References to the "Company," "ASCB," "our," "us" or "we" refer to A SPAC II
Acquisition Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited interim condensed financial statements and the notes thereto
contained elsewhere in this report. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
U.S. Securities and Exchange Commission ("SEC") filings.
Overview
We are a blank check company incorporated in the British Virgin Islands as a
business company and incorporated for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses ("Business Combination"). We have not
selected any specific Business Combination target and we have not, nor has
anyone on our behalf, initiated any substantive discussions, directly or
indirectly, with any Business Combination target. We intend to effectuate our
initial Business Combination using cash from the proceeds of the initial public
offering (the "IPO") and the private placement of the private placement warrants
("Private Placement"), the proceeds of the sale of our securities in connection
with our initial Business Combination, our shares, debt or a combination of
cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
17
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through September 30, 2022 were
organizational activities and those necessary to prepare, and consummate, for
the IPO. We do not expect to generate any operating revenues until after the
completion of our initial Business Combination.
We expect to generate non-operating income in the form of interest income on
marketable securities held after the IPO. We expect that we will incur increased
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses in
connection with searching for, and completing, a Business Combination.
For the three months ended September 30, 2022, we had a net income of $787,351,
which consisted of general and administrative expenses of $134,472, offset by
income earned on investment held in Trust Account of $921,823.
For the period from June 28, 2021 (inception) through September 30, 2021 we had
a net loss of $2,760 which consisted of formation costs.
Liquidity and Capital Resources
As previously disclosed on a Current Report on Form 8-K dated May 6, 2022, on
May 5, 2022, A SPAC II Acquisition Corp. (the "Company") consummated the IPO of
20,000,000 units (the "Units") which includes the partial exercise of the
over-allotment option granted to the underwriters. Each Unit consists of one
ordinary share ("Ordinary Share"), one-half of one redeemable warrant
("Warrant") entitling its holder to purchase one Ordinary Share at a price of
$11.50 per full share and one right ("Right") to receive one-tenth of one Class
A ordinary share upon the consummation of an initial Business Combination. The
Units were sold at an offering price of $10.00 per Unit, generating gross
proceeds of $200,000,000.
As previously disclosed on a Current Report on Form 8-K dated May 6, 2022, on
May 5, 2022, simultaneously with the closing of the IPO, the Company consummated
the Private Placement with A SPAC II (Holdings) Corp., the Company's sponsor
("Sponsor"), of 8,966,000 private placement warrants (the "Private Placement
Warrants") at a price of $1.00 per Private Placement Warrant, generating total
proceeds of $8,966,000. The Private Placement Warrants are identical to the
public warrants sold in the IPO, as set forth in the Underwriting Agreement,
except as described in the Warrant Agreement.
As of May 5, 2022, a total of $203,500,000 ($10.175 per Unit) of the net
proceeds from the IPO and the Private Placement were deposited in a trust
account established for the benefit of the Company's public shareholders (the
"Trust Account"). We intend to use substantially all of the funds held in the
Trust Account, to acquire a target business and to pay our expenses relating
thereto. To the extent that our capital stock is used in whole or in part as
consideration to effect a Business Combination, the remaining funds held in the
Trust Account will be used as working capital to finance the operations of the
target business. Such working capital funds could be used in a variety of ways
including continuing or expanding the target business' operations, for strategic
acquisitions and for marketing, research and development of existing or new
products. Such funds could also be used to repay any operating expenses or
finders' fees which we had incurred prior to the completion of our Business
Combination if the funds available to us outside of the Trust Account were
insufficient to cover such expenses.
For the three months and nine months ended September 30, 2022, cash used in
operating activities was $66,321 and $386,875, respectively.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $204,635,440 consisting of securities held in a treasury trust fund that
invests in United States government treasury bills, bonds or notes with a
maturity of 185 days or less. Interest income on the balance in the Trust
Account may be used by us to pay taxes. Through September 30, 2022, we did not
withdraw any interest earned on the Trust Account to pay our taxes. We intend to
use substantially all of the funds held in the Trust Account, to acquire a
target business and to pay our expenses relating thereto. To the extent that our
capital stock is used in whole or in part as consideration to effect a business
combination, the remaining funds held in the Trust Account will be used as
working capital to finance the operations of the target business. Such working
capital funds could be used in a variety of ways including continuing or
expanding the target business' operations, for strategic acquisitions and for
marketing, research and development of existing or new products. Such funds
could also be used to repay any operating expenses or finders' fees which we had
incurred prior to the completion of our business combination if the funds
available to us outside of the Trust Account were insufficient to cover such
expenses.
As of September 30, 2022, we had cash of $1,115,553 outside the Trust Account.
Until consummation of the business combination, we intend to use the funds held
outside the Trust Account for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the business combination.
18
If our estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating a business combination are less than the
actual amount necessary to do so, we may have insufficient funds available to
operate our business prior to our business combination. In this event, our
officers, directors or their affiliates may, but are not obligated to, loan us
funds as may be required. If we consummate an initial business combination, we
would repay such loaned amounts out of the proceeds of the Trust Account
released to us upon consummation of the business combination. In the event that
a business combination does not close, we may use a portion of the working
capital held outside the Trust Account to repay such loaned amounts, but no
proceeds from our Trust Account would be used for such repayment. The terms of
such loans by our initial shareholders, officers and directors, if any, have not
been determined and no written agreements exist with respect to such loans.
Moreover, we may need to obtain additional financing either to complete our
Business Combination or because we become obligated to redeem a significant
number of our public shares upon consummation of our Business Combination, in
which case we may issue additional securities or incur debt in connection with
such Business Combination. Subject to compliance with applicable securities
laws, we would only complete such financing simultaneously with the completion
of our Business Combination. If we are unable to complete our Business
Combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the Trust Account. In addition,
following our Business Combination, if cash on hand is insufficient, we may need
to obtain additional financing in order to meet our obligations.
As of September 30, 2022, the Company had cash of $1,115,553 and a working
capital of $1,261,674. The Company has 15 months from the closing of the IPO 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.
The Company has incurred and expects to continue to incur significant
professional costs to remain as a publicly traded company and to incur
significant transaction costs in pursuit of the consummation of a business
combination. In connection with the Company's assessment of going concern
considerations in accordance with Financial Accounting Standard Board's
Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about
an Entity's Ability to Continue as a Going Concern," management has determined
that these conditions raise substantial doubt about the Company's ability to
continue as a going concern. The management's plan in addressing this
uncertainty is through the Working Capital Loans, as defined below (see Note 5).
In addition, if the Company is unable to complete a business combination within
the Combination Period (by August 5, 2023), the Company's board of directors
would proceed to commence a voluntary liquidation and thereby a formal
dissolution of the Company. There is no assurance that the Company's plans to
consummate a business combination will be successful within the Combination
Period. As a result, management has determined that such additional condition
also raises substantial doubt about the Company's ability to continue as a going
concern. The financial statement does not include any adjustments that might
result from the outcome of this uncertainty.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non- financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than described below.
The underwriters are entitled to a deferred fee of 3.5% of the gross proceeds of
the IPO and over-allotment, or $7,000,000. The deferred fee will be payable in
cash to the underwriters solely in the event that we complete a Business
Combination from the amounts held in the Trust Account, subject to the terms of
the underwriting agreement.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
19
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity". Ordinary Shares subject to
mandatory redemption are classified as a liability instrument and is measured at
fair value. Conditionally redeemable ordinary shares (including ordinary shares
that feature redemption rights that is either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely
within the Company's control) is classified as temporary equity. At all other
times, ordinary shares are classified as stockholders' equity. The Company's
Class A ordinary shares feature certain redemption rights that are considered to
be outside of the Company's control and subject to the occurrence of uncertain
future events. Accordingly, Class A Ordinary Shares subject to possible
redemption will be presented at redemption value as temporary equity, outside of
the shareholders' equity section of the Company's balance sheet.
The Company recognizes changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable ordinary shares to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of shares of ordinary shares are affected by charges against
additional paid in capital or accumulated deficit if additional paid in capital
equals to zero.
Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC
260, Earnings Per Share. Net loss per share is computed by dividing net loss by
the weighted average number of ordinary shares outstanding during the period,
excluding ordinary shares subject to forfeiture by the Sponsor.
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 ASC 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 the Company's own ordinary shares and whether the
instrument holders could potentially require "net cash settlement" in a
circumstance outside of the Company's control, among other conditions for equity
classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the instruments are outstanding. We determined
that upon further review of the warrant agreement, management concluded that the
Public Warrants and Private Placement Warrants issued pursuant to the warrant
agreement qualify for equity accounting treatment.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2022 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06
would have on its financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the Company's financial statements.
20
© Edgar Online, source Glimpses