References in this report (this "Quarterly Report") to "we," "us," "our" or the
"Company" refer to Innovative International Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Innovative International Sponsor I LLC. The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited condensed financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that
are not historical facts and involve risks and uncertainties that could cause
actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding our
financial position, business strategy and the plans and objectives of management
for future operations, are forward-looking statements. Words such as "expect,"
"believe," "anticipate," "intend," "estimate," "seek" and variations and similar
words and expressions are intended to identify such forward-looking statements.
Such forward-looking statements relate to future events or future performance,
but reflect management's current beliefs, based on information currently
available. A number of factors could cause actual events, performance or results
to differ materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of our
Annual Report on Form 10-K filed with the U.S. Securities and Exchange
Commission (the "SEC"). Our securities filings can be accessed on the EDGAR
section of the SEC's website at www.sec.gov. Except as expressly required by
applicable securities law, we disclaim any intention or obligation to update or
revise any forward-looking statements whether as a result of new information,
future events or otherwise.
Overview
We are a blank check company incorporated as a Cayman Island exempted company on
March 22, 2021. We were formed for the purpose of effecting a merger, share
exchange, asset acquisition, share purchase, reorganization or other similar
business transaction with one or more businesses that we have not yet identified
(a "Business Combination").
As of September 30, 2022, we had not commenced any operations. All activity for
the period from March 22, 2021 (inception) through September 30, 2022, relates
our formation, the IPO, and subsequent to the IPO, identifying a target company
for a Business Combination. We will not generate any operating revenues until
after the completion of our Business Combination, at the earliest. We will
generate non-operating income in the form of interest income on cash and cash
equivalents from the proceeds derived from the IPO. 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.
Our sponsor is Innovative International Sponsor I LLC, a Delaware limited
liability company (the "Sponsor").
Our registration statement for the IPO was declared effective on October 26,
2021 (the "Effective Date"). On October 29, 2021, we consummated our IPO of
23,000,000 units (the "Units" and, with respect to the ordinary shares included
in the Units being offered, the "Public Shares") at $10.00 per Unit (which
included the full exercise of the underwriters' over-allotment option) and the
sale of 1,060,000 shares (the "Private Placement Shares") at a price of $10.00
per Private Placement Share in a private placement to our Sponsor, Cohen &
Company Capital Markets, a division of J.V.B. Financial Group, LLC ("CCM"), and
Cantor Fitzgerald & Co. ("Cantor"), the representative of the underwriters that
closed simultaneously with the Public Offering.
Transaction costs amounted to $16,664,843 consisting of $3,173,059 of
underwriting commissions, $12,100,000 of deferred underwriting commissions and
$1,391,784 of other cash offering costs and were charged to equity.
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Our initial Business Combination must occur with one or more operating
businesses or assets with an aggregate fair market value equal to at least 80%
of the assets held in the Trust Account (excluding the deferred underwriting
commissions and taxes payable on the income earned on the Trust Account) at the
time of our signing a definitive agreement in connection with the initial
Business Combination. However, we will only complete such Business Combination
if the post-transaction company owns or acquires 50% or more of the issued and
outstanding voting securities of the target or otherwise acquires a controlling
interest in the target business sufficient for it not to be required to register
as an investment company under the Investment Company Act of 1940, (the
"Investment Company Act"). There is no assurance that we will be able to
complete a Business Combination successfully.
Upon the closing of the Public Offering, management deposited $234,600,000 or
$10.20 per Unit sold in the Public Offering, including a portion of the proceeds
of the Private Placement Shares, into a Trust Account ("Trust Account") that
will be invested only in U.S. government treasury obligations with a maturity of
185 days or less or in money market funds meeting certain conditions under Rule
2a-7 under the Investment Company Act that invest only in direct U.S. government
treasury obligations. Except with respect to interest earned on the funds held
in the Trust Account that may be released to us to pay our taxes, if any (less
up to $100,000 interest to pay dissolution expenses), the proceeds from the
Public Offering and the sale of the Private Placement Shares deposited into the
Trust Account will not be released from the Trust Account until the earliest of
(i) the completion of our initial Business Combination, the redemption of our
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 allow redemption in connection with
the initial Business Combination or to redeem 100% of the public shares if we do
not complete our initial Business Combination within 15 months from the closing
of the Public Offering or (B) with respect to any other provision relating to
shareholders' rights or pre-Business Combination activity and (iii) the
redemption of all of the public shares if the we are unable to complete its
initial Business Combination within 15 months from the closing of the Public
Offering, subject to applicable law.
We will have until January 29, 2023 to complete the Business Combination (the
"Combination Period"). If we are unable to consummate our 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
10 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 issued and 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 the 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 the warrants, which will expire worthless if we
fail to complete our initial Business Combination within the Combination Period.
Risks and Uncertainties
In February 2022, Russia 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 Russia. The invasion of
Ukraine may result in market volatility that could adversely affect our stock
price and our search for a target company. Other recent events contributing to a
climate of geopolitical uncertainty include rising tensions between China and
Taiwan. Further, the impact of this action and related sanctions on the world
economy are not determinable as of the date of these unaudited condensed
financial statements and the specific impact on our financial condition, results
of operations, and cash flows is also not determinable as of the date of these
unaudited condensed financial statements.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has 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 unaudited condensed financial
statements. The unaudited condensed financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Recent increases in inflation and interest rates in the United States and
elsewhere may lead to increased price volatility for publicly traded securities,
including ours, and may lead to other national, regional and international
economic disruptions, any of which could make it more difficult for us to
consummate an initial business combination.
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On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its shareholders from which
shares are 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 been given authority to provide regulations and
other guidance to carry out and prevent the abuse or avoidance of the excise
tax.
Any redemption or other repurchase that occurs after December 31, 2022, in
connection with a Business Combination, extension vote or otherwise, may be
subject to the excise tax. Whether and to what extent the Company would be
subject to the excise tax in connection with a Business Combination, extension
vote or otherwise would depend on a number of factors, including (i) the fair
market value of the redemptions and repurchases in connection with the Business
Combination, extension or otherwise, (ii) the structure of a Business
Combination, (iii) the nature and amount of any "PIPE" or other equity issuances
in connection with a Business Combination (or otherwise issued not in connection
with a Business Combination but issued within the same taxable year of a
Business Combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by the
Company and not by the redeeming holder, the mechanics of any required payment
of the excise tax have not been determined. The foregoing could cause a
reduction in the cash available on hand to complete a Business Combination and
in the Company's ability to complete a Business Combination.
Results of Operations and Known Trends or Future Events
Through September 30, 2022, we have neither engaged in any operations nor
generated any revenues to date. Our only activities since inception have been
organizational activities and those necessary to prepare for the IPO and
subsequent to the completion of the IPO, customary business conduct relating to
finding a target for the Business Combination. We will not generate any
operating revenues until after completion of our initial Business Combination.
We expect to generate non-operating income in the form of interest income on
cash and cash equivalents after this offering. There has been no significant
change in our financial or trading position and no material adverse change has
occurred since the date of our audited financial statements. We expect to 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. We expect our expenses to increase substantially after the entering
into an enforceable business combination agreement.
For the three months ended September 30, 2022, we had a net loss of $1,348,845,
which consists of formation and operating costs of $2,407,767, offset by
interest income from bank of $16 and interest earned on marketable securities
held in the Trust Account of $1,058,906.
For the nine months ended September 30, 2022, we had a net loss of $4,274,946,
which consists of formation and operating costs of $5,674,326, offset by
interest income from bank of $55 and interest earned on marketable securities
held in the Trust Account of $1,399,325.
For the period from March 22, 2021 (inception) through September 30, 2021, we
had a net loss of $15,859, which consisted of formation and operating costs. For
the three months ended September 30, 2021, no net income or loss was recognized.
Liquidity and Capital Resources
As of September 30, 2022, we had cash of $85,969 and a working capital deficit
of $4,389,396. Following the consummation of the IPO on October 29, 2021, we had
$2,800,472 of cash available to us, temporarily being held in the Sponsor's bank
account, and working capital of $1,210,696. We opened our operating bank account
and the $2,800,472 was transferred to us from the Sponsor's account on November
1, 2021.
Our liquidity needs were satisfied prior to completion of IPO through advances
on behalf of us of $25,000 from the sale of the Founder Shares to our sponsor
and up to $300,000 in loans from our sponsor under an unsecured promissory note.
As of October 29, 2021, we had borrowed $122,292 under the unsecured promissory
note. The balance was repaid on November 5, 2021. We received net proceeds
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from (i) the sale of the units in the IPO, after deducting offering expenses of
approximately $550,000 and underwriting commissions of $4,000,000 (excluding
deferred underwriting commissions of $12,100,000 since the underwriters'
over-allotment option was exercised in full), and (ii) the sale of the private
placement shares for a purchase price of $10,600,000 in the aggregate amount of
$236,050,000 since the underwriters' over-allotment option was exercised in
full. Of this amount, $234,600,000, including $12,100,000 in deferred
underwriting commissions, was deposited into a non-interest-bearing trust
account. The funds in the trust account were invested only in specified U.S.
government treasury bills or in specified money market funds. The remaining
$1,450,000 is not held in the trust account.
On September 7, 2022, the Company issued an unsecured promissory note (the
"Note"), in the amount of up to $500,000 to the Sponsor. The Note bears no
interest and the principal balance is payable on the date of the consummation of
the Company's initial Business Combination (the "Maturity Date"). On or before
the Maturity Date, the Sponsor has the option to convert all or any portion of
the principal outstanding under the Note into Class A ordinary shares of the
Company ("Working Capital Shares") at a conversion price of $10.00 per share.
The terms of the Working Capital Shares, if any, would be identical to the terms
of the Private Placement Shares issued by the Company at the time of its IPO.
The Note is subject to customary events of default, the occurrence of certain of
which automatically triggers the unpaid principal balance of the Note and all
other sums payable with regard to the Note becoming immediately due and payable.
The conversion feature included in the note does not meet definition of the
derivative instrument.
We intend to use substantially all of the funds held in the trust account,
including any amounts representing interest earned on the trust account (which
interest shall be net of taxes payable and excluding deferred underwriting
commissions) to complete our initial business combination. We may withdraw
interest to pay taxes, if any. Our annual income tax obligations will depend on
the amount of interest and other income earned on the amounts held in the trust
account. To the extent that our ordinary shares or debt is used, in whole or in
part, as consideration to complete our initial business combination, the
remaining proceeds held in the trust account will be used as working capital to
finance the operations of the target business or businesses, make other
acquisitions and pursue our growth strategies.
After completion of our IPO, we had available to us $1,450,000 of proceeds held
outside the trust account. We will use these funds 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,
structure, negotiate and complete a business combination, and to pay taxes to
the extent the interest earned on the trust account is not sufficient to pay our
taxes.
In addition, we could use a portion of the funds not being placed in trust to
pay commitment fees for financing, fees to consultants to assist us with our
search for a target business or as a down payment or to fund a "no-shop"
provision (a provision designed to keep target businesses from "shopping" around
for transactions with other companies or investors 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 an agreement where we paid for the right to receive exclusivity
from a target business, the amount that would be used as a down payment or to
fund a "no-shop" provision would be determined based on the terms of the
specific business combination and the amount of our available funds at the time.
Our forfeiture of such funds (whether as a result of our breach or otherwise)
could result in our not having sufficient funds to continue searching for, or
conducting due diligence with respect to, prospective target businesses.
Going Concern
We anticipate that the $85,969 of cash held outside of the Trust Account as of
September 30, 2022, might not be sufficient to allow the us to operate for at
least the next 12 months from the issuance of the unaudited condensed financial
statements, assuming that a Business Combination is not consummated during that
time. Until consummation of our Business Combination, we will be using the funds
not held in the Trust Account, and any additional Working Capital Loans from the
initial shareholders, the Company's officers and directors, or their respective
affiliates, 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.
None of the sponsor, officers or directors are under any obligation to advance
funds to, or to invest in, the Company. If we are unable to raise additional
capital, we may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of our business plan, and reducing overhead expenses. We
cannot provide any assurance that new financing will be available to it on
commercially acceptable terms, if at all. These conditions raise substantial
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doubt about the Company's ability to continue as a going concern for a
reasonable period of time, which is considered to be one year from the issuance
date of the unaudited condensed financial statements. 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," the Company has until January 29, 2023 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 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 January 29,
2023.
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 and December 31, 2021.
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 as described below.
On April 17, 2021, our Sponsor agreed to loan us up to $300,000 to be used for a
portion of the expenses of the IPO. These loans are non-interest bearing,
unsecured and are due at the earlier of December 31, 2021, or the closing of the
IPO. A portion of the loan was be repaid upon the closing of the IPO out of the
offering proceeds not held in the Trust Account. As of September 30, 2022 and
December 31, 2021, we had no borrowings under the promissory note.
On September 7, 2022, we have issued an unsecured promissory note in the amount
of up to $500,000 to the Sponsor. The Note bears no interest and the principal
balance is payable on the date of the consummation of the Company's initial
Business Combination (the "Maturity Date"). On or before the Maturity Date, the
Sponsor has the option to convert all or any portion of the principal
outstanding under the Note into Class A ordinary shares of the Company ("Working
Capital Shares") at a conversion price of $10.00 per share. The terms of the
Working Capital Shares, if any, would be identical to the terms of the Private
Placement Shares issued by the Company at the time of its IPO. The Note is
subject to customary events of default, the occurrence of certain of which
automatically triggers the unpaid principal balance of the Note and all other
sums payable with regard to the Note becoming immediately due and payable. The
conversion feature included in the note does not meet definition of the
derivative instrument.
Certain Relationships and Related Party Transactions
On April 17, 2021, our sponsor paid $25,000 to cover certain of our offering
costs in exchange for 7,187,500 founder shares. On September 20, 2021, we
effected a dividend of 1.12 shares for each outstanding Class B ordinary share,
resulting in an aggregate of 8,050,000 founder shares being held by our sponsor
(up to 1,060,000 shares of which are subject to forfeiture by our sponsor
depending on the extent to which the underwriters' over-allotment option is
exercised), resulting in a purchase price of approximately $0.003 per share. The
purchase price of the founder shares was determined by dividing the amount of
cash contributed to us by the number of founder shares issued. As such, our
initial shareholders collectively own approximately 25% of our issued and
outstanding shares (excluding any shares underlying any units our initial
shareholders may purchase in the IPO and the private placement shares our
sponsor intends to purchase in the private placement) after the IPO. None of our
sponsor, officers, and directors intends to purchase any units after the IPO.
We are reimbursing our sponsor for office space, secretarial and administrative
services provided to members of our management team, in the amount of $10,000
per month. Upon completion of our initial business combination or our
liquidation, we will cease paying these monthly fees.
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Our sponsor, officers and directors, advisers, and any of their respective
affiliates, will be reimbursed for any bona-fide, documented 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 by us to our sponsor, officers, directors, advisers, or
any of their respective 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.
Prior to the closing of the IPO, our sponsor has agreed to loan us up to
$300,000 to be used for a portion of the expenses of the IPO. As of September
30, 2022 and December 31, 2021, we had $300,000 and no borrowings under the
promissory note with our sponsor.
On September 7, 2022, we have issued an unsecured promissory note (the "Note"),
in the amount of up to $500,000 to the Sponsor. The Note bears no interest and
the principal balance is payable on the date of the consummation of the
Company's initial business combination (the "Maturity Date"). On or before the
Maturity Date, the Sponsor has the option to convert all or any portion of the
principal outstanding under the Note into Class A ordinary shares of the Company
("Working Capital Shares") at a conversion price of $10.00 per share. The terms
of the Working Capital Shares, if any, would be identical to the terms of the
private placement shares issued by the Company at the time of its IPO. The Note
is subject to customary events of default, the occurrence of certain of which
automatically triggers the unpaid principal balance of the Note and all other
sums payable with regard to the Note becoming immediately due and payable.
In addition, in order to 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 would repay such loaned amounts. 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 for such repayment. Up to $1,500,000 of such
loans may be convertible into Class A ordinary shares at a price of $10.00 per
share, at the option of the lender. Such shares would be identical to the
Private Placement shares. The terms of such loans by our officers and directors,
if any, have not been determined and no written agreements exist with respect to
such loans. We do not expect to seek loans from parties other than our sponsor
or an affiliate of our sponsor as we do not believe third parties will be
willing to loan such funds and provide a waiver against any and all rights to
seek access to funds in our trust account.
Our sponsor, Cantor and CCM purchased an aggregate of 1,060,000 Class A ordinary
shares at a price of $10.00 per share ($10,060,000 in the aggregate) in a
private placement that closed simultaneously with the closing of the IPO. Of
those 1,000,000 Private Placement shares, our sponsor purchased 960,000 Private
Placement shares, CCM has purchased 30,000 private placement shares, and Cantor
purchased 70,000 Private Placement shares. Our sponsor, Cantor and CCM are
permitted to transfer the Private Placement shares they hold to certain
permitted transferees, including their respective directors, officers, and other
persons or entities affiliated with or related to them, but the transferees
receiving such securities will be subject to the same agreements with respect to
such securities. In addition, the Private Placement shares are not, subject to
certain limited exceptions, transferable or salable until 30 days after the
completion of the IPO. The Private Placement shares will not be redeemable by us
so long as they are held by the initial purchasers or their respective permitted
transferees. If the private placement shares are held by holders other than the
initial purchasers or their respective permitted transferees, the Private
Placement shares will be redeemable by us and exercisable by the holders on the
same basis as the shares and warrants included in the units being sold in the
IPO. Otherwise, and, except as described under "Description of Securities
-Ordinary Shares - Private Placement Shares" in the final prospectus of the IPO
that was filed with the SEC on October 28, 2021, the Private Placement shares
have terms and provisions that are identical to those of the Public Shares.
Pursuant to a registration rights agreement that we entered into with our
sponsor, our directors, our officers, Cantor and CCM on or prior to the closing
of the IPO, we are required to register the offer and sale of certain securities
under the Securities Act. These holders, and holders of shares issued upon
conversion of working capital loans, if any, are entitled under the registration
rights agreement to make up to three demands that we register the offer and sale
of certain of our securities held by them under the Securities Act and to have
the resale of the securities covered thereby registered pursuant to Rule 415
under the Securities Act. In addition, these holders have the right to include
the offer and sale of their securities in other registration statements filed by
us. However, the registration rights agreement provides that we will not permit
any registration statement filed under the Securities Act to become effective
until the offer and sale of the securities covered thereby are released from
their lock-up restrictions, as described herein. Notwithstanding the foregoing,
Cantor may not exercise their demand and "piggyback" registration rights after
five and seven years after the effective date of the registration statement of
which this prospectus forms a part and may not exercise their demand rights on
more than one occasion. We will bear the costs and expenses of filing any such
registration statements.
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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 will 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 Policies
The preparation of unaudited condensed financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the unaudited condensed
financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates. We have identified
the following critical accounting policies:
Ordinary Shares Subject to Possible Redemption
We account for our 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 is classified as a liability instrument and is measured at fair
value. Conditionally redeemable ordinary shares (including ordinary shares that
features 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) is classified as temporary equity. At all other times, ordinary
shares are classified as shareholders' (deficit) 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 is presented as temporary equity,
outside of the shareholders' (deficit) equity section of our condensed balance
sheets. We recognize changes in redemption value immediately as they occur and
adjusts the carrying value of redeemable ordinary shares to equal the redemption
value at the end of each reporting period. Increases or decreases in the
carrying amount of redeemable ordinary shares are affected by charges against
additional paid in capital and accumulated deficit.
Net Income (Loss) Per Ordinary Share
We apply the two-class method in calculating earnings per share. Net income
(loss) per ordinary share is computed by dividing the pro rata net income (loss)
between the redeemable ordinary shares and the non-redeemable ordinary shares of
by the weighted average number of ordinary shares outstanding for each of the
periods. The calculation of diluted income (loss) per share does not consider
the effect of the warrants issued in connection with the IPO since the exercise
of the warrants are contingent upon the occurrence of future events and the
inclusion of such warrants would be anti-dilutive.
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Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted, would have a material effect on the
Company's financial statements.
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