Overview
We are a blank check company incorporated as a Cayman Islands exempted company
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. We have not identified any potential business
combination target and we have not, nor has anyone on our behalf, initiated any
substantive discussions, directly or indirectly, with any potential business
combination target. We intend to effectuate our initial business combination
using cash from the proceeds of the IPO and the Private Placements, our capital
stock, debt or a combination of cash, stock and debt.
On December 7, 2021, we completed our IPO of 16,500,000 Units and the Private
Placement of an aggregate of 8,235,000 private placement warrants. On December
7, 2021, the Underwriter exercised in full the option granted to them by the
Company to purchase up to 2,475,000 additional Units to cover over-allotments,
and we issued an additional 990,000 private placement warrants in the Additional
Private Placement. An aggregate of $193,545,000 in proceeds from the IPO and the
Private Placements has been placed in the Trust Account.
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As of December 31, 2022 and December 31, 2021, we had cash of approximately
$627,628 and $1,050,670 and working capital of approximately $176,944 and
$1,184,733, respectively. We expect to continue to incur significant costs in
the pursuit of our acquisition plans. We cannot assure you that our plans to
raise capital or to complete our initial business combination will be
successful.
Results of Operations
Our only activities from inception through December 31, 2022 were those related
to our formation, the preparation for our Initial Public Offering and, since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any operating revenues to date. We will not generate any operating revenues
until after completion of our initial Business Combination, at the earliest. We
incurred expenses as a result of being a public company (including for legal,
financial reporting, accounting and auditing compliance), as well as for
expenses in connection with searching for a prospective initial Business
Combination.
For the year ended December 31, 2022, had net income of $12,658,706 which
consists of operating expenses of $1,243,831, $11,226,187 of change in fair
value of the warrant liability, $854,167 of interest earned on marketable
securities and $1,822,183 of unrealized gain on marketable securities.
For the period from March 26, 2021 (inception) through December 31, 2021, we had
a net income of $1,742,973, which consists of operating expenses $214,079,
interest earned on marketable securities of $4,933, change in fair value of
warrant liability of $2,432,625 and $480,506 of transaction costs allocated to
the warrant liability.
Liquidity and Capital Resources
On December 7, 2021, we completed our IPO of 16,500,000 Units and the Private
Placement of an aggregate of 8,235,000 private placement warrants, generating
gross proceeds of $173,235,000.
On December 9, 2021, the Underwriter exercised in full the option granted to
them by the Company to purchase up to 2,475,000 additional Units to cover
over-allotments, and we issued an additional 990,000 private placement warrants
in the Additional Private Placement, generating total gross proceeds of
$25,245,000.
Following our IPO, the exercise of the over-allotment option and the sale of the
private placement warrants, a total of $193,545,000 was placed in the Trust
Accounts. We incurred $12,517,335 in transaction costs, including $3,795,000 in
cash underwriting fees, $6,641,250 of deferred underwriting fees, $1,248,100 of
offering costs related to the fair value of the Founder Shares sold to Anchor
Investor, and $832,985 of other offering costs.
For the twelve months ended December 31, 2022, cash used in operating activities
was $411,937. Net income of $12,658,706 was impacted by interest earned on
marketable securities held in the Trust Account of $854,167, change in fair
value of warrant liability of $11,226,187, unrealized gain on marketable
securities held in the Trust Account of $1,822,183 and changes in operating
assets and liabilities which used $831,893 from operating activities.
For the period from March 26, 2021 (inception) through December 31, 2021, cash
used in operating activities was $595,288. Net loss of $1,742,973 was impacted
by interest earned on marketable securities held in the Trust Accounts of
$4,933, change in fair value of warrant liability of $2,432,625, transaction
costs allocable to warrants of $480,506, and changes in operating assets and
liabilities, which used $381,209 of cash from operating activities.
As of December 31, 2022 and December 31, 2021, we had investments of
$196,226,283 and $193,549,933 held in the Trust Accounts, respectively. We
intend to use substantially all of the funds held in the Trust Accounts,
including any amounts representing interest earned on the Trust Accounts (less
taxes paid and deferred underwriting commissions) to complete our initial
Business Combination. We may withdraw interest to pay taxes. During the twelve
months ended December 31, 2022 and the period ended December 31, 2021, we did
not withdraw any interest earned on the Trust Accounts. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to complete
our initial Business Combination, the remaining proceeds held in the Trust
Accounts 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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As of December 31, 2022 and December 31, 2021, we had cash of $627,628 and
$1,050,670 outside of the Trust Accounts. We intend to use the funds held
outside the Trust Accounts primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete our initial Business Combination.
In addition, in order to fund working capital deficiencies or finance
transaction costs in connection with an intended initial business combination,
our sponsor or an affiliate of our sponsor or certain of our officers and
directors may, but are not obligated to, loan us funds as may be required. If we
complete our initial business combination, we may repay such loaned amounts out
of the proceeds of the Trust Account released to us. Otherwise, such loans may
be repaid only out of funds held outside the Trust Account. In the event that
our initial business combination does not close, we may use a portion of the
working capital held outside the Trust Account to repay such loaned amounts but
no proceeds from our Trust Account would be used to repay such loaned amounts.
Up to $1,500,000 of such loans may be convertible into warrants of the
post-business combination company at a price of $1.00 per warrant at the option
of the lender.
Based on the foregoing, management believes that the Company will 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. Over this time period, the Company will be using
these funds for 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.
In connection with the Company's assessment of going concern considerations in
accordance with the authoritative guidance in FASB ASU 2014-15, "Disclosures of
Uncertainties about an Entity's Ability to Continue as a Going Concern." The
Company has until June 6, 2023, 18 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 the specified period. If a Business
Combination is not consummated by June 6, 2023 and the Company decides not to
extend the period of time to consummate a Business Combination, there will be a
mandatory liquidation and subsequent dissolution.
The Company's evaluation of its liquidity condition and the date for mandatory
liquidation and subsequent dissolution raise substantial doubt about the
Company's ability to continue as a going concern one year from the date that
these financial statements are issued. These financial statements do not include
any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
On December 31, 2022, we did not have any obligations, assets or liabilities
that would be considered off-balance sheet arrangements as defined in Item
303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual
obligations.
Contractual Obligations
Administrative Support Agreement
On December 2, 2021, the Company entered into an Administrative Support
Agreement pursuant to which the Company may reimburse an affiliate of the
Sponsor up to an amount of $10,000 per month for office space and secretarial
and administrative support. The Company considered this agreement under the
guidance of ASC 842, Leases, and determined that this agreement did not meet the
definitions of a lease.
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Registration Rights
The holders of the Founder Shares, Private Placement Warrants and any warrants
that may be issued upon conversion of the Working Capital Loans (and in each
case holders of their component securities, as applicable) are entitled to
registration rights pursuant to a registration rights agreement effective
December 2, 2021, which requires the Company to register such securities for
resale (in the case of the Founder Shares, only after conversion to our Class A
ordinary shares). The holders of the majority of these securities are 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 consummation of a Business Combination and rights to require the Company to
register for resale such securities pursuant to Rule 415 under the Securities
Act. The Company will bear the expenses incurred in connection with the filing
of any such registration statements.
Underwriter's Agreement
The Company paid a cash underwriting discount of 2.00% of the gross proceeds of
the IPO, or $3,795,000 due to the exercise of the over-allotment option in full.
In addition, the underwriter will be entitled to a deferred fee of three and a
half percent (3.50%) of the gross proceeds of the IPO, or $6,641,250. The
deferred fee will become payable to the underwriter from the amounts held in the
Trust Account solely in the event that the Company completes a Business
Combination, subject to the terms of the underwriting agreement. The underwriter
has reimbursed the Company for $550,000 for offering expenses. The reimbursement
of these costs has been accounted for as a reduction to offering costs of the
IPO.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with GAAP. The preparation of our financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities in our financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company has identified
the following as its critical accounting policies:
Warrant Liabilities
The Company accounts for the Warrants as either equity-classified or
liability-classified instruments based on an assessment of the specific terms of
the Warrants and the applicable authoritative guidance in Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC") 480,
"Distinguishing Liabilities from Equity" ("ASC 480"), and ASC 815, "Derivatives
and Hedging" ("ASC 815"). The assessment considers whether they are freestanding
financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and meet all of the requirements for equity classification
under ASC 815, including whether the Warrants are indexed to the Company's own
common shares and whether the holders of the Warrants 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 issuance of the
Warrants and as of each subsequent quarterly period end date while the Warrants
are outstanding. For issued or modified warrants that meet all of the criteria
for equity classification, such warrants are required to be recorded as a
component of additional paid-in capital at the time of issuance. For issued or
modified warrants that do not meet all the criteria for equity classification,
such warrants are required to be recorded at their initial fair value on the
date of issuance, and each balance sheet date thereafter. Changes in the
estimated fair value of liability-classified warrants are recognized as a
non-cash gain or loss on the statements of operations.
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Class A Ordinary Shares Subject to Possible Redemption
Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that
feature redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
the Company's control) are classified as temporary equity. At all other times,
Class A ordinary shares is classified as shareholders' equity. Our Class A
ordinary shares feature certain redemption rights that are considered to be
outside of our control and subject to the occurrence of uncertain future events.
Accordingly, at December 31, 2022 and December 31, 2021, 18,975,000 shares of
Class A ordinary shares subject to possible redemption are presented as
temporary equity, outside of the shareholders' deficit section of the Company's
balance sheet.
Net Income Per Ordinary Share
Basic income per ordinary share is computed by dividing net income applicable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period. Consistent with ASC 480, ordinary shares subject
to possible redemption, as well as their pro rata share of undistributed trust
earnings consistent with the two-class method, have been excluded from the
calculation of income per ordinary share for the twelve month period ended
December 31, 2022 and the period from March 26, 2021 (inception) to December 31,
2021. Such shares, if redeemed, only participate in their pro rata share of
trust earnings. Diluted income per share includes the incremental number of
ordinary shares to be issued to settle warrants, as calculated using the
treasury method. For the period from December 31, 2021 to December 31, 2022, the
Company did not have any dilutive warrants, securities or other contracts that
could potentially, be exercised or converted into ordinary shares. As a result,
diluted income per ordinary share is the same as basic income per ordinary share
for all periods presented.
Recently Issued Accounting Standards
In August 2020, the 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. As a smaller reporting company, ASU 2020-06 is
effective January 1, 2024 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
The Company 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 recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company's financial statements.
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. 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 to irrevocably 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 will adopt the new or revised standard at the time public companies adopt the
new or revised standard. This may make comparison of our financial statements
with another emerging growth company that has not opted out of using the
extended transition period difficult or impossible because of the potential
differences in accountant standards used.
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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 controls over financial reporting pursuant to Section 404, (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 the CEO's 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.
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BLUE OCEAN ACQUISITION CORP. 