References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Prime Number Acquisition I Corp. References to our
"management" or our "management team" refer to our officers and directors,
references to the "sponsor A" refer to Prime Number Acquisition LLC, references
to the "sponsor B" refer to Glorious Capital LLC, and references to the
"sponsors" refer to both sponsor A and sponsor B together. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the 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. Our actual
results may differ significantly from the results, expectations and plans
discussed in these forward-looking statements. See "Cautionary Note Concerning
Forward-Looking Statements."
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 the Company's financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements.
Words such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "intends," "may," "might," "plan," "possible," "potential," "predict,"
"project," "should," "would" and variations thereof 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 the
Company's final prospectus for its IPO filed with the SEC on May 16, 2022. The
Company's 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, the Company disclaims 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 Delaware corporation on February
25, 2021 formed for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (a "Business Combination"). The Company
is actively searching and identifying suitable Business Combination target but
has not selected any Business Combination target. . We intend to effectuate our
Business Combination using cash derived from the proceeds of our IPO and the
sale of Class A common stock (the "Private Placement Shares") in a private
placement (the "Private
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Placement") to the Company's sponsors including Prime Number Acquisition LLC
(the "sponsor A") and Glorious Capital LLC (the "sponsor B", together with the
sponsor A, the "sponsors"), potential additional shares, debt or a combination
of cash, shares 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.
Recent Development
On May 17, 2022 the Company consummated the IPO of 6,450,000 units (the "Public
Units") (including 450,000 units issued upon the partial exercise of the
over-allotment option). Each unit consists of one share of Class A common stock,
$0.0001 par value per share (the "Public Shares"), one-half of one redeemable
warrant (the "Public Warrants"), and one right (the "Public Rights"). Each whole
warrant entitles the holder thereof to purchase one share of Class A common
stock (the "Class A common stock") at an exercise price of $11.50 per share, and
each right entitles the holder thereof to receive one-eighth of one share of
Class A common stock upon the consummation of the Company's initial Business
Combination.
On May 17, 2022, we consummated the IPO of 6,450,000 units at a price of $10.00
per unit, generating gross proceeds of $64,500,000. Simultaneously with the
closing of the IPO and partial exercise of the over-allotment option by the
underwriters, we consummated the sale (the "Private Placement") of 398,892
shares of Class A common stock (the "Private Placement Shares") (including
349,032 shares to sponsor A, and 49,860 shares to sponsor B) at a price of
$10.00 per share generating gross proceeds of $3,988,920. Following the closings
of the IPO and the sales of the Private Placement Shares on May 17, 2022, a
total of $65,790,000 (or $10.20 per share) was placed in a trust account,
established for the benefit of the Company's public stockholders and the
underwriters of the IPO with Wilmington Trust, National Association acting as
trustee (the "Trust Account"). On June 3, 2022, the sponsors executed
cancellation notices to the transfer agent to forfeit the remaining 112,500
shares for no consideration.
On June 30, 2022, we announced that holders of our units may elect to separately
trade Public Shares, Public Warrants and Public Rights included in its Public
Units, commencing on or about July 6, 2022.
The Public Shares, Public Warrants and Public Rights are traded on the Nasdaq
Global Market ("Nasdaq") under the symbols "PNAC", "PNACW", and "PNACR"
respectively. Units not separated are traded on Nasdaq under the symbol "PNACU".
As of the date of this report, we have not entered into any definitive
agreements, for the purpose of acquiring, engaging in a share exchange, share
reconstruction and amalgamation with, purchasing all or substantially all of the
assets of, entering into contractual arrangements with, or engaging in any other
similar Business Combination with one or more businesses or entities. We
currently have until May 17, 2023 to consummate our initial Business
Combination. However, if we anticipate that we may not be able to consummate our
initial Business Combination by May 17, 2023, we may, but are not obligated to,
we may, but are not obligated to, extend the period of time to consummate a
Business Combination for up to two times by an additional three-month period
each time and may have until November 17, 2023 to consummate our initial
Business Combination.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date except the preparation and completion of the IPO and search for target
candidate following the consummation of the IPO. Our only activities from
inception through June 30, 2022 were organizational activities and those
necessary to prepare for the IPO, described below. 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 June 30, 2022, we had a net loss of $66,376, which
consisted of general and administrative expenses of $104,831, franchise tax of
$25,117, unrealized gain on investments held in Trust Account (as defined below)
of $47,648, and interest earned on the investments held in the Trust Account of
$15,924. For the period from February 25, 2021 (inception) through June 30,
2022, we had a net loss of $76,328, which consisted of general and
administrative expenses of $110,656, franchise tax of $29,244, and interest
earned on the investments held in the Trust Account of $63,572.
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For three months ended June 30, 2021 and the period from February 25, 2021
(inception) through June 30, 2021, we had a net loss of $87 and $531,
respectively, all of which consisted of formation and operating costs.
Liquidity and Capital Resources
On May 17, 2022, we consummated the IPO of 6,450,000 Public Units at a price of
$10.00 per unit, generating gross proceeds of $64,500,000. Simultaneously with
the closing of the IPO and partial exercise of the over-allotment option by the
underwriters, we consummated the sale of 398,892 Private Placement Shares
(including 349,032 shares to sponsor A, and 49,860 shares to sponsor B) at a
price of $10.00 per share generating gross proceeds of $3,988,920.Following the
closings of the IPO and the Private Placement on May 17, 2022, a total of
$65,790,000 (or $10.20 per share) was placed in a trust account, established for
the benefit of the Company's public stockholders and the underwriters of the IPO
with Wilmington Trust, National Association acting as trustee (the "Trust
Account").
As of June 30, 2022, the Company had cash of $697,281 and a working capital of
$766,875. The Company's liquidity needs up to the closing of the IPO on May 17,
2022 had been satisfied through proceeds from notes payable and advances from
related party and from the issuance of common stock.
We have 12 months from the closing of the IPO to consummate a Business
Combination. It is uncertain that we 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.
In order to finance transaction costs in connection with a Business Combination,
the Company's Sponsor or an affiliate of the Sponsor or certain of the Company's
officers and directors may, but are not obligated to, provide the Company with
working capital. The Company's management plans to continue its efforts to
complete a Business Combination within the Combination Period after the closing
of the IPO.
If the estimated 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, the Company may have insufficient funds available to
operate its business prior to its Business Combination. Moreover, the Company
may need to obtain additional financing either to complete its Business
Combination or because it becomes obligated to redeem a significant number of
public shares upon consummation of its Business Combination, in which case the
Company may issue additional securities or incur debt in connection with such
Business Combination. Subject to compliance with applicable securities laws, the
Company would only complete such financing simultaneously with the completion of
our Business Combination.
In connection with the Company's assessment of going concern considerations in
accordance with FASB ASC Topic 205-40, "Presentation of Financial Statements -
Going Concern," management has determined that 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 for
a reasonable period of time, which is considered to be one year from the
issuance of the financial statements.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities that would be
considered off-balance sheet arrangements as of June 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
As of June 30, 2022, we do not have any long-term debt, capital lease
obligations, operating lease obligations or long-term liabilities.
The holders of the founder shares, the Private Placement Shares, and any common
stock that may be issued upon conversion of working capital loans (and any
underlying securities) will be entitled to registration rights pursuant to a
registration and shareholder rights agreement entered into in connection with
the IPO. The holders of these securities are entitled to make up to three
demands, excluding short form demands, that we register such securities. In
addition, the holders have certain "piggy-back" registration rights with respect
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to registration statements filed subsequent to our completion of our initial
Business Combination. We will bear the expenses incurred in connection with the
filing of any such registration statements.
Critical Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in
conformity with accounting principles generally accepted in the United States of
America ("US GAAP") and pursuant to the rules and regulations of the SEC. The
interim financial information provided is unaudited, but includes all
adjustments which management considers necessary for the fair presentation of
the results for these periods. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Offering Costs
The Company complies with the requirements of FASB ASC Topic 340-10-S99-1,
"Other Assets and Deferred Costs - SEC Materials" ("ASC 340-10-S99") and SEC
Staff Accounting Bulletin Topic 5A, "Expenses of Offering". Offering costs
consisting principally of underwriting, legal, accounting and other expenses
that are directly related to the IPO and charged to shareholders' equity upon
the completion of the IPO.
Warrants
We account for warrants as either equity-classified or liability-classified
instruments based on an assessment of the warrant's specific terms and
applicable authoritative guidance in Financial Accounting Standards Board
("FASB") ASC 480 "Distinguishing Liabilities from Equity" ("ASC 480") and ASC
815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the
warrants are freestanding financial instruments pursuant to ASC 480, whether
they meet the definition of a liability pursuant to ASC 480, and whether the
warrants meet all of the requirements for equity classification under ASC 815,
including whether the warrants are indexed to the Company's own common stock and
whether the warrant holders could potentially require "net cash settlement" in a
circumstance outside of the Company's control, among other conditions for equity
classification. This assessment, which requires the use of professional
judgment, is conducted at the time of warrant issuance and as of each subsequent
quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity
classification, the warrants are required to be recorded as a component of
equity at the time of issuance. For issued or modified warrants that do not meet
all the criteria for equity classification, the warrants are required to be
recorded as liabilities at their initial fair value on the date of issuance, and
each balance sheet date thereafter. Changes in the estimated fair value of the
warrants are recognized as a non-cash gain or loss on the statements of
operations. We determined that upon further review of the proposed form of
warrant agreement, management concluded that the warrants included in the units
issued in the IPO pursuant to the warrant agreement qualify for equity
accounting treatment.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Common stock subject to mandatory redemption (if any) are classified as
a liability instrument and are measured at fair value. Conditionally redeemable
common stock (including common stock 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, common stock is classified
as stockholders' equity. The Company's public shares feature certain redemption
rights that are considered to be outside of the Company's control and subject to
occurrence of uncertain future events. Accordingly, as of June 30, 2022, common
stock subject to possible redemption are presented at redemption value of $10.20
per share 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 common
stock to equal the redemption value at the end of each reporting period.
Increases or decreases in the carrying amount of redeemable common stock are
affected by charges against additional paid in capital or accumulated deficit if
additional paid in capital equals to zero.
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Net Income (Loss) per Share
The Company complies with accounting and disclosure requirements of FASB ASC
260, Earnings Per Share. In order to determine the net income (loss)
attributable to both the redeemable shares and non-redeemable shares, the
Company first considered the undistributed income (loss) allocable to both the
redeemable common stock and non-redeemable common stock and the undistributed
income (loss) is calculated using the total net loss less any dividends paid.
The Company then allocated the undistributed income (loss) ratably based on the
weighted average number of shares outstanding between the redeemable and
non-redeemable common stock. Any remeasurement of the accretion to redemption
value of the common stock subject to possible redemption was considered to be
dividends paid to the public stockholders.
Recent Accounting Pronouncements
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, 2024 for the Company 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 statement.
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