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 "Financial
Statements and Supplementary Data" of this 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 "Special Note Regarding Forward-Looking Statements," "Risk
Factors" and elsewhere in this Report.
References to the "company," "our," "us" or "we" refer to SK Growth
Opportunities Corporation. The following discussion and analysis of the
company's financial condition and results of operations should be read in
conjunction with the audited financial statements and the notes related thereto
which are included in "Financial Statements and Supplementary Data" of this
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," "Risk Factors"
and elsewhere in this Report.
Cautionary Note Regarding Forward-Looking Statements
This Report includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities 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 SEC filings.
69
--------------------------------------------------------------------------------
Table of Contents
Overview
We are a blank check company incorporated in Cayman Islands on December 8, 2021.
The company was formed for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business
combination with one or more businesses. We are an emerging growth company and,
as such, we are subject to all of the risks associated with emerging growth
companies.
Our sponsor is Auxo Capital Managers LLC, a Delaware limited liability company.
The registration statement for our initial public offering was declared
effective on June 23, 2022. On June 28, 2022, we consummated our initial public
offering of 20,000,000 units, at $10.00 per unit, generating gross proceeds of
$200.0 million, and incurring offering costs of approximately $12.0 million, of
which $7.0 million was for deferred underwriting commissions. The underwriter
was granted a 45-day option from the date of the final prospectus relating to
the initial public offering to purchase up to 3,000,000 additional units to
cover over-allotments, if any, at $10.00 per unit (the "Over-Allotment Option").
On July 20, 2022, pursuant to the underwriter's notice of the partial exercise
of the Over-Allotment Option, we sold an additional 960,000 units, at $10.00 per
unit, generating aggregate additional gross proceeds of $9.6 million to us (the
"Partial Over-Allotment Exercise"). On August 7, 2022, the remaining
Over-Allotment Option expired unexercised.
On August 10, 2022, the company announced that, effective August 15, 2022, the
company's Class A ordinary shares and warrants comprising each issued and
outstanding unit will commence trading separately under the ticker symbols
"SKGR" and "SKGW," respectively. Holders of units may elect to continue to hold
units or separate their units into the component securities.
Simultaneously with the closing of the initial public offering, we consummated
the private placement (the "Private Placement") of 6,600,000 private placement
warrants, at a price of $1.00 per private placement warrant in a private
placement to our sponsor, generating proceeds of $6.6 million. Substantially
concurrently with the closing of the Partial Over-Allotment Exercise, we
completed an additional private placement of 192,000 private placement warrants
to our sponsor (the "Additional Private Placement") at a purchase price of $1.00
per private placement warrant, generating gross proceeds to the company of
$192,000.
In addition, upon the consummation of the initial public offering on June 28,
2022, our sponsor provided us with the first overfunding loan in the amount of
$5.0 million to deposit in the trust account at no interest. In connection with
the Partial Over-Allotment Exercise on July 20, 2022, our sponsor provided us
with the second overfunding loan in the amount of $240,000 to deposit in the
trust account.
Upon the closing of the initial public offering and the Partial Over-Allotment
Exercise, approximately $214.8 million ($10.25 per unit) of net proceeds,
including the net proceeds of the initial public offering, the Partial
Over-Allotment Exercise, the proceeds of the overfunding loans and certain of
the proceeds of the Private Placement and the Additional Private Placement, was
placed in the trust account located in the United States with Continental Stock
Transfer & Trust Company acting as trustee, and invested only 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, as
determined by us, until the earlier of: (i) the completion of a business
combination and (ii) the distribution of the trust account as described below.
We will provide the public shareholders with the opportunity to redeem all or a
portion of their public shares upon the completion of a business combination
either (i) in connection with a shareholders 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 its discretion. The public
shareholders will be entitled to redeem their public shares for a pro rata
portion of the amount then held in the trust account (initially at $10.25 per
public share). The per-share amount to be distributed to public shareholders who
redeem their public shares will not be reduced by the deferred underwriting
commissions we will pay to the underwriter.
70
--------------------------------------------------------------------------------
Table of Contents
We have 18 months from the closing of the initial public offering to consummate
an initial business combination, or December 28, 2023 (or 21 months if we have
executed a definitive agreement relating to an initial business combination). If
we anticipate that we may not be able to consummate the initial business
combination within 18 months (or 21 months, if applicable) from the consummation
of the initial public offering, we may, by resolution of the board of directors
if requested by our sponsor, extend the period of time we will have to
consummate an initial business combination up to two additional three-month
periods (for a total of up to 24 months from the closing of the initial public
offering); subject to our sponsor depositing additional funds into the trust
account as set out below. Notwithstanding the foregoing, in no event will we
have more than 24 months from the closing of the initial public offering to
consummate an initial business combination. The public shareholders will not be
entitled to vote on or redeem their shares in connection with any such
extension. For each such extension, our sponsor (or its designees) must deposit
into the trust account, under the form of loan (the "Extension Loans"), funds
equal to $0.10 per unit, or $2,096,000, for up to an aggregate of $4,192,000, on
or prior to the date of the applicable deadline for each three-month extension.
If we are unable to consummate an 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 earned on the funds held in the trust account (less
taxes payable and up to $100,000 of interest to pay dissolution expenses)
divided by the number of the 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 the remaining shareholders and the 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.
Going Concern Consideration
As of December 31, 2022, we had approximately $515,000 in cash and working
capital deficit of approximately $4.6 million.
Our liquidity needs prior to the consummation of the initial public offering
were satisfied through the payment of $25,000 from our sponsor to purchase
founder shares, and loan proceeds from our sponsor of $300,000 under a
promissory note, dated December 9, 2021 that was later amended on May 5, 2022
(the "Note"). We repaid the Note in full upon closing of the initial public
offering. Subsequent to the consummation of the initial public offering, our
liquidity has been satisfied through the net proceeds from the consummation of
the initial public offering, the overfunding loans and the private placement
held outside of the trust account. In addition, in order to finance transaction
costs in connection with a business combination, our sponsor, members of our
founding team or any of their affiliates may provide us with working capital
loans as may be required (of which up to $1.5 million may be converted at the
lender's option into warrants).
We have incurred and expect to continue to incur significant costs in pursuit of
our acquisition plans. In connection with our assessment of going concern
considerations in accordance with FASB ASC Topic 205-40, "Presentation of
Financial Statements-Going Concern," we have until December 28, 2023 to
consummate a business combination. It is uncertain that we will be able to
consummate a business combination by this time, and if a business combination is
not consummated by this date, then there will be a mandatory liquidation and
subsequent dissolution of our company.
Our management has determined that the liquidity condition and mandatory
liquidation, should a business combination not occur, and potential subsequent
dissolution raises substantial doubt about our ability to continue as a going
concern for a period of time within one year after the date that the financial
statements are issued. Our management plans to address this uncertainty through
the initial business combination as discussed above. There is no assurance that
our plans to consummate the initial business combination will be successful or
successful within 18 months from the closing of the initial public offering
(by December 28, 2023). The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
71
--------------------------------------------------------------------------------
Table of Contents
Risks and Uncertainties
Our management continues to evaluate the impact of the COVID-19 pandemic and
have concluded that while it is reasonably possible that the virus could have a
negative effect on our financial position, results of our operations, and/or
search for a target company, the specific impact is not readily determinable as
of the date of the financial statements. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation commenced a military action with the
country of Ukraine. As a result of this action, various nations, including the
United States, have instituted economic sanctions against the Russian
Federation. Further, the impact of this action and related sanctions on the
world economy are not determinable as of the date of the financial statement.
The specific impact on our financial condition, results of operations, and cash
flows is also not determinable as of the date of these financial statements.
Results of Operations
Our entire activity since inception up to December 31, 2022, related to our
formation, the preparation for the initial public offering, and since the
closing of the initial public offering, the search for a prospective initial
business combination. We will not be generating any operating revenues until the
closing and completion of our initial business combination, at the earliest. We
will generate non-operating income in the form of interest income from the
amount held in the trust account.
For the year ended December 31, 2022, we had a net income of approximately
$2.1 million, which consisted of approximately $2.8 million in income from
investments held in the trust account and change in fair value of derivative
liability for the over-allotment option of approximately $21,000, offset by
approximately $717,000 in general and administrative expenses (of which $60,000
was for administrative expenses for related party).
For the year ended December 31, 2021, we had a net loss of approximately
$34,000, which consisted solely of and administrative expenses.
Contractual Obligations
Shareholder and Registration Rights
Pursuant to a registration and shareholder rights agreement entered into on
June 23, 2022, the holders of founder shares, private placement warrants,
Class A ordinary shares underlying the private placement warrants and any
warrants that may be issued upon conversion of working capital loans and
extension 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 working capital loans and extension loans), have registration rights to
require us to register a sale of any of the securities held by them. These
holders are entitled to certain demand and "piggy-back" registration rights.
However, the registration rights agreement provides that we will not be required
to effect or permit any registration or cause any registration statement to
become effective until termination of the applicable lock-up period. We will
bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting and Advisory Agreement
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
$4.0 million in the aggregate, paid upon the closing of the initial public
offering. An additional fee of $0.35 per unit, or approximately $7.0 million in
the aggregate will be payable to the underwriter for deferred underwriting
commissions. The deferred fee will become payable to the underwriter from the
amounts held in the trust account solely in the event that we complete a
business combination, subject to the terms of the underwriting agreement.
We also engaged Cohen & Company Capital Markets ("CCM") to provide consulting
and advisory services to us in connection with the initial public offering, for
which it would receive: (i) an advisory fee of $400,000, paid upon the closing
of the initial public offering, and (ii) a deferred advisory fee of $700,000
(payable solely in the event that we complete the initial business combination.
The underwriter has reimbursed a portion of their fees to cover for the fees
payable to CCM.
72
--------------------------------------------------------------------------------
Table of Contents
In connection with the consummation of the Partial Over-Allotment Exercise, the
underwriter and CCM were entitled to an additional fee of $192,000, paid upfront
on July 20, 2022, and $240,000 in deferred underwriting and advisory
commissions, (net of the reimbursement from the underwriter to cover for the
fees payable to CCM).
Administrative Services Agreement
On June 23, 2022, we entered into an agreement with an affiliate of our sponsor,
pursuant to which we agreed to pay such affiliate a total of $10,000 per month
for secretarial and administrative support services provided to us through the
earlier of consummation of the initial business combination and our liquidation.
We incurred $60,000 in such fees included as general and administrative
expenses to-related party on the accompanying statements of operations for both
the year ended December 31, 2022. As of December 31, 2022, we fully paid for
such services.
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. The
audit committee will review on a quarterly basis all payments that were made to
our sponsor, officers, directors or their affiliates and will determine which
expenses and the amount of expenses that will be reimbursed. There is no cap or
ceiling on the reimbursement of out-of-pocket expenses incurred by such persons
in connection with activities on our behalf.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("GAAP") 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 the reported amounts of
income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have not identified any critical accounting
estimates.
73
--------------------------------------------------------------------------------
Table of Contents
Recent Accounting Pronouncements
Our management do not believe that any recently issued, but not yet effective,
accounting standards updates, if currently adopted, would have a material effect
on the accompanying financial statements.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
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" under
the JOBS Act and are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We elected 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 a result, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
As an "emerging growth company", we are not 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 initial public offering or until we are no longer an
"emerging growth company," whichever is earlier.
74
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source Glimpses
SK GROWTH OPPORTUNITIES CORPORATION 