused on developing growth strategies as well as providing strategic planning and management of the operations and expansion of CG Pharmaceuticals. Previously, Dr. Cho worked as a life sciences consultant at L.E.K. Consulting, working with clients in biopharmaceuticals, contract services, medical devices, healthcare services, HCIT, digital health, and AI. Some of his specific experiences include working on large-scale M&A transactions of leading biopharmaceuticals or healthcare service companies, supporting target identification for acquisition, implementing pipeline development strategies, and optimizing governance structures of fast-growing biotech companies. He also brings strong experience in the Asian markets through his professional network focused around supporting emerging technologies and startups. Dr. Cho received his B.S. in bioengineering at U.C. Berkeley, Ph.D. from the NYU School of Medicine in biomedical imaging and completed his post-doc at Memorial Sloan Kettering focusing on breast cancer imaging. Dr. Cho is also the author of over 10 publications in journals and several conference abstracts during his time as a researcher. He is the son of our director nominee, Dr. Joong Myung Cho.
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Dr. Joong Myung Cho, has been one of our directors since March 2022, is the Founder, Chairman and Chief Executive Officer of CrystalGenomics and has over 35 years of experience in the biopharmaceuticals industry from R&D to commercialization of novel drugs and is a global leading life sciences expert. Dr. Cho has previously served as the Executive Senior Vice President and Director of R&D Biotech Research Institute at LG Life Sciences (formerly LG Chem). During his tenure, the biopharmaceutical institute at LG became one of the leading life science companies in the world, growing from just a few research scientists to several hundred employees. He has successfully introduced 10 different recombinant products such as growth hormones of human, bovine, and porcine, hepatitis B vaccine, interferon alpha and gamma, granulocyte-macrophage colony-stimulating factor and sargramostim, erythropoietin, among others. Moreover, four drug candidates were out-licensed to multinational pharmaceutical companies under his supervision, with one gaining approval from the U.S. Food and Drug Administration (FDA). On the basis of such achievements, Dr. Cho has received many awards and acted as a member of several government committees. Dr. Cho received his Ph.D. from the University of Houston and worked as a post-doctorate fellow at the Baylor College of Medicine. Dr. Cho is an author of more than 80 publications, including a cover-page publication in Nature magazine, and has more than 200 filed patents. Dr. Joong Myung Cho is the father of our Chief Operating Officer, Dr. Gene Young Cho.
Nelson Gentiletti, has been one of our directors since March 2022, brings extensive experience in finance, M&A, operations, sustainability business strategy, and global business development throughout his career as a seasoned Chief Financial Officer and C-suite executive at both publicly traded and privately held companies. Mr. Gentiletti most recently retired from Loop Industries, Inc. (NASDAQ: LOOP), a company dedicated to the sustainable management and recycling of polyethylene terephthalate (PET) plastics and polyester fibers, where he was the Chief Financial and Chief Operating Officer until 2021. Prior to this, Mr. Gentiletti was the Chief Financial and Development Officer of Transcontinental Inc. (TSX: TCL.A, TCL.B), a packaging and printing company, from November 2001 to December 2018; various operation roles from 2005 to 2011 including the Chief Operating Officer (2009-2011) and the Chief Financial Officer (2002-3004) at Transat AT. Inc. (TSX: TRZ), an integrated international tourism company, from August 2002 to September 2011; the Chief Financial Officer at BCE Emergis Inc., a TSX-listed e-commerce information technology company, from April 2001 to July 2002; and the Chief Financial Officer at Unican Security Systems, a TSX-listed company providing mechanical and electronic access control products, from September 1997 to March 2001. Mr. Gentiletti also sits on two public company boards: Cascades Inc. (TSX: CAS) since 2019 and Transcontinental Inc. (TSX: TCL) since 2021. In addition, Mr. Gentiletti is a member of the Advisory Committee at the John Molson School of Business at Concordia University. Mr. Gentiletti is also a Member of the Ordre des comptables professionnels agréés du Québec (Québec CPA Order). Mr. Gentiletti received a Graduate Diploma in Public Accountancy from McGill University and a B.Com degree from Concordia University.
John Kim, has been one of our directors since March 2022, is a Co-Founder and Managing Partner of Datavest Partners, a private equity firm focused on digital consumer, e-commerce, and marketing businesses. Prior to co-founding Datavest Partners, Mr. Kim was a Managing Director at H.I.G. Capital for 18 years leading technology buyouts and investments. He served on the boards of e-commerce brands including Cuyana, Lulu’s Fashion Lounge Holdings, Inc. (NASDAQ: LVLU), Parachute Home, and SCUF Gaming as well as digital marketing companies such as SpotX and Triad Retail Media. Prior to H.I.G., Mr. Kim spent 10 years in various leadership and operating roles at technology, e-commerce, software, and consulting companies, including a co-founder, interim CEO and Director position at Cooligy; a COO position at an e-commerce portal; a General Manager position at a semiconductor equipment manufacturer. Mr. Kim began his career at Booz, Allen & Hamilton where he consulted on operations strategy to Fortune 500 companies. Mr. Kim received a M.S. and a B.S. with Phi Beta Kappa honors in Industrial Engineering from Stanford University and an M.B.A. with distinction from Harvard Business School.
Young Min Kim, has been one of our directors since March 2022, has served in various high-ranking positions for the government of South Korea for over 35 years. Between 2015 and 2018, Mr. Kim was the CEO of Korea Resources Corporation (“KORES”), a government-owned energy and natural resources company dedicated to overseas resources development to provide strategic minerals to the Korean industry. Prior to leading KORES, Mr. Kim was the Commissioner of the Korean Intellectual Property Office, the patent and intellectual property office responsible for processing and disseminating information relating to South Korean patent applications, trademark applications, and design applications. Previously, Mr. Kim held multiple executive roles at the Ministry of Trade, Industry and Energy of South Korea, including SME and startup policy, foreign investment support, and trade cooperation policy. Mr. Kim received a B.A. in Public Administration from Kyungpook National University and an M.A. in Political Science from University of Wisconsin-Madison.
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Gary Wunderlich, has been one of our directors since March 2022, is a Co-Founder and Managing Partner of Live Oak Merchant Partners, a merchant bank providing capital and advisory services to middle market companies across a wide range of industries. From January 2020 to December 2020, Mr. Wunderlich served as the President and the Chief Financial Officer of Live Oak Acquisition Corp. (NYSE: LOAK), which completed its business combination with Meredian Holdings Group, Inc., a Georgia corporation d/b/a Danimer Scientific (NYSE: DNMR) on December 29, 2020. From August 2020 to October 2021, Mr. Wunderlich also served as the President and the Chief Financial Officer of Live Oak Acquisition Corp. II (NYSE: LOKB) and is a director of Navitas Semiconductors (NASDAQ: NVTS), which completed its business combination with Live Oak Acquisition Corp. II on October 20, 2021. Since January 2021, Mr. Wunderlich has served as President and Chief Financial Officer of Live Oak Mobility Acquisition Corp. (NYSE: LOKM) and Live Oak Crestview Climate Acquisition Corp (NYSE: LOCC) blank check companies, which consummated their initial public offerings of $253,000,000 in March 2021 and $200,000,000 in October 2021, respectively. Live Oak Mobility Acquisition Corp. and Live Oak Crestview Climate Acquisition Corp are currently seeking to consummate an initial business combination. Prior to co-founding Live Oak Merchant Partners, Mr. Wunderlich was the founder and CEO of Wunderlich Securities, Inc., a full-service investment banking and brokerage firm. Under his leadership Wunderlich Securities, Inc. grew from a virtual start-up into a full-service investment banking firm with over 400 employees and over $10 billion of client assets under management. In 2017, Mr. Wunderlich helped lead the merger of Wunderlich Securities, Inc. into B. Riley Financial, Inc. (NASDAQ: RILY). Following the merger, Mr. Wunderlich served as a director of B. Riley Financial, Inc. and as CEO of Wunderlich Securities, Inc. (rebranded B. Riley Wealth) until November 2018. Mr. Wunderlich has also been consistently involved in securities industry organizations throughout his career. From 2016 to 2018 Mr. Wunderlich was a member of the Securities Industry and Financial Markets Association’s (“SIFMA”) National Board of Directors. He was also a founding board member of the American Securities Association from its inception in 2016 until 2018. Mr. Wunderlich also served in various capacities with the Financial Industry Regulatory Authority (FINRA) including serving on the National Advisory Board, serving on the District 5 Committee as both a Member and Chairman, and serving as a Member of the National Membership Council. Since March 2020, Mr. Wunderlich has served as a board member of America’s Lift Chair, LLC, a medical equipment supplier. Since 2005, Mr. Wunderlich has been a member of the Young Presidents’ Organization and participates in the Family Business, Family Office, Financial Services and Entrepreneurship and Innovation Networks. He was inducted into the Society of Entrepreneurs in 2014 and has served as a Director since 2016. He is also the Managing Member of Eighty Park Avenue Partners LLC, a family investment vehicle. Mr. Wunderlich received a B.A.in Economics from the University of Virginia and an M.B.A. from the University of Memphis.
Dr. Zhe Zhang, has been one of our directors since March 2022, is the CEO of Still Waters Green Technology Limited (“Still Waters”), an asset management company based in London, specializing in the development and management of renewable energy and power generation assets. Prior to Still Waters, Mr. Zhang served as an independent director of TKK Symphony Acquisition Corporation from 2018 to 2020. Since May 2013, Dr. Zhang has been a Founding Partner of SIFT Capital, an asset manager licensed by the Securities and Futures Commission (SFC) of Hong Kong and China Securities Regulatory Commission (CSRC). From January 2000 to April 2013, Dr. Zhang was an Executive Director at Goldman Sachs Beijing, where he was a member of the Supervisory Board of Goldman’s Beijing Office and led multiple overseas acquisitions by Chinese state-owned enterprises and listed companies. Before entering the private sector, Dr. Zhang had spent 14 years with the Ministry of Commerce of the People’s Republic of China, including some time as a diplomat stationed in Europe. Dr. Zhang currently sits on the board of China Oxford Scholarship Fund and is involved in the process for scholarship awardee selection every year. Dr. Zhang holds a Ph.D. degree from China University of International Business and Economics, Master degrees from both Peking University (LL.M.) and Oxford University (Magister Juris), and a B.A. degree from Shanghai Institute of Foreign Trade.
Number and Terms of Office of Officers and Directors
Our Board of Directors consists of eight members. Holders of our founder shares have the right to appoint all of our directors prior to consummation of our initial Business Combination and holders of our Public Shares do not have the right to vote on the appointment of directors during such time. These provisions of our amended and restated memorandum and articles of association may only be amended by a special resolution passed by at least 90% of our ordinary shares voting in a general meeting. Each of our directors holds office for a two-year term. Subject to any other special rights applicable to the shareholders, any vacancies on our Board of Directors may be filled by the affirmative vote of a majority of the directors present and voting at the meeting of our Board of Directors or by a majority of the holders of our founder shares.
Our officers are appointed by the Board of Directors and serve at the discretion of the Board of Directors, rather than for specific terms of office. Our Board of Directors is authorized to appoint persons to the offices set forth in our amended and restated memorandum and articles of association as it deems appropriate. Our amended and restated memorandum and articles of association provides that our officers may consist of a Chairman, Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Assistant Secretaries, Treasurer and such other offices as may be determined by the Board of Directors.
Director Independence
The rules of Nasdaq require that a majority of our Board of Directors be independent within one year of our IPO. An “independent director” is defined generally as a person who, in the opinion of the company’s board of directors, has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). Our Board of Directors has determined that Dr. Joong Myung Cho, Nelson Gentiletti, John Kim, Young Min Kim, Gary Wunderlich and Dr. Zhe Zhang are independent directors as defined in Nasdaq listing standards and under applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
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Board Committees
Audit Committee
We have established an audit committee of the Board of Directors. Messrs. Gentiletti, Wunderlich and Kim serve as the members of the audit committee, and Mr. Gentiletti chairs the audit committee Our audit committee is entirely composed of independent directors meeting Nasdaq’s additional requirements applicable to members of the audit committee.
Each member of the audit committee is financially literate and our Board of Directors has determined that Mr. Gentiletti qualifies as an “audit committee financial expert” as defined in applicable SEC rules and has accounting or related financial management expertise.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
| ● | the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us; |
| ● | pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; |
| ● | setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations; |
| ● | obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing: (i) the independent registered public accounting firm’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence; |
| ● | reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and |
| ● | reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. |
Nominating and Corporate Governance Committee
We have established a nominating and corporate governance committee. The members of our nominating and corporate governance are John Kim, Nelson Gentiletti and Dr. Zhe Zhang. John Kim serves as chair of the nominating and corporate governance committee. John Kim, Nelson Gentiletti and Dr. Zhe Zhang meet the independent director standard under Nasdaq listing standards applicable to members of the nominating and corporate governance committee.
The primary purposes of our nominating and corporate governance committee are to assist the Board of Directors in:
| ● | identifying, screening and reviewing individuals qualified to serve as directors and recommending to the Board of Directors candidates for nomination for appointment at the annual general meeting or to fill vacancies on the Board of Directors; |
| ● | developing and recommending to the Board of Directors and overseeing implementation of our corporate governance guidelines; |
| ● | coordinating and overseeing the annual self-evaluation of the Board of Directors, its committees, individual directors and management in the governance of the Company; and |
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| ● | reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary. |
The nominating and corporate governance committee is governed by a charter that complies with the rules of Nasdaq. Our shareholders that wish to nominate a director for appointment to our Board of Directors should follow the procedures set forth in our memorandum and articles of association and the charter of the nominating and corporate governance committee.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the Board of Directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our shareholders.
Compensation Committee
We have established a compensation committee of the Board of Directors. Messrs. Gary Wunderlich, Dr. Joong Myung Cho and Young Min Kim serve as members of our compensation committee, and Gary Wunderlich chairs the compensation committee. Under Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom are independent. Gary Wunderlich, Dr. Joong Myung Cho and Young Min Kim meet the independent director standard under Nasdaq listing standards applicable to members of the compensation committee.
We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
| ● | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation; |
| ● | reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers; |
| ● | reviewing on an annual basis our executive compensation policies and plans; |
| ● | implementing and administering our incentive compensation equity-based remuneration plans; |
| ● | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| ● | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees; |
| ● | if required, producing a report on executive compensation to be included in our annual proxy statement; and |
| ● | reviewing, evaluating, and recommending changes, if appropriate, to the remuneration for directors. |
Notwithstanding the foregoing, as indicated above, no compensation of any kind, including finders, consulting, or other similar fees, will be paid to any of our existing shareholders, officers, directors, or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial Business Combination.
Accordingly, it is likely that prior to the consummation of an initial Business Combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial Business Combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Code of Ethics
We have adopted a code of ethics applicable to our directors, officers and employees (“Code of Ethics”). A copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
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ITEM 11. EXECUTIVE COMPENSATION.
None of our officers or directors have received any cash compensation for services rendered to us. We may elect to make payment of customary fees to members of our Board of Directors for director service. In addition, our Sponsor, officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, officers or directors, or our or their affiliates. Any such payments prior to an initial Business Combination will be made from funds held outside the Trust Account. Other than quarterly audit committee review of such reimbursements, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and officers for their out-of-pocket expenses incurred in connection with our activities on our behalf in connection with identifying and consummating an initial Business Combination. Other than these payments and reimbursements, no compensation of any kind, including finder’s and consulting fees, will be paid by the Company to our Sponsor, officers and directors, or any of their respective affiliates, prior to completion of our initial Business Combination.
After the completion of our initial Business Combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to shareholders, to the extent then known, in the proxy solicitation materials or tender offer materials furnished to our shareholders in connection with a proposed initial Business Combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial Business Combination, because the directors of the post-combination business will be responsible for determining officer and director compensation.
Any compensation to be paid to our officers will be determined, or recommended to the Board of Directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our Board of Directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial Business Combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial Business Combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial Business Combination will be a determining factor in our decision to proceed with any potential Business Combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of the date of this Annual Report, by:
| ● | each
person known by us to be a beneficial owner of more than 5% of our outstanding ordinary shares of, on an as-converted basis; |
| ● | each of our officers and directors; and |
| ● | all of our officers and directors as a group. |
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The following table is based on 11,713,208 ordinary shares outstanding as of the date of this Annual Report, of which 6,210,718 were Class A ordinary shares and 5,502,490 were Class B ordinary shares. Unless otherwise indicated, it is believed that all persons named in the table below have sole voting and investment power with respect to all ordinary shares beneficially owned by them.
Name and Address of Beneficial Owner(1) | Number of Class A Ordinary Shares Beneficially Owned | Percentage of Outstanding Class A Ordinary Shares | Number of Class B Ordinary Shares Beneficially Owned | Percentage of Outstanding Class B Ordinary Shares |
Percentage of Combined Voting Power | |||||||||||||||
| Sung Yoon Woo | - | - | - | - | - | |||||||||||||||
| Sungwoo (Andrew) Hyung | - | - | - | - | - | |||||||||||||||
| Sungsik (Sung) Lee | - | - | - | - | - | |||||||||||||||
| Dr. Gene Young Cho | - | - | - | - | - | |||||||||||||||
| Dr. Joong Myung Cho | - | - | - | - | - | |||||||||||||||
| Nelson Gentiletti | - | - | - | - | - | |||||||||||||||
| John Kim | - | - | - | - | - | |||||||||||||||
| Young Min Kim | - | - | - | - | - | |||||||||||||||
| Gary Wunderlich | - | - | - | - | - | |||||||||||||||
| Dr. Zhe Zhang | - | - | - | - | - | |||||||||||||||
| All executive officers and directors as a group (10 individuals) | - | - | 5,502,290 | 100 | % | |||||||||||||||
| VMCA Sponsor, LLC (2)(3) | - | - | 5,502,490 | 100 | % | 47 | % | |||||||||||||
| Glazer Capital, LLC(4) | 700,530 | 11.3 | % | - | - | 5.98 | % | |||||||||||||
| Westchester Capital Management, LLC(5) | 617,365 | 9.9 | % | - | - | 5.27 | % | |||||||||||||
| First Trust Merger Arbitrage Fund(6) | 614,861 | 9.9 | % | - | - | 5.25 | % | |||||||||||||
| (1) | Unless otherwise noted, the business address of each of our shareholders listed is c/o Valuence Merger Corp. I, 4 Orinda Way, Suite 100D, Orinda, California, 94563. |
| (2) | Interests shown consist solely of founder shares, classified as Class B ordinary shares. Such shares are convertible into Class A ordinary shares at the option of the holder at any time and from time to time and will automatically convert into Class A ordinary shares concurrently with or immediately following the consummation of our initial Business Combination, in each case on a one-for-one basis, subject to adjustment. |
| (3) | VMCA Sponsor, LLC, our Sponsor, is the record holder of 4,302,290 of the shares reported herein and the other 1,200,000 shares reported herein are held of record by Valuence Partners LP. VMCA Sponsor, LLC is the sole general partner of Valuence Partners LP and has voting and investment discretion with respect to the securities held of record by Valuence Partners LP. VMCA Sponsor, LLC is governed and controlled by its co-managing members, Credian Partners, Inc., which Sung Yoon Woo is the sole shareholder, Sungwoo (Andrew) Hyung, Sungsik (Sung) Lee, and Gene Young Cho. Each co-managing member has the powers, rights, obligations and liabilities of a manager pursuant to the Limited Liability Companies Act of the Cayman Islands. Under the so-called “rule of three,” if voting and dispositive decisions regarding an entity’s securities are made by two or more individuals, and a voting and dispositive decision requires the approval of a majority of those individuals, none of the individuals is deemed a beneficial owner of the entity’s securities. This is the situation with regard to VMCA Sponsor, LLC. Based on the foregoing, no director exercises voting or dispositive control over any of the securities held by VMCA Sponsor, LLC. Accordingly, none of them are deemed to have or share beneficial ownership of such shares and, for the avoidance of doubt, each has expressly disclaimed any such beneficial interest to the extent of any pecuniary interest he may have therein, directly or indirectly. Each of our officers, directors and advisors is, directly or indirectly, a member of our Sponsor. |
| (4) | According to a Schedule 13G filed by such persons as a group with the SEC on July 10, 2023, each of (i) Glazer Capital, LLC; and Mr. Paul J. Glazer, share voting and dispositive power and may be deemed the beneficial owner of 700,530 Class A ordinary shares reported above. The business address for this stockholder is 250 West 55th Street, Suite 30A, New York, New York 10019. |
| (5) | According to a Schedule 13G filed by such persons as a group with the SEC on February 6, 2024, each of (i) Westchester Capital Management, LLC; Virtus Investment Advisers, Inc.; and The Merger Fund, share voting and dispositive power and may be deemed the beneficial owner of 592,094 Class A ordinary shares and Westchester Capital Management, LLC has sole voting and dispositive power and may be deemed the beneficial owner of 25,271 Class A ordinary shares. The business address for Westchester Capital Management, LLC, Virtus Investment Advisers, Inc. and The Merger Fund are 100 Summit Drive, Valhalla, NY 10595, One Financial Plaza, Hartford, CT 06103 and 101 Munson Street, Greenfield, MA 01301-9683, respectively. |
| (6) | According to a Schedule 13G filed by such persons as a group with the SEC on February 14, 2024, each of (i) First Trust Merger Arbitrage Fund; (ii) First Trust Capital Management L.P.; (iii) First Trust Capital Solutions L.P.; and (iv) FTCS Sub GP LLC share voting and dispositive power and may be deemed the beneficial owner of 614,861 Class A ordinary shares. The principal business address for First Trust Merger Arbitrage Fund is 235 West Galena Street, Milwaukee, WI 53212. The principal business address for First Trust Capital Management L.P.; First Trust Capital Solutions L.P.; and FTCS Sub GP LLC is 225 W. Wacker Drive, 21st Floor, Chicago, IL 60606. |
| 69 |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Founder Shares
The founder shares are identical to the Public Shares, and holders of founder shares have the same shareholder rights as Public Shareholders, except that (i) holders of the founder shares have the right to vote on the appointment of our directors prior to our initial Business Combination, (ii) the founder shares are subject to certain transfer restrictions, as described in more detail below, and (iii) our initial shareholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (A) to waive their redemption rights with respect to their founder shares and Public Shares in connection with the completion of our initial Business Combination and (B) to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if we fail to complete our initial Business Combination within the Combination Period, although they will be entitled to liquidating distributions from the Trust Account with respect to any Public Shares they hold if we fail to complete our initial Business Combination within such time period and (iv) the founder shares will automatically convert into Class A ordinary shares at the time of our initial Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described herein and in our amended and restated memorandum and articles of association. Our initial shareholders have agreed that, subject to applicable law, neither of our initial shareholders will vote its founder shares to change the size of our Board of Directors or, without the other’s consent, with respect to appointment of directors. If we submit our initial Business Combination to our Public Shareholders for a vote, our initial shareholders, officers and directors have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote any founder shares held by them and any Public Shares purchased during or after the IPO in favor of our initial Business Combination. As a result, in addition to our initial shareholders’ founder shares, we would need only 2,111,095, or 18%, of the 6,210,718 Public Shares outstanding as of the date of this Annual Report to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have our initial Business Combination approved.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of our initial Business Combination on a one-for-one basis, subject to adjustment for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein and in our amended and restated memorandum and articles of association. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the IPO and related to the closing of the Business Combination, the ratio at which Class B ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, 20% of the sum of all ordinary shares outstanding upon completion of the IPO plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with the Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination and any private placement-equivalent warrants issued to our initial shareholders or their affiliates upon conversion of loans made to us). Holders of founder shares may also elect to convert their Class B ordinary shares into an equal number of Class A ordinary shares, subject to adjustment as provided above, at any time. The term “equity-linked securities” refers to any debt or equity securities that are convertible, exercisable or exchangeable for our Class A ordinary shares issued in a financing transaction in connection with our initial Business Combination, including but not limited to a private placement of equity or debt. Securities could be “deemed issued” for purposes of the conversion adjustment if such shares are issuable upon the conversion or exercise of convertible securities, warrants or similar securities.
With certain limited exceptions, the founder shares are not transferable, assignable or salable (except to our officers and directors and other persons or entities affiliated with our initial shareholders, each of whom will be subject to the same transfer restrictions) until the earlier of (A) one year after the completion of our initial Business Combination or (B) subsequent to our initial Business Combination, (x) if the last sale price of the Class A ordinary shares equal or exceed $12.00 per share (as adjusted for share sub-divisions, share capitalizations, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial Business Combination, or (y) the date following the completion of our initial Business Combination on which we complete a liquidation, merger, capital stock or share exchange, reorganization or other similar transaction that results in all of our Public Shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
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Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor, together with Valuence Partners LP, an investment fund affiliated with the Sponsor, purchased an aggregate of 6,666,667 Private Placement Warrants, consisting of 2,666,667 Private Placement Warrants to the Sponsor and 4,000,000 Private Placement Warrants to Valuence Partners LP, at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $10,000,000. On March 8, 2022, in connection with the underwriters’ election to partially exercise their over-allotment option, the Company sold an additional 267,995 Private Placement Warrants to the Sponsor, at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $401,993. Each Private Placement Warrant is exercisable to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the Private Placement Warrants were 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 Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law). There will be no liquidating distributions with respect to the Private Placement Warrants.
The Private Placement Warrants are identical to the Public Warrants except that the Private Placement Warrants, so long as they are held by our Sponsor or its permitted transferees, (i) are not redeemable by us, (except in certain circumstances) (ii) may not (including the Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of our initial Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) are entitled to registration rights. The Private Placement Warrants (including the Class A ordinary shares issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Related Party Loans
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, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants.
On June 5, 2023, the Company issued the Sponsor Convertible Promissory Note in the principal amount of up to $613,207 to the Sponsor for working capital requirements and payment of certain expenses in connection the Company’s Business Combination. The Sponsor Convertible Promissory Note is non-interest bearing and payable on the earlier of (i) the date of the Business Combination or (ii) the winding up of the Company. At any time prior to payment in full of the principal balance of the Sponsor Convertible Promissory Note, the Sponsor may elect to convert all or any portion of the unpaid principal balance into the Conversion Warrants, equal to (x) the portion of the principal amount of the Sponsor Convertible Promissory Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The Sponsor Convertible Promissory Note was accounted for using the bifurcation method and was determined that the conversion feature had no value and was recorded at par value. As of December 31, 2023, $613,207 is outstanding under the Sponsor Convertible Promissory Note.
Also on June 5, 2023, the Company issued the VP Convertible Promissory Note to Valuence Partners LP, an affiliate of the Sponsor, pursuant to which the Company may borrow up to an aggregate maximum amount of $1,650,943. The VP Convertible Promissory Note is non-interest bearing and payable on the earlier of (i) the date of the Business Combination or (ii) the winding up of the Company. At any time prior to payment in full of the principal balance of the VP Convertible Promissory Note, Valuence Partners LP may elect to convert all or any portion of the unpaid principal balance into that number of warrants, each exercisable for one Class A Share of the Company, equal to (x) the portion of the principal amount of the VP Convertible Promissory Note being converted, divided by (y) $1.50, rounded up to the nearest whole number of warrants. The aggregate amount convertible into Conversion Warrants pursuant to the Sponsor Convertible Promissory Note and the VP Convertible Promissory Note shall not exceed $1,500,000. The VP Convertible Promissory Note was accounted for using the bifurcation method, and was determined that the conversion feature had no value and was recorded at par value. As of December 31, 2023, $1,650,941 has been borrowed against VP Convertible Promissory Note.
| 71 |
Registration Rights
The holders of the founder shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans) are entitled to registration rights pursuant to a registration rights agreement. The holders of these securities will be entitled to make up to three demands, excluding short form 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 the completion of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The firm of WithumSmith+Brown, PC (“Withum”) acts as our independent registered public accounting firm. The following is a summary of fees paid to Withum for services rendered.
Audit Fees. During the year ended December 31, 2023 and 2022, fees for our independent registered public accounting firm were approximately $98,800 and $111,030, respectively, for the services Withum performed in connection with our Initial Public Offering, quarterly filings and the audit of our December 31, 2023 and 2022 financial statements included in this Annual Report.
Audit-Related Fees. For the year ended December 31, 2023 and 2022, we did not pay Withum any audit-related fees.
Tax Fees. We did not pay Withum for tax services, planning or advice for the year ended December 31, 2023 and 2022.
All Other Fees. We paid Withum $25,750 for Phase II IPO services for the year ended December 31, 2022.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our Board of Directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
| (a) | The following documents are filed as part of this Form 10-K: |
| (1) | Financial Statements: |
| Report of Independent Registered Public Accounting Firm (PCAOB ID Number 100) | F-2 |
| Financial Statements: | |
| Balance Sheets | F-3 |
| Statements of Operations | F-4 |
| Statements of Changes in Shareholders’ Deficit | F-5 |
| Statements of Cash Flows | F-6 |
| Notes to Financial Statements | F-7 to F-18 |
| (2) | Financial Statement Schedules: |
None.
| 72 |
| (3) | Exhibits |
| * | Filed herewith. |
| ** | Furnished herewith. |
ITEM 16. FORM 10-K SUMMARY
None.
| 73 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 28, 2024
| VALUENCE MERGER CORP. I | ||
| By: | /s/ Sung Yoon Woo | |
| Name: | Sung Yoon Woo | |
| Title: | Chief Executive Officer and Director | |
POWER OF ATTORNEY
The undersigned directors and officers of Valuence Merger Corp. I hereby constitute and appoint each of Sung Yoon Woo and Sungwoo (Andrew) Hyung, with the power to act without the others and with full power of substitution and resubstitution, our hue and lawful attorney-in-fact and agent with full power to execute in our name and behalf in the capacities indicated below any and all amendments to this report and to file the same, with all exhibits and other documents relating thereto and hereby ratify and confirm all that such attorney-in-fact, or such attorney-in-fact’s substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated below.
| Name | Title | Date | ||
| /s/ Sung Yoon Woo | Chief Executive Officer and Director | March 28, 2024 | ||
| Sung Yoon Woo | (Principal Executive Officer) | |||
| /s/ Sungwoo (Andrew) Hyung | Chief Financial Officer and Director | March 28, 2024 | ||
| Sungwoo (Andrew) Hyung | (Principal Financial and Accounting Officer) | |||
| /s/ Dr. Joong Myung Cho | Director | March 28, 2024 | ||
| Dr. Joong Myung Cho | ||||
| /s/ Nelson Gentiletti | Director | March 28, 2024 | ||
| Nelson Gentiletti | ||||
| /s/ John Kim | Director | March 28, 2024 | ||
| John Kim | ||||
| /s/ Young Min Kim | Director | March 28, 2024 | ||
| Young Min Kim | ||||
| /s/ Gary Wunderlich | Director | March 28, 2024 | ||
| Gary Wunderlich | ||||
| /s/ Zhe Zhang | Director | March 28, 2024 | ||
| Zhe Zhang |
| 74 |
VALUENCE MERGER CORP. I
INDEX TO FINANCIAL STATEMENTS
| Report of Independent Registered Public Accounting Firm (PCAOB ID Number |
F-2 |
| Financial Statements: | |
| Balance Sheets | F-3 |
| Statements of Operations | F-4 |
| Statements of Changes in Shareholders’ Deficit | F-5 |
| Statements of Cash Flows | F-6 |
| Notes to Financial Statements | F-7 to F-18 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of
Valuence Merger Corp. I
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Valuence Merger Corp. I (the “Company”) as of December 31, 2023 and 2022, the related statements of operations, statements of changes in shareholders’ deficit and statements of cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, if the Company is unable to raise additional funds to alleviate liquidity needs and complete a business combination by March 3, 2025 then the Company will cease all operations except for the purpose of liquidating. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2021.
March 28, 2024
PCAOB ID Number 100
| F-2 |
VALUENCE MERGER CORP. I
BALANCE SHEETS
| 2023 | 2022 | |||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Deferred offering costs | ||||||||
| Investments and cash held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION, AND SHAREHOLDERS’ (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accrued expenses and accounts payable | $ | $ | ||||||
| Accrued offering costs | ||||||||
| Advance from related party | ||||||||
| Working Capital Loans | ||||||||
| Convertible note - related party | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting fees | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and Contingencies | ||||||||
| Class A ordinary shares subject to possible redemption, $ par value; and shares at redemption value of $ and $per share at December 31, 2023 and 2022, respectively | ||||||||
| SHAREHOLDERS’ DEFICIT | ||||||||
| Preference shares, $ par value; shares authorized; issued and outstanding at December 31, 2023 and 2022 | ||||||||
| Class A ordinary shares, $ par value; shares authorized; issued or outstanding (excluding and shares subject to possible redemption) as of December 31, 2023 and 2022, respectively | ||||||||
| Class B ordinary shares, $ par value; shares authorized; shares issued and outstanding as of December 31, 2023 and 2022 | ||||||||
| Common stock value | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, CLASS A ORDINARY SHARES SUBJECT TO POSSIBLE REDEMPTION, AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
VALUENCE MERGER CORP. I
STATEMENTS OF OPERATIONS
| 2023 | 2022 | |||||||
| For the Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| General and administrative expenses | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income: | ||||||||
| Interest earned on investments and cash held in Trust Account | ||||||||
| Total other income | ||||||||
| Net income | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, Class A ordinary shares | ||||||||
| Basic and diluted net income per share, Class A ordinary shares | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, Class B ordinary shares | ||||||||
| Basic and diluted net income per share, Class B ordinary shares | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
VALUENCE MERGER CORP. I
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2023 AND 2022
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
Class B Ordinary Shares | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance — December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||
| Sale
of | — | |||||||||||||||||||
| Fair value of public warrants, net of transaction costs | — | |||||||||||||||||||
| Forfeiture of Founder Shares | ( | ) | ( | ) | ||||||||||||||||
| Allocated value of transaction costs to Class A ordinary shares | — | ( | ) | ( | ) | |||||||||||||||
| Accretion of Class A ordinary shares subject to possible redemption | — | ( | ) | ( | ) | ( | ) | |||||||||||||
| Net income | — | |||||||||||||||||||
| Balance — December 31, 2022 | ( | ) | ( | ) | ||||||||||||||||
| Balance | ( | ) | ( | ) | ||||||||||||||||
| Accretion of Class A ordinary shares subject to possible redemption | — | ( | ) | ( | ) | |||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance — December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
VALUENCE MERGER CORP. I
STATEMENTS OF CASH FLOWS
| 2023 | 2022 | |||||||
| For the Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Interest earned on investments and cash held in Trust Account | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accrued expenses and accounts payable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment of cash 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, net of underwriting discounts paid | ||||||||
| Proceeds from sale of Private Placement Warrants | ||||||||
| Proceeds from promissory note – related party | ||||||||
| Repayment of promissory note – related party | ( | ) | ||||||
| Proceeds from convertible promissory note | ||||||||
| Proceeds from convertible promissory note - related party | ||||||||
| Payment of offering costs | ( | ) | ( | ) | ||||
| Redemption of ordinary shares | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net Change in Cash | ||||||||
| Cash – Beginning of period | ||||||||
| Cash – End of period | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Offering costs included in accrued offering costs | $ | $ | ||||||
| Deferred underwriting fee payable | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
VALUENCE
MERGER CORP. I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 1 - DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Valuence Merger Corp. I (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on August 27, 2021. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (a “Business Combination”).
The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. However, the Company intends to concentrate its efforts in identifying a potential business combination partner that is based in Asia (excluding China, Hong Kong and Macau) and who is developing breakthrough technology in life sciences and/or advancing a platform for sustainable technology. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2023, the Company had not commenced any operations. All activity for the period from August 27, 2021 (inception) through December 31, 2023 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), and subsequent to the Initial Public Offering, identifying a target company for a Business Combination, which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The
registration statement for the Company’s Initial Public Offering was declared effective on February 28, 2022. On March 3,
2022, the Company consummated the Initial Public Offering of
units (the “Units” and, with respect to the Class A ordinary shares, par value $
per share (the “Class A ordinary shares”), included in the Units being offered, the “Public Shares”). Each
Unit consists of one of the Company’s Class A ordinary shares, par value $ per share (the “Class A ordinary
shares”) and one-half of one redeemable warrant (the “Public Warrants”), with each Public Warrant entitling the
holder thereof to purchase one Class A ordinary share for an initial exercise price of $
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of an aggregate of warrants (each, a “Private
Placement Warrant” and, collectively, the “Private Placement Warrants”) at a price of $ per Private Placement Warrant
in a private placement, consisting of Private Placement Warrants sold to VMCA Sponsor, LLC (f/k/a Valuence Capital, LLC) (the
“Sponsor”) and Private Placement Warrants sold to Valuence Partners LP, an investment fund affiliated with the
Company’s Sponsor generating gross proceeds of $
Following
the closing of the Initial Public Offering on March 3, 2022, an amount of $
On
March 8, 2022, the underwriters partially exercised their over-allotment option, resulting in an additional Units issued for
an aggregate amount of $
Transaction
costs amounted to $
Prior to the consummation of the Initial Public Offering, on October 4,
2021, the Sponsor paid $
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 Warrants, 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-7 |
The Company will provide the holders of the Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of the Business Combination, either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares, for a per share redemption price payable in cash equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares. The per-share amount to be distributed to the Public Shareholders who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
On May 25, 2023, the Company held an extraordinary general meeting of shareholders (the “EGM”), where shareholders approved, among other things, an amendment to the Company’s memorandum and articles of association to extend the date by which the Company must consummate a Business Combination from June 3, 2023 (the “Initial Combination Period”) to September 3, 2023 (the “Extended Date”) and to allow the Company, without another shareholder vote, by resolution of the Board of Directors of the Company (the “Board of Directors”), to elect to further extend the Extended Date in one-month increments up to eighteen (18) additional times, or a total of up to thirty-six (36) months (each, an “Additional Extended Date”) after the IPO, until up to March 3, 2025 (the “Combination Period”). The Company’s shareholders also approved a proposal to amend the Company’s memorandum and articles of association to eliminate (i) the limitation that the Company may not redeem Public Shares in an amount that would cause the Company’s net tangible assets to be less than $ and (ii) the limitation that the Company shall not consummate a business combination unless the Company has net tangible assets of at least $ immediately prior to, or upon consummation of, or any greater net tangible asset or cash requirement that may be contained in the agreement relating to, such business combination. The Company’s shareholders also approved a proposal to provide for the right of a holder of the Company’s Class B ordinary shares to convert such shares into Class A ordinary shares on a one-for-one basis at any time and from time to time prior to the closing of a Business Combination at the election of the holder.
As
of the date of this Annual Report, the Company, with the approval by the Board of Directors, extended the Initial Combination Period
to April 3, 2024 and caused to be deposited an additional $
On June 5, 2023, the Company issued a promissory note (the “Sponsor
Convertible Promissory Note”) in the principal amount of up to $
Also
on June 5, 2023, the Company issued an unsecured convertible promissory note to Valuence Partners LP, an affiliate of the Sponsor
(the “VP Convertible Promissory Note”), pursuant to which the Company may borrow up to an aggregate maximum amount of
$
On
June 14, 2023, the Listing Qualifications Department of the Nasdaq Stock Market, LLC (“Nasdaq”) notified the Company that the Company was not in compliance with Nasdaq’s minimum $
On March 1, 2024, the Company entered into amendment no. 1 (the “IMTA
Amendment”) to the Investment Management Trust Agreement (the “IMTA”) with Continental Stock Transfer & Trust Company,
as trustee. Pursuant to the IMTA Amendment, Section 1(c) of the IMTA was amended to provide that the trustee may, at the direction of
the Company (i) hold funds uninvested, (ii) hold funds in an interest-bearing or non-interest bearing bank demand deposit account at a
U.S. chartered commercial bank with consolidated assets of $
| F-8 |
If a shareholder vote is not required in connection with a Business Combination 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 (“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 holders of the Company’s shares prior to the Initial Public Offering (the “Initial Shareholders”) have 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.
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 15% of the Public Shares without the Company’s prior written consent.
The Initial Shareholders have 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 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 material provision relating to the rights of Public Shareholders, unless the Company provides the Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the Trust Account and not previously released to pay taxes, divided by the number of then issued and outstanding Public Shares.
On
each of September 13, 2023, October 3, 2023, November 3, 2023 and December 1, 2023 the Company caused to be deposited an additional $
Subsequent
to the reporting date on these financial statements, on each of January 1, 2024, February 1, 2024 and March 1, 2024, the Company caused
to be deposited an additional $
As previously disclosed, our amended and restated memorandum and articles of association, as amended, provides the Company the right to extend such date up to eighteen times for an additional one month each time to up to March 3, 2025, provided that the Company cause to be deposited the Contribution in connection with each Additional Extended Date.
The Initial Shareholders have 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 Initial Shareholders 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 ($).
| F-9 |
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 entered into a letter of intent, confidentiality, or other similar agreement for a Business Combination, reduce the amount of funds in the Trust Account to below the lesser of (1) $ per Public Share and (2) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (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.
Liquidity and Going Concern
As
of December 31, 2023, the Company had cash of $
Based on the foregoing, management believes that the Company will not have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. However, the Working Capital Loans, the Sponsor Convertible Promissory Note and the VP Convertible Promissory Note, as defined in Note 5, will provide additional flexibility to continue the identification and pursuit of potential business combination targets. Over this time period, the Company will be using available funds, including those from the Working Capital Loans, for the purpose of paying existing accounts payable, identifying and evaluating prospective Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until March 3, 2025, if the Company, without shareholder approval, elects to further extend such deadline, to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after March 3, 2025, if the Company, without shareholder approval, elects to further extend such deadline.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure 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 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-10 |
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of 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.
Cash and Cash Equivalents
As
of December 31, 2023 and 2022, the Company had cash of $
Cash and Investments Held in Trust Account
At December 31, 2023 and 2022, substantially all of the assets held in the Trust Account were held in money market funds, which are invested primarily in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on investments held in Trust Account in the accompanying statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.
Offering Costs
The Company complies with the requirements of the Accounting Standards Codification (“ASC”) 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering date that are directly related to the Initial Public Offering. Offering costs were charged to temporary equity and permanent equity based on relative fair values, upon the completion of the Initial Public Offering.
Warrant Instruments
The Company accounts for the warrants issued in connection with the Initial Public Offering and Over-Allotment as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB 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 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 issuance costs of temporary equity at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, the warrant issuance costs are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The fair value of the Public Warrants has been estimated using its quoted market price as of December 31, 2023. As the Company’s warrants meet the criteria for equity classification, the Company has accounted for the warrants as equity classified.
| F-11 |
Class A ordinary shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified in temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Public Shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2023 and 2022, the Public Shares are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets.
In
connection with the EGM, shareholders holding Class A ordinary shares exercised their right to redeem their shares for a pro
rata portion of the funds in the Trust Account. As a result, approximately $ million (approximately $ per ordinary share) was
removed from the Trust Account to pay such holders and approximately $
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A ordinary shares to equal the redemption value at the end of each reporting period. This method would view the end of the reporting period as if it were also the redemption date for the security. Increases or decreases in the carrying amount of redeemable Class A ordinary shares are affected by charges against additional paid-in capital and accumulated deficit.
At December 31, 2023 and 2022, the Class A ordinary shares reflected in the balance sheets are reconciled in the following table:
SCHEDULE OF ORDINARY CLASS OF SHARES
| Gross proceeds | $ | |||
| Less: | ||||
| Proceeds allocated to Public Warrants | ( | ) | ||
| Class A ordinary shares issuance costs | ( | ) | ||
| Plus: | ||||
| Accretion of Class A ordinary shares subject to possible redemption | ||||
| Class A ordinary shares subject to possible redemption, at redemption value, December 31, 2022 | ||||
| Less: | ||||
| Redemption of shares | ( | ) | ||
| Plus: | ||||
| Accretion of Class A ordinary shares subject to possible redemption | ||||
| Class A ordinary shares subject to possible redemption, at redemption value, December 31, 2023 | $ |
Income Taxes
ASC
Topic 740, “Income Taxes,” 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 as income tax expense. As of December 31, 2023 and 2022, there were
The Company is considered to be a Cayman Islands exempted 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 for the periods presented. 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 complies with accounting and ordinary disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per ordinary share is computed by dividing net income by the weighted average number of ordinary shares outstanding for the period. The Company has two classes of ordinary shares, which are referred to as Class A ordinary shares and Class B ordinary shares. Income and losses are shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of ordinary shares share pro rata in the loss of the Company. Accretion associated with the redeemable shares of Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
| F-12 |
The
calculation of diluted income per ordinary share does not consider the effect of the warrants issued in connection with the (i) Initial
Public Offering, and (ii) the private placement, since the exercise of the warrants is contingent upon the occurrence of future events.
The warrants are exercisable to purchase
SCHEDULE OF NET LOSS PER COMMON SHARE
| Class A | Class B | Class A | Class B | |||||||||||||
| For
the Year Ended December 31, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Class A | Class B | Class A | Class B | |||||||||||||
| Basic and diluted net income per ordinary share | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of net income, as adjusted | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Basic and diluted weighted average shares outstanding | ||||||||||||||||
| Basic and diluted net income per ordinary share | $ | $ | $ | $ | ||||||||||||
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 Deposit Insurance Corporation coverage limit of $
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 Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows. The Company has not adopted this guidance as of December 31, 2023.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 - PUBLIC OFFERING
Pursuant
to the Initial Public Offering, the Company sold Units, inclusive of Units sold to the underwriters on March 8,
2022, upon the underwriters’ election to partially exercise their over-allotment option, at a purchase price of $ per Unit.
Each Unit consists of one Class A ordinary share and one-half of one redeemable warrant (“Public Warrant”). Each whole Public
Warrant entitles the holder to purchase one Class A ordinary share at an exercise price of $
| F-13 |
NOTE 4 - PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor, together with Valuence Partners LP, an investment fund affiliated with
the Sponsor, purchased an aggregate of Private Placement Warrants, consisting of Private Placement Warrants to VMCA
Sponsor, LLC (f/k/a Valuence Capital, LLC) (the “Sponsor”) and Private Placement Warrants to Valuence Partners
LP, at a price of $ per Private Placement Warrant, for an aggregate purchase price of $
NOTE 5 - RELATED PARTY TRANSACTIONS
Founder Shares
On
October 4, 2021, the Sponsor paid $
Each
of the Sponsor and Valuence Partners LP has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder
Shares until the earliest of
Related Party Loans
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, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside
the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the
Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements
exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without
interest, or, at the lender’s discretion, up to $
| F-14 |
On
June 5, 2023, the Company issued a promissory note (the “Sponsor Convertible Promissory Note”) in the principal amount of
up to $
Also
on June 5, 2023, the Company issued an unsecured convertible promissory note to Valuence Partners LP, an affiliate of the Sponsor
(the “VP Convertible Promissory Note”), pursuant to which the Company may borrow up to an aggregate maximum amount of
$
Advance from Related Party
On
March 7, 2022, in connection with the unexercised Over-Allotment options, Carnegie Park Capital agreed for the Company to retain the
residual $
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 global 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 and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. These financial statements does not include any adjustments that might result from the outcome of this uncertainty.
Management continues to evaluate the impact of ongoing geopolitical instability events, including the Russia-Ukraine conflict and the Israel-Hamas conflict. As a result of the Russia-Ukraine conflict, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of the Russia-Ukraine conflict, Israel-Hamas conflict and related sanctions on the world economy are not determinable as of the date of these financial statements and the specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
Registration Rights
Pursuant to a registration rights agreement entered into on February 28, 2022, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans) will be entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggyback” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
| F-15 |
As
a result of the underwriters’ election to partially exercise their over-allotment option on March 8, 2022, the underwriters are
entitled to a deferred fee of $
Placement Agreement
On November 12, 2022, the Company entered into a Placement Agreement with SVB Securities LLC (“SVB Securities”), Robert W. Baird & Co. Incorporated (“Baird”) and BMO Capital Markets Corp. (“BMO” and, together with SVB Securities and Baird, the “Placement Agents” and each a “Placement Agent”), to act on behalf of the Company.
NOTE 7 - SHAREHOLDERS’ DEFICIT
Preference Shares - The Company is authorized to issue preference shares with a par value of $ per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s Board of Directors. At December 31, 2023 and 2022, there were preference shares issued or outstanding.
Class A ordinary shares - The Company is authorized to issue Class A ordinary shares, with a par value of $ per share. Holders of Class A ordinary shares are entitled to one vote for each share. At December 31, 2023 and 2022, there were and Class A ordinary shares issued and outstanding, which are presented in temporary equity, respectively.
Class B ordinary shares - The Company is authorized to issue Class B ordinary shares, with a par value of $ per share. Holders of the Class B ordinary shares are entitled to one vote for each share. At December 31, 2023 and 2022, there were Class B ordinary shares issued and outstanding. The founder shares included an aggregate of up to shares subject to forfeiture if the over-allotment option is not exercised by the underwriters in full. On March 8, 2022, the underwriters partially exercised their over-allotment option resulting in Class B ordinary shares no longer subject to forfeiture. On April 14, 2022, the over-allotment option expired, and Class B ordinary shares were forfeited.
Holders of Class A ordinary shares and Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of shareholders, except as required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of ordinary shares issued and outstanding upon completion of the Initial Public Offering, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding any forward purchases securities and Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor, its affiliates, Valuence Partners LP or any member of the Company’s management team upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one to one.
Warrants -
At December 31, 2023 and 2022, there were
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class
| F-16 |
A ordinary share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those Class A ordinary shares until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but it will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption
of warrants when the price per Class A ordinary share equals or exceeds $
| ● | in whole and not in part; |
| ● | at
a price of $ |
| ● | upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if,
and only if, the closing price of the Class A ordinary shares equals or exceeds $ |
If and when the Public Warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public 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 Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants.
In
addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities, for capital raising purposes in connection
with the closing of a Business Combination at an issue price or effective issue price of less than $ per Class A ordinary share (with
such issue price or effective issue price to be determined in good faith by the Company’s Board of Directors and, in the case of any such issuance
to the Sponsor or its affiliates or Valuence Partners LP, without taking into account any Founder Shares held by the Sponsor or such
affiliates or Valuence Partners LP, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate
gross proceeds from such issuances represent more than
| F-17 |
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees.
NOTE 8 - FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
At
December 31, 2023, assets held in the Trust Account were comprised of $
At
December 31, 2022, assets held in the Trust Account were comprised of $
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2023 and 2022 indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
SCHEDULE OF FAIR VALUE HIERARCHY VALUATION
| Description | Level | December 31, 2023 | December 31, 2022 | |||||||||
| Assets: | ||||||||||||
| Investments held in Trust Account – U.S. Treasury Securities Money Market Fund | 1 | $ | $ | |||||||||
NOTE 9 - SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, except as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On
each of January 3, 2024, February 2, 2024 and March 1, 2024, the Company caused to be deposited an additional $
On March 1, 2024, the Company, pursuant to the IMTA Amendment, instructed Continental Stock Transfer and Trust Company to hold the initial gross proceeds of the IPO into a bank deposit account. Further, investing in our securities is not intended for persons who are seeking a return on investments in government securities or investment securities.
| F-18 |
Exhibit 31.1
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Sung Yoon Woo, certify that:
1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2023 of Valuence Merger Corp. I;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
| Date: March 28, 2024 | By: | /s/ Sung Yoon Woo |
| Sung Yoon Woo | ||
| Chief Executive Officer and Director (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Sungwoo (Andrew) Hyung, certify that:
1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2023 of Valuence Merger Corp. I;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
| Date: March 28, 2024 | By: | /s/ Sungwoo (Andrew) Hyung |
| Sungwoo (Andrew) Hyung | ||
| Chief Financial Officer and Director (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Annual Report on Form 10-K of Valuence Merger Corp. I (the “Company”) for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sung Yoon Woo, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: March 28, 2024 | By: | /s/ Sung Yoon Woo |
| Sung Yoon Woo | ||
| Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Annual Report of Valuence Merger Corp. I (the “Company”) on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sungwoo (Andrew) Hyung, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: March 28, 2024 | By: | /s/ Sungwoo (Andrew) Hyung |
| Sungwoo (Andrew) Hyung | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 97.1
Valuence Merger Corp. I
POLICY
FOR THE
RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
| A. | OVERVIEW |
In accordance with the applicable rules of The Nasdaq Stock Market (the “Nasdaq Rules”), Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Rule 10D-1”), the Board of Directors (the “Board”) of Valuence Merger Corp. I (the “Company”) has adopted this Policy (the “Policy”) to provide for the recovery of erroneously awarded Incentive-based Compensation from Executive Officers. All capitalized terms used and not otherwise defined herein shall have the meanings set forth in Section H, below.
| B. | RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION |
(1) In the event of an Accounting Restatement, the Company will reasonably promptly recover the Erroneously Awarded Compensation Received in accordance with Nasdaq Rules and Rule 10D-1 as follows:
| (i) | After an Accounting Restatement, the Compensation Committee (if composed entirely of independent directors, or in the absence of such a committee, a majority of independent directors serving on the Board) (the “Committee”) shall determine the amount of any Erroneously Awarded Compensation Received by each Executive Officer and shall promptly notify each Executive Officer with a written notice containing the amount of any Erroneously Awarded Compensation and a demand for repayment or return of such compensation, as applicable. |
| (a) | For Incentive-based Compensation based on (or derived from) the Company’s stock price or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the applicable Accounting Restatement: |
| i. | The amount to be repaid or returned shall be determined by the Committee based on a reasonable estimate of the effect of the Accounting Restatement on the Company’s stock price or total shareholder return upon which the Incentive-based Compensation was Received; and |
| ii. | The Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant documentation as required to the Nasdaq. |
| (ii) | The Committee shall have discretion to determine the appropriate means of recovering Erroneously Awarded Compensation based on the particular facts and circumstances. Notwithstanding the foregoing, except as set forth in Section B(2) below, in no event may the Company accept an amount that is less than the amount of Erroneously Awarded Compensation in satisfaction of an Executive Officer’s obligations hereunder. |
| (iii) | To the extent that the Executive Officer has already reimbursed the Company for any Erroneously Awarded Compensation Received under any duplicative recovery obligations established by the Company or applicable law, it shall be appropriate for any such reimbursed amount to be credited to the amount of Erroneously Awarded Compensation that is subject to recovery under this Policy. |
| (iv) | To the extent that an Executive Officer fails to repay all Erroneously Awarded Compensation to the Company when due, the Company shall take all actions reasonable and appropriate to recover such Erroneously Awarded Compensation from the applicable Executive Officer. The applicable Executive Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Erroneously Awarded Compensation in accordance with the immediately preceding sentence. |
(2) Notwithstanding anything herein to the contrary, the Company shall not be required to take the actions contemplated by Section B(1) above if the Committee (which, as specified above, is composed entirely of independent directors or in the absence of such a committee, a majority of the independent directors serving on the Board) determines that recovery would be impracticable and any of the following two conditions are met:
| (i) | The Committee has determined that the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before making this determination, the Company must make a reasonable attempt to recover the Erroneously Awarded Compensation, documented such attempt(s) and provided such documentation to the Nasdaq; or |
| (ii) | Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and regulations thereunder. |
| C. | DISCLOSURE REQUIREMENTS |
The Company shall file all disclosures with respect to this Policy required by applicable U.S. Securities and Exchange Commission (“SEC”) filings and rules.
| D. | PROHIBITION OF INDEMNIFICATION |
The Company shall not be permitted to insure or indemnify any Executive Officer against (i) the loss of any Erroneously Awarded Compensation that is repaid, returned or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company’s enforcement of its rights under this Policy. Further, the Company shall not enter into any agreement that exempts any Incentive-based Compensation that is granted, paid or awarded to an Executive Officer from the application of this Policy or that waives the Company’s right to recovery of any Erroneously Awarded Compensation, and this Policy shall supersede any such agreement (whether entered into before, on or after the Effective Date of this Policy).
| E. | ADMINISTRATION AND INTERPRETATION |
This Policy shall be administered by the Committee, and any determinations made by the Committee shall be final and binding on all affected individuals.
| 2 |
The Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy and for the Company’s compliance with Nasdaq Rules, Section 10D, Rule 10D-1 and any other applicable law, regulation, rule or interpretation of the SEC or Nasdaq promulgated or issued in connection therewith.
| F. | AMENDMENT; TERMINATION |
The Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary. Notwithstanding anything in this Section F to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule or Nasdaq rule.
| G. | OTHER RECOVERY RIGHTS |
This Policy shall be binding and enforceable against all Executive Officers and, to the extent required by applicable law or guidance from the SEC or Nasdaq, their beneficiaries, heirs, executors, administrators or other legal representatives. The Committee intends that this Policy will be applied to the fullest extent required by applicable law. Any employment agreement, equity award agreement, compensatory plan or any other agreement or arrangement with an Executive Officer shall be deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Executive Officer to abide by the terms of this Policy. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under applicable law, regulation or rule or pursuant to the terms of any policy of the Company or any provision in any employment agreement, equity award agreement, compensatory plan, agreement or other arrangement.
| H. | DEFINITIONS |
For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.
(1) “Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements (a “Big R” restatement), or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (a “little r” restatement).
(2) “Clawback Eligible Incentive Compensation” means all Incentive-based Compensation Received by an Executive Officer (i) on or after the effective date of the applicable Nasdaq rules, (ii) after beginning service as an Executive Officer, (iii) who served as an Executive Officer at any time during the applicable performance period relating to any Incentive-based Compensation (whether or not such Executive Officer is serving at the time the Erroneously Awarded Compensation is required to be repaid to the Company), (iv) while the Company has a class of securities listed on a national securities exchange or a national securities association, and (v) during the applicable Clawback Period (as defined below).
(3) “Clawback Period” means, with respect to any Accounting Restatement, the three completed fiscal years of the Company immediately preceding the Restatement Date (as defined below), and if the Company changes its fiscal year, any transition period of less than nine months within or immediately following those three completed fiscal years.
| 3 |
(4) “Erroneously Awarded Compensation” means, with respect to each Executive Officer in connection with an Accounting Restatement, the amount of Clawback Eligible Incentive Compensation that exceeds the amount of Incentive-based Compensation that otherwise would have been Received had it been determined based on the restated amounts, computed without regard to any taxes paid.
(5) “Executive Officer” means each individual who is currently or was previously designated as an “officer” of the Company as defined in Rule 16a-1(f) under the Exchange Act. For the avoidance of doubt, the identification of an executive officer for purposes of this Policy shall include each executive officer who is or was identified pursuant to Item 401(b) of Regulation S-K or Item 6.A of Form 20-F, as applicable, as well as the principal financial officer and principal accounting officer (or, if there is no principal accounting officer, the controller).
(6) “Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures. Stock price and total shareholder return (and any measures that are derived wholly or in part from stock price or total shareholder return) shall, for purposes of this Policy, be considered Financial Reporting Measures. For the avoidance of doubt, a Financial Reporting Measure need not be presented in the Company’s financial statements or included in a filing with the SEC.
(7) “Incentive-based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting Measure.
(8) “Nasdaq” means The Nasdaq Stock Market.
(9) “Received” means, with respect to any Incentive-based Compensation, actual or deemed receipt, and Incentive-based Compensation shall be deemed received in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-based Compensation award is attained, even if the payment or grant of the Incentive-based Compensation to the Executive Officer occurs after the end of that period.
(10) “Restatement Date” means the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.
Effective as of December 1, 2023.
| 4 |
Exhibit A
ATTESTATION AND ACKNOWLEDGEMENT OF POLICY FOR THE RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
By my signature below, I acknowledge and agree that:
| ● | I have received and read the attached Policy for the Recovery of Erroneously Awarded Compensation of Valuence Merger Corp. I (this “Policy”). | |
| ● | I hereby agree to abide by all of the terms of this Policy both during and after my employment with the Company, including, without limitation, by promptly repaying or returning any Erroneously Awarded Compensation to the Company as determined in accordance with this Policy. | |
| ● | I hereby waive any right to the indemnification, insurance or advancement of expenses by the Company with respect to any Erroneously Awarded Compensation in accordance with Section D of this Policy. |
| Signature: | ||
| Printed Name: | ||
| Date: |